<PAGE>
<PAGE>
As filed with the Securities and Exchange Commission
on April 9, 1998
Registration No. 333-_____
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
_____________________________________________
NEWSOUTH BANCORP, INC.
- ---------------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 56-1999749
- ---------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1311 Carolina Avenue, P.O. Box 2047
Washington, North Carolina 27889
(919) 946-4178
- -----------------------------------------------------------------
(Address of Principal Executive Offices)
NewSouth Bancorp, Inc. Management Recognition Plan
NewSouth Bancorp, Inc. 1997 Stock Option Plan
- -----------------------------------------------------------------
(Full Title of the Plan)
Gary R. Bronstein, Esquire
J. Mark Poerio, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street N.W., Suite 700
Washington, D.C. 20036
- -----------------------------------------------------------------
(Name and Address of Agent For Service)
(202) 822-9611
- -----------------------------------------------------------------
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================
<S> <C> <C> <C> <C>
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount to be Offering Price Offering Price Registration
to be Registered Registered Per Share Price Fee
- ------------------------------------------------------------------------------------
Common Stock,
$.01 par value 407,330 (1) (2) $14,103,801 (2) $4,160.62
===================================================================================
<FN>
(1) Maximum number of shares issuable under the NewSouth Bancorp, Inc. Management
Recognition Plan (116,380 shares) and NewSouth Bancorp, Inc. 1997 Stock Option
Plan (290,950 shares), as such amounts may be increased in accordance with said
plan in the event of a merger, consolidation, recapitalization, stock dividend,
stock split or similar event involving the Registrant.
(2) Under Rule 457(h) the registration fee may be calculated, inter alia, based upon
the price at which the options may be exercised. 407,330 shares are being
registered hereby, of which 263,535 are under option at a weighted average
exercise price of $34.625 per share ($9,124,899 in the aggregate). The
remainder of such shares, which are not presently subject to option (143,795
shares), are being registered based upon the average of the high and low selling
prices of the common stock of the Registrant as reported on the National
Association of Securities Dealers Automated Quotation, National Market System
("NMS") on April 8, 1998 of $34.625 per share ($4,978,902 in the aggregate).
Therefore, the total amount of the offering being registered herein is
$14,103,801.
</FN>
/TABLE
<PAGE>
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION
10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION*
- ------
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL
- ------ INFORMATION*
*Documents containing the information required by Part I
of this Registration Statement will be sent or given to
participants in the NewSouth Bancorp, Inc. Management
Recognition Plan and the NewSouth Bancorp, Inc. 1997 Stock
Option Plan (together, the "Plans") in accordance with Rule
428(b)(1). In accordance with Note to Part I of Form S-8, such
documents are not filed with the Securities and Exchange
Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus
supplements.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ------
NewSouth Bancorp, Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") and, accordingly, files
periodic reports and other information with the Commission.
Reports, proxy statements and other information concerning the
Company filed with the Commission may be inspected and copies
may be obtained (at prescribed rates) at the Commission's Public
Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Web
site that contains reports, proxy and information statements and
other information regarding registrants that file electronically
with the Commission, including the Company. The address for the
Commission's Web site is "http://www.sec.gov".
The following documents are incorporated by reference in
this Registration Statement:
(a) The Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1997 (Commission File No. 0-
22219);
(b) The Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1997 (Commission File No. 0-22219);
(c) The description of the Company's securities
contained in this Company's Registration Statement on Form 8-A
as declared effective by the Commission on April 7, 1997.
ALL DOCUMENTS FILED BY THE COMPANY PURSUANT TO SECTIONS
13(A), 13(C), 14, AND 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, PRIOR TO THE FILING OF A POST-EFFECTIVE
AMENDMENT WHICH INDICATES THAT ALL SECURITIES OFFERED HAVE BEEN
SOLD OR WHICH DEREGISTERS ALL SECURITIES THEN REMAINING UNSOLD,
SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THIS
REGISTRATION STATEMENT, AND TO BE A PART HEREOF FROM THE DATE OF
FILING OF SUCH DOCUMENTS.
ITEM 4. DESCRIPTION OF SECURITIES
- ------
Not applicable, as the Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934.
<PAGE>
<PAGE>
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
- ------
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------
Directors and officers of the Company may be entitled to
benefit from the indemnification provisions contained in the
Delaware General Corporation Law (the "DGCL") and the Company's
Certificate of Incorporation. The general effect of these
provisions is summarized below:
DELAWARE GENERAL CORPORATION LAW
Section 145 of the DGCL permits a Delaware corporation to
indemnify any person who was or is a party or is threatened to
be made a party to any proceeding of any type, (other than an
action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, may not, of itself,
create a presumption that these standards have not been met.
A Delaware corporation may also indemnify any person who
was or is a party or is threatened to be made a party to any
proceeding by or in the right of the corporation by reason of
the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation. However, no
indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought determines upon application that such person is fairly
and reasonably entitled to be indemnified.
To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise
in defense of any proceeding described above indemnification
against expenses (including attorneys' fees) actually and
reasonably incurred by him is mandatory.
Any determination that indemnification of the director,
officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth
in subsections (a) and (b) must be made by a majority of the
board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or
proceeding, or if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or by the
stockholders.
Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition
of or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be
indemnified by the corporation.
The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this
section is not exclusive.
2<PAGE>
<PAGE>
In addition, a corporation shall have power to purchase
and maintain insurance against any liability of individuals whom
the corporation is required to indemnify.
Article XVII of the Company's Certificate of Incorporation
sets forth circumstances under which directors, officers,
employees and agents may be insured or indemnified against
liability which they may incur in their capacities as such.
ARTICLE XVII
INDEMNIFICATION
A. Persons. The Corporation shall indemnify, to the
extent provided in paragraphs B, D or F:
(1) any person who is or was a director, officer,
employee, or agent of the Corporation; and
(2) any person who serves or served at the
Corporation's request as a director, officer, employee,
agent, partner or trustee of another corporation,
partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a
threatened, pending or completed action or suit by or in the
right of the Corporation against a person named in paragraph A
by reason of his holding a position named in paragraph A, the
Corporation shall indemnify him if he satisfies the standard in
paragraph C, for expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably
incurred by him in connection with the defense or settlement of
the action or suit.
C. Standard -- Derivative Suits. In case of a
threatened, pending or completed action or suit by or in the
right of the Corporation, a person named in paragraph A shall be
indemnified only if:
(1) he is successful on the merits or otherwise;
or
(2) he acted in good faith in the transaction
which is the subject of the suit or action, and in a
manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, including, but not
limited to, the taking of any and all actions in
connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage
in a Business Combination (as defined in Article XV) not
approved by the board of directors. However, he shall not
be indemnified in respect of any claim, issue or matter as
to which he has been adjudged liable to the Corporation
unless and only to the extent that the court in which the
suit was brought shall determine, upon application, that
despite the adjudication but in view of all the
circumstances, he is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem
proper.
D. Extent -- Nonderivative Suits. In case of a
threatened, pending or completed suit, action or proceeding
(whether civil, criminal, administrative or investigative),
other than a suit by or in the right of the Corporation,
together hereafter referred to as a nonderivative suit, against
a person named in paragraph A by reason of his holding a
position named in paragraph A, the Corporation shall indemnify
him if he satisfies the standard in paragraph E, for amounts
actually and reasonably incurred by him in connection with the
defense or settlement of the nonderivative suit, including, but
not limited to (i) expenses (including attorneys' fees), (ii)
amounts paid in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a
nonderivative suit, a person named in paragraph A shall be
indemnified only if:
(1) he is successful on the merits or otherwise;
or
3<PAGE>
<PAGE>
(2) he acted in good faith in the transaction
which is the subject of the nonderivative suit and in a
manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, including, but not
limited to, the taking of any and all actions in
connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage
in a Business Combination (as defined in Article XV) not
approved by the board of directors and, with respect to
any criminal action or proceeding, he had no reasonable
cause to believe his conduct was unlawful. The
termination of a nonderivative suit by judgment, order,
settlement, conviction, or upon a plea of nolo contendereor
its equivalent shall not, in itself, create a
presumption that the person failed to satisfy the standard
of this subparagraph E(2).
F. Determination That Standard Has Been Met. A
determination that the standard of paragraph C or E has been
satisfied may be made by a court, or, except as stated in
subparagraph C(2) (second sentence), the determination may be
made by:
(1) the board of directors by a majority vote of a
quorum consisting of directors of the Corporation who were
not parties to the action, suit or proceeding; or
(2) independent legal counsel (appointed by a
majority of the disinterested directors of the
Corporation, whether or not a quorum) in a written
opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under
paragraph F may determine that a person has met the standard as
to some matters but not as to others, and may reasonably prorate
amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in
advance any expenses (including attorneys' fees) which may
become subject to indemnification under paragraphs A through G
if:
(1) the board of directors authorizes the specific
payment; and
(2) the person receiving the payment undertakes in
writing to repay the same if it is ultimately determined
that he is not entitled to indemnification by the
Corporation under paragraphs A through G.
I. Nonexclusive. The indemnification and advance
payment of expenses provided by paragraphs A through H shall not
be exclusive of any other rights to which a person may be
entitled by law, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this
Article XVII shall be deemed to be a contract between the
Corporation and the persons entitled to indemnification
thereunder, and any repeal or modification of this Article XVII
shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or
any action, suit or proceeding theretofore or thereafter brought
based in whole or in part upon any such state of facts. The
indemnification and advance payment provided by paragraphs A
through H shall continue as to a person who has ceased to hold a
position named in paragraph A and shall inure to his heirs,
executors and administrators.
K. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who holds or who has
held any position named in paragraph A, against any liability
incurred by him in any such position, or arising out of his
status as such, whether or not the Corporation would have power
to indemnify him against such liability under paragraphs A
through H.
L. Intention and Savings Clause. It is the intention
of this Article XVII to provide for indemnification to the
fullest extent permitted by the General Corporation Law of the
State of Delaware, and this Article XVII shall be interpreted
accordingly. If this Article XVII or any portion hereof shall
be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify
each director, officer, employee, and
4<PAGE>
<PAGE>
agent of the Corporation as to costs, charges, and expenses
(including attorneys' fees), judgments, fines, and amounts paid
in settlement with respect to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative,
including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article
XVII that shall not have been invalidated and to the full extent
permitted by applicable law. If the General Corporation Law of
the State of Delaware is amended, or other Delaware law is
enacted, to permit further or additional indemnification of the
persons defined in this Article XVII A, then the indemnification
of such persons shall be to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended,
or such other Delaware law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF NEWSOUTH BANK
The Certificate of Incorporation of NewSouth Bank, the
Company's main operating subsidiary (the "Bank"), provides that,
to the fullest extent permitted by the North Carolina Business
Corporation Act (the "NCBCA"), no person who serves as a
director shall be personally liable to the Bank or any of its
stockholders or otherwise for monetary damages for breach of any
duty as director.
In addition, Article VII of the Bylaws of the Bank state
that any person who at any time serves or has served as a
director or officer of the Bank, or who serves or has served at
the request of the Bank 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 Bank to the fullest extent permitted by law against
liability and litigation expense arising out of such status or
activities in such capacity. "Liability and litigation expense"
includes 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.
In no circumstances, however, shall the Bank indemnify any such
person against any liability or litigation expense incurred on
account of activities which were at the time taken known or
believed by such person to be clearly in conflict with the best
interests of the Bank.
