<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:
[X ] Preliminary Proxy Statement
[ ] 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>
[LOGO]
[NEWSOUTH BANCORP, INC. LETTERHEAD]
January 11, 1999
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of NewSouth Bancorp, Inc. (the "Company")
to be held at the main office of NewSouth Bank (the "Bank")
located at 1311 Carolina Avenue, Washington, North Carolina on
Thursday, February 18, 1999, at 1:00 p.m., eastern time.
An important aspect of the annual meeting process is the
annual stockholder vote on corporate business items. I urge you
to exercise your rights as a stockholder to vote and participate
in this process. In addition to the election of two directors,
stockholders are being asked to consider and vote on a proposal
to change the state of incorporation of the Company from
Delaware to Virginia (the "Reincorporation Proposal"). The
Board of Directors has carefully considered and approved the
Reincorporation Proposal and believes for the reasons described
in the accompanying proxy statement that the best interests of
the Company and its stockholders will be served by changing the
Corporation's state of incorporation from Delaware to Virginia.
Accordingly, your Board of Directors unanimously recommends that
you vote for the Reincorporation Proposal.
During the meeting, we will also report on the operations
of NewSouth Bank, the Company's wholly owned subsidiary.
Directors and officers of the Company and the Bank will be
present to respond to any questions the stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ACCOMPANYING FORM OF PROXY AS SOON AS
POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. Your vote is important, regardless of the number of
shares you own. This will not prevent you from voting in person
but will assure that your vote is counted if you are unable to
attend the meeting.
On behalf of the Board of Directors and all the employees
of the Company and the Bank, I wish to thank you for your
continued support.
Sincerely,
Thomas A. Vann
President<PAGE>
<PAGE>
________________________________________________________________
NEWSOUTH BANCORP, INC.
1311 CAROLINA AVENUE
WASHINGTON, NORTH CAROLINA 27889
________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 18, 1999
________________________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Annual 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 Thursday, February 18, 1999, at 1:00 p.m., eastern
time.
A Proxy Statement and Proxy Card for the Annual Meeting
are enclosed.
The Annual Meeting is for the purpose of considering and
acting upon the following matters:
1. The election of two directors of the Company;
2. The approval of a Plan of Reorganization and
Agreement and Plan of Merger, pursuant to
which the Company's state of incorporation
will be changed from Delaware to Virginia by
means of a merger of the Company with and into
NewSouth Bancorp, Inc., a newly formed
Virginia corporation that is a wholly owned
subsidiary of the Company; and
3. The transaction of such other business as may
properly come before the Annual Meeting or any
adjournment thereof.
The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on any one of the foregoing pro-
posals at the Annual Meeting on the date specified above or on
any date or dates to which, by original or later adjournment,
the Annual Meeting may be adjourned. Stockholders of record at
the close of business on December 31, 1998, are the stockholders
entitled to notice of and to vote at the Annual 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 Annual Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
William L. Wall
Secretary
Washington, North Carolina
January 11, 1999
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
________________________________________________________________
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 18, 1999
________________________________________________________________
________________________________________________________________
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 Annual Meeting of Stockholders (the "Annual
Meeting") which will be held at the main office of NewSouth Bank
(the "Bank") located at 1311 Carolina Avenue, Washington, North
Carolina on Thursday, February 18, 1999, at 1:00 p.m., eastern
time, and at any adjournment thereof. The accompanying Notice
of Annual Meeting and proxy card and this Proxy Statement are
being first mailed to stockholders on or about January 11, 1999.
________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
________________________________________________________________
Stockholders who execute proxies retain the right to
revoke them at any time. Unless so revoked, the shares
represented by properly executed proxies will be voted at the
Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to William L. Wall, Secretary of the
Company, at the address shown above, by filing a later dated
proxy prior to a vote being taken on a particular proposal at
the Annual Meeting or by attending the Annual Meeting and voting
in person. The presence of a stockholder at the Annual Meeting
will not in itself revoke such stockholder's proxy.
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 NOMINEES FOR DIRECTORS SET FORTH BELOW AND FOR THE OTHER
PROPOSITION STATED. The proxy confers discretionary authority
on the persons named therein to vote with respect to the
election of any person as a director where the nominee is unable
to serve or for good cause will not serve, and matters incident
to the conduct of the Annual Meeting. If any other business is
presented at the Annual Meeting, proxies will be voted by those
named therein in accordance with the determination of a majority
of the Board of Directors. Proxies marked as abstentions will
not be counted as votes cast. Shares held in street name which
have been designated by brokers on proxies as not voted will not
be counted as votes cast. Proxies marked as abstentions or as
broker non-votes, however, will be treated as shares present for
purposes of determining whether a quorum is present.
________________________________________________________________
VOTING SECURITIES AND SECURITY OWNERSHIP
________________________________________________________________
The securities entitled to vote at the Annual Meeting
consist of the Company's common stock, par value $.01 per share
(the "Common Stock"). Stockholders of record as of the close of
business on December 31, 1998 (the "Record Date") are entitled
to one vote for each share of Common Stock then held. As of the
Record Date, there were 4,054,144 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 Annual Meeting.
<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 November 30, 1998 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
"Proposal I -- Election of Directors -- 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
AS OF NOVEMBER 30, 1998(1) CLASS (2)
-------------------------- ----------
<S> <C> <C>
Persons Owning Greater than 5%:
NewSouth Bancorp, Inc. 347,443 (3) 8.47%
Employee Stock Ownership Plan
Trust ("ESOP")
1311 Carolina Avenue
Washington, North Carolina 27889
Directors:
Edmund T. Buckman, Jr. 88,455 (4) 2.14
Linley H. Gibbs, Jr. 61,110 (5) 1.48
Fred N. Holscher 51,154 (6) 1.24
Frederick H. Howdy 91,110 (7) 2.21
Charles E. Parker, Jr. 59,610 (8) 1.44
Marshall T. Singleton 72,682 (9) 1.76
Thomas A. Vann 195,359 (10) 4.64
All directors and executive 773,229 (11) 17.36
officers 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 347,443 shares under the ESOP and 116,374
shares under the Company's 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 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. 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 4,101,910 shares of Common Stock
outstanding as of November 30, 1998.
(3) These shares are currently held in a suspense account for
future allocation and distribution among participants as the
loan used to purchase the shares is repaid. The ESOP
trustees vote all allocated shares in accordance with the
instructions of the participating employees. Unallocated
shares and allocated shares for which no instructions have
been received are voted by the trustees in the same ratio as
participants direct the voting of allocated shares or, in
the absence of such direction, as directed by the Company's
Board of Directors. At November 30, 1998, 78,734 shares had
been allocated.
(4) Includes 30,000 shares owned by Mr. Buckman's spouse and
27,450 shares Mr. Buckman has the right to acquire upon the
exercise of options exercisable within 60 days of November
30, 1998.
(5) Includes 2,100 shares owned by Mr. Gibbs' spouse and 27,450
shares Mr. Gibbs has the right to acquire upon the exercise
of options exercisable within 60 days of November 30, 1998.
(6) Includes 2,025 shares owned by Mr. Holscher's spouse, 300
shares owned by his son and 27,450 shares Mr. Holscher has
the right to acquire upon the exercise of options
exercisable within 60 days of November 30, 1998.
2<PAGE>
<PAGE>
(7) Includes 30,000 shares owned by Dr. Howdy's spouse and
27,450 shares Dr. Howdy has the right to acquire upon the
exercise of options exercisable within 60 days of November
30, 1998.
(8) Includes 27,450 shares Mr. Parker has the right to acquire
upon the exercise of options exercisable within 60 days of
November 30, 1998.
(9) Includes 15,000 shares owned by B.E. Singleton & Sons, Inc.,
a corporation co-owned by Mr. Singleton, 2,226 shares owned
by his spouse and 27,450 shares Mr. Singleton has the right
to acquire upon the exercise of options exercisable within
60 days of November 30, 1998.
(10)Includes 30,000 shares owned by Mr. Vann's spouse, 8,550
shares owned by his son, 4,208 shares allocated to Mr.
Vann's account under the ESOP and 109,103 shares Mr. Vann
has the right to acquire upon the exercise of options
exercisable within 60 days of November 30, 1998.
(11)Includes 351,803 shares all directors and executive officers
as a group have the right to acquire upon the exercise of
options exercisable within 60 days of November 30, 1998.
________________________________________________________________
PROPOSAL I -- ELECTION OF DIRECTORS
________________________________________________________________
GENERAL
The Company's Board of Directors consists of seven
members. The Company's Certificate of Incorporation requires
that directors be divided into three classes, as nearly equal in
number as possible, with approximately one-third of the
directors elected each year. At the Annual Meeting, two
directors will be elected for a term expiring at the 2002 Annual
Meeting. The Board of Directors has nominated Charles E.
Parker, Jr. and Marshall T. Singleton to serve as directors for
a three-year period. Both nominees are currently members of the
Board. Under Delaware law and the Company's Bylaws, directors
are elected by a plurality of the votes present in person or by
proxy at a meeting at which a quorum is present.
It is intended that the persons named in the proxies
solicited by the Board of Directors will vote for the election
of the named nominees. If either nominee is unable to serve,
the shares represented by all valid proxies will be voted for
the election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate
the vacancy. At this time, the Board knows of no reason why
either nominee might be unavailable to serve.
The following table sets forth, for each nominee for
director and continuing director of the Company, his age, the
year he first became a director of the Bank, which is the
Company's principal operating subsidiary, and the expiration of
his term as a director. All such persons were appointed as
directors in 1996 in connection with the incorporation and
organization of the Company. Each director of the Company also
is a member of the Board of Directors of the Bank.
<TABLE>
<CAPTION>
YEAR FIRST
AGE AT ELECTED AS CURRENT
SEPTEMBER 30, DIRECTOR OF TERM
NAME 1998 THE BANK TO EXPIRE
---- ------------ ----------- ---------
<S> <C> <C> <C>
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2002
Charles E. Parker, Jr. 62 1971 1999
Marshall T. Singleton 59 1990 1999
DIRECTORS CONTINUING IN OFFICE
Edmund T. Buckman, Jr. 72 1975 2000
Fred N. Holscher 50 1985 2000
Frederick H. Howdy 66 1975 2000
Linley H. Gibbs, Jr. 67 1985 2001
Thomas A. Vann 49 1979 2001
3
<PAGE>
Set forth below is information concerning the Company's
directors. Unless otherwise stated, all directors have held the
positions indicated for at least the past five years.
CHARLES E. PARKER, JR. is a Vice President of the Robinson
Insurance Agency in New Bern. He joined the agency in 1989.
MARSHALL T. SINGLETON has been a co-owner of B.E. Singleton
& Sons, a highway construction firm, since 1960.
EDMUND T. BUCKMAN, JR. has been retired since 1994. Prior
to his retirement, Mr. Buckman was the owner of Buckman Auto
Supply in Washington, North Carolina.
FRED N. HOLSCHER is a partner with the Washington, North
Carolina law firm of Rodman, Holscher, Francisco & Peck, P.A.
and has been with the firm since 1973.
FREDERICK H. HOWDY is President of Drs. Freshwater and
Howdy P.A., a dental health care corporation of North Carolina.
Prior to that, he was a dentist in Washington, North Carolina
for 36 years.
LINLEY H. GIBBS, JR. has been retired since 1992. Prior to
his retirement, Mr. Gibbs served as a general manager with
Hamilton Beach, an appliance manufacturing company in
Washington, North Carolina.
THOMAS A. VANN serves as President of the Company and the
Bank. He joined the Bank in 1972 as Assistant Manager. Mr.
Vann was promoted to a number of positions prior to becoming
President of the Bank in 1977.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information with respect to
executive officers who do not serve on the Board of Directors.
</TABLE>
<TABLE>
<CAPTION>
AGE AT
SEPTEMBER 30,
NAME 1998 TITLE (1)
- ---- ------------ ---------
<S> <C> <C>
William L. Wall 52 Executive Vice President,
Chief Financial Officer and
Secretary of the Company and
the Bank
John B. Burgess, Sr. 62 Executive Vice President --
Commercial Lending and
Credit Administration
Jack L. Ashley 53 Executive Vice President --
Branch Administration and
Operations
Joseph C. Dunn 58 Senior Vice President --
Commercial Lending
William R. Outland 61 Vice President -- Consumer
Lending
Walter P. House 52 Vice President -- Mortgage
Operations
Sherry L. Correll 43 Vice President -- Savings and
Deposit Administration
Mary R. Boyd 48 Vice President -- Loan
Servicing
Kristie W. Hawkins 33 Treasurer and Controller of
the Company and the Bank
<FN>
_______________
(1) All positions are with the Bank unless indicated otherwise.
</FN>
</TABLE>
WILLIAM L. WALL joined the Bank in 1993 and currently
serves as Executive Vice President, Chief Financial Officer and
Secretary of the Company and the Bank. Prior to joining the
Bank, Mr. Wall served as Senior Vice President, Treasurer and
Chief Financial Officer of Pioneer Savings Bank in Rocky Mount,
North Carolina.
4
<PAGE>
JOHN B. BURGESS, SR. joined the Bank in October 1992 and
currently serves as Executive Vice President of Commercial
Lending and Credit Administration. Prior to joining the Bank,
Mr. Burgess served as Executive Vice President of Unity Bank in
Rocky Mount, North Carolina.
JACK L. ASHLEY joined the Bank in 1997 and currently
serves as Executive Vice President of Branch Administration and
Operations. Prior to joining the Bank, from June 1995 to August
1997, Mr. Ashley served as Senior Vice President and Region
Executive of United Carolina Bank in Greenville, North Carolina.
Prior to that, Mr. Ashley was employed for 17 years with
Southern National Bank in various capacities, most recently as
Senior Vice President.
JOSEPH C. DUNN joined the Bank in April 1997 and currently
serves as a Senior Vice President of Commercial Lending. Prior
to joining the Bank, Mr. Dunn served as Senior Underwriter for
Eastern North Carolina for First Union National Bank, from
October 1994 to March 1997. Prior to that, Mr. Dunn served for
two years as President of American National Bank in
Jacksonville, Florida.
WILLIAM R. OUTLAND has served as the Bank's Vice President
of Consumer Lending since he joined the Bank in 1983.
WALTER P. HOUSE joined the Bank in 1990 and currently
serves as Vice President of Mortgage Operations.
SHERRY L. CORRELL is currently the Vice President of
Savings and Deposit Administration. She joined the Bank in
1985.
MARY R. BOYD has been with the Bank since 1983 and
currently serves as a Vice President - Loan Servicing.
KRISTIE W. HAWKINS joined the Bank in 1982. Prior to
being promoted to her current position of Controller and
Treasurer, she served as the Bank's Assistant Treasurer and
Secretary as well as accounting department supervisor.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company meets monthly and
may have additional special meetings. During the year ended
September 30, 1998, the Board of Directors of the Company met 13
times. No director attended fewer than 75% in the aggregate of
the total number of Company Board of Directors meetings held
during the year ended September 30, 1998 and the total number of
meetings held by committees on which he served during such
fiscal year. The Company's Board of Directors has standing
Audit and Executive Committees.
The Board of Directors' Audit Committee consists of
Directors Buckman, Singleton and Parker, who serves as
Chairperson. The function of the Audit Committee is to examine
and approve the audit report prepared by the independent
auditors of the Company, to review and recommend the independent
auditors to be engaged by the Company, to review the internal
audit function and internal accounting controls, and to review
and approve audit policies. The Audit Committee met once during
the year ended September 30, 1998.
