<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
NEWSOUTH BANCORP, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which
transaction applies:
________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
________________________________________________________________
3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined):
________________________________________________________________
4. Proposed maximum aggregate value of transaction:
________________________________________________________________
5. Total fee paid:
________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________
<PAGE>
<PAGE>
[NEWSOUTH BANCORP, INC. LETTERHEAD]
March 5, 1998
Dear Stockholder:
We invite you to attend the Special Meeting of Stockholders
(the "Special Meeting") of NewSouth Bancorp, Inc. (the
"Company") which will be held on Wednesday, April 8, 1998, at
the main office of NewSouth Bank (the "Bank") located at 1311
Carolina Avenue, Washington, North Carolina at 10:00 a.m.,
eastern time. The attached Notice of Special Meeting and Proxy
Statement describe the formal business to be transacted at the
Special Meeting.
The Special Meeting has been called to consider and vote
upon approval of the Company's 1997 Stock Option Plan and
Management Recognition Plan. Enclosed are a Proxy Statement and
a Proxy Card. Certain directors and officers of the Company
will be present at the Special Meeting to respond to any
questions that our stockholders may have.
The Board of Directors of the Company has determined that
the matters to be considered at the Special Meeting are in the
best interests of the Company and its stockholders. For the
reasons set forth in the Proxy Statement, the Board unanimously
recommends a vote "FOR" each matter to be considered.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE,
EVEN IF YOU CURRENTLY PLAN TO ATTEND THE SPECIAL MEETING. This
will not prevent you from voting in person but will assure
that your vote is counted if you are unable to attend the
Special Meeting.
On behalf of the Board of Directors and all the employees
of the Company and NewSouth Bank, I wish to thank you for your
continued support.
Sincerely,
/s/ Thomas A. Vann
Thomas A. Vann
President<PAGE>
<PAGE>
________________________________________________________________
NEWSOUTH BANCORP, INC.
1311 CAROLINA AVENUE
WASHINGTON, NORTH CAROLINA 27889
________________________________________________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 8, 1998
________________________________________________________________
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders (the "Special Meeting") of NewSouth Bancorp, Inc.
(the "Company") will be held at the main office of NewSouth Bank
(the "Bank") located at 1311 Carolina Avenue, Washington, North
Carolina on Wednesday, April 8, 1998, at 10:00 a.m., eastern
time.
A Proxy Statement and Proxy Card for the Special Meeting
are enclosed.
The Special Meeting is for the purpose of considering and
acting upon the following matters:
1. Approval of the NewSouth Bancorp, Inc. 1997 Stock
Option Plan;
2. Approval of the NewSouth Bancorp, Inc. Management
Recognition Plan;
3. Such other business as may properly come before
the Special Meeting or any adjournment thereof.
The Board of Directors is not aware of any other business
to come before the Special Meeting.
Any action may be taken on any one of the foregoing
proposals at the Special Meeting on the date specified above or
on any date or dates to which, by original or later adjournment,
the Special Meeting may be adjourned. Stockholders of record at
the close of business on February 25, 1998 are the stockholders
entitled to notice of and to vote at the Special Meeting and any
adjournment thereof.
You are requested to fill in and sign the enclosed Proxy
Card which is solicited by the Board of Directors and to mail it
promptly in the enclosed envelope. The proxy will not be used
if you attend and vote at the Special Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William L. Wall
William L. Wall
Secretary
Washington, North Carolina
March 5, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE
COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO
INSURE A QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.<PAGE>
<PAGE>
________________________________________________________________
PROXY STATEMENT
OF
NEWSOUTH BANCORP, INC.
1311 CAROLINA AVENUE
WASHINGTON, NORTH CAROLINA 27889
________________________________________________________________
SPECIAL MEETING OF STOCKHOLDERS
APRIL 8, 1998
________________________________________________________________
GENERAL
________________________________________________________________
This Proxy Statement is furnished to stockholders of
NewSouth Bancorp, Inc. (the "Company") in connection with the
solicitation by the Board of Directors of the Company of proxies
to be used at the Special Meeting of Stockholders (the "Special
Meeting") which will be held at the main office of NewSouth Bank
(the "Bank") located at 1311 Carolina Avenue, Washington, North
Carolina on Wednesday, April 8, 1998, at 10:00 a.m., eastern
time, and at any adjournment thereof. The accompanying Notice
of Special Meeting and Proxy Card and this Proxy Statement are
being first mailed to stockholders on or about March 5, 1998.
________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
________________________________________________________________
Regardless of the number of shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), owned, it
is important that stockholders be represented by proxy or
present in person at the Special Meeting. Stockholders are
requested to vote by completing the enclosed proxy card and
returning it signed and dated in the enclosed postage-paid
envelope. Stockholders are urged to indicate their vote in the
spaces provided on the proxy card. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY WILL BE VOTED IN ACCORDANCE
WITH THE DIRECTIONS GIVEN THEREIN. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE APPROVAL OF THE
SPECIFIC PROPOSALS PRESENTED IN THIS PROXY STATEMENT. Proxies
marked as abstentions will not be counted as votes cast. In
addition, shares held in street name which have been designated
by brokers on proxy cards as not voted will not be counted as
votes cast. Proxies marked as abstentions or as broker
nonvotes, however, will be treated as shares present for
purposes of determining whether a quorum is present.
The Board of Directors knows of no additional matters that
will be presented for consideration at the Special Meeting.
Execution of a proxy, however, confers on the designated proxy
holders discretionary authority to vote the shares in accordance
with the determination of a majority of the Board of Directors
on such other business, if any, that may properly come before
the Special Meeting or any adjournments thereof.
A proxy may be revoked at any time prior to its exercise by
the filing of a written notice of revocation with the Secretary
of the Company, by delivering a duly executed proxy bearing a
later date to the Secretary of the Company at the address listed
above, or by attending the Special Meeting and voting in person.
The presence of a stockholder at the Special Meeting will not in
itself revoke such stockholder's proxy.
<PAGE>
________________________________________________________________
VOTING SECURITIES AND SECURITY OWNERSHIP
________________________________________________________________
The securities entitled to vote at the Special Meeting
consist of the Company's Common Stock. Stockholders of record
as of the close of business on February 25, 1998 (the "Record
Date") are entitled to one vote for each share of Common Stock
then held. As of the Record Date, there were 2,909,500 shares
of Common Stock issued and outstanding. The presence, in person
or by proxy, of at least one-third of the total number of shares
of Common Stock outstanding and entitled to vote will be
necessary to constitute a quorum at the Special Meeting.
<PAGE>
<PAGE>
Persons and groups beneficially owning more than 5% of the
Common Stock are required to file certain reports with respect
to such ownership pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The following table sets
forth information regarding the shares of Common Stock
beneficially owned as of the Record Date by persons who
beneficially own more than 5% of the Common Stock, each of the
Company's directors, including the executive officer of the
Company named in the Summary Compensation Table set forth
under "Management Compensation -- Executive Compensation --
Summary Compensation Table," and all of the Company's directors
and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
AT RECORD DATE (1) CLASS (2)
---------------------- ----------
<S> <C> <C>
Persons Owning Greater than 5%:
- ------------------------------
NewSouth Bancorp, Inc. 231,629 7.96%
Employee Stock Ownership Plan Trust
("ESOP")
1311 Carolina Avenue
Washington, North Carolina 27889
Directors:
- ---------
Edmund T. Buckman, Jr. 40,000 (3) 1.37
Linley H. Gibbs, Jr. 20,000 (4) *
Frederick N. Holscher 13,763 (5) *
Frederick H. Howdy 40,000 (6) 1.37
Charles E. Parker, Jr. 20,000 *
Marshall T. Singleton 31,466 (7) 1.08
Thomas A. Vann 46,441 (8) 1.60
All directors and executive officers 241,563 8.30
of the Company as a group (16 persons)
</TABLE>
__________
(1) In accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, a person is deemed to be the beneficial owner,
for purposes of this table, of any shares of Common Stock
if he or she has or shares voting or investment power with
respect to such Common Stock. As used herein, "voting
power" is the power to vote or direct the voting of shares
and "investment power" is the power to dispose or direct
the disposition of shares. Except as otherwise noted,
ownership is direct, and the named individuals and group
exercise sole voting and investment power over the shares
of the Common Stock. The listed amounts do not include
shares with respect to which Directors Gibbs, Holscher,
and Howdy have voting power by virtue of their positions as
trustees of the trusts holding 231,629 shares under the
ESOP and 116,380 shares under the Company's proposed
Management Recognition Plan ("MRP"). Shares held by the
ESOP trust and allocated to the accounts of participants
are voted in accordance with the participants'
instructions, and, subject to applicable labor laws,
unallocated shares are voted in the same ratio as ESOP
participants direct the voting of allocated shares or, in
the absence of such direction, in the ESOP trustees' best
judgment. At the Record Date, 24,828 shares had been
allocated. The shares held by the MRP trust are voted in
the same proportion as the ESOP trustees vote the shares
held in the ESOP trust.