Sections 55-8-50 through 55-8-58 of the NCBCA contain
provisions prescribing the extent to which directors and
officers shall or may be indemnified. Section 55-8-51 of the
NCBCA permits a corporation, with certain exceptions, to
indemnify a present or former director against liability if (i)
the director conducted himself in good faith, (ii) the director
reasonably believed (x) that the director's conduct in the
director's official capacity with the corporation was in its
best interests and (y) in all other cases the director's conduct
was at least not opposed to the corporation's best interests,
and (iii) in the case of any criminal proceeding, the director
had no reasonable cause to believe the director's conduct was
unlawful. A corporation may not indemnify a director in
connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation or in connection with a proceeding charging improper
personal benefit to the director. The above standard of conduct
is determined by the board of directors, or a committee or
special legal counsel or the shareholders as prescribed in
Section 55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a
corporation to indemnify a director or officer in the defense of
any proceeding to which the director or officer was a party
against reasonable expenses when the director or officer is
wholly successful in the director's or officer's defense, unless
the articles of incorporation provide otherwise. Upon
application, the court may order indemnification of the director
or officer if the director or officer is adjudged fairly and
reasonably so entitled under Section 55-8-54.
In addition, Section 55-8-57 permits a corporation to
provide for indemnification of directors, officers, employees or
agents, in its articles of incorporation or bylaws or by
contract or resolution, against liability in various proceedings
and to purchase and maintain insurance policies on behalf of
these individuals.
5<PAGE>
<PAGE>
The foregoing is only a general summary of certain aspects
of North Carolina law dealing with indemnification of directors
and officers and does not purport to be complete. It is
qualified in its entirety by reference to the relevant statutes,
which contain detailed specific provisions regarding the
circumstances under which and the person for whose benefit
indemnifications shall or may be made.
The Bank has a directors and officers liability policy
providing for insurance against certain liabilities incurred by
directors and officers of the Bank while serving in their
capacities as such.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
- ------
Not Applicable.
ITEM 8. EXHIBITS
- ------
For a list of all exhibits filed or included as part of
this Registration Statement, see "Index to Exhibits" at the end
of this Registration Statement.
ITEM 9. UNDERTAKINGS
- ------
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement --
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high and of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent
change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information
with respect to the plan of distribution not
previously disclosed in the registration statement
or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or
Form F-3, and the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(b) That, for the purpose of determining any
liability under the Securities Act of 1934, each such post-
effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
6<PAGE>
<PAGE>
2. The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation
S-X are not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information.
4. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
7<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the registrant certifies that it has
reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of
Washington, State of North Carolina, on April 8, 1998.
NEWSOUTH BANCORP, INC.
By: /s/ Thomas A. Vann
---------------------------------
Thomas A. Vann
President
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of NewSouth Bancorp, Inc.,
hereby severally constitute and appoint Thomas A. Vann, with
full power of substitution, our true and lawful attorney and
agent, to do any and all things in our names in the capacities
indicated below which said Thomas A. Vann may deem necessary or
advisable to enable NewSouth Bancorp, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in
connection with the registration of NewSouth Bancorp, Inc.
common stock, including specifically, but not limited to, power
and authority to sign for us in our names in the capacities
indicated below, the Registration Statement and any and all
amendments (including post-effective amendments) thereto; and we
hereby ratify and confirm all that said Thomas A. Vann shall do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- -----
<S> <C> <C>
/s/ Thomas A. Vann President and Director April 8, 1998
- ---------------------- (Principal Executive Officer)
Thomas A. Vann
/s/ William L. Wall Executive Vice President and April 8, 1998
- --------------------- Chief Financial Officer
William L. Wall (Principal Financial and
Accounting Officer)
/s/ Edmund T. Buckman, Jr. Director April 8, 1998
- --------------------------
Edmund T. Buckman, Jr.
/s/ Linley H. Gibbs, Jr. Director April 8, 1998
- ------------------------
Linley H. Gibbs, Jr.
/s/ Frederick N. Holscher Director April 8, 1998
- -------------------------
Frederick N. Holscher
/s/ Frederick H. Howdy Director April 8, 1998
- ----------------------
Frederick H. Howdy
/s/ Charles E. Parker, Jr.
- ------------------------- Director April 8, 1998
Charles E. Parker, Jr.
<PAGE>
/s/ Marshall T. Singleton Director April 8, 1998
- -------------------------
Marshall T. Singleton
/TABLE
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
5 Opinion of Housley Kantarian & Bronstein, P.C.
as to the legality of the Common Stock being
registered
23.1 Consent of Housley Kantarian & Bronstein, P.C.
(appears in their opinion filed as Exhibit 5)
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (contained in the signature
page to this registration statement)
99.1 NewSouth Bancorp, Inc. Management Recognition
Plan, Trust Agreement under the NewSouth
Bancorp, Inc. Management Recognition Plan,
and Notice of Removal of Trustee
99.2 NewSouth Bancorp, Inc. 1997 Stock Option Plan
and associated trust
99.3 Form of Stock Option Agreement to be entered
into with Optionees with respect to Incentive
Stock Options granted under the NewSouth
Bancorp, Inc. 1997 Stock Option Plan
99.4 Form of Stock Option Agreement to be entered
into with Optionees with respect to
Non-Incentive Stock Options granted under the
NewSouth Bancorp, Inc. 1997 Stock Option Plan
99.5 Notice of MRP Award
99.6 Memorandum concerning taxation of MRP Awards,
and associated election form
April 9, 1998
Board of Directors
NewSouth Bancorp, Inc.
1311 Carolina Avenue, P.O. Box 2047
Washington, North Carolina 27889
Re: NewSouth Bancorp, Inc. Management Recognition
Plan and NewSouth Bancorp, Inc. 1997 Stock Option Plan
Registration Statement on Form S-8
Dear Board Members:
We have acted as special counsel to NewSouth Bancorp,
Inc., a Delaware corporation (the "Company"), in connection with
the preparation of the Registration Statement on Form S-8 filed
with the Securities and Exchange Commission (the "Registration
Statement") under the Securities Act of 1933, as amended,
relating to 407,330 shares of common stock, par value $.01 per
share (the "Common Stock") of the Company which may be issued
pursuant to the NewSouth Bancorp, Inc. Management Recognition
Plan and the NewSouth Bancorp, Inc. 1997 Stock Option Plan
(together, the "Plans"), all as more fully described in the
Registration Statement. You have requested the opinion of this
firm with respect to certain legal aspects of the proposed
offering.
We have examined such documents, records and matters of
law as we have deemed necessary for purposes of this opinion and
based thereon, we are of the opinion that the Common Stock when
issued pursuant to and in accordance with the terms of the Plans
will be legally issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement on Form S-8 and to
references to our firm included under the caption "Legal
Opinion" in the Prospectuses which are part of the Registration
Statement.
Very truly yours,
Housley Kantarian & Bronstein, P.C.
By: /s/ J. Mark Poerio
--------------------------------
J. Mark Poerio, Esquire
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
NewSouth Bancorp, Inc.
Washington, NC 27889
We consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated
October 17, 1997 on our audits of the consolidated
statements of financial condition of NewSouth Bancorp,
Inc. and subsidiary as of September 30, 1997 and 1996,
and the related consolidated statements of operations,
stockholders' equity, and cash flows, for each of the
three years in the period ended September 30, 1997,
which report is included in NewSouth Bancorp, Inc.
Annual Report on Form 10-K for the fiscal year ended
September 30, 1997. We also consent to the reference to
our firm under the caption "Experts" in the Prospectuses
which are part of the Registration Statement.
/s/ Coopers & Lybrand, L.L.P.
COOPERS & LYBRAND, L.L.P.
Raleigh, North Carolina
April 9, 1998
<PAGE>
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the
terms and conditions hereinafter stated.
1.02 Through acceptance of their appointment to the
Committee, each member of the Committee hereby accepts his or
her appointment hereunder upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain
personnel of experience and ability in key positions of
responsibility by providing Employees and Directors of the
Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past
contributions to the Bank, and as an incentive to make such
contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with
an initial capital letter, shall have the meanings set forth
below unless the context clearly indicates otherwise. Wherever
appropriate, the masculine pronoun shall include the feminine
pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Internal
Revenue Code of 1986, as amended.
3.02 "Bank" means NewSouth Bank.
3.03 "Beneficiary" means the person or persons designated
by a Participant to receive any benefits payable under the Plan
in the event of such Participant's death. Such person or
persons shall be designated in writing on forms provided for
this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence
of a written designation, the Beneficiary shall be the
Participant's surviving spouse, if any or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Change in Control" means any one of the following
events: (1) the acquisition of ownership, holding or power to
vote more than 25% of the Bank's or the Company's voting stock,
(2) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (3) the
acquisition of a controlling influence over the management or
policies of the Bank or the Company by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), (4) the acquisition of control
of the Bank or the Company within the meaning of Section 53-42.1
of the General Statutes of North Carolina or 12 U.S.C. Section
1817(7)(j)(8)(B) or the regulations promulgated by any North
Carolina or Federal regulatory agency having regulatory
authority over the Company or the Bank applying such statutes,
or (5) during any period of two consecutive years, individuals
(the "Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Company or the Bank
(the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board<PAGE>
<PAGE>
was approved by a vote of at least two-thirds of the Continuing
Directors then in office shall be considered a Continuing
Director. For purposes of this subparagraph only, the term
"person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of
entity not specifically listed herein. The decision of the
Committee as to whether a change in control has occurred shall
be conclusive and binding.
3.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
3.07 "Common Stock" means shares of the common stock of
the Company.
3.08 "Company" means NewSouth Bancorp, Inc.
3.09 "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
3.10 "Date of Conversion" means the date of the conversion
of the Bank from mutual to stock form.
3.11 "Director" means a member of the Board.
3.12 "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
3.13 "Effective Date" means the date on which the Plan
first becomes effective, as determined under Section 8.07
hereof.
3.14 "Employee" means any person who is employed by the
Company or an Affiliate.
3.15 "Non-Employee Director" shall have the meaning
provided in Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
3.16 "Participant" means an Employee or Director who holds
a Plan Share Award.
3.17 "Plan" means this NewSouth Bancorp, Inc. Management
Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in
the Trust which are awarded or issuable to a Participant
pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this
Plan to receive Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common Stock
held by the Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement
entered into pursuant to the terms hereof between the Company
and the Trustee, and "Trust" means the trust created thereunder.
3.22 "Trustee" means the Company's Directors acting by
majority.
2<PAGE>
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3.23 "Year of Service" shall mean a full twelve-month
period, measured from the date of a Plan Share Award and each
annual anniversary of that date, during which a Participant's
Continuous Service has not terminated for any reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be
administered and interpreted by the Committee, which shall
consist of at least two Directors appointed by the Board. In
the absence at any time of a duly appointed Committee, the Plan
shall be administered by those members of the Board who are Non-
Employee Directors, and by the Board if there are less than
three Non-Employee Directors.
The Committee shall have all of the powers allocated to it
in this and other Sections of the Plan. Except as limited by
the express provisions of the Plan or by resolutions adopted by
the Board, the Committee shall have sole and complete authority
and discretion (i) to make Plan Share Awards to such Employees
as the Committee may select, (ii) to determine the form and
content of Plan Share Awards to be issued under the Plan, (iii)
to interpret the Plan, (iv) to prescribe, amend and rescind
rules and regulations relating to the Plan, and (v) to make
other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may
exercise such other power and authority as may be delegated to
it by the Board from time to time. Subject to Section 4.02, the
interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding. The Committee shall act
by vote or written consent of a majority of its members, and
shall report its actions and decisions with respect to the Plan
to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the
Board one or more persons or entity to act as Trustee(s) in
accordance with the provisions of this Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee
shall be appointed or approved by, and will serve at the
pleasure of, the Board. The Board may in its discretion from
time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to
it in this and other Sections of the Plan, may take any action
under or with respect to the Plan which the Committee is
authorized to take, and may reverse or override any action taken
or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan
Share Award already made or impair a participant's vested rights
under a Plan Share Award.