The Board of Directors' Executive Committee consists of
Directors Gibbs, Holscher, Vann and Howdy, who serves as
Chairperson. The Executive Committee, among other things,
evaluates the compensation and benefits of the directors,
officers and employees, recommends changes, and monitors and
evaluates employee performance. The Executive Committee reports
its evaluations and findings to the full Board of Directors and
all compensation decisions are ratified by the full Board of
Directors. Directors who also are officers abstain from
discussion and voting on matters affecting their compensation.
The Executive Committee is empowered to exercise all of the
authority of the Board when the Board is not in session. The
Executive Committee met once during the year ended September 30,
1998.
5<PAGE>
<PAGE>
The Company's full Board of Directors acts as a nominating
committee. The Board of Directors met once during the year
ended September 30, 1998 for the purpose of considering
potential nominees to the Board of Directors. In its
deliberations, the Board, functioning as a nominating committee,
considers the candidate's knowledge of the banking business and
involvement in community, business and civic affairs, and also
considers whether the candidate would provide for adequate
representation of its market area. The Company's Certificate of
Incorporation sets forth procedures that must be followed by
stockholders seeking to make nominations for director. In order
for a stockholder of the Company to make any nominations, he or
she must give written notice thereof to the Secretary of the
Company not less than thirty days nor more than sixty days prior
to the date of any such meeting; provided, however, that if less
than forty days' notice of the meeting is given to stockholders,
such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the Company not later than the close of
business on the tenth day following the day on which notice of
the meeting was mailed to stockholders. Each such notice given
by a stockholder with respect to nominations for the election of
directors must set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in
such notice; (ii) the principal occupation or employment of each
such nominee; and (iii) the number of shares of stock of the
Company which are beneficially owned by each such nominee. In
addition, the stockholder making such nomination must promptly
provide any other information reasonably requested by the
Company.
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:
. To link executive compensation rewards
to increases in stockholder value, as
measured by favorable long-term
operating results and continued
strengthening of the Company's financial
condition.
. 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.
. To correlate, as closely as possible,
executive officers' receipt of
compensation with the attainment of
specified performance objectives.
. To maintain a competitive mix of total
executive compensation, with particular
emphasis on awards related to increases
in long-term stockholder value.
. 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 three specific components of
executive compensation: base salary, a cash bonus and stock
benefit plans.
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
6<PAGE>
<PAGE>
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.
Stock Benefit Plans. 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
Company has adopted a stock option plan and a management
recognition plan.
Under the stock option plan, the Company reserved for
issuance a number of shares equal to 10% of the originally
issued Common Stock. The Committee believes that stock options
are an important element of compensation because they provide
executives with incentives linked to the performance of the
Common Stock. The Company awards stock options as a means of
providing employees the opportunity to acquire a proprietary
interest in the Company and to link their interests with those
of the Company's stockholders. Options are granted with an
exercise price equal to the market value of the Common Stock on
the date of grant, and thus acquire value only if the Company's
stock price increases. Although there is no specific formula,
in determining the level of option awards, the Committee takes
into consideration individual and corporate performance.
Under the management recognition plan, officers and
directors were granted awards of restricted Common Stock,
subject to vesting and forfeiture as determined by the
Committee. Under this plan, the Company reserved for issuance a
number of shares equal to 4% of the originally issued Common
Stock. The purpose of a management recognition plan 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.
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 1998
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 stockholder 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 1998 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 undertaking increased responsibility
due to the Company's status as a publicly traded corporation.
These same factors were considered by the Committee in setting
the amounts of the awards made to Mr. Vann for fiscal year 1998
under the Company's stock option plan and management recognition
plan. The Committee
7<PAGE>
<PAGE>
does not anticipate that Mr. Vann will be awarded additional
stock options or shares of restricted stock during fiscal year
1999.
The Committee believes that the Company's executive
compensation program serves the Company and its stockholders by
providing a direct link between the interests of executive
officers and those of stockholders 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.
Fred N. Holscher
Thomas A. Vann
8<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, 1998 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, 1998
<TABLE>
<CAPTION>
04/08/97 09/30/97 03/31/98 09/30/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
COMPANY $100 $154.8 $173.9 $164.3
NASDAQ 100 134.4 147.5 137.4
NASDAQ BANKS 100 136.0 163.2 135.0
</TABLE>
[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, 1998. Plot
points are provided above.]
9
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets
forth the cash and noncash compensation for the fiscal years
ended September 30, 1998, 1997 and 1996 awarded to or earned by
the President. No other executive officer of the Company earned
salary and bonus in fiscal 1998 exceeding $100,000 for services
rendered in all capacities to the Company and the Bank.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
AWARDS
ANNUAL COMPENSATION ------------------------
NAME AND ------------------------------- RESTRICTED SECURITIES
PRINCIPAL FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S)(2) OPTIONS(2) COMPENSATION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas A. Vann 1998 $175,000 $50,000 $ -- $1,007,257 (3) 109,103 $105,470 (4)
President 1997 156,750 50,000 -- -- -- 104,927
1996 135,000 55,000 -- -- -- 60,025
<FN>
___________
(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 1998 did not exceed 10% of the executive
officer's salary and bonus.
(2) Share amounts and price per share data on this table and in the footnotes have been
adjusted to reflect the effect of a three-for-two stock split paid on August 19, 1998.
(3) Amount shown in the table is based on the closing price of the Common Stock of $23.08 as
quoted on the Nasdaq National Market on the date of grant, April 8, 1998. The restricted
Common Stock awarded vests at the rate of 33 % per year following the date of grant, with
the first 33 % having vested on April 8, 1998. As of September 30, 1998, based on the
closing sale price of the Common Stock of $21.75, as reported on the Nasdaq National
Market, the aggregate value of the 29,090 shares of restricted Common Stock held by Mr.
Vann was $632,708. In the event the Company pays dividends with respect to its Common
Stock, when shares of restricted stock vest and/or are distributed, the holder will be
entitled to receive any cash dividends and a number of shares of Common Stock equal to any
stock dividends, declared and paid with respect to a share of restricted Common Stock
between the date the restricted stock was awarded and the date the restricted stock is
distributed, plus interest on cash dividends, provided that dividends paid with respect to
unvested restricted stock must be repaid to the Company in the event the restricted stock
is forfeited prior to vesting.
(4) For the year ended September 30, 1998, consists of $5,015 in matching contributions under
the Bank's 401(k) Plan, $7,705 in Board of Directors and Committee fees, $44,500
representing the value as of September 30, 1998 of shares of Common Stock allocated to Mr.
Vann's account under the ESOP during fiscal 1998, $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 $6,600
accrued pursuant to the Bank's Pension Plan.
</FN>
</TABLE>
Option Grants in Fiscal Year 1998. The following table
contains information concerning the grant of stock options
during the year ended September 30, 1998 to the executive
officer named in the Summary Compensation Table set forth above.
<TABLE>
<CAPTION>
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES FOR OPTIONS TERM (3)
OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------
NAME GRANTED(1)(2) YEAR PRICE(2) DATE 5% 10%
- ---- ----------- -------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Vann 109,103 46.7% $23.08 4/8/2008 $1,583,617 $4,013,198
<FN>
_________________
(1) All options were immediately exercisable upon grant.
(2) Share amounts and price per share data on this table have been adjusted to reflect the
effect of a three-for-two stock split paid on August 19, 1998.
(3) Represents the difference between the aggregate exercise price of the options and the
aggregate value of the underlying Common Stock at the expiration date assuming the
indicated annual rate of appreciation in the value of the Common Stock as of the date of
grant, April 8, 1998, based on the closing sale price of the Common Stock as quoted on the
Nasdaq National Market.
</FN>
</TABLE>
11<PAGE>
<PAGE>
Year-End Option Values. The following table sets forth
information concerning the value as of September 30, 1998 of
options held by the executive officer named in the Summary
Compensation Table set forth above.
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End (2) at Fiscal Year-End (1)(2)
Name Exercisable/ Unexercisable Exercisable/Unexercisable
---- -------------------------- -------------------------
<S> <C> <C>
Thomas A. Vann 109,103/-- $--/$--
<FN>
__________
(1) No options held by Mr. Vann were in the money at September 30, 1998.
(2) Share amounts and price per share data on this table and in the footnotes
have been adjusted to reflect the effect of a three-for-two stock split
paid on August 19, 1998.
</FN>
</TABLE>
No options were exercised during fiscal year 1998, and no
options held by any executive officer of the Company repriced
during the past ten full fiscal years.
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 the employee's actual years of service
bear 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, 1998, Mr. Vann had
approximately 26 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, 1998. 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.
<TABLE>
<CAPTION>
Years of Service
Average Final ------------------------------------------
Compensation (1) 15 20 25 30 35
- ---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
125,000 $30,300 $40,500 $50,600 $ 60,700 $ 60,700
150,000 36,900 49,200 61,500 73,800 73,800
175,000 43,500 58,000 72,400 86,900 86,900
200,000 50,000 66,700 83,400 100,100 100,100
225,000 56,600 75,500 94,300 113,200 113,200
250,000 63,200 84,200 105,300 126,300 126,300
300,000 76,300 101,700 127,100 152,600 152,600
<PAGE>
<FN>
_____________
(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.
</FN>
</TABLE>
11
<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, 1998 would have
been approximately $523,250. 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.
12
<PAGE>
<PAGE>
DIRECTOR COMPENSATION
Fees. 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. Directors also participate in certain benefit
plans of the Company and the Bank, as described below.
Directors are eligible to receive awards under the
Company's stock option plan and MRP. During the year ended
September 30, 1998, Directors Buckman, Gibbs, Holscher, Howdy,
Parker, Singleton and Vann received options to purchase 27,450,
27,450, 27,450, 27,450, 27,450, 27,450 and 109,103 shares of
Common Stock, respectively, at an exercise price of $23.08 per
share. In addition, Directors Buckman, Gibbs, Holscher, Howdy,
Parker, Singleton and Vann received awards of 10,980, 10,980,
10,980, 10,980, 10,980, 10,980 and 43,642 shares, respectively,
of restricted Common Stock. Such awards vest at the rate of 33
% annually, with the first 33 % having vested on April 8,
1998, the date of grant. Share amounts and price per share data
have been adjusted to reflect the effect of a three-for-two
stock split paid on August 19, 1998.
Other. 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
13<PAGE>
<PAGE>
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 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.
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
14<PAGE>
<PAGE>
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.
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.
15
<PAGE>
<PAGE>
TRANSACTIONS WITH MANAGEMENT
The Bank offers loans to its directors and executive
officers. At September 30, 1998, the Bank's loans to directors
and executive officers totaled $1.8 million, or 3.2% of the
Company's stockholders' equity at that date. All loans to the
Company's and the Bank's directors and executive officers and
members of their immediate families and corporations or
organizations of which a director or executive officer is an
executive officer, partner or 10% owner were made in the
ordinary course of business on the same terms, including
interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and do not
involve more than the normal risk of collectibility or present
other unfavorable features.
________________________________________________________________
PROPOSAL II -- PROPOSAL TO REINCORPORATE AS A
VIRGINIA CORPORATION
________________________________________________________________
GENERAL
The Board of Directors of the Company has unanimously
approved, subject to stockholder approval, a proposal to change
the Company's state of incorporation from Delaware to Virginia
by means of a merger (the "Merger") of the Company with and into
NewSouth Bancorp, Inc., a newly formed Virginia corporation
("NewSouth Virginia") and wholly owned subsidiary of the Company
(the "Reincorporation Proposal"). The principal office of
NewSouth Virginia is 1311 Carolina Avenue, Washington, North
Carolina 27889, telephone (252) 946-4178. NewSouth Virginia
will be the surviving corporation in the Merger, and the effect
of the Merger will be to change the law applicable to the
Company's corporate affairs from the Delaware General
Corporation Law ("Delaware Law") to the Virginia Stock
Corporation Act ("Virginia Law"), including certain differences
in stockholders' rights. See "-- Comparison of Stockholder
Rights."
The following discussion summarizes certain aspects of the
Reincorporation Proposal, including certain material differences
between Delaware Law and Virginia Law. This summary is not
intended to be a complete description of the Reincorporation
Proposal or the differences between stockholders' rights under
Delaware Law or Virginia Law, and is qualified in its entirety
by reference to (i) the Plan of Reorganization and Agreement and
Plan of Merger dated December 16, 1998 between the Company and
NewSouth Virginia (the "Agreement") attached hereto at Appendix
A; (ii) the Articles of Incorporation of NewSouth Virginia (the
"Articles") attached hereto at Appendix B; and (iii) the Bylaws
of NewSouth Virginia (the "New Bylaws") attached hereto at
Appendix C. Copies of the Company's Certificate of Incorporation
(the "Certificate") and Bylaws (the "Present Bylaws") are
available for inspection at the Company's principal executive
office, and copies will be provided to stockholders upon
request.
The Company's Board of Directors has unanimously approved
the Reincorporation Proposal and, for the reasons set forth
below, believes that the best interests of the Company and its
stockholders will be served by changing the Company's state of
incorporation from Delaware to Virginia. The Company's
stockholders are being asked to approve the Reincorporation
Proposal (including the adoption of the Agreement and the
approval of the Articles and the New Bylaws) at the Annual
Meeting. The Board of Directors unanimously recommends that the
Company's stockholders vote FOR the Reincorporation Proposal.
Approval of the Reincorporation Proposal by the Company's
stockholders will constitute adoption of the Agreement and
approval of the Merger, the Articles and the New Bylaws. As a
result of the Merger, the Articles and New Bylaws will replace
the Certificate and Present Bylaws as the charter documents
affecting corporate governance and stockholders' rights. See
"-- Comparison of Stockholder Rights." Accordingly,
stockholders are urged to read carefully this Proxy Statement
and the Appendices attached hereto.
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DESCRIPTION OF THE REINCORPORATION PROPOSAL
At the Effective Date of the Merger (as defined in the
Agreement), the separate existence of the Company will cease and
NewSouth Virginia, as the surviving corporation, will succeed to
all business, properties, assets and liabilities of the Company.
Each share of Common Stock of the Company issued and outstanding
immediately prior to the Effective Date will by virtue of the
Merger be converted into one share of common stock, par value
$.01 per share, of NewSouth Virginia ("NewSouth Virginia Common
Stock"). As of December 16, 1998, there were 4,056,644 shares
of Common Stock issued and outstanding. At the Effective Date,
certificates which immediately prior to the Effective Date
represented shares of Common Stock of the Company will be deemed
for all purposes to represent the same number of shares of
NewSouth Virginia Common Stock. It will not be necessary for
stockholders of the Company to exchange their existing stock
certificates for stock certificates of NewSouth Virginia.
However, when outstanding certificates representing shares of
Common Stock are presented for transfer after the Merger, new
certificates representing shares of NewSouth Virginia Common
Stock will be issued. New certificates will also be issued upon
the request of any stockholder, subject to proper endorsement,
signature guarantee, if required, and payment of applicable
taxes, if any.
Following consummation of the Merger, the NewSouth
Virginia Common Stock will be listed for trading on the Nasdaq
National Market, the market on which the Common Stock currently
is listed for trading. The NewSouth Virginia Common Stock will
be listed under the symbol "NSBC," which is the same symbol as
the Company's current symbol. Delivery of existing stock
certificates representing Common Stock of the Company will
constitute "good delivery" of shares of NewSouth Virginia in
transactions subsequent to the Effective Date of the Merger.
Approval of the Reincorporation Proposal will effect a
change in the legal domicile of the Company and certain other
changes of a legal nature, as described in this Proxy Statement.
Reincorporation of the Company will not, in and of itself,
result in any change in the name, business, management, location
of the principal executive offices, assets, liabilities or
stockholders' equity of the Company. The directors and officers
of the Company prior to the Merger will continue to serve as the
directors and officers of NewSouth Virginia following the
Merger.