(2) Based on a total of 2,909,500 shares of Common Stock
outstanding at the Record Date.
(3) Includes 20,000 shares owned by Mr. Buckman's spouse.
(4) Includes 1,400 shares owned by Mr. Gibbs' spouse.<PAGE>
(5) Includes 1,350 shares owned by Mr. Holscher's spouse, 200
shares owned by his son and 100 shares owned by his
daughter.
(6) Includes 20,000 shares owned by Dr. Howdy's spouse.
(7) Includes 10,000 shares owned by B.E. Singleton & Sons,
Inc., a corporation co-owned by Mr. Singleton, and 1,484
shares owned by his spouse.
(8) Includes 20,000 shares owned by Mr. Vann's spouse, 5,000
shares owned by his son and 1,441 shares allocated to Mr.
Vann's account under the ESOP.
* Less than 1% of outstanding Common Stock.
2<PAGE>
<PAGE>
________________________________________________________________
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
________________________________________________________________
Overview and Philosophy
The Company's executive compensation policies are
established by the Executive Committee of the Board of Directors
(the "Committee") composed of three outside directors and the
Company's President, Thomas Vann. Mr. Vann does not participate
in deliberations regarding his compensation. The Committee is
responsible for developing the Company's executive compensation
policies. The Company's President, under the direction of the
Committee, implements the Company's executive compensation
policies. The Committee's objectives in designing and
administering the specific elements of the Company's executive
compensation program are as follows:
o To link executive compensation rewards to increases in
shareholder value, as measured by favorable long-term operating
results and continued strengthening of the Company's financial
condition.
o To provide incentives for executive officers to work
towards achieving successful annual results as a step in
achieving the Company's long-term operating results and
strategic objectives.
o To correlate, as closely as possible, executive
officers' receipt of compensation with the attainment of
specified performance objectives.
o To maintain a competitive mix of total executive
compensation, with particular emphasis on awards related to
increases in long-term shareholder value.
o To attract and retain top performing executive officers
for the long-term success of the Company.
In furtherance of these objectives, the Committee has
determined that there should be two specific components of
executive compensation: base salary and a cash bonus.
Base Salary. The Committee makes recommendations to the
Board concerning executive compensation on the basis of surveys
of salaries paid to executive officers of other bank holding
companies, non-diversified banks and other financial
institutions similar in size, market capitalization and other
characteristics. In addition, the Company maintains a salary
administration program, pursuant to which it assembles a list of
executive positions, with job descriptions and salary ranges,
which the Committee uses in setting executive salaries. In
setting executive salaries, the Committee also takes into
consideration the relative complexity of the Bank's operations,
compared to those of other similarly sized banks, attributable
to the large volume of loans serviced for others. The
Committee's objective is to provide for base salaries that are
competitive with the average salary paid by the Company's peers.
Bonus. The Bank pays a discretionary bonus on an annual
basis based on satisfaction of a combination of individual and
Bank performance objectives. Whether bonuses are paid each
year and the amount of such bonuses are determined by the
Committee, subject to ratification by the Board of Directors, at
year end based on the Bank's ability to achieve performance
goals established by the Board in each year's Business Plan.
Discretionary bonuses for achieving specific performance goals
during the year are paid during the next fiscal year.
In addition, the Committee believes that stock related
award plans are an important element of compensation since they
provide executives with incentives linked to the performance of
the Common Stock. Accordingly, the Committee recommended and
the Board of Directors adopted the NewSouth Bancorp, Inc. 1997
Stock Option Plan (the
3<PAGE>
<PAGE>
"Option Plan") and the NewSouth Bancorp, Inc. Management
Recognition Plan (the "MRP"), each subject to stockholder
approval at the Special Meeting.
The Board of Directors adopted the Option Plan pursuant to
which officers and directors will be granted options to acquire
a number of shares of Common Stock equal to up to an aggregate
of 10% of the outstanding Common Stock. The Committee believes
that an option plan can serve as a means of providing key
employees with the opportunity to acquire a proprietary interest
in the Company and to link their interests with those of the
Company's stockholders.
In addition, the Board of Directors adopted the MRP
pursuant to which officers and directors would be granted awards
of restricted Common Stock, subject to vesting and forfeiture as
determined by the Committee. The maximum aggregate number of
shares available for awards under the MRP will equal 4% of the
outstanding Common Stock. The purpose of the MRP is to reward
and retain personnel of experience and ability in key positions
of responsibility by providing such employees with a proprietary
interest in the Company as compensation for their past
contributions to the Company and the Bank and as an incentive to
make further contributions in the future.
For information with respect to the Option Plan, see
"Proposal I -- Approval of the NewSouth Bancorp, Inc. 1997 Stock
Option Plan," and for information with respect to the MRP, see
"Proposal II -- Approval of the NewSouth Bancorp, Inc.
Management Recognition Plan."
Compensation of the President
Mr. Vann's base salary is established in accordance with
the terms of the employment agreement entered into between the
Company and Mr. Vann. See " -- Executive Compensation --
Employment Agreements." The Committee determines the
President's compensation on the basis of several factors. In
determining Mr. Vann's base salary, the Committee conducted
surveys of compensation paid to chief executive officers of
similarly situated banks and non-diversified banks and other
financial institutions of similar asset size. The Committee
believes that Mr. Vann's base salary is generally competitive
with the average salary paid to executives of similar rank and
expertise at banking institutions which the Committee considered
to be comparable and taking into account the Bank's superior
performance and complex operations relative to comparable
institutions.
Mr. Vann received bonus compensation for fiscal year 1997
pursuant to the same basic factors as described above under " --
Bonus." In establishing Mr. Vann's bonus, the Committee
considered the Company's overall performance, record of increase
in shareholder value and success in meeting strategic objectives
and his personal leadership and accomplishments. These factors
were considered in conjunction with the Company's financial
results for fiscal 1997 in relation to the established Business
Plan and achieving certain annual performance goals, including
but not limited to return on assets and return on equity,
satisfactory results of regulatory examinations and independent
audits, and successfully completing the conversion of the Bank
from the mutual to the stock form of ownership and from a
savings bank to a commercial bank.
<PAGE>
The Committee believes that the Company's executive
compensation program serves the Company and its shareholders by
providing a direct link between the interests of executive
officers and those of shareholders generally and by helping to
attract and retain qualified executive officers who are
dedicated to the long-term success of the Company.
Members of the Executive Committee
Frederick H. Howdy (Chairman)
Linley H. Gibbs, Jr.