4.03 LIMITATION ON LIABILITY. No member of the Board or
the Committee or the Trustee(s) shall be liable for any
determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member
of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or
not done by him in such capacity under or with respect to the
Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
<PAGE>
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall
determine the amounts (or the method of computing the amounts)
to be contributed by the Company to the Trust, provided that the
Bank may also make contributions to the Trust. Such amounts
shall be paid to the Trustee at the time of contribution. No
contributions to the Trust by Employees shall be permitted.
3<PAGE>
<PAGE>
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE
AWARDS. The Trustee shall invest Trust assets only in
accordance with the Trust Agreement; provided that the Trust
shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares
issued on the Date of Conversion. Such Shares may be newly
issued Shares, Shares held in Treasury, or Shares held in a
grantor trust.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON
PLAN SHARE RESERVES. Upon the allocation of Plan Share Awards
under Section 6.02, the Plan Share Reserve shall be reduced by
the number of Shares subject to the awards so allocated. Any
Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. The Committee may make Plan Share
Awards only to Employees or Directors. In addition, the
Committee shall automatically make the Plan Share Awards
specified in Sections 6.04 and 6.05.
6.02 ALLOCATIONS. The Committee will determine which
Employees or Directors or directors of an Affiliate will be
granted discretionary Plan Share Awards, and the number of
Shares covered by each Plan Share Award, provided that in no
event shall any awards be made which will violate the governing
instruments of the Bank or its Affiliates or any applicable
federal or state law or regulation. In the event Plan Shares
are forfeited for any reason or additional shares of Common
Stock are purchased by the Trustee, the Committee may, from time
to time, grant additional Plan Share Awards from the forfeited
or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after
a determination is made pursuant to Section 6.02 that a Plan
Share Award is to be made, the Committee shall notify the
Participant in writing of the grant of the award and the number
of Plan Shares covered by the award. The date on which the
Committee so notifies the Participant shall be considered the
date of grant of the Plan Share Awards, and prior thereto the
Participant shall have no rights pursuant to the Plan Share
Awards. The Committee shall maintain records as to all grants
of Plan Share Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
Notwithstanding any other provisions of this Plan, each Director
who is not an Employee but is a Director on the Effective Date
shall receive, on April 8, 1998, a Plan Share Award for 7,320
Shares. Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the
general rules set forth in subsections (a) and (b) of Section
7.01. Unless otherwise inapplicable or inconsistent with the
provisions of this Section, the Plan Share Awards to be granted
hereunder shall be subject to all other provisions of this Plan.
6.05 AUTOMATIC GRANTS TO EMPLOYEES. On April 8, 1998,
each of the following individuals shall receive a Plan Share
Award as to the number of Plan Shares listed below, provided
that such award shall not be made to an individual who is not an
Employee on April 8, 1998:
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
Thomas A. Vann 29,095
Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the
general rules set forth in subsections (a) and (b) of Section
7.01, and the Committee shall have no discretion to alter said
vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other
provisions of this Plan.
4<PAGE>
<PAGE>
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything
to the contrary in Sections 6.01 and 6.02, but subject to
Sections 6.04 and 6.05, no Employee or Director shall have any
right or entitlement to receive a Plan Share Award hereunder,
such awards being at the total discretion of the Committee, nor
shall any Employees or Directors as a group have such a right.
The Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share
Reserve to the Company at any time, and cease issuing Plan Share
Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) General Rules. With respect to Plan Share Awards that
occur on April 8, 1998, the Plan Shares subject to such Awards
shall be earned and become non-forfeitable by a Participant
according to the following schedule, provided the Participant is
an Employee or Director on the scheduled vesting date:
Percent of Plan Share
Vesting Date Award that Becomes Vested
------------ -------------------------
April 8, 1998 33-1/3%
April 8, 1999 33-1/3%
April 8, 2000 33-1/3%
The Committee shall determine the vesting conditions
applicable to any Plan Share Awards made after the Effective
Date.
(b) Acceleration for Terminations Due to Death,
Disability, or Change in Control. Notwithstanding the general
rule contained in Section 7.01(a) above: (i) all Plan Shares
subject to a Plan Share Award held by a Participant whose
service with the Company or an Affiliate terminates due to the
Participant's death or Disability, or shall be deemed earned and
100% vested as of the Participant's last day of service with the
Company or an Affiliate, and (ii) all Plan Shares subject to a
Plan Share Award held by a Participant shall be deemed earned
and 100% vested upon a Change in Control.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid
to a Participant or Beneficiary under Section 7.03, such
Participant or Beneficiary shall also be entitled to receive,
with respect to each Plan Share paid, an amount equal to any
cash dividends (including special large and nonrecurring
dividends, including one that has the effect of a return of
capital to the Company's stockholders) and a number of shares of
Common Stock equal to any stock dividends, declared and paid
with respect to a share of Common Stock between the date the
relevant Plan Share Award was initially granted to such
Participant and the date the Plan Shares are being distributed.
There shall also be distributed an appropriate amount of net
earnings, if any, of the Trust with respect to any cash
dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) Timing of Distributions: GENERAL RULE. Except as
provided in Subsections (c), and (d) below, the Trustee shall
distribute Plan Shares and accumulated cash from dividends and
interest to the Participant or his Beneficiary, as the case may
be, as soon as practicable after they have been earned. No
fractional shares shall be distributed.
5<PAGE>
<PAGE>
(b) Form of Distribution. The Trustee shall distribute
all Plan Shares, together with any shares representing stock
dividends, in the form of Common Stock. One share of Common
Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made
in cash.
(c) Withholding. The Trustee shall withhold from any cash
payment made under this Plan sufficient amounts to cover any
applicable withholding and employment taxes, and if the amount
of such cash payment is not sufficient, the Trustee shall
require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the
Plan Shares. The Trustee shall pay over to the Company or
Affiliate which employs or employed such Participant any such
amount withheld from or paid by the Participant or Beneficiary.
(d) Timing: Exception for 10% Shareholders.
Notwithstanding Subsections (a) and (b) above, no Plan Shares
may be distributed prior to the date which is three (3) years
from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and
outstanding shares of Common Stock unless such action is
approved in advance by a majority vote of disinterested
directors of the Board. To the extent this limitation would
delay the date on which a Participant receives Plan Shares, the
Participant may elect to receive from the Trust, in lieu of such
Plan Shares, the cash equivalent thereof. Any Plan Shares
remaining undistributed solely by reason of the operation of
this Subsection (d) shall be distributed to the Participant or
his Beneficiary on the date which is three years from the Date
of Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be
distributed unless and until all of the requirements of all
applicable law and regulation shall have been fully complied
with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be
required by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock
held by the Trust (whether or not subject to a Plan Share Award)
shall be voted by the Trustee in the same proportion as the
trustee of the Company's Employee Stock Ownership Plan votes
Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner
directed by the Board.
7.05. DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) Elections to Defer. At any time prior to December
31st of any year prior to the date on which a Participant
becomes vested in any shares subject to his or her Plan Share
Award, a Participant who is a member of a select group of
management or highly compensated employees (within the meaning
of the Employees' Retirement Income Security Act of 1973) may
irrevocably elect, on the form attached hereto as Exhibit "A"
(the "Election Form"), to defer the receipt of all or a
percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award
(the "Deferred Shares").
(b) Recordkeeping; Holding of Deferred Shares. The MRP
Committee shall establish and maintain an individual account in
the name of each Participant who files an Election Form for the
purpose of tracking deferred earnings attributable to cash
dividends paid on Deferred Shares (the "Cash Account"). On the
last day of each fiscal year of the Company, the Committee shall
credit to the Participant's Cash Account earnings on the balance
of the Cash Account at a rate equal to the dividend-adjusted
total return on Common Stock, as determined from time to time by
the MRP Committee in its sole discretion. The Trustees shall
hold each Participant's Deferred Shares and Deferred Earnings in
the Trust until distribution is required pursuant to the
election set forth in the Participant's Election Form.
<PAGE>
(c) Distributions of Deferred Shares. The Trustee shall
distribute a Participant's Deferred Shares and Deferred Earnings
in accordance with the Participant's Election Form. All
distributions made by the Company and/or the Trustees pursuant
to elections made hereunder shall be subject to applicable
federal, state, and local tax withholding and to such other
deductions as shall at the time of such payment be required
under any income tax or other law, whether of the United States
or any other jurisdiction, and, in the case of payments to a
beneficiary, the
6<PAGE>
<PAGE>
delivery to the Committee and/or Trustees of all necessary
waivers, qualifications and other documentation. Within 90 days
after receiving notice of a Participant's death, the Trustee
shall distribute any balance of the Participant's Deferred
Shares and Deferred Earnings to the Participant's designated
beneficiary, if living, or if such designated beneficiary is
deceased or the Participant failed to designate a beneficiary,
to the Participant's estate. If, on the other hand, a
Participant's Continuous Service terminates for a reason other
than the Participant's death, Disability, early retirement, or
normal retirement, the Participant's Deferred Shares and
Deferred Earnings shall be distributed to the Participant in a
lump sum occurring as soon as reasonably practicable. The
distribution provisions of a Participant's Election Form shall
become irrevocable on the date that occurs (i) one year before
the Participant's termination of Continuous Service for a reason
other than death, and (ii) on the Participant's death if that
terminates the Participant's Continuous Service.
(d) Hardship Withdrawals. Notwithstanding any other
provision of the Plan or a Participant's Election Form, in the
event the Participant suffers an unforeseeable emergency
hardship within the contemplation of this paragraph, the
Participant may apply to the Committee for an immediate
distribution of all or a portion of his Deferred Shares and
Deferred Earnings. The hardship must result from a sudden and
unexpected illness or accident of the Participant or a dependent
of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of
purposes which are not considered hardships include post-
secondary school expenses or the desire to purchase a residence.
In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation
by insurance or otherwise, or by liquidation of the
Participant's nonessential assets to the extent such liquidation
would not itself cause a severe financial hardship. The amount
of any distribution hereunder shall be limited to the amount
necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship
and the amount which qualifies for distribution, if any, shall
be made by the Committee in its sole discretion. The Committee
may require evidence of the purpose and amount of the need, and
may establish such application or other procedures as it deems
appropriate.
(e) Rights to Deferred Shares and Earnings. A Participant
may not assign his or her claim to Deferred Shares and Deferred
Earnings during his or her lifetime, except in accordance with
Section 8.03 of this Plan. A Participant's right to Deferred
Shares and Deferred Earnings shall at all times constitute an
unsecured promise of the Company to pay benefits as they come
due. The right of the Participant or his or her beneficiary to
receive benefits hereunder shall be solely an unsecured claim
against the general assets of the Company. Neither the
Participant nor his or her beneficiary shall have any claim
against or rights in any specific assets or other fund of the
Company, and any assets in the Trust shall be deemed general
assets of the Company.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) Recapitalizations; Stock Splits, Etc. The number and
kind of shares which may be purchased under the Plan, and the
number and kind of shares subject to outstanding Plan Share
Awards, shall be proportionately adjusted for any increase,
decrease, change or exchange of shares of Common Stock for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in
which the number or kind of shares is changed without the
receipt or payment of consideration by the Company.
<PAGE>
(b) Transactions in Which the Company Is Not the Surviving
Entity. In the event of (i) the liquidation or dissolution of
the Company, (ii) a merger or consolidation in which the Company
is not the surviving entity, or (iii) the sale or disposition of
all or substantially all of the Company's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Plan Share Awards shall be adjusted for any change
or exchange of shares of Common Stock for a different number or
kind of shares or other securities which results from the
Transaction.