Pursuant to the terms of the Agreement, each option to
purchase Common Stock outstanding immediately prior to the
Effective Date of the Merger under the Company's 1997 Stock
Option Plan (the "Option Plan") will be converted into an option
to purchase NewSouth Virginia Common Stock, subject to the same
terms and conditions as set forth in the Option Plan or other
agreements pursuant to which such option was granted. All other
employee benefit plans and other agreements and arrangements of
the Company will be continued by NewSouth Virginia upon the same
terms and subject to the same conditions.
Upon approval of the Reincorporation Proposal by the
Company's stockholders, the proposed reorganization will be
consummated at such time as the Boards of Directors of the
Company and NewSouth Virginia determine is advisable. The
Agreement provides, however, that the Merger may be abandoned by
the Board of Directors of either the Company or NewSouth
Virginia prior to the Effective Date, either before or after
stockholder approval. In addition, the Agreement may be amended
prior to the Effective Date, either before or after stockholder
approval; provided, however, that the Agreement may not be
amended after stockholder approval if such amendment would (i)
alter or change the amount or kind of shares or other
consideration to be received by stockholders in the Merger; (ii)
alter or change any term of the Articles; (iii) alter or change
any of the terms and conditions of the Agreement if such
alteration or change would adversely affect the stockholders; or
(iv) otherwise violate applicable law.
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REASONS FOR THE PROPOSED REINCORPORATION
The primary purpose for reincorporating in Virginia is
that the franchise tax and related fees that the Company pays as
a Delaware corporation are significantly higher than the
comparable fees for a Virginia corporation. Management of the
Company estimates that reincorporation in Virginia will save the
Company approximately $40,000 annually in franchise taxes.
Additionally, after considering the advantages and disadvantages
of the Reincorporation Proposal, including the differences
between Delaware Law and Virginia Law, the Board of Directors
concluded that the
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benefits of being incorporated in Virginia outweigh the benefits
and detriments of remaining in Delaware, including the
continuing expense of Delaware's annual franchise tax. In light
of the foregoing, the Board of Directors of the Company believes
that the best interests of the Company and its stockholders will
be served by changing the Company's state of incorporation from
Delaware to Virginia. See " -- Comparison of Stockholder
Rights" and "-- Possible Disadvantages of the Reincorporation
Proposal."
COMPARISON OF STOCKHOLDER RIGHTS
Upon consummation of the Merger, the Company will be
governed by Virginia Law and by the Articles and New Bylaws.
The provisions of the Articles and New Bylaws are substantially
similar to the provisions of the Certificate and Present Bylaws
of the Company, except for those differences attributable to the
differences between Delaware Law and Virginia Law. Significant
provisions of the Articles and New Bylaws and certain
differences between such new charter documents and the present
charter documents of the Company are discussed below. Although
it is impracticable to compare all of the aspects in which
Virginia Law and Delaware Law differ, the following is a summary
of certain significant differences between the provisions of
these laws. For purposes of this section, the "Company" shall
refer to NewSouth Bancorp, Inc. incorporated under Delaware Law
and/or under Virginia Law, as the context indicates.
The following discussion is not intended to be a complete
statement of the differences affecting the rights of
stockholders, but rather summarizes material differences and
certain important similarities. The discussion is qualified in
its entirety by reference to the Articles and New Bylaws which
are attached at Appendices B and C, respectively, to this Proxy
Statement, and the Certificate and Present Bylaws, copies of
which are available for inspection at the Company's executive
office or will be provided to stockholders upon request.
Capital Stock. The Company's authorized capital stock
consists of 8,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, par value $.01 per share ("Preferred
Stock"). As of December 31, 1998, 4,054,144 shares of Common
Stock were issued and outstanding. No shares of Preferred Stock
of the Company have been issued. The amount of the authorized
capital stock of NewSouth Virginia is identical to that of the
Company.
The Certificate authorizes the Board of Directors to issue
Preferred Stock by resolution from time to time in one or more
series and to fix and state the designations, powers and
preferences and relative, participating, optional and other
special rights of such shares, including voting rights (which
could be full or limited) and conversion rights. The Company
also has a substantial number of authorized but unissued shares
of Common Stock available for issuance. The authorized but
unissued and unreserved shares of Common Stock are available for
general corporate purposes, including but not limited to
possible issuance as stock dividends or stock splits, in future
mergers or acquisitions, under a cash dividend reinvestment and
stock purchase plan, in a future underwritten or other public
offering, or under a stock-based employee plan. The authorized
but unissued shares of Preferred Stock are similarly available
for issuance in future mergers or acquisitions, in a future
underwritten public offering or private placement or for other
general corporate purposes. Except as required by law or as
otherwise required to approve the transaction in which the
additional authorized shares of Common Stock or authorized
shares of Preferred Stock would be issued, no stockholder
approval is required for the issuance of these shares.
Accordingly, the Board of Directors of the Company, without
stockholder approval, can issue Preferred Stock with voting and
conversion rights which could adversely affect the voting power
of the holders of Common Stock. The Board of Directors of
NewSouth Virginia will have similar rights and powers under the
Articles.
Restrictions on Acquisitions of Securities and Voting
Rights. The Certificate and the Articles contain identical
provisions that provide that for three years after the effective
date of the Bank's conversion to stock form (the "Stock
Conversion"), no person may directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of
any class of the equity security of the Company, unless such
offer or acquisition shall have been approved in advance by a
two-thirds vote of the Company's Continuing Directors
(generally, a director who is unaffiliated with a person that
acquires beneficial ownership of 10% or more of the Company's
Common Stock). This provision does not apply to any employee
stock benefit plan of the Company or to an underwriter or member
of an underwriting or selling group involving the public sale or
resale of securities of the Company or a subsidiary thereof;
provided, that upon completion
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of the sale or resale, no such underwriter or member of the
selling group is a beneficial owner of more than 10% of any
class of equity securities of the Company. In addition, during
such three-year period, no shares beneficially owned in
violation of the foregoing percentage limitation, as determined
by the Company's Board of Directors, shall be entitled to vote
in connection with any matter submitted to stockholders for a
vote. Additionally, the Certificate and Articles provide for
further restrictions on voting rights of shares owned in excess
of 10% of any class of equity security of the Company beyond the
three years after the Stock Conversion. Specifically, the
Certificate and the Articles provide that if, at any time after
three years from the Stock Conversion, any person acquires the
beneficial ownership of more than 10% of any class of equity
security of the Company, then, with respect to each vote in
excess of 10%, the record holders of voting stock of the Company
beneficially owned by such person shall be entitled to cast only
one-hundredth of one vote with respect to each vote in excess of
10% of the voting power of the outstanding shares of voting
stock of the Company which such record holders would otherwise
be entitled to cast without giving effect to the provision, and
the aggregate voting power of such record holders shall be
allocated proportionately among such record holders. An
exception from the restriction is provided if the acquisition of
more than 10% of the securities received the prior approval by a
two-thirds vote of the Company's Continuing Directors. Under
the Articles and Certificate, the restriction on voting shares
beneficially owned in violation of the foregoing limitations is
imposed automatically. In order to prevent the imposition of
such restrictions, the Board of Directors must take affirmative
action approving in advance a particular acquisition or an offer
to acquire. The term "person" is defined as an individual,
group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or
similar company, a syndicate or any group formed for the purpose
of acquiring, holding or disposing of securities of an insured
institution.
Payments of Dividends. The ability of the Company to pay
dividends on its capital stock is limited by certain
restrictions imposed upon corporations under Delaware Law and by
the Federal Reserve Board. Under Delaware Law, dividends may be
declared and paid out of capital surplus, or, in case there is
no capital surplus, out of the corporation's net profits for the
fiscal year in which the dividend is declared and/or the net
profits from the preceding fiscal year. Distribution of
dividends are not permitted by Delaware corporations in the
event the capital of such corporation shall have diminished by
depreciation of property or losses, to an amount less than the
aggregate amount of the capital represented by issued and
outstanding stock having a preference upon distribution of
assets. The Company is also subject to regulation by the
Federal Reserve Board, pursuant to a policy statement which sets
forth guidelines for the payment of cash dividends by bank
holding companies. According to the Federal Reserve Board
policy statement, the Company should pay cash dividends only to
the extent that its net income for the past year is sufficient
to cover both the cash dividends and a rate of earning retention
that is consistent with the company's capital needs, asset
quality and overall financial condition. Furthermore, the
Federal Reserve Board policy statement indicated that it would
be inappropriate for a bank holding company experiencing serious
financial problems to borrow funds to pay dividends, and the
Federal Reserve Board may prohibit a bank holding company from
paying any dividends if the holding company's bank subsidiary is
classified as "undercapitalized" (generally, an institution that
fails to meet the minimum level for any relevant capital
measure).
After the Merger, dividends paid by NewSouth Virginia on
its capital stock will be governed by Virginia Law. Under
Virginia Law, dividends may be declared and paid as determined
by the Company's board of directors, provided that no dividends
may be paid if, after giving effect to the distribution (i) the
corporation would not be able to pay its debts as they become
due in the usual course of business, or (ii) the corporation's
total assets would be less than the sum of its total liabilities
plus any amount required to be paid to holders of Preferred
Stock in the event of liquidation of the Company. NewSouth
Virginia will be subject to the same Federal Reserve Board
policy statement discussed above.
Board of Directors. Both the Certificate and Present
Bylaws and the Articles and New Bylaws require the Board of
Directors of the Company to be divided into three classes as
nearly equal in number as possible and that the members of each
class shall be elected for a term of three years and until their
successors are elected and qualified, with one class being
elected annually ("classified board of directors"). Following
the Merger, the current directors of the Company will continue
to serve as directors of NewSouth Virginia in the same classes
in which they currently serve.
Cumulative Voting. Neither the Certificate and Present
Bylaws, nor the Articles and New Bylaws permit cumulative
voting. Cumulative voting would entitle each stockholder to
vote as many votes as he or she has shares of
19
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Common Stock, multiplied by the number of directors to be
elected at any stockholder meeting. If cumulative voting were
permitted, the stockholder would be able to cast all votes for a
single nominee or may distribute votes among as many nominees as
such stockholder chooses. Cumulative voting could possibly
allow holders of a significant minority of a corporation's stock
to assure the election of one or more directors.
Preemptive Rights. The Certificate and Present Bylaws and
the Articles and New Bylaws do grant preemptive rights of any
shares of Common Stock or other securities of the Company.
Removal of Directors. The Certificate and the Articles
provide that a director or the entire Board of Directors may be
removed only for cause and only by the affirmative vote of not
less than 80% of the outstanding shares of capital stock
entitled to vote generally in the election of directors, cast at
a meeting of stockholders called for that purpose.
Board Vacancies. Under the Certificate and Articles, any
vacancies on the Board of Directors, however caused, and newly
created directorships shall be filled only by a two-thirds vote
of the directors then in office, whether or not there is a
quorum. Under the Certificate, any director selected to fill
such a vacancy by the remaining members of the Board of
Directors shall hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which
such director has been chosen expires and when such director's
successor is elected and qualified. Under the Articles, a
director selected by the remaining directors to fill a vacancy
will serve only until the next annual meeting of stockholders.
Evaluation of Business Combinations. The Certificate
contains a provision that permits the Board of Directors to give
due consideration to the following relevant factors in
connection with the exercise of its judgment in determining what
is in the best interest of the Company and its stockholders when
evaluating a business combination or tender or exchange offer
may, in addition to considering the adequacy of the amount to be
paid in connection with such transactions: (i) the social and
economic effects of the transaction on the Company and its
subsidiaries, employees, depositors, loan and other customers,
creditors and other elements of the communities in which the
Company and its subsidiaries operate or are located; (ii) the
business and financial condition and earnings prospects of the
acquiring person or entity, including, but not limited to, debt
service and other existing financial obligations, financial
obligations to be incurred in connection with the acquisition
and other likely financial obligations of the acquiring person
or entity and the possible effect of such conditions upon the
Company and its subsidiaries, as well as other elements of the
communities in which the Company and its subsidiaries operate or
are located; and (iii) the competence, experience, and integrity
of the acquiring person or entity and its or their management.
The Articles contain an identical provision.
Limitations on Director and Officer Liability;
Indemnification. The Certificate and Articles both contain a
provision that eliminates or limits a director's personal
liability for monetary damages for breach of his or her
fiduciary duty, subject to certain limitations. The Certificate
provides that a director of the Company shall not be liable for
his or her duty as a director, except for liability for: (i)
any breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
the law; (iii) under Section 174 of Delaware Law which imposes
liability on directors for unlawful payment of dividends or
unlawful stock repurchases; or (iv) any transaction from which
the director derived an improper personal benefit. The
Certificate does not limit the potential liability of officers.
The Articles eliminate a director's or officer's liability
to the Company or its stockholders except to the extent such
liability may not be limited under Virginia law. Under Virginia
Law, in any proceeding brought by or on behalf of a stockholder
of the Company or in the right of the Company, the damages
assessed against an officer or director arising out of a single
transaction, occurrence or course of conduct, shall not exceed
the lesser of: (1) the monetary amount, including the
elimination of liability, specified in the articles of
incorporation or, if approved by the stockholders, in the bylaws
as a limitation on or elimination of the liability of the
officer or director; or (2) the greater of (i) $100,000 or (ii)
the amount of cash compensation received by the officer or
director from the Company during the twelve months immediately
preceding the act or omission for which liability was imposed.
However, an officer or director will be liable without
limitation if he or she engaged in willful misconduct knowing
violation of criminal law or any federal or state securities
law, including, without limitation, any claim of unlawful
insider trading or manipulation
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of the market of any security. The Certificate and the Articles
each provide that if the law of the appropriate jurisdiction is
subsequently amended to eliminate or limit liability with
respect to these actions, then the liability of the directors
and/or officers shall be eliminated or limited to the fullest
extent of the law.
Indemnification provisions contained in the Certificate and
the Articles as governed by Delaware Law and Virginia Law,
respectively, are similar. Both provisions generally allow for
indemnification of directors and officers to the extent
permitted by law. In general, Delaware Law and Virginia Law
permit a corporation to provide indemnification for officers and
directors (among others such as employees agents of the
corporation or such person serving at the request of the
Company) who is a party or is threatened to made a party to any
threatened, pending, or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative)
against expenses, judgements, fines and amounts paid in
settlement that are actually and reasonably incurred. Under
Delaware Law, indemnification is permitted if the indemnitee
acted in good faith and in a manner the person reasonably
believed to be in the corporation's best interest, and in a
criminal proceeding, had no reasonable cause to believe that the
conduct was unlawful. Under Virginia Law, indemnification is
permitted provided that (i) the director or officer conducted
himself or herself in good faith; (ii) the director or officer
believed that his or her conduct was in the best interests of
the Company or at least not opposed to such interests; and (iii)
in the case of a criminal proceeding, the director or officer
had no reasonable cause to believe his or her conduct was
unlawful. Indemnification is not permitted under Virginia Law
(a) in connection with a proceeding by or in the right of the
corporation in which the director or officer was adjudged liable
to the corporation; or (b) in connection with any other
proceeding charging improper personal benefit to such
officer or director whether or not involving action in his or
her official capacity, in which he or she was adjudged liable on
the basis that a personal benefit was improperly received.
Under the Articles and Certificate and under Delaware Law and
Virginia Law, prior approval of a majority of the Company's
Board of Directors is required before an officer or director may
be indemnified, except where there is not a quorum of the Board
of Directors, then such determination of indemnification may be
made as otherwise provided under the respective statutes.