Frederick N. Holscher
Thomas A. Vann
4<PAGE>
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph and table which follow show the cumulative total
return on the Common Stock for the period from April 8, 1997
(the day trading began in the Common Stock following completion
of the Company's initial public offering) through the fiscal
year ended September 30, 1997 with (1) the total cumulative
return of all companies whose equity securities are traded on
the Nasdaq market and (2) the total cumulative return of banking
companies traded on the Nasdaq market. The comparison assumes
$100 was invested on April 8, 1997 in the Company's Common Stock
and in each of the foregoing indices and assumes reinvestment of
dividends. The stockholder returns shown on the performance
graph are not necessarily indicative of the future performance
of the Common Stock or of any particular index.
CUMULATIVE TOTAL STOCKHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
APRIL 8, 1997 THROUGH SEPTEMBER 30, 1997
04/08/97 09/30/97
COMPANY $100 $154.8
NASDAQ 100 134.4
NASDAQ BANKS 100 136.0
[Line graph appears here depicting the cumulative total
shareholder return of $100 invested in the Common Stock as
compared to $100 invested in all companies whose equity
securities are traded on the Nasdaq market and banking companies
traded on the Nasdaq market. Line graph plots the cumulative
total return from April 8, 1997 to September 30, 1997. Plot
points are provided above.]
5<PAGE>
<PAGE>
________________________________________________________________
MANAGEMENT COMPENSATION
________________________________________________________________
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
the cash and noncash compensation for the fiscal years ended
September 30, 1997 and 1996 awarded to or earned by the
President. No other executive officer of the Company earned
salary and bonus in fiscal 1997 exceeding $100,000 for services
rendered in all capacities to the Company and the Bank.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation
- ------------------ ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Thomas A. Vann 1997 $156,750 $ 50,000 $ -- $104,927 (2)
President 1996 135,000 55,000 -- 60,025
</TABLE>
__________
(1) Executive officers of the Company and the Bank receive
indirect compensation in the form of certain perquisites
and other personal benefits. The amount of such benefits
received by the named executive officer in fiscal 1997 did
not exceed 10% of the executive officer's salary and bonus.
(2) For the year ended September 30, 1997, consists of $4,711
in matching contributions under the Bank's 401(k) Plan,
$7,706 in Board of Directors and Committee fees, $44,860
representing the value as of September 30, 1997 of shares
of Common Stock allocated to Mr. Vann's account under the
ESOP, $26,900 accrued under a Supplemental Income Plan
Agreement, $11,500 accrued under a Directors Deferred
Compensation Plan Agreement, $3,250 accrued under a
Directors Deferred Retirement Plan Agreement and $6,000
accrued pursuant to the Bank's Pension Plan.
Pension Plan. The Bank sponsors a defined benefit plan
(the "Pension Plan") in which employees who have one year of
service and have reached age 21 are eligible to participate.
Participating employees become 100% vested in their right to
benefits upon completing five years of service, except that
participants become 100% vested upon attaining age 65,
regardless of years of service. If vested, a participant in the
Pension Plan will receive, after completion of 30 or more years
of service, an annual normal retirement benefit at age 65 equal
to the sum of (a) 37.5% of the participant's average salary over
his highest five years of compensation up to the "covered
compensation level" (as defined in the Pension Plan), plus (b)
52.5% of the participant's average salary of his highest five
years of compensation over the covered compensation level. Upon
termination of employment at or after age 65 before completion
of 30 years of service, the retirement benefit will be
multiplied by the ratio of the employee's actual years of
service to 30 years. On an actuarially reduced basis, the
Pension Plan also provides for both early retirement benefits,
beginning at age 55, and death benefits. The Bank makes all
contributions to the Pension Plan. At September 30, 1997, Mr.
Vann had approximately 25 years of credited service under the
Pension Plan.
The following table illustrates annual pension benefits at
age 65 under the Pension Plan at various levels of compensation
and years of service, assuming 100% vesting of benefits and
retirement at September 30, 1997. All retirement benefits
illustrated in the table below are without regard to any Social
Security benefits to which a participant might be entitled. The
Pension Plan is not subject to offset for Social Security
benefits.
<PAGE>
<TABLE>
<CAPTION>
Years of Service
Average Final ------------------------------------------
Compensation (1) 15 20 25 30 35
- ---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
125,000 $30,500 $40,600 $50,800 $61,000 $61,000
150,000 37,000 49,400 61,700 74,100 74,100
175,000 43,600 58,100 72,700 87,200 87,200
200,000 50,200 66,900 83,600 100,300 100,300
225,000 56,700 75,600 94,500 113,500 113,500
250,000 63,300 84,400 105,500 126,600 126,600
300,000 76,400 101,900 127,400 152,800 152,800
</TABLE>
__________
(1) The compensation covered by the Pension Plan consists of
salary and bonus and the portion of all other compensation
represented by Board of Directors and Committee fees listed
on the Summary Compensation Table.
6<PAGE>
<PAGE>
Employment Agreements. The Company and the Bank have
entered into employment agreements (the "Employment Agreements")
pursuant to which Thomas A. Vann (the "Employee") serves as
President of the Bank and President of the Company. In such
capacities, the Employee is responsible for overseeing all
operations of the Bank and the Company and for implementing the
policies adopted by the Boards of Directors.
The Employment Agreements became effective on April 7, 1997
and provide for a term of three years. On each anniversary date
of the commencement of the Employment Agreements, the term of
the Employee's employment will be extended for an additional
one-year period beyond the then effective expiration date, upon
a determination by the Board of Directors that the performance
of the Employee has met the required performance standards and
that such Employment Agreements should be extended. The
Employment Agreements provide the Employee with a salary review
by the Board of Directors not less often than annually, as well
as with inclusion in any discretionary bonus plans, retirement
and medical plans, customary fringe benefits, vacation and sick
leave. The Employment Agreements terminate upon the Employee's
death, may terminate upon the Employee's disability and is
terminable by the Bank for "just cause" (as defined in the
Employment Agreements). In the event of termination for just
cause, no severance benefits are available. If the Company or
the Bank terminates the Employee without just cause, the
Employee will be entitled to a continuation of his salary and
benefits from the date of termination through the remaining term
of the Employment Agreements plus an additional 12 month's
salary and, at the Employee's election, either continued
participation in benefits plans in which the Employee would have
been eligible to participate through the Employment Agreements'
expiration date or the cash equivalent thereof. If the
Employment Agreements are terminated due to the Employee's
"disability" (as defined in the Employment Agreements), the
Employee will be entitled to a continuation of his salary and
benefits through the date of such termination, including any
period prior to the establishment of the Employee's disability.
In the event of the Employee's death during the term of the
Employment Agreements, his estate will be entitled to receive
his salary through the last day of the calendar month in which
the Employee's death occurred. The Employee is able to
voluntarily terminate his Employment Agreements by providing 90
days' written notice to the Boards of Directors of the Bank and
the Company, in which case the Employee is entitled to receive
only his compensation, vested rights and benefits up to the date
of termination.