7<PAGE>
<PAGE>
(c) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment
made pursuant to this Section, a Participant becomes entitled to
new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the shares pursuant to the
Plan Share Award before the adjustment was made. In addition,
the Committee shall have the discretionary authority to impose
on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable,
including but not limited to a right of first refusal, or
repurchase option, or both of these restrictions.
(d) Other Issuances. Except as expressly provided in this
Section, the issuance by the Company or an Affiliate of shares
of stock of any class, or of securities convertible into shares
of Common Stock or stock of another class, for cash or property
or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not
affect, and no adjustment shall be made with respect to, the
number or class of shares of Common Stock then subject to Plan
Share Awards or reserved for issuance under the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by
resolution, at any time amend or terminate the Plan; provided
that no amendment or termination of the Plan shall, without the
written consent of a Participant, impair any rights or
obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with
this Section 8.02 shall include the power to direct the Trustee
to return to the Company all or any part of the assets of the
Trust, including shares of Common Stock held in the Plan Share
Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a
distribution of Common Stock relating thereto, including
earnings thereon, in accordance with the terms of this Plan and
the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be
sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent
and distribution. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Plan Share
Awards may transfer such awards to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. Plan Share
Awards so transferred may thereafter be transferred only to the
Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially
transferred the awards pursuant to this Section 8.03. Plan
Share Awards which are transferred pursuant to this Section 8.03
shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor
any grant of a Plan Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in
connection with the Plan shall create any right, either express
or implied, on the part of any Employee or Director to continue
in the service of the Company, the Bank, or an Affiliate
thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall
have any voting or dividend rights or other rights of a
stockholder in respect of any Plan Shares covered by a Plan
Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed
and construed under the laws of the State of North Carolina to
the extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become effective
immediately upon its approval by a favorable vote of
stockholders of the Company who own at least a majority of the
total votes cast at a duly called meeting of the Company's
stockholders held in accordance with applicable laws. In no
event shall Plan Share Awards be made within one year of the
Date of Conversion.
8<PAGE>
<PAGE>
8.08 TERM OF PLAN. This Plan shall remain in effect until
the earlier of (i) termination by the Board, or (ii) the
distribution of all assets of the Trust. Termination of the
Plan shall not affect any Plan Share Awards previously granted,
and such Awards shall remain valid and in effect until they have
been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the
Trust associated with the Plan be treated as a grantor trust of
the Company under the provisions of Section 671 et seq. of the
Code, as the same may be amended from time to time, and (ii)
that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of
general unsecured creditors of the Company, the Plan constitutes
a mere unfunded promise to make benefit payments in the future,
the Plan is unfunded for tax purposes and for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be
maintained in conformity with Revenue Procedure 92-64 (as the
same may be amended from time to time).
9<PAGE>
<PAGE>
Exhibit A
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
---------------------------
DEFERRAL ELECTION AGREEMENT
---------------------------
AGREEMENT, made this ____ day of ________, 199_, by and
between __________________ (the "Participant"), and NewSouth
Bancorp, Inc. (the "Company").
WHEREAS, the Company has established the NewSouth Bancorp,
Inc. Management Recognition Plan (the "Plan"), and the
Participant is eligible to participate in said Plan;
WHEREAS, the Participant is a recipient of Plan Share
Awards (the "Awards") for _____ shares of common stock of the
Company, to become vested according to the terms set forth in
Section 7.01 of the Plan; and
WHEREAS, the Participant desires to defer receipt of
certain Awards and the earnings thereon to which the Participant
is entitled upon the vesting of such Awards; and
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to
participate in the Plan upon the terms and conditions set forth
therein, and, in accordance therewith, makes the following
elections:
a. The amount of Awards which the Participant hereby
elects to defer is as follows:
Number of Shares
Vesting Date Deferred
------------ ----------------
b. All amounts deferred pursuant to the Plan after the
date of this Agreement, shall be distributed beginning:
( ) the calendar year immediately following the year in
which the Participant ceases service with the Company.
( ) upon the Participant's attainment of age 55 with 10
or more years of service.
<PAGE>
<PAGE>
( ) the later of the calendar year immediately following
the year in which the Participant ceases service with the
Company, or ____________, 199_ (a specific date not later than
the year in which the Participant will attain 65 years of age).
( ) the year in which the Participant attains 65 years
of age.
c. The Participant hereby elects to have the amount
deferred after the date of this Agreement and any related
accumulated earnings distributed as follows:
( ) annually over a ten-year period.
( ) annually over a ______- year period (must be less
than ten years).
( ) in a lump sum.
d. All distributions made pursuant to the Plan and
this Agreement will be made in Plan Shares and in cash to the
extent of earnings on Plan Shares.
2. The Participant hereby designates _____________________
to be his or her beneficiary and to receive the balance of any
unpaid deferred compensation and related earnings.
3. This election shall be irrevocable, except that (a) the
beneficiary designation made in paragraph 2 hereof may be
revised at any time and from time to time, and (b) the elections
made in paragraphs 1(b) and 1(c) shall only become irrevocable
on the first to occur of the Participant's death, or the date
one year before the Participant's Continuous Service terminates
for a reason other than death. Any changes to the elections
made herein by said Participant will be limited to the range of
choices offered herein.
4. The Company agrees to make payment of the amount due
the Participant in accordance with the terms of the Plan and the
elections made by the Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands the day and year first above-written.
PARTICIPANT COMPANY
_______________________ ___________________________
By ___________________________
Its __________________________
<PAGE>
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
_______________
TRUST AGREEMENT
_______________
This Agreement made this 14th day of November, 1996 by and
between NewSouth Bancorp, Inc. (the "Company") and Thomas A.
Vann, Linley H. Gibbs, Jr., Frederick H. Howdy, Edmund T.
Buckman, Jr., Harold A. Lane, Charles E. Parker, Jr., Marshal T.
Singleton, and Frederick N. Holscher (acting by majority, the
"Trustee").
WHEREAS, the Company maintains the NewSouth Bancorp, Inc.
Management Recognition Plan (the "Plan"), and has incurred or
expects to incur liability under the terms of the Plan with
respect to the individuals participating in the Plan
("Participants"); and
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute to the Trust assets that shall be
held therein, subject to the claims of the Company's general
creditors in the event of Insolvency, as defined in Section 3(a)
hereof, until paid to Participants and their beneficiaries in
such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect
the status of the Plan as an unfunded plan maintained for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan;
NOW, THEREFORE, the parties do hereby establish this Trust
and agree that the Trust shall be comprised, held and disposed
of as follows:
Section 1. Establishment of Trust.
----------------------------------
(a) The Company hereby deposits, or will shortly hereafter
deposit, with the Trustee in trust (i) a number of shares of the
Company's common stock ("Common Stock") equal to four percent
(4%) of the number of shares of Common Stock issued by the
Company in connection with the conversion of Home Savings Bank,
SSB (the "Bank") from mutual-to-stock form, or (ii) an amount
expected to be sufficient to permit the Trust to purchase said
shares. Said shares or amount shall become the initial
principal of the Trust to be held, administered and disposed of
by the Trustee as provided in this Trust Agreement.
(b) The Trust shall become irrevocable upon the effective
date of the Plan.
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.
<PAGE>
<PAGE>
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of
Participants and general creditors as herein set forth.
Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of
Participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time,
or from time to time, make additional deposits of cash or other
property in trust with the Trustee to augment the principal to
be held, administered and disposed of by Trustee as provided in
this Trust Agreement. Neither the Trustee nor any Participant
or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
---------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to the
Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available
under the Plan), and the time of commencement for payment of
such amounts. Except as otherwise provided herein, the Trustee
shall make payments to Participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by the Company.
(b) The entitlement of a Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Company or such party as it shall designate under the Plan,
and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to
Participants or their beneficiaries as they become due under the
terms of the Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Company shall
make the balance of each such payment as it falls due. The
Trustee shall notify the Company where principal and earnings
are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
--------------------------------------------------------
(a) The Trustee shall cease payment of benefits to
Participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes
subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive Officer
of the Company shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be
a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the
2<PAGE>
<PAGE>
Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or
their beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or
a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
(2) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Plan participants or their beneficiaries, shall liquidate the
Trust's investment in Common Stock, and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their beneficiaries as general
creditors of the Company with respect to benefits due under the
Plan or otherwise.
(3) The Trustee shall resume the payment of benefits
to Participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer
Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any
payments made to Participants or their beneficiaries by the
Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to
others any of the Trust assets before all payment of benefits
have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock provided that the Trust shall not purchase from
time to time a number of shares of Common Stock exceeding 4% of
the shares of Common Stock issued in the Bank's mutual-to-stock
conversion.
(b) All rights associated with assets of the Trust shall
be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or rest with
Participants, except that voting rights with respect to Common
Stock will be exercised in accordance with the terms of the
Plan.
(c) Subject to applicable federal and state securities
laws, if for any reason the Trustee will be selling shares of
Common Stock, the Trustee shall sell such shares by (i) giving
each Beneficiary 20 business days within which to purchase, at
fair market value, all or part of the shares of Common Stock
that the Trustee holds for the benefit of the Beneficiary, and
(ii) to the extent purchases by Beneficiaries are insufficient
to eliminate the Trusts' excess holdings of Common Stock, to
offer to sell, and to sell, all or any part of the excess shares
held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan
maintained by the Company or the Bank; third, directors of the
Bank; fourth, officers of the Bank; and fifth, members of the
general public.
3<PAGE>
<PAGE>
Section 6. Disposition of Income.
---------------------------------
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of
all investments, receipts, disbursements, and all other
transactions required to be made, including such specific
records as shall be agreed upon in writing between the Company
and the Trustee. Within 60 days following the close of each
fiscal year of the Company and within 20 days after the removal
or resignation of the Trustee, the Trustee shall deliver to the
Company a written account of its administration of the Trust
during such year or during the period from the close of the last
preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all
securities and investments purchased and sold with the cost or
net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as
the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by the
Company which is contemplated by, and in conformity, the terms
of the Plan or this Trust and is given in writing by the
Company. In the event of a dispute between the Company and a
party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except in those cases where the Trustee shall have
been found by a court of competent jurisdiction to have acted
with gross negligence or willful misconduct. If the Company
does not pay such costs, expenses and liabilities in a
reasonably timely manner, the Trustee may obtain payment from
the Trust.
(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all
powers conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor the Trustee, or to loan to any person the proceeds of
any borrowing against such policy.
<PAGE>
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
4 <PAGE>
<PAGE>
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Plan and this Trust.
If not so paid, the fees and expenses shall be paid from the
Trust.
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee (or any individual serving as one of the
trustees who act by majority as the Trustee) may resign at any
time by written notice to the Company, which resignation shall
be effective 30 days after the Company receives such notice
(unless the Company and the Trustee agree otherwise). The
Trustee (or any individual serving as one of the trustees who
act by majority as the Trustee) may be removed by the Company
on 30 days notice or upon shorter notice accepted by the
Trustee.
If the Trustee (or any individual serving as one of the
trustees who act by majority as the Trustee) resigns or is
removed, a successor shall be appointed, in accordance with
Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been
made, the Trustee may apply to a court of competent jurisdiction
for appointment of a successor or for instructions. All
expenses of the Trustee in connection with the proceeding shall
be allowed as administrative expenses of the Trust. Upon
resignation or removal of the Trustee and appointment of a
successor trustee, all assets shall subsequently be transferred
to the successor trustee. The transfer shall be completed
within 60 days after receipt of notice of resignation, removal
or transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Company may appoint any other party as a
successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by
the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust
assets. The former trustee shall execute any instrument
necessary or reasonably requested by the Company or the
successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts
of any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor
trustee shall not be responsible for, and the Company shall
indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes successor trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company, provided
that no such amendment shall make the Trust revocable.