Virginia Law and Delaware Law both prohibit such
indemnification if the proposed indemnitee is adjudged liable to
the corporation, except upon application to a court which
determines such person is reasonably entitled to such
indemnification. The rights to indemnification are not
exclusive of any other right which any person may have or
hereafter acquire under any statute, the Articles, the New
Bylaws, agreement, vote of stockholders or directors, or
otherwise.
Notice Requirements for Stockholder Nominations and
Stockholder Proposals. The Certificate and the Articles
provide that nominations for the election of directors and
proposals for any new business to be taken up at any annual or
special meeting of stockholders may be made by the Board of
Directors of the Company or by any stockholder of the Company
entitled to vote generally in the election of directors.
Stockholders who want to make a nomination for the election of
directors or a proposal for new business at any annual or
special meeting must deliver or mail written notice to the
Secretary of the Company providing certain specified information
not less than thirty days nor more than sixty days prior to the
date of any such meeting; provided, however, that if less than
forty days' notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed, as prescribed, to
the Secretary of the Company not later than the close of
business on the tenth day following the day on which notice of
the meeting was mailed to stockholders.
Stockholders' Inspection Rights. Under Delaware Law a
stockholder may inspect a corporation's stock ledgers, the
stockholders' list and its other books and records for any
purpose reasonably related to such person's interest as a
stockholder. Virginia Law provides for stockholder inspection
of the "corporate records" of Virginia corporations upon written
demand of at least five business days prior to such inspection,
provided that the requesting stockholder: (i) has been a
stockholder of record for at least the six months preceding the
written demand; (ii) makes a demand in good faith and for a
proper purpose; (iii) describes, with particularity, the purpose
and the records to be inspected; and (iv) requests records that
are connected with the purpose. Under Virginia Law, "corporate
records" include the following: (a) excerpts from minutes of any
meeting of the board of directors, records of any action of a
committee of the board of directors while acting in place of the
board of directors on behalf of the corporation, minutes of the
stockholders, and records of action taken by stockholders or
board of directors without a meeting, to the extent permitted
under statute; (b) accounting records of the corporation; and
(c) the record of stockholders.
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Special Meetings of Stockholders. The Certificate and
Present Bylaws and the Articles and New Bylaws provide that
special meetings of stockholders may only be called by the Board
of Directors or by a duly designated committee of the Board of
Directors. Stockholders are not authorized to call a special
meeting.
Stockholder Action Without a Meeting. The Certificate
provides that stockholder action may be taken only at a special
or annual meeting of stockholders and not by written consent.
The Articles permit action by the stockholders without a
meeting, provided that all the stockholders consent in writing
to the action taken.
Restrictions on Business Combinations with Principal
Stockholders. The Certificate and Articles require the approval
of the holders of (i) at least 80% of the Company's outstanding
shares of voting stock; and (ii) at least a majority of the
Company's outstanding shares of voting stock, not including
shares deemed beneficially owned by a "Related Person," to
approve certain "Business Combinations" as defined, and related
transactions. The increased voting requirements in the
Certificate and Articles apply in connection with Business
Combinations involving a Related Person, except in cases where
the proposed transaction has been approved in advance by two-
thirds of those members of the Company's Board of Directors who
are unaffiliated with the Related Person and who were directors
prior to the time when the Related Person became a Related
Person (the "Continuing Directors"). The term "Related Person"
is defined to include any individual, corporation, partnership
or other entity or affiliate thereof which owns beneficially or
controls, directly or indirectly, 10% or more of the outstanding
shares of Common Stock of the Company. A "Business Combination"
is defined to include (i) any merger or consolidation of the
Company with or into a Related Person; (ii) any sale, lease
exchange, transfer, or other disposition of all or a substantial
part of the assets of the Company or of a subsidiary to a
Related Person (the term "substantial part" is defined to
include more than 25% of the Company's total assets); (iii) any
merger or consolidation of a Related Person with or into the
Company or a subsidiary of the Company; (iv) any sale, lease,
exchange, transfer or other disposition of all or any
substantial part of the assets of a Related Person to the
Company or a subsidiary of the Company; (v) the issuance of any
securities of the Company or a subsidiary of the Company to a
Related Person; (vi) the acquisition by the Company or a
subsidiary of the Company of any securities of the Related
Person; (vii) any reclassification of the Common Stock, or any
recapitalization involving the Common Stock; and (viii) any
agreement, contract or other arrangement providing for any of
the above transactions.
Under Virginia Law, in addition to this provision, Business
Combinations would be subject to the Virginia Affiliated
Transactions Act which requires the approval of the holders of
at least a two-thirds of the outstanding disinterested shares of
common stock, subject to certain exceptions. For a discussion
of the Virginia Affiliated Transaction Act, see "-- Comparison
of Stockholder Rights -- Antitakeover Statutes."
Antitakeover Statutes. Delaware Law and Virginia Law
regulate transactions with major stockholders after they become
major stockholders. Under Delaware Law, a Delaware
corporation is prohibited from engaging in mergers, dispositions
of 10% or more of its assets, and issuances of stock and other
transactions ("business combinations") with a person or group
that owns 15% or more of the voting stock of the corporation (an
"interested stockholder"), for a period of three years after
the interested stockholder crosses the 15% threshold. These
restrictions on transactions involving an interested stockholder
do not apply in certain circumstances, including those
transactions in which (i) prior to an interested stockholder
owning 15% or more of the voting stock, the board of directors
approved the business combination or the transaction that
resulted in the person or group becoming an interested
stockholder; (ii) in a transaction that resulted in a person or
group becoming an interested stockholder, the person or group
acquired at least 85% of the voting stock other than stock owned
by inside directors and certain employee stock plans; (iii)
after the person or group became an interested stockholder, the
board of directors and at least 66 2/3% of the voting stock
other than stock owned by the interested stockholder approved
the business combination; or (iv) certain competitive bidding
circumstances were present.
The Virginia Stock Corporation Act ("VSCA") contains a
similar statute designed to provide Virginia corporations with
additional protections against hostile takeovers. The Virginia
Affiliated Transactions Act restricts certain transactions
between a Virginia corporation and a holder of 10% or more of
the corporation's outstanding voting stock, together with
affiliates or associates thereof (an "interested shareholder").
For a period of three years following the date that a
stockholder becomes an interested shareholder, the Virginia
Affiliates Transactions Act generally prohibits
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the following types of transactions between the corporation and
the interested shareholder (unless certain conditions, described
below, are met): (i) mergers; (ii) sales, leases, exchanges,
mortgages, pledges, transfers or other dispositions (in one or a
series of transactions) having a total market value in excess of
5% of the corporation's consolidated net worth; (iii) any
guarantees of indebtedness of any interested shareholder in an
amount in excess of 5% of the corporation's consolidated net
worth; (iv) sales or other dispositions by the corporation or
any subsidiary thereof of any voting shares of the corporation
or any subsidiary thereof having a market value of 5% or more of
the total market value of the outstanding voting shares of the
corporation to any interested shareholder or affiliate of any
Interested Shareholder other than pursuant to a stock dividend
or the exercise of rights or warrants; (v) the dissolution of
the corporation if proposed by or on behalf of an interested
shareholder; (vi) any reclassification of securities, including
any reverse stock split, or recapitalization of the corporation,
or any merger of the corporation with any of its subsidiaries or
any distribution or other transaction which has the effect
directly or indirectly of increasing by more than 5% the
percentage of the outstanding voting shares of the corporation
or any of its subsidiaries beneficially owned by any interested
shareholder; and (vii) any share exchange in which an interested
shareholder acquires a class or series of the corporation's
voting stock, unless the affiliated transaction is approved by
(a) a majority of the disinterested directors, and (b)
two-thirds of the disinterested voting shares. Additionally,
after the three-year prohibition on affiliated transactions has
expired, an affiliated transaction must be approved by
two-thirds of the votes cast by disinterested stockholders.
The foregoing voting requirements do not apply if the
particular affiliated transaction (i) has been approved by a
majority of the disinterested directors; (ii) meets the rigorous
fair price requirements of the Virginia Affiliated Transactions
Act; or (iii) qualifies for one of the statutory exemptions. A
Virginia corporation may exempt itself from the requirements of
the statute in its articles of incorporation. In this regard,
the Company has not exempted itself from the provisions of the
Virginia Affiliated Transactions Act. Additionally, the
Virginia
Affiliated Transactions Act does not apply to corporations with
less than 300 stockholders of record.
Virginia Law also contains a control share acquisition
statute, the Virginia Control Share Acquisition Act, which
requires an interested investor who acquires a threshold
percentage of stock in a target corporation to obtain the
approval of non-interested stockholders before it may exercise
voting rights. Under the Virginia Control Share Acquisition
Act, certain notice and informational filings and special
stockholder meeting and voting procedures must be followed prior
to consummation of a proposed "control share acquisition,"
which is generally defined as any acquisition of an issuer's
shares which would entitle the acquiror, immediately after such
acquisition, directly or indirectly, to exercise or direct the
exercise of voting power of the issuer in the election of
directors within any of the following ranges of such voting
power: (i) one-fifth or more but less than one-third of such
voting power; (ii) one-third or more but less than a majority of
such voting power; or (iii) a majority or more of such voting
power. Assuming compliance with the notice and information
filings prescribed by statute, the proposed control share
acquisition may be made only if the acquisition is approved by a
majority of all votes entitled to be cast for the election of
directors, excluding the combined voting power of the
"interested shares" (generally, the shares held by the intended
acquiror and the directors and officers of the issuer). A
Virginia corporation may include a provision in its articles of
incorporation or bylaws exempting the corporation from
Virginia's Control Share Acquisitions Statute. NewSouth
Virginia, however, has not exempted itself from the provisions
of Virginia's Control Share Acquisitions Statute. In addition,
Virginia's Control Share Acquisitions Statute does not apply to
corporations with less than 300 shareholders. Delaware Law does
not contain any similar type of statute.
Consolidation, Merger, Share Exchange and Transfer of
Assets. In addition to the antitakeover provisions discussed
above, Virginia Law requires consolidations, mergers, share
exchanges and certain asset transfers to be approved by a
two-thirds vote of the voting power of the corporation.
Delaware Law does not require stockholder approval in the case
of asset and share acquisitions and, in general, requires
approval of mergers and disposition of substantially all of a
corporation's assets by a majority vote of the voting power of
the corporation.
Amendment of the Present Bylaws And New Bylaws. The
Certificate and Articles provide that the Bylaws may be amended
the affirmative vote of not less than 80% of the outstanding
shares of capital stock of the Company entitled to vote
generally in the election of directors, cast at a meeting called
for that purpose. The Present Bylaws and New Bylaws contain
numerous provisions concerning the Company's governance, such as
fixing the number of directors.
23<PAGE>
<PAGE>
By reducing the ability of a potential corporate raider to make
changes in the bylaws and to reduce the authority of the Board
of Directors or impede its ability to manage the Company, this
provision in the respective bylaws could have the effect of
discouraging a tender offer or other takeover attempt where the
ability to make fundamental changes through bylaw amendments is
an important element of the takeover strategy of the acquiror.
Amendment of the Certificate and Articles. The Certificate
and Articles provide that specified provisions (listed below)
may not be amended, repealed, altered or rescinded unless the
affirmative vote of 80% of the outstanding shares of capital
stock entitled to vote generally in the election of directors at
a meeting called for that purpose approve such amendment, except
where a majority of the Continuing Directors first approve such
amendment or other alteration, then the affirmative vote of a
majority of the outstanding shares of capital stock entitled to
vote generally in the election of directors may approve such
amendment or other alteration. The specific provisions are
those: (i) governing the calling of special meetings, the
absence of cumulative voting rights and the requirement that
stockholder action be taken only at annual or special meetings
or by unanimous written consent; (ii) requiring written notice
to the Company of nominations for the election of directors and
new business proposals; (iii) governing the number of the
Company's Directors, the filling of vacancies on the Board of
Directors and classification of the Board of Directors; (iv)
providing the mechanism for removing directors; (v) limiting the
acquisition of 10% or more of the capital stock of the Company
(except, with the prior approval of the Continuing Directors of
the Company); (vi) governing the requirement for the approval of
certain Business Combinations involving a "Related Person;"
(vii) regarding the consideration of certain nonmonetary factors
in the event of an offer by another party; (viii) providing for
the indemnification of directors, officers, employees and agents
of the Company; (ix) pertaining to the elimination of the
liability of the directors to the Company and its stockholders
for monetary damages, with certain exceptions; and (x) governing
the required stockholder vote for amending the Articles of
Incorporation (Certificate of Incorporation in Delaware) or
Bylaws of the Company.
Stockholders' Rights in Certain Transactions. Virginia Law
provides generally, with certain exceptions hereinafter
described, that a stockholder of a Virginia corporation has the
right to demand and receive payment of the fair value of the
stockholder's stock from a successor corporation if: (i) the
corporation merges or consolidates with another corporation;
(ii) the stockholder's stock is to be acquired in a share
exchange; (iii) the corporation transfers its assets other than
in the ordinary course of business; or (iv) the corporation
alters its charter in a way which alters contractual rights, as
expressly set forth in the charter, of any outstanding stock and
substantially adversely affects the stockholder's rights,
unless the right to do so is reserved by the charter of the
corporation.
In order for a stockholder to perfect their dissenters
rights, such stockholder must file with the corporation prior to
the vote a demand in writing for the fair cash value of his
shares of his or her intent to demand payment . Virginia Law
provides that the right to fair value does not apply, with
certain exceptions, if (i) the stock is listed on a national
securities exchange or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or (ii) if the
stock is held by at least 2,000 record stockholders.
Delaware Law provides similar rights in the context of a
merger or consolidation only. Such rights are not available,
however, with respect to the merger of a parent corporation with
a wholly owned subsidiary corporation, as in the Merger
discussed herein.
If the Reincorporation Proposal is approved by
stockholders, after consummation of the Merger, stockholders
will not have dissenters' rights in connection with the types of
transactions as described under Virginia Law above since the
Company is and will be listed on NASDAQ.
Anti-takeover Effects. Many of the provisions contained in
the Articles and New Bylaws and under Virginia Law are similar
to the provisions contained in the Certificate and Present
Bylaws and under Delaware Law. These provisions could have the
effect of discouraging an acquisition of the Company or stock
purchases in furtherance of an acquisition, and could, under
certain circumstances, discourage transactions which might
otherwise have a favorable effect on the price of the Company's
Common Stock. These provisions may serve to make it more
difficult to remove incumbent management and may also discourage
all attempts to acquire control not approved by the Board of
Directors
24<PAGE>
<PAGE>
for any reason. As a result, stockholders who might desire to
participate in, or benefit from, such a transaction may not have
an opportunity to do so.
Costs. Delaware imposes significantly greater annual
franchise taxes and other fees on corporations incorporated in
Delaware than Virginia imposes on corporations organized under
its laws. The annual franchise tax for a Delaware corporation is
calculated either by the authorized number of shares or assumed
capital methods, with the lesser tax being payable. The
Company currently pays franchise taxes of approximately $45,000
per year. The Company, if incorporated in Virginia, would be
subject to a minimal annual franchise tax.
NO DISSENTERS RIGHTS
Pursuant to Delaware Law, dissenters' rights of appraisal
are not available to stockholders.
POSSIBLE DISADVANTAGES OF THE REINCORPORATION PROPOSAL.
Despite the belief of the Company's Board of Directors
that the Reincorporation Proposal is in the best interests of
the Company and its stockholders, stockholders should be aware
that many provisions in the Articles and the New Bylaws and
under Virginia Law have not yet received extensive scrutiny and
interpretation by the Virginia courts. Delaware Law is widely
regarded as the most extensive and well-defined body of
corporate law in the United States. Because of Delaware's
prominence as a state of incorporation for many major
corporations, both the legislature and courts in Delaware have
demonstrated an ability and willingness to act quickly and
effectively to meet changing business needs. Furthermore,
Delaware corporations are often guided by the extensive body of
court decisions interpreting Delaware's corporate law. The
Board of Directors, however, believes Virginia Law will provide
the Company with the comprehensive, flexible structure which it
needs to operate effectively.