In the event of (i) the Employee's involuntary termination
of employment other than for "just cause" during the period
beginning six months before a change in control and ending on
the later of the second anniversary of the change in control or
the expiration date of the Employment Agreements (the "Protected
Period"), (ii) the Employee's voluntary termination within 90
days of the occurrence of certain specified events occurring
during the Protected Period which have not been consented to by
the Employee, or (iii) the Employee's voluntary termination of
employment for any reason within the 30-day period beginning on
the date of the change in control, the Employee will be paid
within 10 days of such termination (or the date of the change in
control, whichever is later) an amount equal to the difference
between (i) 2.99 times his "base amount," as defined in Section
280G(b)(3) of the Internal Revenue Code, and (ii) the sum of any
other parachute payments, as defined under Section 280G(b)(2) of
the Internal Revenue Code, that the Employee receives on account
of the change in control. "Change in control" generally refers
to the acquisition, by any person or entity, of the ownership or
power to vote more than 25% of the Bank's or Company's voting
stock, the control of the election of a majority of the Bank's
or the Company's directors, or the exercise of a controlling
influence over the management or policies of the Bank or the
Company. In addition, under the Employment Agreements, a change
in control occurs when, during any consecutive two-year period,
directors of the Company or the Bank at the beginning of such
period cease to constitute two-thirds of the Board of Directors
of the Company or the Bank, unless the election of replacement
directors was approved by a two-thirds vote of the initial
directors then in office. The Employment Agreement with the
Bank provides that within 10 business days following a change in
control, the Bank shall fund a trust in the amount of 2.99 times
the Employee's base amount, that will be used to pay the
Employee amounts owed to him. The aggregate payment that would
be made to Mr. Vann assuming his termination of employment under
the foregoing circumstances at September 30, 1997 would have
been approximately $502,320. These provisions may have an
anti-takeover effect by making it more expensive for a potential
acquiror to obtain control of the Company. In the event that
the Employee prevails over the Company and the Bank, or obtains
a written settlement, in a legal dispute as to the Employment
Agreement, he will be reimbursed for his legal and other
expenses.
7<PAGE>
<PAGE>
DIRECTOR COMPENSATION
Each member of the Bank's Board of Directors receives a fee
of $1,150 for each regular and special Board meeting attended
and $75 for each Board committee meeting attended. No fees are
paid for attendance at meetings of the Company's Board. In
addition, directors will participate in and receive certain
automatic awards under the Option Plan and the MRP. See
"Proposal I -- Approval of the NewSouth Bancorp, Inc. 1997 Stock
Option Plan", "Proposal II -- Approval of the NewSouth Bancorp,
Inc. Management Recognition Plan" and "New Plan Benefits."
Directors also participate in certain benefit plans of the
Company and the Bank, as described below.
The Bank has entered into a Supplemental Income Agreement
(as amended, the "SIA") with Thomas A. Vann. Pursuant to the
terms of the SIA, Mr. Vann may elect to defer a portion of his
cash compensation on a monthly basis. Upon the earlier of Mr.
Vann's (i) attainment of age 65 ("SIA Retirement Age") and (ii)
the date of Mr. Vann's retirement before the SIA Retirement Age
but after attaining age 55 and completing at least 29 years of
service with the Bank ("SIA Early Retirement Date"), the Bank
shall pay Mr. Vann (in lieu of cash compensation otherwise
receivable) an amount equal to $19,250 ("SIA Retirement Amount")
annually for a period of 15 years. This amount shall be
increased by 5% for every full year of service after July 1,
1990, provided that there will be no increases in benefits (i)
after Mr. Vann reaches age 65 and (ii) for more than 10 years of
additional service.
In the event of Mr. Vann's death after becoming entitled to
receive the SIA Retirement Amount but before any payments have
been made, his beneficiary shall receive all remaining payments.
In the event of Mr. Vann's death prior to attaining age 65, the
Bank will pay his beneficiary $19,250 annually for 15 years. In
the event of Mr. Vann's termination of employment by reason
other than death, retirement upon attaining age 65, or upon the
occurrence of the SIA Early Retirement Date, Mr. Vann (or his
beneficiary) shall be entitled to receive, on the earlier of his
attainment of age 65 and his death, a percentage of the SIA
Retirement Amount. This percentage will be based on Mr. Vann's
full years of service up to the date of his termination,
beginning with 0% for less than 20 years of service, and
increased in 5% increments (from 50% to 100%) for every year of
service thereafter, starting with 50% at 20 years of service up
to 100% for 29 years of service. In the event that Mr. Vann's
employment terminates for any reason other than his death, or
retirement on the SIA Early Retirement Date prior to the time he
is first entitled to receive payments under the SIA, Mr. Vann
shall be entitled to receive such percentages of his SIA
Retirement Amount, as discussed above, when he reaches age 55 or
on upon his death, whichever is earlier. In the event that a
termination of protected employment occurs (i) on or before the
SIA Retirement Date or SIA Early Retirement Date and (ii)
following a "change in control" (as defined below), then Mr.
Vann shall be deemed to have retired as of the SIA Early
Retirement Date, except that the SIA Early Retirement Date shall
be deemed to be the date of the change in control.
The Bank has entered into a Supplemental Income Plan
Agreement (as amended, the "SIPA") with Thomas A. Vann.
Pursuant to the terms of SIPA, if Mr. Vann retires from
employment with the Bank either at or after the age of 65 (the
"Retirement Date") or at or after age 55 with at least 10 years
of service with the Bank after January 1, 1994 (the "Early
Retirement Date"), the Bank shall pay, in equal monthly
installments, a minimum sum of $40,000 ("SIPA Retirement
Amount") per annum for a period of 15 years. This amount shall
increase by 5% for each full year of service completed by Mr.
Vann after January 1, 1994.
In the event of Mr. Vann's death after becoming entitled to
receive payments but before all payments have been made, the
Bank will make the remaining payments to his designated
beneficiary. In the event of Mr. Vann's death before the
Retirement Date or Early Retirement Date, the Bank shall make
payments in the same manner as if he had retired. In the event
that Mr. Vann terminates his service for reasons other than (i)
his retirement on the Early Retirement Date, (ii) a change in
control, (iii) "termination of protected employment" (as defined
below), or (iv) his death, and the termination occurs before he
is entitled to receive payments, Mr. Vann shall be entitled to
receive a percentage of his SIPA Retirement Amount upon his
attainment of age 55 or prior death. This percentage will be
based on Mr. Vann's full years of service after January 1, 1994,
and increased in 10% increments (from 10% to 100%) for every
year of service after January 1994, starting with 10% at one
year of service up to 100% for 10 years of service. Payments
shall be made in equal monthly installments. In the event that,
prior to the Retirement Date or Early
8<PAGE>
<PAGE>
Retirement Date, a "termination of protected employment" occurs
following a change in control, Mr. Vann shall be deemed to have
retired as of his Early Retirement Date, and the Early
Retirement Date shall be considered the date of the change in
control.
The Bank has entered into a Directors' Deferred
Compensation Plan Agreement (as amended, the "Agreement") with
each of Directors Buckman, Howdy, Gibbs, Parker, Singleton,
Holscher and Vann (the "Directors"). Pursuant to the terms of
the Agreements, the Directors have agreed to defer the receipt
of their Directors' fees in the amount of $350 per month,
beginning on January 1, 1994 and ending on December 31, 1998.
In exchange for the agreement to defer fees, the Directors shall
receive certain retirement benefits (described below) upon the
later to occur of their 65th birthday and January 1, 1999 (the
"Qualifying Date"). Upon the Qualifying Date, the Bank shall
pay a Director a certain amount ("Deferred Amount") per month
for 120 months. The Deferred Amount for Directors Buckman,
Howdy, Gibbs, Parker, Singleton, Holscher and Vann equals $513,
$942, $942, $1,533, $1,975, $4,088, and $4,818, respectively.
In the event of a Director's death after becoming entitled
to receive the Deferred Amount but before all of the payments
have been made, the Bank shall make the remaining payments to
the Director's beneficiary. Similarly, in the event of a
Director's death while serving as a Director but before the
Qualifying Date, the Bank will pay the Deferred Amount per month
for 120 months to the Director's beneficiary. In the event that
a Director voluntarily resigns after January 1, 1996 but before
the Qualifying Date, then the Director will receive a percentage
of the monthly Deferred Amount. This percentage varies among
the different Agreements, but is generally determined by
a formula based on the Director's full years of service after
January 1, 1994. The Deferred Amounts generally vest over a
period of five to ten years under the different Agreements. In
the event that the Director's service is terminated on or before
the Qualifying Date for a reason other than death or voluntary
resignation, then he shall be paid the vested monthly Deferred
Amount, and the Qualifying Date shall be deemed to be the date
of the Director's termination of service.