(b) The Trust shall not terminate until the date on
which Participants and their beneficiaries are no longer
entitled to benefits pursuant to the terms hereof. Upon
termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits),
the Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to the Company.
5<PAGE>
<PAGE>
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant
to the terms of the Plan.
(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of North
Carolina, to the extent not preempted by federal law.
(d) The Trustee agrees to be bound by the terms of the
Plan, as in effect from time to time.
(e) The Trustee shall act by vote or written consent of
a majority of its duly-appointed members.
6<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Agreement to be executed, and its
corporate seal affixed, and the Trustees have executed this
Agreement, this 14th day of November, 1996.
ATTEST: NEWSOUTH BANCORP, INC.
/s/ Brenda Ipoch By: /s/ Thomas A. Vann
- ---------------- ------------------------
Its President
ATTEST:
/s/ Brenda Ipoch /s/ Thomas A. Vann
- ---------------- ------------------------
Thomas A. Vann, Trustee
/s/ Brenda Ipoch /s/ Linley H. Gibbs, Jr.
- ---------------- ------------------------
Linley H. Gibbs, Jr., Trustee
/s/ Brenda Ipoch /s/ Frederick H. Howdy
- ---------------- ------------------------
Frederick H. Howdy, Trustee
/s/ Brenda Ipoch /s/ Edmund T. Buckman, Jr.
- ---------------- --------------------------
Edmund T. Buckman, Jr., Trustee
/s/ Brenda Ipoch /s/ Harold A. Lane
- ---------------- --------------------------
Harold A. Lane, Trustee
/s/ Brenda Ipoch /s/ Charles E. Parker, Jr.
- ---------------- --------------------------
Charles E. Parker, Jr., Trustee
/s/ Brenda Ipoch /s/ Marshal T. Singleton
- ---------------- --------------------------
Marshal T. Singleton, Trustee
/s/ Brenda Ipoch /s/ Frederick N. Holscher
- ---------------- --------------------------
Frederick N. Holscher, Trustee
7
<PAGE>
<PAGE>
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN AND TRUST
----------------------------
NOTICE OF REMOVAL OF TRUSTEE
----------------------------
PLEASE BE ADVISED that pursuant to Section 10 of the trust
agreement associated with the NewSouth Bancorp, Inc. Management
Recognition Plan (the "Plan"), the Board of Directors of
NewSouth Bancorp, Inc. hereby removes Edmund T. Buckman, Jr.,
Harold A. Lane, Charles E. Parker, Jr., Marshall T. Singleton,
and Thomas A. Vann from their positions as trustees of the trust
established under the Plan, with such removal to be effective
immediately.
Dated: March 20, 1997
S NEWSOUTH BANCORP, INC.
E
A
L By: /s/ Thomas A. Vann
------------------
Its President
AGREED TO AND ACCEPTED by the undersigned, as of the dated
referenced above.
/s/ Edmund T. Buchman, Jr. /s/ Charles E. Parker, Jr.
---------------------- --------------------------
Edmund T. Buckman, Jr. Charles E. Parker, Jr.
/s/ Harold A. Lane /s/ Marshall T. Singleton
---------------------- --------------------------
Harold A. Lane Marshall T. Singleton
/s/ Thomas A. Vann
--------------------------
Thomas A. Vann
<PAGE>
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the
Company through providing select key Employees and Directors of
the Bank, the Company, and their Affiliates with the opportunity
to acquire Shares. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility and to
provide additional incentives to Directors and key Employees of
the Company or any Affiliate to promote the success of the
business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Bank" shall mean NewSouth Bank.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Change in Control" shall mean any one of the
following events: (1) the acquisition of ownership, holding or
power to vote more than 25% of the Bank's or the Company's
voting stock, (2) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's directors,
(3) the acquisition of a controlling influence over the
management or policies of the Bank or the Company by any person
or by persons acting as a "group" (within the meaning of Section
13(d) of the Securities Exchange Act of 1934), (4) the
acquisition of control of the Bank or the Company within the
meaning of Section 53-42.1 of the General Statutes of North
Carolina or 12 U.S.C. Section 1817(7)(j)(8)(B) or the
regulations promulgated by any North Carolina or Federal
regulatory agency having regulatory authority over the Company
or the Bank applying such statutes, or (5) during any period of
two consecutive years, individuals (the "Continuing Directors")
who at the beginning of such period constitute the Board of
Directors of the Company or the Bank (the "Existing Board")
cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. For purposes
of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to
whether a change in control has occurred shall be conclusive and
binding.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(g) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock of the
Company.
(i) "Company" shall mean NewSouth Bancorp, Inc.
(j) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company, in the case of transfers
<PAGE>
<PAGE>
between payroll locations of the Company or between the Company,
an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any
member of the board of directors of any Affiliate that the Board
has by resolution designated as being eligible for participation
in this Plan.
(l) "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
(m) "Effective Date" shall mean the date specified in
Paragraph 13 hereof.
(n) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned
Share at which an Option may be exercised.
(p) "ISO" means an option to purchase Common Stock which
meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an
Option granted pursuant to this Plan.
(v) "Participant" shall mean any person who receives an
Option pursuant to the Plan.
(w) "Plan" shall mean this NewSouth Bancorp, Inc. 1997
Stock Option Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(y) "Share" shall mean one share of Common Stock.
(z) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Option and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.
2<PAGE>
<PAGE>
3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect
for a term of ten years from the Effective Date, unless sooner
terminated pursuant to Paragraph 15 hereof. No Option shall be
granted under the Plan after ten years from the Effective Date.
(b) Term of Options. The term of each Option granted
under the Plan shall be established by the Committee, but shall
not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required under Paragraph 10, the
aggregate number of Shares deliverable pursuant to Options shall
not exceed 290,950 Shares, which equals 10% of the Shares issued
by the Company in connection with the Bank's conversion from
mutual to stock form. Such Shares may either be authorized but
unissued Shares, Shares held in treasury, or Shares held in a
grantor trust created by the Company. If any Options should
expire, become unexercisable, or be forfeited for any reason
without having been exercised, the Optioned Shares shall, unless
the Plan shall have been terminated, be available for the grant
of additional Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be
administered by the Committee, which shall consist of at least
two Directors appointed by the Board. Members of the Committee
shall serve at the pleasure of the Board. In the absence at any
time of a duly appointed Committee, the Plan shall be
administered by those members of the Board who are Non-Employee
Directors.
(b) Powers of the Committee. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion (i) to select Participants and grant Options, (ii) to
determine the form and content of Options to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to
time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in
writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) Agreement. Each Option shall be evidenced by a
written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a
binding contract between the Company and the Participant, and
every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such
Agreement. The terms of each such Agreement shall be in
accordance with the Plan, but each Agreement may include such
additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms
of the Plan. In particular, the Committee shall set forth in
each Agreement (i) the Exercise Price of an Option, (ii) the
number of Shares subject to, and the expiration date of, the
Option, (iii) the manner, time and rate (cumulative or
otherwise) of exercise or vesting of such Option, and (iv) the
restrictions, if any, to be placed upon such Option, or upon
Shares which may be issued upon exercise of such Option.
The Chairman of the Committee and such other Directors and
officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Options.
3<PAGE>
<PAGE>
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights
of indemnification as they may have, the members of the
Committee shall be indemnified by the Company in connection with
any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or
any Option, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Committee shall have the discretion
to make discretionary grants of Options to Employees and
Directors (including members of the Committee). In addition,
the Committee shall automatically make the awards specified in
Paragraphs 6(b) and 9 hereof.
(b) Automatic Grants to Employees. On the Effective Date,
each of the following Employees shall receive an Option to
purchase the number of Shares listed below, at an Exercise Price
per Share equal to the Market Value of a Share on the Effective
Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective
Date:
Participant Number of Shares
----------- ----------------
Thomas A. Vann 72,735
With respect to each of the above-named Participants, the
Option granted to the Participant hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a) of
the Plan, (ii) shall have a term of ten years from the Effective
Date, and (iii) shall be subject to the general rule set forth
in Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to
exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value,
as of the date the Option is granted, of the Shares with respect
to which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Company or
any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case such Options granted in excess of such limitation shall be
Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price
as to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In
the case of an Employee who owns Shares representing more than
10% of the Company's outstanding Shares of Common Stock at the
time an ISO is granted, the Exercise Price shall not be less
than 110% of the Market Value of the Optioned Shares at the time
the ISO is granted.
(b) Standards for Determining Exercise Price. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average
of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the
Market Value per Share shall be the mean between the bid and
asked price on such date, or, if there is no bid and asked price
on such
4<PAGE>
<PAGE>
date, then on the next prior business day on which there was a
bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Unless the Committee specifically
imposes a vesting schedule in an Agreement granting an Option,
each Option shall be fully vested and exercisable at all times,
subject to Paragraph 13 hereof. An Option may not be exercised
for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of
intent to exercise the Option with respect to a specified number
of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
Exercise Price for the number of Shares with respect to which
the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at its executive offices. Common Stock utilized in full
or partial payment of the Exercise Price for Options shall be
valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised. Upon a
Participant's exercise of an Option, the Company may, in the
discretion of the Committee, pay to the Participant a cash
amount up to but not exceeding the amount of dividends, if any,
declared on the underlying Shares between the date of grant and
the date of exercise of the Option.
(c) Period of Exercisability. Except to the extent
otherwise provided in the terms of an Agreement, an Option may
be exercised by a Participant only while he is an Employee and
has maintained Continuous Service from the date of the grant of
the Option, or within one year after termination of such
Continuous Service (but not later than the date on which the
Option would otherwise expire), except if the Employee's
Continuous Service terminates by reason of -
(1) "Just Cause" which for purposes hereof shall
have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Bank
and/or the Company (and, in the absence of any such
agreement, shall mean termination because of the
Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final
cease-and-desist order), then the Participant's rights to
exercise such Option shall expire on the date of such
termination;
(2) death, then to the extent that the Participant
would have been entitled to exercise the Option
immediately prior to his death, such Option of the
deceased Participant may be exercised within two years
from the date of his death (but not later than the date on
which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom
his rights under such Option shall have passed by will or
by laws of descent and distribution.
<PAGE>
(d) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding
any other provision of this Plan to the contrary, Common Stock
that is purchased upon exercise of an Option may not be sold
within the six-month period following the grant date of that
Option, except in the event of the Participant's death or
disability, or such other event as the Board may specifically
deem appropriate.
5<PAGE>
<PAGE>
9. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. Notwithstanding any other
provisions of this Plan, each Director who is not an Employee
but is a Director on the Effective Date shall receive, on said
date, Non-ISOs to purchase 18,300 Shares. Such Non-ISOs shall
have an Exercise Price per Share equal to the Market Value of a
Share on the date of grant, and be subject to the terms of
Paragraph 9(b) hereof.
(b) Terms of Exercise. Options received under the
provisions of Paragraph 9(a) shall (i) be fully exercisable at
all times, subject to Paragraph 13 hereof, and (ii) may be
exercised from time to time by written notice of intent to
exercise the Option with respect to all or a specified number of
the Optioned Shares, and payment to the Company
(contemporaneously with the delivery of such notice), in cash,
in Common Stock, or a combination of cash and Common Stock, of
the amount of the Exercise Price for the number of the Optioned
Shares with respect to which the Option is then being exercised.