TAX CONSEQUENCES
The Company has received an opinion from its special
counsel, Housley Kantarian & Bronstein, P.C., Washington, D.C.,
to the effect that the proposed Merger will be a tax free
reorganization under the Internal Revenue Code of 1986, as
amended. Accordingly: (i) no gain or loss will be recognized
for federal income tax purposes by the stockholders of the
Company as a result of the Merger; and (ii) the basis and
holding period for the stock of NewSouth Virginia received by
the stockholders of the Company in exchange for Common Stock of
the Company will be the same as the basis and holding period of
the stock of the Company exchanged therefor. The Merger will
have no federal income tax effect on the Company. State, local
or foreign income tax consequences to stockholders may vary from
the federal tax consequences described above, and stockholders
should consult their own tax advisors as to the effect of the
Reincorporation Proposal under applicable state, local or
foreign income tax laws.
ABANDONMENT
Notwithstanding a favorable vote of the stockholders, the
Company reserves the right by action of its Board of Directors
to abandon the proposed reincorporation prior to the Effective
Date of the Merger if it determines that such abandonment is in
the best interests of the Company. The board of Directors has
made no determination as to any circumstances which may prompt a
decision to abandon the proposed reincorporation.
VOTE REQUIRED
Pursuant to Delaware Law and the Certificate, the
affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock is required for approval of
the Merger to effectuate the reincorporation of the Company in
Virginia. Approval of the Reincorporation Proposal by
stockholders of the Company will constitute adoption of the
Agreement and approval of the Merger, the Articles and the New
Bylaws.
25<PAGE>
<PAGE>
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
REINCORPORATION PROPOSAL AND THE MERGER WHICH WILL EFFECTUATE
THE PROPOSED REINCORPORATION AND UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE REINCORPORATION PROPOSAL.
________________________________________________________________
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
________________________________________________________________
Pricewaterhouse Coopers, LLP, the successor to Coopers &
Lybrand L.L.P., was the Company's independent auditors for the
1998 fiscal year. Pricewaterhouse Coopers, LLP has been
retained by the Board of Directors to be the Company's auditors
for the 1999 fiscal year. A representative of Pricewaterhouse
Coopers, LLP is expected to be present at the Annual Meeting and
will have the opportunity to make a statement if he or she so
desires. The representative will also be available to answer
appropriate questions.
________________________________________________________________
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________
Pursuant to regulations promulgated under the Exchange Act,
the Company's officers and directors and all persons who own
more than ten percent of the Common Stock ("Reporting Persons")
are required to file reports detailing their ownership and
changes of ownership in the Common Stock and to furnish the
Company with copies of all such ownership reports that are
filed. Based solely on the Company's review of the copies of
such ownership reports which it has received in the past fiscal
year or with respect to the past fiscal year, or written
representations that no annual report of changes in beneficial
ownership were required, the Company believes that during fiscal
year 1998 all Reporting Persons have complied with these
reporting requirements.
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to come
before the Annual Meeting other than those matters described
above in this proxy statement and matters incident to the
conduct of the Annual Meeting. However, if any other matters
should properly come before the Annual 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 therefor.
The Company's 1998 Annual Report to Stockholders, including
financial statements, is being mailed to all stockholders of
record as of the close of business on the Record Date. Any
stockholder who has not received a copy of such Annual Report
may obtain a copy by writing to the Secretary of the Company.
Such Annual Report is not to be treated as a part of the proxy
solicitation material or as having been incorporated herein by
reference.
26<PAGE>
<PAGE>
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
For consideration at the Annual Meeting, a stockholder
proposal must be delivered or mailed to the Company's Secretary
no later than January 21, 1998. 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, 1999,
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 13, 1999. 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
William L. Wall
Secretary
January 11, 1999
Washington, North Carolina
________________________________________________________________
ANNUAL REPORT ON FORM 10-K
________________________________________________________________
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1998 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT
CHARGE TO EACH STOCKHOLDER AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO CORPORATE SECRETARY, NEWSOUTH BANCORP, INC., 1311
CAROLINA AVENUE, WASHINGTON, NORTH CAROLINA 27889.
27<PAGE>
<PAGE>
APPENDIX A
PLAN OF REORGANIZATION AND AGREEMENT AND PLAN OF MERGER
This Plan of Reorganization and Agreement of Merger
(hereinafter called the "Merger Agreement") is made as of
December __, 1998, by and between NewSouth Bancorp, Inc., a
Delaware corporation ("NewSouth Delaware") and NewSouth
Bancorp, Inc., a Virginia corporation ("NewSouth Virginia").
NewSouth Delaware and/or NewSouth Virginia, when reference is
made to the entity irrespective of the state of incorporation,
is sometimes herein referred to as the "Company."
WITNESSETH:
WHEREAS, NewSouth Delaware is a corporation duly organized
and existing under the laws of the State of Delaware;
WHEREAS, NewSouth Virginia is a corporation duly organized
and existing under the laws of the Commonwealth of Virginia;
WHEREAS, as of the date of this Merger Agreement, NewSouth
Delaware has authority to issue 8,000,000 shares of common
stock, par value $.01 per share, of which ________ shares are
issued and outstanding; and 1,000,000 shares of preferred stock,
par value $.01 per share, none of which are issued or
outstanding;
WHEREAS, as of the date of this Merger Agreement, NewSouth
Virginia has authority to issue 8,000,000 shares of common
stock, par value $.01 per share, of which 100 shares are issued
and outstanding and owned by NewSouth Delaware; and 1,000,000
shares of preferred stock, par value $.01 per share, none of
which are issued or outstanding;
WHEREAS, the respective Boards of Directors of NewSouth
Delaware and NewSouth Virginia have determined that, for the
purpose of effecting the reincorporation of NewSouth Delaware in
the Commonwealth of Virginia, it is advisable and to their
advantage and the advantage of their respective stockholders
that NewSouth Delaware merge with and into NewSouth Virginia
upon the terms and conditions herein provided; and
WHEREAS, the respective Boards of Directors of NewSouth
Delaware and NewSouth Virginia have approved this Merger
Agreement and have directed that this Merger Agreement be
submitted to the vote of their respective stockholders.<PAGE>
<PAGE>
AGREEMENT
NOW, THEREFORE, the parties do hereby adopt the plan of
reorganization encompassed by this Merger Agreement and do
hereby agree that NewSouth Delaware shall merge with and into
NewSouth Virginia on the following terms, conditions and other
provisions:
I. TERMS AND CONDITIONS
1.1 Merger. Subject to approval of the respective
stockholders of NewSouth Delaware and NewSouth Vifginia and the
receipt of all required regulatory approvals, NewSouth Delaware
shall be merged with and into NewSouth Virginia (the "Merger"),
and NewSouth Virginia shall be the surviving corporation,
effective upon the date when this Merger Agreement is made
effective in accordance with applicable law (the "Effective
Date").
1.2 Succession. Upon the Effective Date, NewSouth
Virginia shall succeed to all of the rights, privileges, powers
and property of NewSouth Delaware in the manner of and as more
fully set forth in Section 13.1-721 of the Virginia Stock
Corporation Act.
1.3 Common Stock of NewSouth Delaware. Upon the Effective
Date, by virtue of the Merger and without any action on the part
of the holder thereof, each share of common stock, par value
$.01 per share, of NewSouth Delaware outstanding immediately
prior thereto shall be changed and converted into one fully paid
and non-assessable share of the common stock of NewSouth
Virginia, par value $.01 per share.
1.4 Common Stock of NewSouth Virginia. Upon the Effective
Date, by virtue of the Merger and without any action on the part
of the holder thereof, the 100 shares of common stock, par value
$.01 per share, of NewSouth Virginia outstanding immediately
prior thereto shall be canceled and returned to the status of
authorized but unissued shares.
1.5 Stock Certificates. Upon and after the Effective
Date, all of the outstanding certificates which prior to that
time represented shares of common stock, par value $.01 per
share, of NewSouth Delaware shall be deemed for all purposes to
evidence ownership of and to represent the shares of common
stock, par value $.01 per share, of NewSouth Virginia into which
the shares of NewSouth Delaware represented by such certificates
have been converted as herein provided. The registered owner on
the books and records of NewSouth Virginia or its transfer agent
of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or
conversion or otherwise accounted for to NewSouth Virginia or
its transfer agent, have and be entitled to exercise any voting
and other rights with respect to, and to receive any dividend
and other distributions upon, the shares of NewSouth Virginia
evidenced by such outstanding certificate as above provided.
1.6 Options. Upon the Effective Date, NewSouth Virginia
will assume and continue NewSouth Delaware's 1997 Stock Option
Plan, and the outstanding and unexercised portions of all
2<PAGE>
<PAGE>
options and rights to buy common stock, par value $.01 per
share, of NewSouth Delaware shall become options or rights for
the same number of shares of common stock, par value $.01 per
share, of NewSouth Virginia, with no other changes in the terms
and conditions of such options or rights, including exercise
prices, and effective upon the Effective Date, NewSouth Virginia
hereby assumes the outstanding and unexercised portions of such
options and rights and the obligations of NewSouth Delaware with
respect thereto.
1.7 Restricted Stock Awards. Upon the Effective Date,
NewSouth Virginia will assume and continue NewSouth Delaware's
Management Recognition Plan, and awarded but unvested shares of
restricted common stock, par value $.01 per share, of NewSouth
Delaware shall become the same number of shares of awarded but
unvested restricted common stock, par value $.01 per share, of
NewSouth Virginia, with no other changes in the terms and
conditions of such restricted stock awards, including vesting
schedules and rights to receive dividend payments, and effective
upon the Effective Date, NewSouth Virginia hereby assumes the
obligations of NewSouth Delaware with respect to the Management
Recognition Plan and awards made by NewSouth Delaware
thereunder.
1.8 Other Employee Benefit Plans. Upon the Effective
Date, NewSouth Virginia will assume all obligations of NewSouth
Delaware under any and all employee benefit plans in effect as
of the Effective Date or with respect to which employee rights
or accrued benefits are outstanding as of the Effective Date.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Articles of Incorporation and Bylaws. The Articles of
Incorporation of NewSouth Virginia in effect on the Effective
Date (a copy of which is attached hereto and incorporated herein
by this reference), shall continue to be the Articles of
Incorporation of NewSouth Virginia. The Bylaws of NewSouth
Virginia in effect on the Effective Date shall continue to be
the Bylaws of NewSouth Virginia.
2.2 Directors. The directors of NewSouth Virginia
immediately preceding the Effective Date shall remain the
directors of NewSouth Virginia on and after the Effective Date.
Such directors of NewSouth Virginia shall hold office in the
classes and for the terms as in effect immediately prior to the
Effective Date, and until their successors are elected and
qualified or their prior resignation, removal or death.
2.3 Officers. The officers of NewSouth Virginia shall
remain the officers of NewSouth Virginia upon the Effective Date
and shall serve until their successors are elected and qualified
or their prior resignation, removal or death.
III. MISCELLANEOUS
3.1 Further Assurances. From time to time, as and when
required by NewSouth Virginia or by its successors and assigns,
there shall be executed and delivered on behalf of NewSouth
3<PAGE>
<PAGE>
Delaware such deeds and other instruments, and there shall be
taken or caused to be taken by it such further and other action
as shall be appropriate or necessary in order to vest or
perfect, or to conform of record or otherwise, in NewSouth
Virginia the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers,
franchises, and authority of NewSouth Delaware, and otherwise to
carry out the purposes of this Merger Agreement, and the
officers and directors of NewSouth Virginia are fully authorized
in the name of and on behalf of NewSouth Delaware or otherwise
to take any and all such action and to execute and deliver any
and all such deeds and other instruments.
3.2 Amendment. At any time before or after approval by
the stockholders of NewSouth Delaware, this Merger Agreement may
be amended in any manner (except that Section 1.3, 1.4 and 2.1
and any of the other principal terms hereof as set forth in
Section 251(d) of the Delaware General Corporation Law may not
be amended without the approval of the stockholders of NewSouth
Delaware) as may be determined in the judgment of the respective
Boards of Directors of NewSouth Delaware and NewSouth Virginia
to be necessary, desirable or expedient in order to clarify the
intention of the parties hereto or to effect or facilitate the
purposes and intent of this Merger Agreement; provided, however,
that the Merger Agreement may not be amended after stockholder
approval if such amendment would (i) alter or change the amount
or kind of shares or other consideration to be received by
stockholders in the Merger; (ii) alter or change any term of the
Articles of Incorporation of NewSouth Virginia; (iii) alter or
change any of the terms and conditions of the Merger Agreement
if such alteration or change would adversely affect the
stockholders; or (iv) otherwise violate applicable law.
3.3 Abandonment. At any time before the Effective Date,
this Merger Agreement may be terminated and the Merger may be
abandoned by the Board of Directors of either NewSouth Delaware
or NewSouth Virginia or both, notwithstanding the approval of
this Merger Agreement by the stockholders of NewSouth Delaware.
3.4 Counterparts. In order to facilitate the filing and
recording of this Merger Agreement, the same may be executed in
any number of counterparts, each of which shall be deemed to be
an original.
4<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first
been duly approved by the Boards of Directors of NewSouth
Delaware and NewSouth Virginia, is hereby executed on behalf of
each said corporation and attested by their respective officers
thereunto duly authorized.
NEWSOUTH BANCORP, INC.,
a Delaware corporation
Corporate Seal By:
----------------------
Thomas A. Vann
Attest:
- -----------------------------
William L. Wall
Secretary
NEWSOUTH BANCORP, INC.,
a Virginia corporation
Corporate Seal By:
----------------------
Thomas A. Vann
Attest:
____________________________
William L. Wall
Secretary
5<PAGE>
<PAGE>
APPENDIX B
ARTICLES OF INCORPORATION
OF
NEWSOUTH BANCORP, INC.
The undersigned, pursuant to Chapter 9 of Title 13.1 of
the Code of Virginia, states as follows:
ARTICLE I
NAME
The name of the corporation is NewSouth Bancorp, Inc.
(herein the "Corporation").
ARTICLE II
POWERS
The purpose for which the Corporation is organized is to
act as a financial institution holding company and to transact
all other lawful business for which corporations may be
incorporated pursuant to the Virginia Stock Corporation Act.
The Corporation shall have all the powers of a corporation
organized under the Virginia Stock Corporation Act.
ARTICLE III
RESIDENT AGENT
The mailing address of the Corporation's initial resident
office in the Commonwealth of Virginia is 5511 Staples Mill
Road, Richmond, Virginia 23228, County of Henricho, and the name
of the Corporation's initial registered agent at that office is
Edward R. Parker, Esquire. The initial registered agent is a
resident of the Commonwealth of Virginia and a member of the
Virginia State Bar and has a business office identical with the
registered office.