The Bank has entered into a Directors' Retirement Plan
Agreement, as amended ("Retirement Plan") with Directors
Buckman, Howdy, Parker, Singleton, Holscher, Gibbs and Vann.
Under the terms of the Retirement Plan, the Bank will pay a
director a monthly amount (the "Retirement Plan Amount") for a
period of 120 months beginning upon the later to occur of the
director's 70th birthday and January 1, 1999 ("Retirement Plan
Qualifying Date"). Under the Retirement Plan, Directors Vann,
Buckman, Howdy, Parker, Singleton, Holscher and Gibbs each will
receive $2,000 per month.
In the event of a director's death prior to January 1,
1999, the Bank will pay the Retirement Plan Amount on a monthly
basis for a period of 120 months to the director's beneficiary.
Similarly, in the event of a director's death after becoming
entitled to receive the payments under the Retirement Plan but
before all payments have been made, the Bank shall pay the
remaining amounts to the director's beneficiary. In the event
that the director voluntarily resigns prior to January 1, 1999,
the director shall be entitled to receive a percentage of the
monthly Retirement Plan Amount. This percentage varies among
the different Retirement Plan agreements, but is generally
determined by a formula based on the director's full years of
service after January 1, 1994. The Retirement Plan Amounts
generally vest over a period of five to ten years under the
different agreements. In the event that on or before the
Retirement Plan Qualifying Date the director's service is
terminated for any reason within 24 months following a change in
control, the Bank will pay the director the monthly Retirement
Plan Amount for a period of 120 months.
<PAGE>
The Bank has entered into a deferred compensation agreement
entitled Director's Deferred Payment Agreement (as amended, the
"Payment Agreement") with Directors Buckman, Howdy, Gibbs,
Parker, Holscher and Vann. Under the terms of each Payment
Agreement, a director deferred receipt of his director's fees in
an amount equivalent to $291.66 per month over a six-year
period. In addition, Mr. Vann has agreed to defer receipt of
his director's fees in the amount of $220.35 per month from
September 1, 1995 until the end of his term as a director. In
exchange for the agreement to defer receipt of his director's
fees, a director will receive, upon the earlier of the
director's 65th birthday or termination of service as a director
for any reason on or after attaining age 55, a certain amount
("Payment") per month for a period of 120 months. Directors
Buckman, Howdy, Gibbs, Parker, Holscher, and Vann will receive a
monthly Payment of $1,054, $1,726, $1,610, $2,748, $3,628, and
$8,256, respectively.
9<PAGE>
<PAGE>
In the event of a director's death after becoming entitled
to receive monthly Payments but before all Payments have been
made, the Bank will pay all remaining amounts to the director's
beneficiary. Similarly, in the event of the director's death
prior to the commencement of his monthly Payments, the Bank will
pay a monthly amount for 120 months to the director's
beneficiary. In the event that prior to the commencement of the
monthly Payments a director's service is terminated for any
reason other than death, then the director will be entitled to
begin receiving his Payments (beginning on a date to be
determined by the Bank, but not later than the first day of the
sixth month following the month in which the director's 55th
birthday, or if earlier, death, occurs).
With respect to all of the deferred compensation and
retirement arrangements discussed above, the timing of the first
payments under the agreements shall be determined by the Bank,
provided that such payments shall commence no later than the
first day of the sixth month following the month in which the
event triggering the distribution occurred. In addition, each
arrangement provides that within ten business days after a
change in control, the Bank shall fund, or cause to be funded, a
trust in an amount equal to the present value of all benefits
that may become payable under the respective arrangements,
unless the recipient of the benefits has provided a release of
any claims under the agreement. With respect to the above plans
and agreements, "change in control" generally refers to the
acquisition, by any person or entity, of the ownership or power
to vote more than 25% of the Bank's or Company's voting stock,
the control of the election of a majority of the Bank's or the
Company's directors, or the exercise of a controlling influence
over the management or policies of the Bank or the Company. In
addition, a change in control occurs when, during any
consecutive two-year period, directors of the Company or the
Bank at the beginning of such period ("Continuing Directors")
cease to constitute at least two-thirds of the Board of
Directors of the Company or the Bank, unless the election of
replacement directors was approved by at least two-thirds of the
Continuing Directors then in office. "Termination of protected
employment" generally refers to an employee's termination of
employment without just cause, or the employee's voluntary
termination of employment for certain events which have not been
consented to in advance by the employee, including but not
limited to a material reduction in base compensation as in
effect on the date of a change in control, the failure of the
Bank to maintain existing or substantially similar employee
benefit plans, the assignment of duties and responsibilities
which are other than those normally associated with the
employee's position, a material reduction in the employee's
authority and responsibility, and the failure to elect or
re-elect the employee to the Board of Directors, if he has
served on the Board during the term of the applicable agreement
or plan.
With the exception of the Retirement Plan, the cost of
which is funded through payments by the Bank, the cost of all of
the director retirement and deferred compensation plans
described above is funded through deferral of compensation or
Board of Director fees otherwise payable to the beneficiary
under the plan or agreement. The deferred amounts are then used
to purchase insurance, and dividends on such insurance in turn
are utilized to purchase additional insurance, which will
provide the funds necessary to meet the Bank's obligations under
the plans and agreements when such obligations become due. The
Board of Directors periodically reviews its insurance coverage
to ensure that the coverage is adequate to reimburse the Bank
for its anticipated expenses under the plans and agreements. If
the insurance coverage is found to be inadequate as to a covered
director, the Board of Directors may require the director to
defer additional sums to reimburse the Bank for the purchase of
additional insurance or may reduce the retirement benefit.
Under the director retirement and deferred compensation
plans, directors are considered general creditors of the Bank
with respect to retirement benefits and will receive such
benefits only if the Bank continues to be solvent or, if the
Bank is insolvent, only to the extent funds remain following
full payment to priority creditors such as depositors and
secured creditors.
________________________________________________________________
PROPOSAL II -- APPROVAL OF THE NEWSOUTH BANCORP, INC.
1997 STOCK OPTION PLAN
________________________________________________________________
GENERAL
The Board of Directors of the Company has adopted the
NewSouth Bancorp, Inc. 1997 Stock Option Plan (the "Option
Plan"), subject to its approval by the Company's stockholders.
The initial grant of stock options under the Option Plan will
occur upon the Option Plan's receipt of stockholder approval.
The Option Plan is attached hereto as
10<PAGE>
<PAGE>
Exhibit A and should be consulted for additional information.
All statements made herein regarding the Option Plan, which are
only intended to summarize the Option Plan, are qualified in
their entirety by reference to the Option Plan.
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests
of the Company by providing directors and selected employees of
the Company and its affiliates, including the Bank, with the
opportunity to acquire shares of Common Stock. 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 incentive
to directors and employees of the Company and its affiliates to
promote the success of the business of the Company.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan will become effective on
the date of its approval by the Company's stockholders (the
"Effective Date"), and prior thereto no awards may or will be
made.
Administration. The Option Plan is administered by a
committee (the "Committee"), appointed by the Board of
Directors, consisting of at least two directors of the Company
who are "Non-employee Directors" within the meaning of the
federal securities laws. The Committee has discretionary
authority to select participants and grant options, to determine
the form and content of any options granted under the Option
Plan, to interpret the Option Plan, to prescribe, amend and
rescind rules and regulations relating to the Option Plan, and
to make other decisions necessary or advisable in connection
with administering the Option Plan. All decisions,
determinations, and interpretations of the Committee are final
and conclusive on all persons affected thereby. Members of the
Committee will be indemnified to the full extent permissible
under the Company's governing instruments in connection with any
claims or other actions relating to any action taken under the
Option Plan. It is expected that the Committee will initially
consist of Directors Howdy, Gibbs and Holscher.