Each such notice and payment shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Treasurer
of the Company at the Company's executive offices. Upon a
Director's exercise of an Option, the Company may, in the
discretion of the Committee, pay to the Director a cash amount
up to but not exceeding the amount of dividends, if any,
declared on the underlying Shares between the date of grant and
the date of exercise of the Option. A Director who exercises
Options pursuant to this Paragraph may satisfy all applicable
federal, state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably electing to
have the Company withhold shares of Common Stock, or to deliver
to the Company shares of Common Stock that he already owns,
having a value equal to the amount required to be withheld;
provided that to the extent not inconsistent herewith, such
election otherwise complies with those requirements of
Paragraphs 8 and 18 hereof.
Options granted under this Paragraph shall have a term of
ten years; provided that Options granted under this Paragraph
shall expire one year after the date on which a Director
terminates Continuous Service on the Board for a reason other
than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's
death during the term of his directorship, Options granted under
this Paragraph shall become immediately exercisable, and may be
exercised within two years from the date of his death by the
personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or
by laws of descent and distribution, but in no event later than
the date on which such Options would otherwise expire. In the
event of such Director's Disability during his or her
directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within two years
of the termination of directorship due to Disability, but not
later than the date that the Option would otherwise expire.
Unless otherwise inapplicable or inconsistent with the
provisions of this Paragraph, the Options to be granted to
Directors hereunder shall be subject to all other provisions of
this Plan.
10. CHANGE IN CONTROL; EFFECT OF CHANGES IN COMMON STOCK
SUBJECT TO THE PLAN.
(a) Change in Control. Upon a Change in Control, all
Options shall become fully exercisable, notwithstanding any
other provision of the Plan or any Agreement.
<PAGE>
(b) Recapitalizations; Stock Splits, Etc. The number
and kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Options, and
the Exercise Price thereof, shall be proportionately adjusted
for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in
which the number or kind of shares is changed without the
receipt or payment of consideration by the Company.
(c) Transactions in which the Company is Not the
Surviving Entity. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to
6<PAGE>
<PAGE>
herein as a "Transaction"), all outstanding Options, together
with the
Exercise Prices thereof, shall be equitably adjusted for any
change or exchange of Shares for a different number or kind of
shares or other securities which results from the Transaction.
(d) Special Rule for ISOs. Any adjustment made pursuant
to subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(e) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the
Option before the adjustment was made.
(f) Other Issuances. Except as expressly provided in
this Paragraph, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect,
and no adjustment shall be made with respect to, the number,
class, or Exercise Price of Shares then subject to Options or
reserved for issuance under the Plan.
(g) Certain Special Dividends. The Exercise Price of
shares subject to outstanding Options shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the
stockholders, except that this subparagraph (g) shall not apply
to any dividend which is paid to the Participant pursuant to
Paragraph 8(b) or 9(b) hereof.
11. NON-TRANSFERABILITY OF OPTIONS.
Options may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or
by the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant
who holds Options may transfer such Options (but not ISOs) to
his or her spouse, lineal ascendants, lineal descendants, or to
a duly established trust for the benefit of one or more of these
individuals. Options so transferred may thereafter be
transferred only to the Participant who originally received the
grant or to an individual or trust to whom the Participant could
have initially transferred the Options pursuant to this
Paragraph 11. Options which are transferred pursuant to this
Paragraph 11 shall be exercisable by the transferee according to
the same terms and conditions as applied to the Participant.
12. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be
the later of the date on which the Committee makes the
determination of granting such Option, and the Effective Date.
Notice of the determination shall be given to each Participant
to whom an Option is so granted within a reasonable time after
the date of such grant.
<PAGE>
13. EFFECTIVE DATE.
The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders owning at least a
majority of the total votes cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws.
No Options may be granted within one year of the closing date of
the Bank's mutual-to-stock conversion, or become exercisable
prior to approval of the Plan by the stockholders of the
Company.
7<PAGE>
<PAGE>
14. MODIFICATION OF OPTIONS.
At any time, and from time to time, the Board may authorize
the Committee to direct execution of an instrument providing for
the modification of any outstanding Option, provided no such
modification shall confer on the holder of said Option any right
or benefit which could not be conferred on him by the grant of a
new Option at such time, or impair the Option without the
consent of the holder of the Option.
15. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the
Plan and, with respect to any Shares at the time not subject to
Options, suspend or terminate the Plan. No amendment,
suspension or termination of the Plan shall, without the consent
of any affected holders of an Option, alter or impair any rights
or obligations under any Option theretofore granted.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common
Stock shall not be issued with respect to any Option unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) Special Circumstances. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of
any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, the
Company may require the person exercising the Option to make
such representations and warranties as may be necessary to
assure the availability of an exemption from the registration
requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal, or to establish repurchase rights, or to pay an
Optionee the in-the-money value of his Option in consideration
for its cancellation, or all of these restrictions.
17. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
18. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise
of Options shall be subject to the Participant's satisfaction of
all applicable federal, state and local income and employment
tax withholding obligations. The Committee, in its discretion,
may permit the Participant to satisfy the obligation, in whole
or in part, by irrevocably electing to have the Company withhold
Shares, or to deliver to the Company Shares that he already
owns, having a value equal to the amount required to be
withheld. The value of the Shares to be withheld, or delivered
to the Company, shall be based on the Market Value of the Shares
on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell
without notice, a number of such Shares sufficient to cover the
amount required to be withheld.
8<PAGE>
19. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility
to participate or participation in the Plan create or be deemed
to create any legal or equitable right of the Employee,
Director, or any other party to continue service with the
Company, the Bank, or any Affiliate of such corporations.
Except to the extent provided in Paragraphs 6(b) and 9(a), no
Employee or Director shall have a right to be granted an Option
or, having received an Option, the right to again be granted an
Option. However, an Employee or Director who has been granted
an Option may, if otherwise eligible, be granted an additional
Option or Options.
20. Governing Law.
The Plan shall be governed by and construed in accordance
with the laws of the State of North Carolina, except to the
extent that federal law shall be deemed to apply.
9<PAGE>
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
_________________
TRUST AGREEMENT
_________________
This Agreement made this 20th day of March, 1997, by and
between NewSouth Bancorp, Inc. (the "Company") and Linley H.
Gibbs, Jr., Frederick N. Holscher, and Frederick H. Howdy
(acting by majority, the "Trustee").
WHEREAS, the Company maintains the NewSouth Bancorp, Inc.
1997 Stock Option Plan (the "Plan"), and has incurred or expects
to incur liability under the terms of the Plan with respect to
the individuals participating in the Plan ("Participants"); and
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute to the Trust assets that shall be
held therein, subject to the claims of the Company's general
creditors in the event of Insolvency, as defined in Section 3(a)
hereof, until paid to Participants and their beneficiaries in
such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan as an unfunded plan maintained for
the purpose of providing compensation for a select group of
management or other employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan; and
WHEREAS, the Trust is intended to hold a number of shares
of the Company's common stock ("Common Stock") sufficient for
transfer to Participants as they exercise stock options granted
under the Plan; and
WHEREAS, the Company desires to establish a fund,
consisting of the cash dividends that have accumulated from the
shares held in the Trust, for the payment of discretionary cash
bonuses to Participants other than those serving as the Trustee.
NOW, THEREFORE, the parties do hereby establish this Trust
and agree that the Trust shall be comprised, held, and disposed
of as follows:
Section 1. Establishment of Trust.
----------------------------------
(a) The Company hereby deposits, or will from time to
time deposit, with the Trustee in trust an amount expected to be
sufficient to permit the Trust to purchase up to ten percent
(10%) <PAGE>
<PAGE>
of the shares of Common Stock issued by the Company. Said
amount shall become the initial principal of the Trust to
be held, administered and disposed of by the Trustee as provided
in this Trust Agreement.
(b) The Trust shall be revocable, but become irrevocable
upon a Change in Control (as that term is defined in Section
13(f) of this Trust Agreement.
(c) The Trust is intended to be a grantor trust, of
which the Company is the grantor, within the meaning of subpart
E, part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings
thereon, shall be held separate and apart from other funds of
the Company and shall be used exclusively as herein set forth.
Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of
Participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any
time, or from time to time, make additional deposits of cash or
other property in trust with the Trustee to augment the
principal to be held, administered and disposed of by Trustee as
provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such
additional deposits.
(f) Upon a Change in Control within the meaning of
Section 13(f) hereof, the Trust shall become irrevocable, and
the Company shall, as soon as possible but in no event longer
than ten business days after the Change in Control, make an
irrevocable contribution to this Trust in an amount that is
projected to be sufficient to pay each Participant the benefits
to which he or she is entitled pursuant to the Plan as of the
date of the Change in Control.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
---------------------------------------------------
(a) Within 60 days after the end of each fiscal year of
the Company during which the Trust Agreement is in effect, the
Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each
Participant (and his or her beneficiaries), that provides a
formula or other instructions acceptable to the Trustee for
determining the amounts so payable, the form in which such
amount is to be paid (as provided for or available under the
Plan, and including transfers of Common Stock from the Trust to
Participants), and the time of commencement for payment of such
amounts. Except as otherwise provided herein, the Trustee shall
make payments to Participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall makwe
provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect
2<PAGE>
<PAGE>
to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by the Company.
(b) The entitlement of a Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Company or such party as it shall designate under the Plan,
and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to
Participants or their beneficiaries as they become due under the
terms of the Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Company shall make
the balance of each such payment as it falls due. The Trustee
shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
--------------------------------------------------------
(a) The Trustee shall cease payment of benefits to
Participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes
subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust,
as provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to inform the Trustee
in writing of the Company's Insolvency. If a person claiming to
be a creditor of the Company alleges in writing to the Trustee
that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits
to Participants or their beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or
a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
3<PAGE>
<PAGE>
(2) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Plan participants or their beneficiaries, shall liquidate the
Trust's investment in Common Stock, and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their beneficiaries as general
creditors of the Company with respect to benefits due under the
Plan or otherwise.
(3) The Trustee shall resume the payment of
benefits to Participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after the Trustee
has determined that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any
payments made to Participants or their beneficiaries by the
Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
SECTION 4. PAYMENTS TO THE COMPANY.
Except as provided in Section 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust assets before
all payment of benefits have been made to Plan Participants and
their beneficiaries pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY.
(a) The Trustee shall have sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock; provided that the Trust shall not purchase, in the
aggregate, more than 10% of the shares of Common Stock then
outstanding.
(b) All rights associated with assets of the Trust shall
be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or rest with
Participants, except that voting rights with respect to Common
Stock will be exercised in accordance with the terms and
conditions for the exercise of voting rights of unallocated
shares under the Company's Employee Stock Ownership Plan, as in
effect on the date hereof.
(c) Subject to applicable federal and state securities
laws, if for any reason the Trustee will be selling shares of
Common Stock, the Trustee shall sell such shares by (i) giving
each Participant 20 business days within which to purchase, at
fair market value, all or part of any shares of Common Stock
that the Trustee holds for the benefit of the Participant, and
(ii) to the
4<PAGE>
<PAGE>
extent purchases by Participants are insufficient to eliminate
the Trust's excess holdings of Common Stock, to offer to sell,
and to sell, all or any part of the excess shares held by the
Trust to the following purchasers, listed here by order of
priority: first, the Company; second, any benefit plan
maintained by the Company or Home Savings Bank, SSB (the
"Bank"); third, directors of the Bank; fourth, officers of the
Bank; fifth, members of the general public (through sales on the
open market).
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee.