ARTICLE IV
INITIAL DIRECTORS
The number of directors constituting the initial board of
directors of the Corporation is seven, which number may be
increased or decreased pursuant to the bylaws of the Corporation
and Article X of these Articles, but shall never be less than
the minimum number permitted by the Virginia Stock Corporation
Act now or hereafter in force. The names and addresses of the
persons who are to serve as directors until the first annual
meeting and until their successors are elected and qualified,
are:
<PAGE>
<PAGE>
Name Address
---- -------
Edmund T. Buckman, Jr. 1026 Summit Avenue
Washington, NC 27889
Frederick N. Holscher 46 Harbor Road
Washington, NC 27889
Frederick H. Howdy 67 Katherine Drive
Washington, NC 27889
Linley H. Gibbs, Jr. 222 Magnolia Drive
Washington, NC 27889
Thomas A. Vann 113 Palmer Place
Washington, NC 27889
Charles E. Parker, Jr. 1061 Lucerne Way
New Bern, NC 28560
Marshall T. Singleton 776 Mimosa Shores Road
Washington, NC 27889
ARTICLE V
CAPITAL STOCK
The aggregate number of shares of all classes of capital
stock which the Corporation has authority to issue is 9,000,000,
of which 8,000,000 are to be shares of common stock, $.01 par
value per share, and of which 1,000,000 are to be shares of
serial preferred stock, $.01 par value per share. The shares
may be issued by the Corporation from time to time as approved
by the board of directors of the Corporation without the
approval of the stockholders except as otherwise provided in
this Article V or to the extent that such approval is required
by governing law, rule or regulation. The consideration for the
issuance of the shares shall be paid to or received by the
Corporation in full before their issuance and shall not be less
than the par value per share. Shares may be issued for
consideration consisting of any tangible property or benefit to
the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed, or other
securities of the Corporation. A good faith determination by
the board of directors that the consideration received or to be
received for the shares to be issued is adequate is conclusive
insofar as the adequacy of consideration relates to whether the
shares are validly issued, fully paid and nonassessable. When
the board of directors has made such a determination and the
Corporation has received the consideration, the shares issued
therefor are fully paid and nonassessable.
A description of the different classes and series (if any)
of the Corporation's capital stock, and a statement of the
relative, designations, preferences, limitations and relative
rights of the shares of each class and series (if any) of
capital stock, and the qualifications, limitations or
restrictions thereof, are as follows:
A. Common Stock. Except as provided in these Articles,
the holders of the common stock shall exclusively possess all
voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except
as otherwise expressly set forth in these Articles.
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Whenever there shall have been paid, or declared and set
aside for payment, to the holders of the outstanding shares of
any class of stock having preference over the common stock as to
the payment of dividends, the full amount of dividends and
sinking fund or retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in
preference to the common stock, then dividends may be paid on
the common stock, and on any class or series of stock entitled
to participate therewith as to dividends, out of any assets
legally available for the payment of dividends, but only when
and as declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up
of the Corporation, after there shall have been paid, or
declared and set aside for payment, to the holders of the
outstanding shares of any class having preference over the
common stock in any such event, the full preferential amounts to
which they are respectively entitled, the holders of the common
stock and of any class or series of stock entitled to
participate therewith, in whole or in part, as to distribution
of assets shall be entitled, after payment or provision for
payment of all debts and liabilities of the Corporation, to
receive the remaining assets of the Corporation available for
distribution, in cash or in kind.
Each share of common stock shall have the same relative
powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of common stock of the
Corporation, except as otherwise expressly set forth in these
Articles.
B. Serial Preferred Stock. Except as provided in these
Articles, the board of directors of the Corporation is
authorized, from time to time by adoption of an amendment to
these Articles, to provide for the issuance of one or more
classes of serial preferred stock in series and to fix and state
the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of
each such class or series, and the qualifications, limitations
or restrictions thereof, including, but not limited to
determination of any of the following:
1. the distinctive designation and the number of shares
constituting such class or series;
2. the dividend rates or the amount of dividends to be
paid on the shares of such class or series, whether
dividends shall be cumulative and, if so, from which
date or dates, the payment date or dates for
dividends, and the participating or other special
rights, if any, with respect to dividends;
3. the voting powers, full or limited, if any, of the
shares of such class or series;
4. whether the shares of such class or series shall be
redeemable and, if so, the price or prices at which,
and the terms and conditions upon which such shares
may be redeemed;
5. the amount or amounts payable upon the shares of
such class or series in the event of voluntary or
involuntary liquidation, dissolution or winding up
of the Corporation;
6. whether the shares of such class or series shall be
entitled to the benefits of a sinking or retirement
fund to be applied to the purchase or redemption of
such shares, and, if so entitled, the amount of such
fund and the manner of its application, including
the price or prices at which such shares may be
redeemed or purchased through the application of
such funds;
7. whether the shares of such class or series shall be
convertible into, or exchangeable for, shares of any
other class or classes or any other series of the
same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable,
the conversion price or prices, or the rate or rates
of exchange, and the adjustments thereof, if any, at
which such conversion or exchange may be made, and
any other terms and conditions of such conversion or
exchange;
8. the subscription or purchase price and form of
consideration for which the shares of such class or
series shall be issued;
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9. whether the shares of such class or series which are
redeemed or converted shall have the status of
authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as
shares of the same or any other class or series; and
10. any other preferences, limitations, relative rights,
restrictions, including restrictions on
transferability, and qualifications of shares of
such class or series, not inconsistent with law and
these Articles.
Each share of each series of serial preferred stock shall
have the same relative powers, preferences, limitations and
rights as, and shall be identical in all respects with, all the
other shares of preferred stock of the same series, except as
otherwise expressly set forth in these Articles.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of
stock or of options, warrants or other rights to purchase shares
of any class or series of stock or of other securities of the
Corporation shall have any preemptive right to purchase or
subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or
other securities convertible into or exchangeable for stock of
any class or series or carrying any right to purchase stock of
any class or series; but any such unissued stock, bonds,
certificates or indebtedness, debentures or other securities
convertible into or exchangeable for stock or carrying any right
to purchase stock may be issued pursuant to resolution of the
board of directors of the Corporation to such persons, firms,
corporations or associations, whether or not holders thereof,
and upon such terms as may be deemed advisable by the board of
directors in the exercise of its sole discretion.
ARTICLE VII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to
authorization by the board of directors of the Corporation and
without action by the stockholders, purchase or otherwise
acquire shares of any class, bonds, debentures, notes, scrip,
warrants, obligations, evidences of indebtedness, or other
securities of the Corporation in such manner, upon such terms,
and in such amounts as the board of directors shall determine;
subject, however, to such limitations or restrictions, if any,
as are contained in the express terms of any class of shares of
the Corporation outstanding at the time of the purchase or
acquisition in question or as are imposed by law.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. Any action required to be taken or which may be
taken at any meeting of stockholders of the Corporation may be
taken without a meeting if a consent in writing setting forth
the action so taken shall be signed by all of the stockholders
entitled to vote with respect to the subject matter thereof.
B. Special meetings of the stockholders of the
Corporation for any purpose or purposes may be called at any
time by the board of directors of the Corporation or by a
committee of the board of directors which has been duly
designated by the board of directors and whose powers and
authorities, as provided in a resolution of the board of
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directors or in the bylaws of the Corporation, include the power
and authority to call such meetings, but special meetings may
not be called by any other person or persons.
C. There shall be no cumulative voting by stockholders
of any class or series in the election of directors of the
Corporation
D. Meetings of stockholders may be held at any place
within the United States as the bylaws may provide.
E. One-third of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less
than one-third of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the
meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or repre-
sented, any business may be transacted which might have been
transacted at the meeting as originally notified. The stock-
holders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the with-
drawal of enough stockholders to leave less than a quorum.
ARTICLE IX
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations for the election of directors and
proposals for any new business to be taken up at any annual or
special meeting of stockholders may be made by the board of
directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of
directors. In order for a stockholder of the Corporation to
make any such nominations and/or proposals, he or she shall give
notice thereof in writing, delivered or mailed by first class
United States mail, postage prepaid, to the secretary of the
Corporation not less than 30 days nor more than 60 days prior to
any such meeting; provided, however, that if less than 40 days'
notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the
secretary of the Corporation not later than the close of
business on the tenth day following the day on which notice of
the meeting was mailed to stockholders. Each such notice given
by a stockholder with respect to nominations for the election of
directors shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee.
In addition, the stockholder making such nomination shall
promptly provide any other information reasonably requested by
the Corporation.
B. Each such notice given by a stockholder to the
secretary with respect to business proposals to bring before a
meeting shall set forth in writing as to each matter: (i) a
brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the
meeting; (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business;
(iii) the class and number of shares of the Corporation which
are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business.
Notwithstanding anything in these Articles to the contrary, no
business shall be conducted at the meeting except in accordance
with the procedures set forth in this Article IX.
C. The chairman of the annual or special meeting of
stockholders may, if the facts warrant, determine and declare to
such meeting that a nomination or proposal was not made in
accordance with the foregoing procedure, and, if he should so
determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for
action at the next succeeding adjourned, special or annual
meeting of the stockholders taking place thirty days or more
thereafter. This provision shall not require the holding of any
adjourned or special meeting of stockholders for the purpose of
considering such defective nomination or proposal.
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ARTICLE X
DIRECTORS
A. Number; Vacancies. The number of directors of the
Corporation shall be such number, not less than five nor more
than fifteen (exclusive of directors, if any, to be elected by
holders of preferred stock of the Corporation, voting separately
as a class), as shall be set forth from time to time in the
bylaws, provided that no action shall be taken to decrease or
increase the number of directors unless at least two-thirds of
the directors then in office shall concur in said action, and
further provided that no increase or decrease in the number of
directors shall affect the tenure of office of any director.
Subject to the rights of the holders of any class of preferred
stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office
or other cause shall be filled by a majority vote of the
stockholders or by a two-thirds vote of the directors then in
office, whether or not a quorum. A director so chosen by the
stockholders shall hold office for the balance of the term
then remaining. A director so chosen by the remaining directors
shall hold office until the next annual meeting of stockholders
at which directors are elected and until his successor is
elected and qualifies, at which time the stockholders shall
elect a director to hold office for the balance of the term then
remaining.
B. Classified Board. At the first meeting of
stockholders of the Corporation at which directors are elected,
the board of directors of the Corporation shall be divided into
three classes as nearly equal in number as the then total number
of directors constituting the entire board of directors shall
permit, which classes shall be designated Class I, Class II and
Class III. At such annual meeting of stockholders, directors
assigned to Class I shall be elected to hold office for a term
expiring at the first succeeding annual meeting of stockholders
thereafter, directors assigned to Class II shall be elected to
hold office for a term expiring at the second succeeding annual
meeting thereafter, and directors assigned to Class III shall be
elected to hold office for a term expiring at the third
succeeding annual meeting thereafter. Thereafter, at each
succeeding annual meeting, directors of each class shall be
elected for three year terms. Notwithstanding the foregoing, a
director whose term shall expire at any annual meeting shall
continue to serve until such time as his successor shall have
been duly elected and shall have qualified unless his position
on the board of directors shall have been abolished by action
taken to reduce the size of the board of directors prior to said
meeting.
Should the number of directors of the Corporation be
reduced, the directorship(s) eliminated shall be allocated among
classes as appropriate so that the number of directors in each
class is as specified in the immediately preceding paragraph.
The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding
the foregoing, no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director.
Should the number of directors of the Corporation be increased,
the additional directorships shall be allocated among classes as
appropriate so that the number of directors in each class is as
specified in the immediately preceding paragraph.
Whenever the holders of any one or more series of
preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the
Corporation, the board of directors shall consist of said
directors so elected in addition to the number of directors
fixed as provided above in this Article X. Notwithstanding the
foregoing, and except as otherwise may be required by law or by
the terms and provisions of the preferred stock of the
Corporation, whenever the holders of any one or more series of
preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the
Corporation, the terms of the director or directors elected by
such holders shall expire at the next succeeding annual meeting
of stockholders.
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ARTICLE XI
REMOVAL OF DIRECTORS
Notwithstanding any other provision of these Articles or
the bylaws of the Corporation, any director or the entire board
of directors of the Corporation may be removed at any time, but
only for cause and only by the affirmative vote of the holders
of at least 80% of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose.
Notwithstanding the foregoing, whenever the holders of any one
or more series of preferred stock of the Corporation shall have
the right, voting separately as a class, to elect one or more
directors of the Corporation, the preceding provisions of this
Article XI shall not apply with respect to the director or
directors elected by such holders of preferred stock.
ARTICLE XII
ACQUISITION OF CAPITAL STOCK
A. Three-Year Prohibition. For a period of three years
from the effective date of the completion of the conversion of
Home Savings Bank, SSB, Washington, North Carolina, from mutual
to stock form (which entity or its successor shall become a
wholly owned subsidiary of the Corporation upon such
conversion), no person shall directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of
any class of equity security of the Corporation, unless such
offer or acquisition shall have been approved in advance by a
two-thirds vote of the Continuing Directors, as defined in
Article XIII. In addition, for a period of three years from the
completion of the conversion of Home Savings Bank, SSB from
mutual to stock form (which entity or its successor shall become
a wholly owned subsidiary of the Corporation upon such
conversion), and notwithstanding any provision to the contrary
in these Articles or in the bylaws of the Corporation, where any
person directly or indirectly acquires beneficial ownership of
more than 10% of any class of equity security of the Corporation
in violation of this Article XII, the securities beneficially
owned in excess of 10% shall not be counted as shares entitled
to vote, shall not be voted by any person or counted as voting
shares in connection with any matter submitted to the
stockholders for a vote, and shall not be counted as outstanding
for purposes of determining a quorum or the affirmative vote
necessary to approve any matter submitted to the stockholders
for a vote.
B. Prohibition After Three Years. If at any time after
three years from the effective date of the completion of the
conversion of Home Savings Bank, SSB from mutual to stock form
(which entity or its successor shall become a wholly owned
subsidiary of the Corporation upon such conversion), any person
shall acquire the beneficial ownership of more than 10% of any
class of equity security of the Corporation without the prior
approval by a two-thirds vote of the Continuing Directors, as
defined in Article XIII hereof, then the record holders of
voting stock of the Corporation beneficially owned by such
acquiring person shall have only the voting rights set forth in
this paragraph B on any matter requiring their vote or consent.
With respect to each vote in excess of 10% of the voting power
of the outstanding shares of voting stock of the Corporation
which such record holders would otherwise be entitled to cast
without giving effect to this paragraph B, such record holders
in the aggregate shall be entitled to cast only one-hundredth
(1/100) of a vote, and the aggregate voting power of such record
holders, so limited for all shares of voting stock of the
Corporation beneficially owned by such acquiring person, shall
be allocated proportionately among such record holders. For
each such record holder, this allocation shall be accomplished
by multiplying the aggregate voting power, prior to imposing the
limitations of this paragraph B, of the outstanding shares of
voting stock of the Corporation beneficially owned by such
record holder by a fraction whose numerator is the number of
votes equal to 10% of the shares of voting stock of the
Corporation and whose denominator is the total number of votes
represented by the shares of voting stock of the Corporation
that are beneficially owned by such acquiring person; any share
held by such record holder in excess of the allocated amount as
determined in accordance with the previous clause shall be
entitled to cast one-hundredth of a vote. A person who is a
record owner of shares of voting stock of the Corporation that
are
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beneficially owned simultaneously by more than one person
shall have, with respect to such shares, the right to cast the
least number of votes that such person would be entitled to cast
under this paragraph B by virtue of such shares being so
beneficially owned by any of such acquiring persons.
C. Definitions. The term "person" means an individual,
a group acting in concert, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any other group
acting in concert formed for the purpose of acquiring, holding,
voting or disposing of securities of the Corporation. The term
"acquire" includes every type of acquisition, whether effected
by purchase, exchange, operation of law or otherwise. The term
group "acting in concert" includes (a) knowing participation in
a joint activity or conscious parallel action towards a common
goal whether or not pursuant to an express agreement, and (b) a
combination or pooling of voting or other interest in the
Corporation's outstanding shares for a common purpose, pursuant
to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. The term "beneficial
ownership" shall have the meaning defined in Rule 13d-3 of the
General Rules and Regulations under the Securities and Exchange
Act of 1934, as in effect on the date of filing of these
Articles.