Eligible Persons. Under the Option Plan, the Committee has
discretionary authority to grant stock options ("Options") to
such employees and directors (including members of the
Committee) as the Committee shall designate. In addition, all
directors, including one executive officer, will receive the
automatic grants described below (see "Automatic Grants"). As
of the Record Date, the Company and its subsidiaries had
approximately 12 employees and six non-employee directors who
were eligible to participate in the Option Plan.
Shares Available for Grants. The Option Plan reserves
290,950 shares of Common Stock for issuance upon the exercise of
Options. Such shares may be (i) authorized by unissued shares,
(ii) shares held in treasury, or (iii) shares held in a grantor
trust. In the event of any 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 receipt or
payment of consideration by the Company, the Committee will
adjust the number and kind of shares reserved for issuance under
the Option Plan and the exercise prices of such Options. If
Options should expire, become unexercisable or be forfeited for
any reason without having been exercised, the shares of Common
Stock subject to such Options shall, unless the Option Plan
shall have been terminated, be available for the grant of
additional Options under the Option Plan.
Options. Options may be either incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code,
or options that are not ISOs ("Non-ISOs"). The exercise price
as to any Option may not be less than the fair market value
(determined under the Option Plan) of the optioned shares on the
date of grant. In the case of a participant who owns more than
10% of the outstanding Common Stock on the date of grant, such
exercise price may not be less than 110% of fair market value of
the shares. As required by federal tax laws, to the extent that
the aggregate fair market value (determined when an ISO is
granted) of the Common Stock with respect to which ISOs are
exercisable by an optionee for the first time during any
calendar year (under all plans of the Company and of any
subsidiary) exceeds $100,000, the Options granted in excess of
$100,000 will be treated as Non-ISOs, and not as ISOs.
11<PAGE>
<PAGE>
Automatic Grants. On the Effective Date, all directors,
including one executive officer, of the Company and the Bank
will receive one-time grants of Options to purchase shares of
Common Stock at an exercise price per share equal to its fair
market value on the Effective Date (see "--Stock Option Grants"
and "New Plan Benefits" below). Options granted to non-employee
directors will have a term of ten years, and expire one year
after a director terminates continuous service as a director for
any reason other than death, but in no event later than the date
on which such Options would otherwise expire. In the event of a
director's death during the term of his or her directorship, the
Options shall become immediately exercisable, and will expire
two years after his or her death. 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.
Exercise of Options. The exercise of Options will be
subject to such terms and conditions as are established by the
Committee in a written agreement between the Committee and the
optionee. 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. In the absence of
Committee action to the contrary, an otherwise unexpired Option
shall cease to be exercisable upon (i) an optionee's termination
of employment for "just cause" (as defined in the Option Plan),
(ii) the date that is one year after an optionee terminates
service for a reason other than just cause or death, or (iii)
the date that is two years after an optionee's death. Upon an
optionee's exercise of an Option, the Company may, in the
discretion of the Committee, pay the optionee a cash amount of
up to the amount of any dividends declared on the underlying
shares between the date of grant and the date of exercise of the
Option. The exercise price of shares subject to any outstanding
Option will 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, provided that the
Committee did not elect to pay the amount of such nonrecurring
dividend to the optionee upon exercise of the Option.
An optionee may exercise Options, subject to provisions
relative to their termination and limitations on their exercise,
only by (i) written notice of intent to exercise the Option with
respect to a specified number of shares of Common Stock, and
(ii) 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. 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.
Conditions on Issuance of Shares. The Committee will have
the discretionary authority to impose, in agreements, such
restrictions on shares of Common Stock issued pursuant to the
Option Plan 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 both of these
restrictions. In addition, the Committee may not issue shares
unless the issuance complies with applicable securities laws,
and to that end may require that a participant make certain
representations or warranties.
Change in Control. The Option Plan provides that upon the
earlier of a "Change in Control" or the execution of an
agreement to effect a Change in Control, all Options shall
become fully exercisable, notwithstanding any other provision of
the Option Plan or any agreement with an optionee. For purposes
of the Option Plan, 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
12<PAGE>
<PAGE>
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 defining Change in Control, 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.
Although these provisions are included in the Option Plan
primarily for the protection of an employee-optionee in the
event of a Change in Control of the Company, they may be
regarded as having a takeover defensive effect, which may reduce
the Company's vulnerability to hostile takeover attempts and
certain other transactions which have not been negotiated with
and approved by the Board of Directors.
Transferability. Optionees may transfer their Options to
family members or trusts under specified circumstances. Options
may not otherwise be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or
by the laws of descent and distribution. In addition, Common
Stock that is purchased upon the 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 optionee's death or
disability, or such other event as the Board of Directors may
specifically deem appropriate.
Effect of Dissolution and Related Transactions. 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
Options, together with the exercise prices thereof, will 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. However, any such adjustment will
be made in such a manner as to not constitute a modification,
within the meaning of Section 424(h) of the Internal Revenue
Code, of outstanding ISOs.
Duration of the Option Plan and Grants. The Option Plan
has a term of 10 years from the Effective Date, after which date
no Options may be granted. The maximum term for an Option is 10
years from the date of grant, except that the maximum term of an
ISO may not exceed five years if the optionee owns more than 10%
of the Common Stock on the date of grant. The expiration of the
Option Plan, or its termination by the Committee, will not
affect any Option then outstanding.
Amendment and Termination of the Option Plan. The Board of
Directors of the Company may from time to time amend the terms
of the Option Plan and, with respect to any shares at the time
not subject to Options, suspend or terminate the Option Plan.
No amendment, suspension, or termination of the Option Plan
will, without the consent of any affected optionee, alter or
impair any rights or obligations under any Option previously
granted.
Financial Effects of Options. The Company will receive no
monetary consideration for the granting of Options under the
Option Plan. It will receive no monetary consideration other
than the exercise price for shares of Common Stock issued to
optionees upon the exercise of their Options. Under applicable
accounting standards, recognition of compensation expense is not
required when Options are granted at an exercise price equal to
or exceeding the fair market value of the Common Stock on the
date the Option is granted.
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the
grant of ISOs. If the optionee holds the shares purchased upon
exercise of an ISO for at least two years from the date the ISO
is granted, and for at least one year from the date the ISO is
exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain.
However, the difference between the fair market value of the
Common Stock on the date of exercise and the exercise price of
the ISO will be treated by the optionee as an item of tax
preference in the year of exercise for purposes of the
alternative minimum tax. If an optionee disposes of the shares
before the expiration of
13<PAGE>
<PAGE>
either of the two special holding periods noted above, the
disposition is a "disqualifying disposition." In this event,
the optionee will be required, at the time of the disposition of
the Common Stock, to treat the lesser of the gain realized or
the difference between the exercise price and the fair market
value of the Common Stock at the date of exercise as ordinary
income and the excess, if any, as capital gain.
The Company will not be entitled to any deduction for
federal income tax purposes as the result of the grant or
exercise of an ISO, regardless of whether or not the exercise of
the ISO results in liability to the optionee for alternative
minimum tax. However, if an optionee has ordinary income
taxable as compensation as a result of a disqualifying
disposition, the Company will be entitled to deduct an
equivalent amount.
Non-ISOs. In the case of a Non-ISO, an optionee will
recognize ordinary income upon the exercise of the Non-ISO in an
amount equal to the difference between the fair market value of
the shares on the date of exercise and the option price (or, if
the optionee is subject to certain restrictions imposed by the
federal securities laws, upon the lapse of those restrictions
unless the optionee makes a special tax election within 30 days
after the date of exercise to have the general rule apply).
Upon a subsequent disposition of such shares, any amount
received by the optionee in excess of the fair market value of
the shares as of the exercise will be taxed as capital gain.