Within 60 days following the close of each fiscal year and
within 20 days after the removal or resignation of the Trustee,
the Trustee shall deliver to the Company a written account of
its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by the
Company which is contemplated by, and in conformity with, the
terms of the Plan or this Trust and is given in writing by the
Company. In the event of a dispute between the Company and a
party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except in those cases where the Trustee shall have
been found by a court of competent jurisdiction to have acted
with gross negligence or willful misconduct.
5<PAGE>
<PAGE>
If the Company does not pay such costs, expenses and liabilities
in a reasonably timely manner, the Trustee may obtain payment
from the Trust.
(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all
powers conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Plan and this Trust.
If not so paid, the fees and expenses shall be paid from the
Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
The Trustee may resign at any time by written notice to
the Company, which resignation shall be effective 30 days after
the Company receives such notice (unless the Company and the
Trustee agree otherwise). The Trustee may be removed by the
Company on 30 days notice or upon shorter notice accepted by the
Trustee, but only if each Participant (and each beneficiary in
pay status) consents in writing to such removal.
If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date or resignation or removal under this section. If
no such appointment has been made, the Trustee may apply to a
court of competent jurisdiction for appointment of a successor
or for instructions. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses
of the Trust. Upon resignation or removal of the Trustee and
appointment of a successor trustee, all assets shall
subsequently be transferred
6<PAGE>
<PAGE>
to the successor trustee. The transfer shall be completed
within 60 days after receipt of notice of resignation, removal
or transfer, unless the Company extends the time limit.
SECTION 11. APPOINTMENT OF SUCCESSOR.
If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Company may appoint any other party as a
successor to replace the Trustee upon such resignation or
removal. The appointment shall be effective when accepted in
writing by the new trustee, who shall have all of the rights and
powers of the former trustee, including ownership rights in the
Trust assets. The former trustee shall execute any instrument
necessary or reasonably requested by the Company or the
successor trustee to evidence the transfer.
Notwithstanding the foregoing, if the Trustee resigns or
is removed following a Change in Control, the Trustee that has
resigned or is being removed shall appoint as its successor a
third party financial institution that has trust powers and is
independent of and unrelated to the entity that has acquired or
otherwise obtained control of the Company.
A successor trustee need not examine the records and acts
of any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor
trustee shall not be responsible for, and the Company shall
indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes successor trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company, provided
that no such amendment shall either conflict with the terms of
the Plan, or make the Trust revocable.
(b) The Trust shall not terminate until the date on
which Participants and their beneficiaries are no longer
entitled to benefits pursuant to the terms hereof. Upon
termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits),
the Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to the Company.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
7<PAGE>
<PAGE>
(b) Benefits payable to Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant
to the terms of the Plan.
(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota,
to the extent not preempted by federal law.
(d) The Trustee agrees to be bound by the terms of the
Plan, as in effect from time to time.
(e) The Trustee shall act by vote or written consent of a
majority of its then duly appointed members.
(f) "Change in Control" is defined in Section 6 of the
Bank's Supplemental Income Plan Agreement, as amended and
restated December 14, 1995, with Mr. Thomas A. Vann, and shall
be defined in the same manner for purposes of this Trust. Any
amendment to said agreement that modifies said definition shall
be deemed to apply with equal force, effect, and timing to the
definition of Change in Control for purposes of this Trust,
except that a modification that may adversely affect a
Participant shall be ineffectual as to the Participant unless he
or she consents in writing to be bound by the modification.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust shall be the date of
execution designated below.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Agreement to be executed, and its
corporate seal affixed, and the undersigned Trustees have
executed this Agreement, this 20th day of March, 1997.
NEWSOUTH BANCORP, INC.
ATTEST:
/s/ William L. Wall By:/s/ Thomas A. Vann
- ------------------- ------------------------
Its President
ATTEST:
/s/ William L. Wall /s/ Linley H. Gibbs, Jr.
- ------------------- -----------------------------
Linley H. Gibbs, Jr., Trustee
/s/ William L. Wall /s/ Frederick N. Holscher
- ------------------- ------------------------------
Frederick N. Holscher, Trustee
/s/ William L. Wall /s/ Frederick H. Howdy
- ------------------- ------------------------------
Frederick H. Howdy, Trustee
<PAGE>
STOCK OPTION AGREEMENT
FOR INCENTIVE STOCK OPTIONS UNDER SECTION 422
OF THE INTERNAL REVENUE CODE
PURSUANT TO THE
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
STOCK OPTION for a total of _____ shares of Common Stock,
par value $.01 per share, of NewSouth Bancorp, Inc. (the
"Company"), which Option is intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), is hereby granted to ________
(the "Optionee") at the price set forth herein, and in all
respects subject to the terms, definitions and provisions of the
NewSouth Bancorp, Inc. 1997 Stock Option Plan (the "Plan") which
was adopted by the Company and which is incorporated by
reference herein, receipt of which is hereby acknowledged.
1. Option Price. The option price is $_____ for each
share, being 100% of the fair market value, as determined by the
Committee, of the Common Stock on the date of grant of this
Option.
2. Exercises of Option. This Option shall be exercisable
in accordance with provisions of the Plan as follows:
(i) Schedule of rights to exercise.
------------------------------
Percentage of Total Shares
Years of Continuous Employment Subject to Option Which May
After Date of Grant of Option Be Exercised
------------------------------ ---------------------------
Upon Grant __%
1 year but less than 2 years __%
2 years but less than 3 years __%
3 years but less than 4 years __%
4 years but less than 5 years __%
5 years or more __%
__________
*/ 100% in the case of an Optionee who owns shares
representing more than 10% of the outstanding common stock
of the Company on the date of grant of this Option.<PAGE>
<PAGE>
ISO Agreement
Page 2
(ii) Method of Exercise. This Option shall be
exercisable by a written notice by the Optionee which shall:
(a) state the election to exercise the Option,
the number of shares with respect to which it is being
exercised, the person in whose name the stock
certificate or certificates for such shares of Common
Stock is to be registered, his address and Social
Security Number (or if more than one, the names,
addresses and Social Security Numbers of such
persons);
(b) contain such representations and agreements
as to the holder's investment intent with respect to
such shares of Common Stock as may be satisfactory to
the Company's counsel;
(c) be signed by the person or persons entitled
to exercise the Option and, if the Option is being
exercised by any person or persons other than the
Optionee, be accompanied by proof, satisfactory to
counsel for the Company, of the right of such person
or persons to exercise the Option; and
(d) be in writing and delivered in person or by
certified mail to the Treasurer of the Company.
Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be by cash, Common
Stock, or such combination of cash and Common Stock as the
Optionee elects. In addition, the Optionee may elect to pay for
all or part of the exercise price of the shares by having the
Company withhold a number of shares having a fair market value
equal to the exercise price. The certificate or certificates for
shares of Common Stock as to which the Option shall be exercised
shall be registered in the name of the person or persons
exercising the Option.
(iii) Restrictions on exercise. This Option may not
be exercised if the issuance of the shares upon such exercise
would constitute a violation of any applicable federal or state
securities or other law or valid regulation. As a condition to
the Optionee's exercise of this Option, the Company may require
the person exercising this Option to make any representation and
warranty to the Company as may be required by any applicable law
or regulation.
3. Withholding. The Optionee hereby agrees that the
exercise of the Option or any installment thereof will not be
effective, and no shares will become transferable to the
Optionee, until the Optionee makes appropriate arrangements with
the Company for such tax withholding as may be required of the
Company under federal, state, or local law on account of such
exercise.<PAGE>
<PAGE>
ISO Agreement
Page 3
4. Non-transferability of Option. This Option may not be
transferred in any manner otherwise than by will or the laws of
descent or distribution. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
5. Term of Option. This Option may not be exercisable
for more than ten years from the date of grant of this Option,
as stated below, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN COMMITTEE
By _____________________________
_____________________
Date of Grant Attest: ___________________ (Seal)
__________
**/ Five years in the case of an Optionee who owns shares
representing more than 10% of the outstanding stock of the
Company on the date of grant of this Option.
<PAGE>
<PAGE>
INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
____________
Date
Treasurer
NewSouth Bancorp, Inc.
1311 Carolina Avenue, P.O. Box 2047
Washington, North Carolina 27889
Re: NewSouth Bancorp, Inc. 1997 Stock Option Plan
---------------------------------------------
Dear Sir:
The undersigned elects to exercise the Incentive Stock
Option to purchase _____ shares, par value $.01, of Common Stock
of NewSouth Bancorp, Inc. under and pursuant to a Stock Option
Agreement dated __________, 199__.
Delivered herewith is a certified or bank cashier's or
teller's check and/or shares of Common Stock, valued at the fair
market value of the stock on the date of exercise, as set forth
below.
$_____ of cash or check
$_____ in the form of _____ shares of Common Stock,
valued at $_____ per share
$_____ in the form of the Company's withholding of
_____ shares of Common Stock, valued at $_____
per share, that are subject to this Option
$ Total
=====
The name or names to be on the stock certificate or
certificates and the address and Social Security Number of such
person(s) is as follows:
Name __________________________________________________________
Address _______________________________________________________
Social Security Number ________________________________________
Very truly yours,
________________________
<PAGE>
STOCK OPTION AGREEMENT
FOR NON-INCENTIVE STOCK OPTIONS PURSUANT TO THE
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
STOCK OPTION for a total of _____ shares of Common Stock,
par value $.01 per share, of NewSouth Bancorp, Inc. (the
"Company") is hereby granted to _____ (the "Optionee") at the
price set forth herein, and in all respects subject to the
terms, definitions and provisions of the NewSouth Bancorp, Inc.
1997 Stock Option Plan (the "Plan") which has been adopted by
the Company and which is incorporated by reference herein,
receipt of which is hereby acknowledged. Such Stock Options do
not comply with Options granted under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
1. Option Price. The option price is $_____ for each
share, being 100% of the fair market value, as determined by the
Committee, of the Common Stock on the date of grant of this
Option.
2. Exercise of Option. This Option shall be exercisable
in accordance with provisions of the Plan as follows:
(i) Schedule of rights to exercise.
------------------------------
Percentage of Total Shares
Years of Continuous Employment Subject to Option Which May
After Date of Grant of Option Be Exercised
------------------------------ ---------------------------
Upon Grant __%
1 year but less than 2 years __%
2 years but less than 3 years __%
3 years but less than 4 years __%
4 years but less than 5 years __%
5 years or more __%
(ii) Method of Exercise. This Option shall be
exercisable by a written notice which shall:
(a) state the election to exercise the Option,
the number of shares with respect to which it is being
exercised, the person in whose name the stock
certificate or certificates for such shares of Common
Stock is to be registered, his address and Social
Security Number (or if more than one, the names,
addresses and Social Security Numbers of such
persons);
<PAGE>
<PAGE>
Non-ISO Agreement
Page 2
(b) contain such representations and agreements
as to the holders' investment intent with respect to
such shares of Common Stock as may be satisfactory to
the Company's counsel;
(c) be signed by the person or persons entitled
to exercise the Option and, if the Option is being
exercised by any person or persons other than the
Optionee, be accompanied by proof, satisfactory to
counsel for the Company, of the right of such person
or persons to exercise the Option; and
(d) be in writing and delivered in person or by
certified mail to the Treasurer of the Company.
Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be by cash, Common
Stock, or such combination of cash and Common Stock as the
Optionee elects. In addition, the Optionee may elect to pay for
all or part of the exercise price of the shares by having the
Company withhold a number of shares having a fair market value
equal to the exercise price. The certificate or certificates for
shares of Common Stock as to which the Option shall be exercised
shall be registered in the name of the person or persons
exercising the Option.