D. Exclusion for Employee Benefit Plans, Directors,
Officers, Employees and Certain Proxies. The restrictions
contained in this Article XII shall not apply to (i) any
underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the
Corporation or a subsidiary thereof; provided, however, that
upon completion of the sale or resale of such securities, no
such underwriter or member of such selling group is a beneficial
owner of more than 10% of any class of equity security of the
Corporation, (ii) any proxy granted to one or more Continuing
Directors, as defined in Article XIII, by a stockholder of the
Corporation or (iii) any employee benefit plans of the
Corporation. In addition, the Continuing Directors, as defined
in Article XIII, the officers and employees of the Corporation
and its subsidiaries, the directors of subsidiaries of the
Corporation, the employee benefit plans of the Corporation and
its subsidiaries, entities organized or established by the
Corporation or any subsidiary thereof pursuant to the terms of
such plans and trustees and fiduciaries with respect to such
plans acting in such capacity shall not be deemed to be a group
with respect to their beneficial ownership of voting stock of
the Corporation solely by virtue of their being directors,
officers or employees of the Corporation or a subsidiary thereof
or by virtue of the Continuing Directors, as defined in Article
XIII, the officers and employees of the Corporation and its
subsidiaries and the directors of subsidiaries of the
Corporation being fiduciaries or beneficiaries of an employee
benefit plan of the Corporation or a subsidiary of the
Corporation. Notwithstanding the foregoing, no director,
officer or employee of the Corporation or any of its
subsidiaries or group of any of them shall be exempt from the
provisions of this Article XII should any such person or group
become a beneficial owner of more than 10% of any class of
equity security of the Corporation.
E. Determinations. A majority of the Continuing
Directors, as defined in Article XIII, shall have the power to
construe and apply the provisions of this Article XII and to
make all determinations necessary or desirable to implement such
provisions, including but not limited to matters with respect to
(a) the number of shares beneficially owned by any person, (b)
whether a person has an agreement, arrangement or understanding
with another as to the matters referred to in the definition of
beneficial ownership, (c) the application of any other
definition or operative provision of this Article XII to the
given facts or (d) any other matter relating to the
applicability or effect of this Article XII. Any constructions,
applications, or determinations made by the Continuing Directors
pursuant to this Article XII in good faith and on the basis of
such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the
Corporation and its stockholders.
ARTICLE XIII
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
In addition to any voting requirements under the Virginia
Stock Corporation Act, the stockholder vote required to approve
Business Combinations (as hereinafter defined) shall be as set
forth in this section.
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A. (1) Except as otherwise expressly provided in this
Article XIII, the affirmative vote of the holders of (i) at
least 80% of the outstanding shares entitled to vote thereon
(and, if any class or series of shares is entitled to vote
thereon separately, the affirmative vote of the holders of at
least 80% of the outstanding shares of each such class or
series), and (ii) at least a majority of the outstanding shares
entitled to vote thereon, not including shares deemed
beneficially owned by a Related Person (as hereinafter defined),
shall be required in order to authorize any of the following:
(a) any merger or consolidation of the
Corporation with or into a Related Person (as
hereinafter defined);
(b) any sale, lease, exchange, transfer or
other disposition, including without limitation, a
mortgage, or any other capital device, of all or any
Substantial Part (as hereinafter defined) of the
assets of the Corporation (including without
limitation any voting securities of a subsidiary) or
of a subsidiary, to a Related Person;
(c) any merger or consolidation of a Related
Person with or into the Corporation or a subsidiary
of the Corporation;
(d) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of
the assets of a Related Person to the Corporation or
a subsidiary of the Corporation;
(e) the issuance of any securities of the
Corporation or a subsidiary of the Corporation to a
Related Person;
(f) the acquisition by the Corporation or a
subsidiary of the Corporation of any securities of a
Related Person;
(g) any reclassification of the common stock
of the Corporation, or any recapitalization
involving the common stock of the Corporation; and
(h) any agreement, contract or other
arrangement providing for any of the transactions
described in this Article.
(2) Such affirmative vote shall be required
notwithstanding any other provision of these Articles, any
provision of law, or any agreement with any regulatory
agency or national securities exchange which might
otherwise permit a lesser vote or no vote.
(3) The term "Business Combination" as used in
this Article XIII shall mean any transaction which is
referred to in any one or more of subparagraphs A(1)(a)
through (h) above.
B. The provisions of paragraph A shall not be
applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as
is required by any other provision of these Articles, any
provision of law, or any agreement with any regulatory agency or
national securities exchange, if the Business Combination shall
have been approved by a two-thirds vote of the Continuing
Directors (as hereinafter defined); provided, however, that such
approval shall only be effective if obtained at a meeting at
which a Continuing Director Quorum (as hereinafter defined) is
present.
C. For the purposes of this Article XIII the following
definitions apply:
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(1) The term "Related Person" shall mean and
include (a) any individual, corporation, partnership or
other person or entity which together with its
"affiliates" (as that term is defined in Rule 12b-2
9
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of the General Rules and Regulations under the Securities
Exchange Act of 1934), "beneficially owns" (as that term
is defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934) in
the aggregate 10% or more of the outstanding shares of the
common stock of the Corporation; and (b) any "affiliate"
(as that term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of any such individual,
corporation, partnership or other person or entity.
Without limitation, any shares of the common stock of the
Corporation which any Related Person has the right to
acquire pursuant to any agreement, or upon exercise or
conversion rights, warrants or options, or otherwise,
shall be deemed "beneficially owned" by such Related
Person.
(2) The term "Substantial Part" shall mean more
than 25 percent of the total assets of the Corporation, as
of the end of its most recent fiscal year ending prior to
the time the determination is made.
(3) The term "Continuing Director" shall mean any
member of the board of directors of the Corporation who is
unaffiliated with the Related Person and was a member of
the board prior to the time that the Related Person became
a Related Person, and any successor of a Continuing
Director who is unaffiliated with the Related Person and
is recommended to succeed a Continuing Director by a
majority of Continuing Directors then on the board.
(4) The term "Continuing Director Quorum" shall
mean two-thirds of the Continuing Directors capable of
exercising the powers conferred on them.
ARTICLE XIV
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and
of the stockholders, when evaluating a Business Combination (as
defined in Article XIII hereof) or a tender or exchange offer,
the board of directors of the Corporation may, in addition to
considering the adequacy of the amount to be paid in connection
with any such transaction, consider all of the following factors
and any other factors which it deems relevant; (i) the social
and economic effects of the transaction on the Corporation and
its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in
which the Corporation and its subsidiaries operate or are
located; (ii) the business and financial condition and earnings
prospects of the acquiring person or entity, including, but not
limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection
with the acquisition, and other likely financial obligations of
the acquiring person or entity, and the possible effect of such
conditions upon the Corporation and its subsidiaries and the
other elements of the communities in which the Corporation and
its subsidiaries operate or are located; and (iii) the
competence, experience, and integrity of the acquiring person or
entity and its or their management.
ARTICLE XV
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY
An officer or director of the Corporation, as such, shall
not be liable to the Corporation or its stockholders for money
damages in any proceeding brought by or in the right of the
Corporation or brought by or on behalf of stockholders of the
Corporation, except to the extent otherwise required by Virginia
law. If Virginia law is amended or enacted after the date of
filing of these articles to further eliminate or limit the
personal liability of officers and directors, then the liability
of officers and directors of the Corporation shall be eliminated
or limited to the fullest extent permitted by Virginia law, as
so amended. Any repeal or modification of the foregoing
paragraph by the stockholders
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of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time
of such repeal or modification.
ARTICLE XVI
INDEMNIFICATION
A. The Corporation shall indemnify, to the fullest
extent permissible under the Virginia Stock Corporation Act, any
individual who is or was a director, officer, employee or agent
of the Corporation, and any individual who serves or served at
the Corporation's request as a director, officer, partner,
trustee, employee or agent of another corporation, partnership,
joint venture, trust, other enterprise or employee benefit plan,
in any proceeding in which the individual is made a party as a
result of his service in such capacity.
B. (1) Reasonable expenses incurred by any person
identified in paragraph A of this Article XVI who is a party to
a proceeding will be paid or reimbursed by the Corporation in
advance of the final disposition of the proceeding upon receipt
by the Corporation of: (i) a written statement by such person
of his good faith belief that the standard of conduct necessary
for indemnification by the Corporation as authorized in this
Article XVI has been met; and (ii) a written undertaking by or
on behalf of such person to repay the amount if it shall
ultimately be determined that the standard of conduct has not
been met.
(2) The undertaking required by subparagraph (ii)
of paragraph (1) of this paragraph B shall be an unlimited
general obligation of such person but need not be secured and
may be accepted without reference to financial ability to make
the repayment.
C. Nonexclusive. The indemnification and advance
payment of expenses provided by paragraphs A and B shall not be
exclusive of any other rights to which a person may be entitled
by law, bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
D. Continuation. The indemnification and advancement
of expenses provided by this Article XVI shall be deemed to be a
contract between the Corporation and the persons entitled to
indemnification thereunder, and any repeal or modification of
this Article XVI shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore
existing or any action, suit or proceeding theretofore or
thereafter brought based in whole or in part upon any such state
of facts. The indemnification and advance payment provided by
paragraphs A and B shall continue as to a person who has ceased
to hold a position named in paragraph A and shall inure to his
or her heirs, executors and administrators.
E. Insurance. The Corporation shall purchase and
maintain insurance on behalf of any person who holds or who has
held any position as a director or officer of the Corporation
against any liability incurred by him or her in any such
position, or arising out of his status as such, whether or not
the Corporation would have power to indemnify him or her against
such liability under paragraphs A and B.
F. Intention and Savings Clause. It is the intention
of this Article XVI to provide for indemnification to the
fullest extent permitted by the Virginia Stock Corporation Act,
and this Article XVI shall be interpreted accordingly. If this
Article XVI or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer,
employee, and agent of the Corporation as to costs, charges, and
expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement with respect to any action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the
Corporation, to the full extent permitted by any applicable
portion of this Article XVI that shall not have been invalidated
and to the full extent permitted by applicable law. If the
Virginia Stock Corporation Act is amended, or other Virginia law
is enacted, to permit further or additional indemnification of
the
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persons defined in this Article XVI.A, then the indemnification
of such persons shall be to the fullest extent permitted by the
Virginia Stock Corporation Act, as so amended, or such other
Virginia law.
Any repeal or modification of the foregoing paragraph by
the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
ARTICLE XVII
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers
conferred by statute, the board of directors of the Corporation
is expressly authorized to adopt, repeal, alter, amend and
rescind the bylaws of the Corporation by a vote of two-thirds of
the board of directors. Notwithstanding any other provision of
these Articles or the bylaws of the Corporation (and
notwithstanding the fact that some lesser percentage may be
specified by law), the bylaws shall not be adopted, repealed,
altered, amended or rescinded by the stockholders of the
Corporation except by the vote of the holders of not less than
80% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration,
amendment or rescission is included in the notice of such
meeting), or, as set forth above, by the board of directors.
ARTICLE XVIII
AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation reserves the right to repeal, alter, amend
or rescind any provision contained in these Articles in the
manner now or hereafter prescribed by law, and all rights
conferred on stockholders herein are granted subject to this
reservation. Notwithstanding the foregoing, the provisions set
forth in Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII
and this Article XVIII of these Articles may not be repealed,
altered, amended or rescinded in any respect unless the same is
approved by the affirmative vote of the holders of not less than
80% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors (considered for this purpose as a single class) cast
at a meeting of the stockholders called for that purpose
(provided that notice of such proposed repeal, alteration,
amendment or rescission is included in the notice of such
meeting); except that such repeal, alteration, amendment or
rescission may be made by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors (considered for this purpose as a single class) if the
same is first approved by a majority of the Continuing
Directors, as defined in Article XIII of these Articles.
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IN WITNESS WHEREOF, I have signed these Articles and
acknowledge the same to be my act this ____ day of December,
1998.
_______________________________
Thomas A. Vann, Incorporator
13
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APPENDIX C
BYLAWS
OF
NEWSOUTH BANCORP, INC.
ARTICLE I
PRINCIPAL EXECUTIVE OFFICE
The principal executive office of NewSouth Bancorp, Inc.
(herein the "Corporation") shall be at 1311 Carolina Avenue,
Washington, North Carolina 27889. The Corporation may also have
offices at such other places within or without the State of
North Carolina as the board of directors shall from time to time
determine.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meetings. All annual and special
meetings of stockholders shall be held at the principal
executive office of the Corporation or at such other place
within the United States as the board of directors may determine
and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders
of the Corporation for the election of directors and for the
transaction of any other business of the Corporation shall be
held annually at such date and time as the board of directors
may determine.
SECTION 3. Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be called at any
time by the chairman, by the president, by a majority of the
board of directors or by a committee of the board of directors
in accordance with the provisions of the Corporation's Articles
of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special
meetings shall be conducted in accordance with these bylaws or
as otherwise prescribed by the board of directors. The chairman
or chief executive officer of the Corporation shall preside at
such meetings.
SECTION 5. Notice of Meeting. Written notice stating the
place, day and hour of the meeting and the purpose or purposes
for which the meeting is called shall be mailed by the secretary
or the officer performing his duties, not less than ten days nor
more than sixty days before the meeting to each stockholder of
record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United
States mail, addressed to the stockholder at his address as it
appears on the stock transfer books or records of the
Corporation as of the record date prescribed in Section 6 of
this Article II, with postage thereon prepaid. If a stockholder
is present in person or by proxy at a meeting, unless the
stockholder at the beginning of the meeting objects to holding
the meeting or transacting business at the meeting, or in writ-
ing waives notice thereof before or after the meeting, notice of
the meeting to such stockholder shall be unnecessary. When any
stockholders' meeting, either annual or special, is adjourned to
a different date, time or place, it shall not be necessary to
give any notice of the date, time or place of any meeting or of
the business to be transacted at such adjourned meeting, other
than an announcement at the meeting at which such adjournment is
taken. If a new record date for the adjourned meeting is or
shall be fixed under Section 6 of Article II of these Bylaws,
however, notice of the adjourned meeting shall be given under
this Section 5 to persons who are stockholders as of the new
record date.
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SECTION 6. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any
meeting of stockholders, or any adjournment thereof, or stock-
holders entitled to receive payment of any dividend, or in order
to make a determination of stockholders for any other proper
purpose, the board of directors shall fix in advance a date as
the record date for any such determination of stockholders.
Such date in any case shall be not more than seventy days prior
to the date on which the particular action, requiring such
determination of stockholders, is to be taken. A determination
of stockholders entitled to notice of or to vote at a
stockholders' meeting is effective for any adjournment of the
meeting unless the board of directors fixes a new record date,
which it shall do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
SECTION 7. Voting Lists. The officer or agent having
charge of the stock transfer books for shares of the Corporation
shall make, at lest ten days before each meeting of
stockholders, a complete record of the stockholders entitled to
vote at such meeting or any adjournment thereof, with the
address of and the number of shares held by each. The record,
for a period of ten days before such meeting, shall be kept on
file at the registered office or the principal office of the
Corporation or at the office of the Corporation's transfer
agent, whether within or outside the State of North Carolina,
and shall be subject to inspection by any stockholder for any
purpose germane to the meeting at any time during usual business
hours. Such record shall also be produced and kept open at the
time and place of the meeting and shall be subject to the
inspection of any stockholder for any purpose germane to the
meeting during the whole time of the meeting. The original
stock transfer books shall be prima facie evidence as to who are
the stockholders entitled to examine such record or transfer
books or to vote at any meeting of stockholders.