The Company will be entitled to a deduction for federal income
tax purposes at the same time and in the same amount as the
ordinary income recognized by the optionee in connection with
the exercise of a Non-ISO.
PROPOSED STOCK OPTION GRANTS
Set forth below is certain information relating to all
Options which are to be granted to the specified individuals and
groups of individuals on the Effective Date of the Option Plan.
All such Options (i) will be subject to the terms and conditions
described above, and are contingent on, and not exercisable
until, the Option Plan receives stockholder approval, and (ii)
will automatically expire ten years after the date of their
grant. The exercise price for these Options will equal the fair
market value of the Common Stock on the date of grant. The
closing sale price of the Common Stock on February 13, 1998, as
reported on the Nasdaq National Market System, was $29.75 per
share.
Number of Shares
Participant or Group Subject to Options
-------------------- ------------------
Non-Employee Directors:
Edmund T. Buckman, Jr. 18,300
Linley H. Gibbs, Jr. 18,300
Frederick N. Holscher 18,300
Frederick H. Howdy 18,300
Charles E. Parker, Jr. 18,300
Marshall T. Singleton 18,300
Others
------
Thomas A. Vann, President of the
Company and the Bank 72,735
All current executive officers
as a group (10 persons) 139,735
All current directors who are not
executive officers as a group (6 persons) 109,800
All employees, including all current
officers who are not executive officers,
as a group (2 persons) 14,000
For additional information relating to proposed option
grants, see "New Plan Benefits" below.
14<PAGE>
<PAGE>
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan
is desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of
Directors is seeking stockholder approval of the Option Plan in
order to satisfy the requirements of the Code for favorable tax
treatment of ISOs and to exempt certain option transactions from
the short-swing trading rules of the Securities and Exchange
Commission ("SEC").
Stockholder approval of the Option Plan requires the
affirmative vote of the holders of a majority of the votes cast
at the Special Meeting. The Board of Directors recommends a
vote "FOR" approval of the Option Plan.
________________________________________________________________
PROPOSAL III -- APPROVAL OF MANAGEMENT RECOGNITION PLAN
________________________________________________________________
GENERAL
The Board of Directors of the Company has adopted the
NewSouth Bancorp, Inc. Management Recognition Plan (the "MRP"),
subject to its approval by the Company's stockholders. The
initial grant of MRP awards will occur upon the MRP's receipt of
stockholder approval. A copy of the MRP is attached hereto as
Exhibit B, and should be consulted for additional information.
All statements made herein regarding the MRP, which are only
intended to summarize the MRP, are qualified in their entirety
by reference to the MRP.
PURPOSE OF THE MRP
The purpose of the MRP 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,
with compensation for their past contributions to the Company
and the Bank, and with an incentive to make such contributions
in the future.
DESCRIPTION OF THE MRP
Effective Date. The MRP will become effective immediately
upon its approval by the Company's stockholders (the "Effective
Date"), and prior thereto no awards may be made.
Administration. The MRP will be administered by an MRP
Committee consisting of not less than two members of the
Company's Board of Directors who are "Non-employee Directors"
within the meaning of the federal securities laws. Except as
limited by the express provisions of the MRP or by resolutions
adopted by the Board, the MRP Committee has sole and complete
authority and discretion (1) to grant MRP awards to such
employees as the MRP Committee may select, (2) to determine the
form and content of MRP awards to be issued under the MRP, (3)
to interpret the MRP, (4) to prescribe, amend, and rescind rules
and regulations relating to the MRP, and (5) to make other
determinations necessary or advisable for the administration of
the MRP. The MRP provides that members of the MRP Committee
shall be indemnified and held harmless for actions taken under
the MRP in good faith and which he or she reasonably believed to
be in the best interests of the Company and its affiliates. As
of the Record Date, the MRP Committee consists of Directors
Howdy, Gibbs and Holscher.
MRP Trust; Purchase Limitations. The assets of the MRP
will be held in a trust (the "MRP Trust"), as to which Directors
Howdy, Gibbs and Holscher will act as trustees ("MRP Trustees")
and thereby have the responsibility to invest all funds
contributed to the MRP Trust by the Company or the Bank. With
funds contributed by the Company, the MRP Trust has purchased,
in the aggregate, 116,380 shares of the Company's Common Stock.
Such shares currently are being held in a grantor trust. The
number of shares is the maximum that the MRP Trust may purchase.
In the event the MRP award is forfeited for any reason or
additional shares are purchased by the MRP Trust associated with
the MRP, the MRP Committee may make awards with respect to such
shares.
15<PAGE>
<PAGE>
Types of Awards; Eligible Persons. The MRP Committee may
make MRP awards, in the form of restricted stock, with respect
to shares held in the underlying MRP Trust. The MRP Committee
has the discretion to select employees and directors of the
Company and/or of the Bank who will receive MRP awards. In
selecting those employees and directors to whom MRP awards will
be granted and the number of shares covered by such awards, the
MRP Committee will consider the position, duties and
responsibilities of eligible employees, the value of their
services to the Company and its affiliates (including the Bank)
and any other factors the MRP Committee may deem relevant. In
addition, the MRP specifically provides for certain automatic
awards to all directors, including an executive officer, (see "
- -- Automatic Awards" below).
Automatic Awards. All directors, including an executive
officer, of the Company and the Bank will receive one-time
awards on April 8, 1998 (see "New Plan Benefits" below).
Vesting. Pursuant to the MRP, freely transferable shares
of Common Stock will be transferred to participants as they
become vested in their MRP awards. The automatic MRP awards
that will be granted on April 8, 1998 will become 33 1/3% vested
on each of the three anniversary dates of the award, provided,
with respect to each vesting date, that the participant is an
employee or director of the Company or an affiliate on such
date. All shares of Common Stock subject to outstanding awards
will be immediately 100% earned and nonforfeitable upon a
participant's death or disability (as defined in the MRP). If a
participant terminates employment for reasons other than death
or disability, the participant forfeits all rights to the shares
then under restriction.
Change in Control. The MRP provides that notwithstanding
the general rule with respect to vesting of awards: (i) all
shares subject to an award under the MRP held by a participant
whose service with the Company or an affiliate terminates due to
the participant's death or disability, 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 shares subject to an
award held by a participant shall be deemed earned and 100%
vested as of the earlier of a "Change in Control" or, if
earlier, the execution of an agreement to effect a Change in
Control. For purposes of the MRP, Change in Control is defined
to 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 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 the definition of Change in Control, 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. The decision of the MRP
Committee as to whether a change in control has occurred shall
be conclusive and binding.
Distributions of Shares; Voting; Dividends. All unvested
shares of Common Stock held by the MRP Trust (whether or not
subject to an MRP award) shall be voted by the MRP Trustees in
the same proportion as the trustee of the Company's Employee
Stock Ownership Plan trust votes Common Stock held therein, and
in the absence of any such voting, shall be voted in the manner
directed by the Board of Directors. The MRP Trustees shall
distribute all shares, together with any shares representing
stock dividends, in the form of Common Stock. One share of
Common Stock shall be given for each share earned. Payments
representing cash dividends (and earnings thereon) will be made
in cash. There shall also be distributed an appropriate amount
of net earnings, if any, of the MRP Trust with respect to any
cash dividends so paid out.
16<PAGE>
<PAGE>
Accrual of Dividends. Whenever shares of Common Stock are
paid to an award recipient or beneficiary thereof, such
recipient or beneficiary shall also be entitled to receive, with
respect to each 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 MRP award
was initially granted to such participant and the date the
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.
No shares may be distributed from the MRP Trust prior to
the date which is three years from the date of the Bank's
conversion from mutual to stock form to the extent the recipient
would after receipt of such shares own in excess of 10% of the
issued and outstanding shares of Common Stock, unless such
action is approved in advance by a majority vote of the
disinterested directors of the Company's Board of Directors.