(iii) Restrictions on exercise. The Option may not
be exercised if the issuance of the shares upon such exercise
would constitute a violation of any applicable federal or state
securities or other law or valid regulation. As a condition to
his exercise of this Option, the Company may require the person
exercising this Option to make any representation and warranty
to the Company as may be required by any applicable law or
regulation.
3. Withholding. The Optionee hereby agrees that the
exercise of the Option or any installment thereof will not be
effective, and no shares will become transferable to the
Optionee, until the Optionee makes appropriate arrangements with
the Company for such tax withholding as may be required of the
Company under federal, state, or local law on account of such
exercise.
4. Non-transferability of Option. This Option may not be
transferred in any manner otherwise than by will or the laws of
descent or distribution. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors
and assigns of the Optionee. Notwithstanding any other terms of
this agreement, to the extent permissible under Rule 16b-3 of
the Securities Exchange Act of 1934, as amended, this Option may
be transferred to the Optionee's spouse, lineal ascendants,
lineal descendants, or to a duly established trust, provided
that such transferee shall be permitted to exercise this Option
subject to the same terms and conditions applicable to the
Optionee.
<PAGE>
<PAGE>
Non-ISO Agreement
Page 3
5. Term of Option. This Option may not be exercisable
for more than ten years from the date of grant of this Option,
as set forth below, and may be exercised during such term only
in accordance with the Plan and the terms of this Option.
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN COMMITTEE
By _____________________________
___________________
Date of Grant
Attest ____________________ (Seal)
<PAGE>
<PAGE>
NON-INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
____________
Date
Treasurer
NewSouth Bancorp, Inc.
1311 Carolina Avenue, P.O. Box 2047
Washington, North Carolina 27889
Re: NewSouth Bancorp, Inc. 1997 Stock Option Plan
---------------------------------------------
Dear Sir:
The undersigned elects to exercise his Non-Incentive Stock
Option to purchase _____ shares, par value $.01, of Common Stock
of NewSouth Bancorp, Inc. under and pursuant to a Stock Option
Agreement dated __________, 199__.
Delivered herewith is a certified or bank cashier's or
tellers check and/or shares of Common Stock, valued at the fair
market value of the stock on the date of exercise, as set forth
below.
$_____ of cash or check
$_____ in the form of _____ shares of Common Stock,
valued at $_____ per share
$_____ in the form of the Company's withholding of
_____ shares of Common Stock, valued at $_____
per share, that are subject to this Option
$ Total
=====
The name or names to be on the stock certificate or
certificates and the address and Social Security Number of such
person is as follows:
Name __________________________________________________________
Address _______________________________________________________
Social Security Number ________________________________________
Very truly yours,
________________________
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN COMMITTEE
NOTICE OF AWARD
---------------
WHEREAS, the Board of Directors of NewSouth Bancorp, Inc.
(the "Company") has previously adopted the NewSouth Bancorp,
Inc. Management Recognition Plan (the "Plan"); and
WHEREAS, the Board of Directors of the Company has
previously appointed Directors Gibbs, Howdy, and Holscher as
members of the Management Recognition Plan Committee (the
"Committee") pursuant to the terms of the Plan, and by
resolution dated __________, 19__ the Committee made awards
under the Plan.
PLEASE TAKE NOTICE, that the following individual be
granted an award under the Plan ("Plan Share Award"), effective
_______________:
Number of Shares Subject to
Recipient Plan Share Award
--------- ---------------------------
_______________ _____
AND BE IT FURTHER RESOLVED, that the Plan Share Award
specified herein shall be subject to the restrictions and other
provisions of Section 7.01 of the Plan.
Date of Notice:
__________, 199__
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
COMMITTEE
By: _________________________
Its Chairman
<PAGE>
M E M O R A N D U M
TO: Participants in the NewSouth Bancorp, Inc.
Management Recognition Plan
DATE: February 27, 1998
FROM: J. Mark Poerio, Esquire
RE: Taxation of MRP Awards
================================================================
* * * * * * * * * * * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * * * * * * * * * * *
This memorandum concerns the taxation of the awards that
will automatically occur under the NewSouth Bancorp's (the
"Company's") Management Recognition Plan (the "MRP") upon its
receipt of stockholder approval. To facilitate your review, the
discussion below is divided as follows:
Part I: General Tax Principles and Application
to the MRP
Part II: Accelerated Taxation under Section 83(b)
Please understand that this memorandum is merely designed
to summarize the tax rules generally applicable to MRP awards.
We could provide individual tax advice to the recipients of MRP
awards ("Participants"), should anyone desire assistance.
The deadline for making a Section 83(b) election is 30
days after the award date -- or May 8, 1998 -- with respect to
awards occurring on the MRP's receipt of stockholder approval.
<PAGE>
<PAGE>
Taxation of MRP Awards
Page 2
PART I:
GENERAL TAX PRINCIPLES
Section 83 -- Generally. Section 83 of the Internal
Revenue Code (the "Code") controls the federal income taxation
of property that is transferred in connection with the
performance of services. In the absence of the Section 83(b)
election described in Part II, the recipient of restricted
property (such as an MRP award) recognizes income not on the
date of the award but on the date that his or her interest
vests. The amount of the recipient's taxable income will equal
the fair market value of the restricted property when vesting
occurs. 1/ Subsequent gain or loss is treated as capital gain,
with the amount that is included in the recipient's ordinary
income determining his or her basis in the property.
Operation of the MRP. The Company's MRP will generally
work as follows for Recipients who do not make Section 83(b)
elections:
Date Event
Stockholder The MRP should provide a "Notice of the MRP
Approval of Award" to each Recipient. The notice
will specify the number of shares subject
to the award.
Recipients will not receive shares of the
Company's common stock, or be subject to
federal income taxation as the result of
receiving an award.
April 8, 1998, The MRP trusts will transfer to each
April 8, 1999, Recipient a number of unrestricted shares
and subject to the award, plus any dividends
April 8, 2000 attributable to those shares (provided)
that the Recipient has not previously
terminated service).
As you may recall, vesting would accelerate to 100% upon a
Recipient's termination of service due to death or disability or
upon a change in control, and that special rules apply if a
transfer of Common Stock would cause the Recipient to own in
excess of 10% of the Common Stock.
__________
1/ This contracts with the financial accounting treatment for
MRP awards (i.e., expense recognition is determined by the
fair market on the date of the award).<PAGE>
<PAGE>
Taxation of MRP Awards
Page 3
Tax Withholding. In the case of Recipients who are non-
employee directors, federal income tax withholding is not
required when their MRP awards give rise to taxable income. On
the other hand, Recipients who are employees must satisfy
federal income tax withholding not only at the time their MRP
awards generate taxable income, but also before they may receive
shares of Common Stock from the MRP trust.
IRS Reporting. We understand that in the case of an
employee, the ordinary income arising from the vesting of MRP
awards and from the payment of tax bonuses is reportable on Form
W-2, in Box 11, and that in the case of a non-employee director,
such income is reportable on Form 1099-MISC, in Box 7.
PART II:
ACCELERATED TAXATION UNDER SECTION 83(B)
Section 83(b) Generally. Within 30 days after receiving
an MRP Award, a Recipient may make a special, irrevocable
election under Code Section 83(b), and thereby accelerate
ordinary income taxation to the date that the property transfer
occurred. The amount of the Recipient's ordinary income would
equal the fair market value of the Common Stock subject to the
MRP award as of the date on which the award occurred. Subsequent
gain (or loss, if the award is forfeited or depreciates) would
be long- or short-term capital gain, not ordinary income.
Procedural Requirements. Section 83(b) elections must
include the information set forth in the form of Section 83(b)
election that we have attached hereto. Further, Section 83(b)
elections must be filed with the IRS Service Center where the
Recipient files his or her return (both within 30 days after the
transfer occurs, and as an attachment to his or her tax return
for the year to which the Section 83(b) election relates). A
copy of the Section 83(b) election must also be filed with the
Company.
Tax Caveat. In several recent private letter rulings
(which, while not binding precedent, are indicative of current
IRS policy), the Internal Revenue Service has taken the position
that, for purposes of Section 83 of the Code, no "transfer" of
property occurs when an individual receives an interest in an
employer's grantor trust. Because the trust associated with the
MRP is a grantor trust (by design, in order to secure deferred
taxation of awards), these rulings suggest that the IRS could
question whether Section 83(b) elections may be made with
respect to MRP awards. While we do not believe that this
theoretical possibility involves a substantial tax risk for
Recipients, each Recipient should contact his or her personal
tax counsel for independent advice about this issue.
Tax Reporting and Withholding. The rules described in
Part I would apply, as though vesting occurred on the date of
the Recipient's Section 83(b) election.
<PAGE>
<PAGE>
Taxation of MRP Awards
Page 4
CONCLUSION
Whether or not a Recipient should make a Section 83(b)
election depends on a variety of factors, including the
Recipient's expectations as to (i) the short-term and long-term
future value of the Common Stock, (ii) the length of time the
Recipient is likely to hold the Common Stock, (iii) future tax
rates -- as to both income and capital gain, (iv) the risk of
forfeiture, and (v) the Recipient's ability to pay the taxes
associated with the MRP award.
<PAGE>
NEWSOUTH BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
-------------------------------------------------------------
Election to Include Value of Restricted Stock in Gross Income
in Year of Transfer Under Code Section 83(b)
-------------------------------------------------------------
* * * * * * * * * * * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * * * * * * * * * * *
The undersigned hereby makes the election permitted under
Section 83(b) of the Internal Revenue Code of 1986, as amended,
with respect to the property described below, and supplies the
following information in accordance with the regulations
promulgated thereunder:
1. The name, address, and taxpayer identification or social
security number of the undersigned are:
Name: ________________________________
Address: ________________________________
________________________________
I.D. No. ________________________________
2. Description of the property with respect to which the
election is being made:
__________________ ( ) shares of common stock,
par value $0.01 per share, of NewSouth Bancorp, Inc.
(hereinafter, the "Common Stock").
3. The date on which the Common Stock was transferred is
__________ ___, 19__. The taxable year to which this
election relates is calendar year 19__.
4. The nature of the restrictions to which the Common Stock
is subject is as follows:
The Common Stock is forfeitable until it is earned in
accordance with Article VII of the NewSouth Bancorp, Inc.
Management Recognition Plan (the "Plan"). With respect
to plan share awards that were granted on April 8, 1998,
the Common Stock becomes earned and nonforfeitable by the
undersigned at the rate of one-third<PAGE>
<PAGE>
Section 83(b) Election
Page 2 of 2
on each of the following dates: April 8, 1998, April 8,
1999, and April 8, 2000. The vesting conditions
applicable to any plan share awards made after April 8,
1998 will be determined by the Committee. For special
rules regarding the vesting of the undersigned's interest
in the Common Stock, see Section 7.01 of the Plan.
The Common Stock is non-transferable until the
undersigned's interest therein becomes vested and
nonforfeitable, pursuant to Section 8.03 of the Plan.
5. Fair market value:
The fair market value at the time of transfer
(determined without regard to any restrictions other
then restrictions which by their terms will never
lapse) of the stock with respect to which this
election is being made is $_____ per share.
6. Amount paid for Common Stock:
The amount paid by taxpayer for said Common Stock is
$0.00 per share.
7. Furnishing statement to employer:
A copy of this statement has been furnished to
NewSouth Bancorp, Inc.
8. Notice:
Nothing contained herein shall be held to alter, vary
or affect any of the terms, provisions or conditions
of the Plan, or the award made thereunder to the
undersigned.
Dated: ____________ __, 199__.
___________________________
Taxpayer/Plan Participant