SECTION 8. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stock-
holder or by his duly authorized attorney in fact. Proxies
solicited on behalf of the management shall be voted as directed
by the stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy
shall be valid after eleven months from the date of its
execution unless otherwise provided in the proxy.
SECTION 9. Voting. Except as otherwise specified in the
Articles of Incorporation, at each election for directors every
stockholder entitled to vote at such election shall be entitled
to one vote for each share of stock held by him. Unless other-
wise provided in the Articles of Incorporation, by statute, or
by these Bylaws, a majority of those votes cast by stockholders
at a lawful meeting shall be sufficient to pass on a transaction
or matter which properly comes before the meeting, except that a
plurality of all the votes cast at a meeting at which a quorum
is present is sufficient to elect a director.
SECTION 10. Voting of Shares in the Name of Two or More
Persons. When ownership of stock stands in the name of two or
more persons, in the absence of written directions to the
Corporation to the contrary, at any meeting of the stockholders
of the Corporation any one or more of such stockholders may
cast, in person or by proxy, all votes to which such ownership
is entitled. In the event an attempt is made to cast
conflicting votes, in person or by proxy, by the several persons
in whose name shares of stock stand, the vote or votes to which
these persons are entitled shall be cast proportionally in
proportion to the number of persons voting.
SECTION 11. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by any
officer, agent or proxy as the bylaws of such corporation may
prescribe, or, in the absence of such provision, as the board of
directors of such corporation may determine. Shares held by an
administrator, executor, guardian, conservator, committee or
curator representing the stockholder may be voted by him, either
in person or by proxy, without a transfer of such shares into
his name. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such
shares into his name. Shares standing in the name of a receiver
may be voted by such receiver, and shares held by or under the
control of a receiver may be voted by such receiver without the
transfer thereof into his name if authority to do so is
contained in an appropriate order of the court or other public
authority by which such receiver was appointed.
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A stockholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into
the name of the pledgee and thereafter the pledgee shall be
entitled to vote the shares so transferred.
Shares held by another corporation, if a majority of the
shares entitled to vote for the election of directors of such
other corporation are held by the Corporation, shall not be
voted at any meeting or counted in determining the total number
of outstanding shares at any given time for purposes of any
meeting.
SECTION 12. Inspectors of Election. In advance of any
meeting of stockholders, the board of directors may appoint one
or more persons, other than nominees for office, as inspectors
of election to act at such meeting or any adjournment thereof.
If inspectors of election are not so appointed, the person
presiding at the meeting shall make such appointment at the
meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors in advance of the meeting
or at the meeting by the person presiding at the meeting.
Unless otherwise prescribed by applicable law, the duties
of such inspectors shall include: determining the number of
shares of stock and the voting power of each share, the shares
of stock represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies; receiving
votes, ballots or consents; hearing and determining all chal-
lenges and questions in any way arising in connection with the
right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all stockholders.
SECTION 13. Nominating Committee. The board of directors
or a committee appointed by the board of directors shall act as
a nominating committee for selecting the nominees for election
as directors. Except in the case of a nominee substituted as a
result of the death or other incapacity of a management nominee,
the nominating committee shall deliver written nominations to
the secretary at least twenty days prior to the date of the
annual meeting. Provided such committee makes such nominations,
no nominations for directors except those made by the nominating
committee shall be voted upon at the annual meeting unless other
nominations by stockholders are made in writing and delivered to
the secretary of the Corporation in accordance with the
provisions of the Corporation's Articles of Incorporation.
SECTION 14. New Business. Any new business to be taken
up at the annual meeting shall be stated in writing and filed
with the secretary of the Corporation in accordance with the
provisions of the Corporation's Articles of Incorporation. This
provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers,
directors and committees, but in connection with such reports no
new business shall be acted upon at such annual meeting unless
stated and filed as provided in the Corporation's Articles of
Incorporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of
the Corporation shall be under the direction of its board of
directors. The chairman shall preside at all meetings of the
board of directors.
SECTION 2. Number, Term and Election. The board of
directors shall initially consist of seven members and
thereafter shall consist of such number of members as determined
by the board of directors from time to time in accordance with
the provisions of the Corporation's Articles of Incorporation.
The board of directors shall be divided into three classes as
nearly equal in number as possible. The members of each class
shall be elected for a term of three years and until their
successors are elected or qualified. The board of directors
shall be classified in accordance with the provisions of the
Corporation's Articles of Incorporation.
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SECTION 3. Regular Meetings. A regular meeting of the
board of directors shall be held at such time and place as shall
be determined by resolution of the board of directors without
other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the
board of directors may be called by or at the request of the
chairman, the chief executive officer, or one-third of the
directors. The person calling the special meeting of the board
of directors may fix any place as the place for holding any
special meeting of the board of directors called by such person.
Members of the board of directors may participate in
regular or special meetings by means of conference telephone or
similar communications equipment by which all persons
participating in the meeting can hear each other. Such
participation shall constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting
shall be given to each director at least two days previous
thereto delivered personally or by telegram or at least seven
days previous thereto delivered by mail at the address at which
the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid if mailed or when
delivered to the telegraph company if sent by telegram. Any
director may waive notice of any meeting by a writing filed with
the secretary. The attendance or participation of a director at
a meeting shall constitute a waiver of notice of such meeting,
except where a director at the beginning of a meeting or
promptly upon his or her arrival objects to holding the meeting
or transacting business at the meeting and does not thereafter
vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any meeting of
the board of directors need be specified in the notice or waiver
of notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors
fixed by Section 2 of this Article III shall constitute a quorum
for the transaction of business at any meeting of the board of
directors, but if less than such majority is present at a meet-
ing, a majority of the directors present may adjourn the meeting
from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 5 of this
Article III.
SECTION 7. Manner of Acting. The act of the majority of
the directors present at a meeting at which a quorum is present
shall be the act of the board of directors, unless a greater
number is prescribed by these Bylaws, the Corporation's Articles
of Incorporation, or the Virginia Stock Corporation Act.
SECTION 8. Action Without a Meeting. Any action required
or permitted to be taken by the board of directors at a meeting
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the direc-
tors and filed with the minutes or proceedings of the board of
directors.
SECTION 9. Resignation. Any director may resign at any
time by sending a written notice of such resignation to the
principal executive office of the Corporation addressed to the
board of directors, the chairman, the president or the
secretary. Unless otherwise specified in such written notice,
such resignation shall take effect upon delivery of the notice
in accordance with the terms of the preceding sentence.
SECTION 10. Vacancies. Any vacancy occurring in the
board of directors shall be filled in accordance with the
provisions of the Corporation's Articles of Incorporation. The
term of any director elected or appointed to fill a vacancy
shall be in accordance with the provisions of the Corporation's
Articles of Incorporation.
SECTION 11. Removal of Directors. Any director or the
entire board of directors may be removed only in accordance with
the provisions of the Corporation's Articles of Incorporation.
SECTION 12. Compensation. Directors, as such and
advisory or emeritus directors, may receive compensation for
service on the board of directors. Members of either standing
or special committees may be allowed such compensation as the
board of directors may determine.
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SECTION 13. Presumption of Assent. A director of the
Corporation who is present at a meeting of the board of
directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless (i) he
objects at the beginning of the meeting, or promptly upon his
arrival, to holding it or transacting specified business at the
meeting, or (ii) he votes against, or abstains from, the action
taken.
SECTION 14. Advisory and Emeritus Directors. The board
of directors may by resolution appoint as advisory directors
individuals whom the board believes possess knowledge,
experience and other qualifications which may prove valuable to
the Corporation, and may appoint as emeritus directors
individuals who have retired from the board after extended and
faithful service. Advisory and emeritus directors may sit with
the board of directors at regular and special meetings and
discuss any question under consideration; provided, however,
that advisory and emeritus directors shall cast no vote. The
board of directors shall have the power to remove any advisory
or emeritus director with or without cause at any time.
SECTION 15. Age Limitation. No person shall be eligible
for election, reelection, appointment, or reappointment to the
board of directors if such person is then more than 80 years of
age. No director shall serve beyond the annual meeting of the
Corporation immediately following his attainment of 80 years of
age. Persons may serve as advisory directors or emeritus
directors without regard to age.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees,
as they may determine to be necessary or appropriate for the
conduct of the business of the Corporation, and may prescribe
the duties, constitution and procedures thereof. Each committee
shall consist of one or more directors of the Corporation
appointed by a majority of the whole board. The board of
directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
The board of directors shall have power at any time to
change the members of, to fill vacancies in, and to discharge
any committee of the board. Any member of any such committee
may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board of directors, the
chairman, the chief executive officer, the chairman of such
committee, or the secretary shall be deemed to constitute notice
to the Corporation. Such resignation shall take effect upon
receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective. Any
member of any such committee may be removed at any time, either
with or without cause, by the affirmative vote of a majority of
the authorized number of directors at any meeting of the board
of directors called for that purpose.
ARTICLE V
OFFICERS
SECTION 1. Positions. The officers of the Corporation
shall be a chairman, a vice chairman, a president, one or more
vice presidents, a secretary and a treasurer, each of whom shall
be elected by the board of directors. The board of directors
may designate one or more vice presidents as executive vice
president or senior vice president. The board of directors may
also elect or authorize the appointment of such other officers
as the business of the Corporation may require. The officers
shall have such authority and perform such duties as the board
of directors may from time to time authorize or determine. In
the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their
respective offices.
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SECTION 2. Election and Term of Office. The officers of
the Corporation shall be elected annually by the board of
directors at the first meeting of the board of directors held
after each annual meeting of the stockholders. If the election
of officers is not held at such meeting, such election shall be
held as soon thereafter as possible. Each officer shall hold
office until his successor shall have been duly elected and
qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided. Election
or appointment of an officer, employee or agent shall not of
itself create contract rights. The board of directors may
authorize the Corporation to enter into an employment contract
with any officer in accordance with state law; but no such
contract shall impair the right of the board of directors to
remove any officer at any time in accordance with Section 3 of
this Article V.
SECTION 3. Removal. Any officer may be removed by vote
of two-thirds of the board of directors whenever, in its
judgment, the best interests of the Corporation will be served
thereby, but such removal, other than for cause, shall be
without prejudice to the contract rights, if any, of the person
so removed.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may
be filled by the board of directors for the unexpired portion of
the term.
SECTION 5. Remuneration. The remuneration of the
officers shall be fixed from time to time by the board of
directors, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. To the extent permitted by
applicable law, and except as otherwise prescribed by the
Corporation's Articles of Incorporation or these Bylaws with
respect to certificates for shares, the board of directors or
the executive committee may authorize any officer, employee, or
agent of the Corporation to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to
specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf
of the Corporation and no evidence of indebtedness shall be
issued in its name unless authorized by the board of directors.
Such authority may be general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the Corporation shall be
signed by one or more officers, employees or agents of the
Corporation in such manner, including in facsimile form, as
shall from time to time be determined by resolution of the board
of directors.
SECTION 4. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation in any of its duly authorized
depositories as the board of directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. The shares of the
Corporation shall be represented by certificates signed by the
chairman of directors or by the president or a vice president
and by the treasurer or an assistant treasurer or by the
secretary or an assistant secretary of the Corpora-
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tion, and may be sealed with the seal of the Corporation or a
facsimile thereof. Any or all of the signatures upon a
certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the
Corporation. If any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have
ceased to be such officer before the certificate is issued, it
may be issued by the Corporation with the same effect as if he
were such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All certificates
representing shares issued by the Corporation shall set forth
upon the face or back that the Corporation will furnish to any
stockholder upon written request and without charge a full
statement of the designations, relative rights, preferences, and
limitations applicable to each class and the variations in
rights, preferences, and limitations determined for each series
(and the authority of the board of directors to determine
variations for future series).
Each certificate representing shares shall state upon the
face thereof: the name of the Corporation; that the Corporation
is organized under the laws of the Commonwealth of Virginia; the
name of the person to whom issued; the number and class of
shares; the date of issue; the designation of the series, if
any, which such certificate represents; the par value of each
share represented by such certificate, or a statement that the
shares are without par value. Other matters in regard to the
form of the certificates shall be determined by the board of
directors.
SECTION 3. Payment for Shares. The consideration for the
issuance of shares shall be paid in accordance with the
provisions of the Corporation's Articles of Incorporation.
SECTION 4. Transfer of Shares. Transfer of shares of
capital stock of the Corporation shall be made only on its stock
transfer books. Authority for such transfer shall be given only
by the holder of record thereof or by his legal representative,
who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed
and filed with the Corporation. Such transfer shall be made
only on surrender for cancellation of the certificate for such
shares. The person in whose name shares of capital stock stand
on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
SECTION 5. Lost Certificates. The board of directors may
direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to
have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, or destroyed. When authorizing such
issue of a new certificate, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or
destroyed.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the last
day of September of each year. The Corporation shall be subject
to an annual audit as of the end of its fiscal year by
independent public accountants appointed by and responsible to
the board of directors.
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ARTICLE IX
DIVIDENDS
Subject to the provisions of the Corporation's Articles of
Incorporation and applicable law, the board of directors may, at
any regular or special meeting, declare dividends on the
Corporation's outstanding capital stock. Dividends may be paid
in cash, in property or in the Corporation's own stock.
ARTICLE X
CORPORATE SEAL
The corporate seal of the Corporation shall be in such
form as the board of directors shall prescribe.
ARTICLE XI
AMENDMENTS
In accordance with the Corporation's Articles of
Incorporation, these Bylaws may be repealed, altered, amended or
rescinded by the stockholders of the Corporation only by vote of
not less than 80% of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting). In
addition, the board of directors may repeal, alter, amend or
rescind these Bylaws by vote of two-thirds of the board of
directors at a legal meeting held in accordance with the
provisions of these Bylaws.
8<PAGE>
<PAGE>
REVOCABLE PROXY
________________________________________________________________
NEWSOUTH BANCORP, INC.
WASHINGTON, NORTH CAROLINA
________________________________________________________________
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 18, 1999
The undersigned hereby appoints Frederick H. Howdy, Linley
H. Gibbs, Jr. and Fred 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
Annual Meeting of Stockholders, to be held at the main office of
NewSouth Bank (the "Bank") located at 1311 Carolina Avenue,
Washington, North Carolina, on Thursday, February 18, 1999, at
1:00 p.m. (the "Annual Meeting"), and at any and all
adjournments thereof, as follows:
VOTE
FOR WITHHELD
--- --------
1. The election as directors of both
nominees listed below (except as
marked to the contrary below). [ ] [ ]
Charles E. Parker, Jr.
Marshall T. Singleton
INSTRUCTION: TO WITHHOLD YOUR VOTE
FOR EITHER OF THE INDIVIDUALS NOMINATED, INSERT
THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
_______________________
FOR AGAINST ABSTAIN
2. The approval of a Plan of
Reorganization and Agreement
and Plan of Merger, pursuant to
which the Company's state of
incorporation will be changed
from Delaware to Virginia by
means of a merger of the
Company with and into NewSouth
Bancorp, Inc., a newly formed
Virginia corporation that is
a wholly owned subsidiary of
the Company. [ ] [ ] [ ]
3. The transaction of such other
business as may properly come
before the Annual Meeting or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED
PROPOSITIONS.
________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR THE OTHER PROPOSITION STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING MATTERS
RELATING TO THE CONDUCT OF THE ANNUAL 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 ANNUAL MEETING.
________________________________________________________________
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<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Annual 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 Annual Meeting and
a Proxy Statement dated January 11, 1999.
Dated: ______________________, 1999
_________________________ _________________________
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.