Any shares remaining undistributed solely by reason of the
operation of this rule shall be distributed to the recipient on
the date which is three years from the date of the Bank's
conversion to stock form.
Deferral of Awards. The MRP provides that 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
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 to defer the receipt of all or a percentage of
the shares that would otherwise be transferred to the
participant upon the vesting of such award (the "Deferred
Shares"). MRP participants shall receive earnings on dividends
paid on Deferred Shares at a rate equal to the dividend-adjusted
total return on the Common Stock, as determined from time to
time by the MRP Committee in its sole discretion. The MRP
Trustees shall hold each Participant's Deferred Shares and
deferred earnings in the MRP Trust until distribution is
required pursuant to the participant's election.
Transferability. Participants may transfer their MRP
awards to family members or trusts under specified
circumstances. MRP awards and rights to shares held in the MRP
Trust are not otherwise transferable by participants in the MRP,
and during the lifetime of a participant, shares held in the MRP
Trust may only be earned by and paid to the participant.
Taxation. Participants will recognize compensation income
when their interest vests, or at an earlier date pursuant to a
participant's election to accelerate recognition pursuant to
Section 83(b) of the Internal Revenue Code.
Financial Effects of Awards. Neither the Company nor the
Bank will receive any monetary consideration for the granting of
awards under the MRP. Under applicable accounting standards,
when MRP awards are granted, the Company must recognize
compensation expense based on the fair market value of the
Common Stock on the date the MRP awards are granted, with such
amount being amortized over the expected vesting period for the
award.
Adjustments for Capital Changes. In the event of any
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 receipt or payment of consideration by the
Company, the MRP Committee will adjust both the number and kind
of shares of stock which may be purchased under the MRP and the
number and kind of shares of stock subject to outstanding MRP
awards. 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, all
outstanding MRP 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.
Amendment and Termination of the MRP. The Company's Board
of Directors may, by resolution, amend or terminate the MRP at
any time, provided that no amendment or termination of the MRP
will, without the written consent of any affected holders of an
MRP award, impair any rights or obligations under any MRP award
previously granted.
17<PAGE>
<PAGE>
The power to amend or terminate includes the power to
direct the MRP Trustees to return to the Company all or any part
of the assets of the MRP Trust, including shares of Common Stock
held in the plan share reserve of the MRP. However, the
termination of the MRP Trust will not affect a participant's
right to earn outstanding MRP awards and to receive Common Stock
relating thereto, including earnings thereon, in accordance with
the terms of the MRP and the particular MRP award made to the
participant.
Duration of the MRP. The MRP and MRP Trust will remain in
effect until the earlier of (i) termination by the Company's
Board of Directors, or (ii) the distribution of all assets of
the MRP Trust. Termination of the MRP will not affect any MRP
awards previously granted, and such MRP awards will remain valid
and in effect until they have been earned and distributed from
the MRP Trust, or by their terms expire or are forfeited.
Proposed MRP Awards. For information relating to proposed
MRP awards, see "New Plan Benefits"below.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the MRP is
desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of
Directors is seeking stockholder approval of the MRP to exempt
certain transactions from the short-swing trading rules of the
SEC.
Approval of the MRP requires the affirmative vote of the
holders of a majority of the votes cast at the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
MRP.
NEW PLAN BENEFITS
The following tables sets forth certain information
regarding the benefits to be received under the Option
Plan and the MRP.
<TABLE>
<CAPTION>
Option Plan MRP
----------------------- -----------------------
Dollar Number Dollar Number
Name and Position Value ($)(1) of Units Value ($)(2) of Units
----------------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Thomas A. Vann, President $ -- 72,735 $ 865,576 29,095
of the Company and the Bank
All current executive officers
as a group (10 persons) -- 139,735 2,006,935 67,460
All current directors who are
not executive officers
as a group (6 persons) -- 109,800 1,306,620 43,920
All employees, including all
current officers who are not
executive officers, as a group
(2 persons) -- 14,000 148,750 5,000
</TABLE>
__________
(1) Based on the fair market value of the Common Stock on the
date of grant less the exercise price. All Options will be
granted at an exercise price equal to the fair market value
of the underlying shares of Common Stock on the date of the
grant, which will occur upon receipt of stockholder
approval at this Special Meeting.
(2) Based on the closing price of the underlying Common Stock
of $29.75 per share as quoted on the Nasdaq National Market
System on February 13, 1998.
18<PAGE>
<PAGE>
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to come
before the Special Meeting other than those matters described
above in this proxy statement and matters incident to the
conduct of the Special Meeting. However, if any other matters
should properly come before the Special Meeting, it is intended
that proxies in the accompanying form will be voted in respect
thereof in accordance with the determination of a majority of
the Board of Directors.
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
The cost of soliciting proxies will be borne by the
Company. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial
owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may
solicit proxies personally or by telegraph or telephone without
additional compensation. The Company has retained Regan &
Associates, Inc., a proxy soliciting firm, to assist in the
solicitation of proxies, for which Regan and Associates, Inc.
will receive a fee of $4,250, plus reimbursement of certain
out-of-pocket expenses.
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
In order to be eligible for inclusion in the proxy
materials of the Company for the Annual Meeting of Stockholders
for the year ending September 30, 1998, any stockholder proposal
to take action at such meeting must be received at the Company's
executive offices at 1311 Carolina Avenue, Washington, North
Carolina 27889 by no later than September 14, 1998. Any such
proposals shall be subject to the requirements of the proxy
rules adopted under the Securities Exchange Act of 1934, as
amended.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William L. Wall
William L. Wall
Secretary
March 5, 1998
Washington, North Carolina
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
YOU ARE REQUESTED TO SIGN AND PROMPTLY RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
19<PAGE>
<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 respon-
sibility 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.
A-1<PAGE>
<PAGE>
(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 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.
A-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.
A-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
A-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.
(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.
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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.
(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, recapita-
lization, 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
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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 deter-
mination 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.
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.
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14. MODIFICATION OF OPTIONS.
At any time, and from time to time, the Board may autho-
rize 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.
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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.
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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
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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.
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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.
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.
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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.
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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.
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(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.
(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
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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, recapita-
lization, 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.
(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.
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(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.
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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).
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REVOCABLE PROXY
NEWSOUTH BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
April 8, 1998
The undersigned hereby appoints Frederick H. Howdy, Linley
H. Gibbs, Jr. and Frederick N. Holscher, with full powers of
substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of the common stock of NewSouth
Bancorp, Inc. which the undersigned is entitled to vote at the
Special Meeting of Stockholders, to be held at 1311 Carolina
Avenue, Washington, Washington, North Carolina, on Wednesday,
April 8, 1998, at 10:00 a.m., eastern time (the "Special
Meeting"), and at any and all adjournments thereof, as follows:
FOR AGAINST ABSTAIN
1. Approval of the
NewSouth Bancorp, Inc.
1997 Stock Option Plan
[ ] [ ] [ ]
2. Approval of the
NewSouth Bancorp, Inc.
Management Recognition Plan
[ ] [ ] [ ]
The Board of Directors recommends a vote "FOR" each of the
listed propositions.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE
SPECIAL MEETING, INCLUDING MATTERS RELATING TO THE CONDUCT OF
THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF
THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
SPECIAL MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Special Meeting or at any adjournment thereof, then the power of
said attorneys and prior proxies shall be deemed terminated and
of no further force and effect. The undersigned may also revoke
his proxy by filing a subsequent proxy or notifying the
Secretary of his decision to terminate his proxy.
The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Special Meeting
and a Proxy Statement dated March 5, 1998.
Dated: ______________________, 1998
_________________________ _________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
_________________________ _________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the enclosed
card. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. Corporation
proxies should be signed in corporate name by an authorized
officer. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
