<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1996
REGISTRATION NO. 333-8503
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CENTURA BANKS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6712 56-1688522
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
134 NORTH CHURCH STREET
ROCKY MOUNT, NORTH CAROLINA 27804
(919) 977-4400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
<TABLE>
<S> <C> <C>
JOSEPH A. SMITH, JR. ALEXANDER M. DONALDSON
GENERAL COUNSEL AND CORPORATE SECRETARY MOORE & VAN ALLEN, PLLC
CENTURA BANKS, INC. WITH COPY TO: ONE HANNOVER SQUARE, SUITE 1700
134 NORTH CHURCH STREET FAYETTEVILLE STREET MALL
ROCKY MOUNT, NORTH CAROLINA 27804 RALEIGH, NORTH CAROLINA 27601
(919) 977-4400 (919) 828-4481
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the merger (the "Merger") described in this
Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE PROPOSED OFFERING AGGREGATE OFFER-
BE REGISTERED REGISTERED (1) PRICE PER UNIT ING PRICE (2)
<S> <C> <C> <C>
Common Stock,
no par value.............. 1,191,163 shares * $17,124,086
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO REGISTRATION
BE REGISTERED FEE
<S> <C>
Common Stock,
no par value.............. $5,904.86
</TABLE>
* Not applicable
(1) This Registration Statement covers (i) the maximum number of shares of the
common stock of the Registrant which is expected to be issued in connection
with the Merger and (ii) the maximum number of shares of common stock
reserved for issuance under various option and other plans of FirstSouth
Bank ("FirstSouth"), the obligations under which will be assumed by the
Registrant upon consummation of the Merger but which may be issued prior to
consummation of the Merger.
(2) Estimated solely for purposes of calculating the registration fee and based,
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended, on
the book value of FirstSouth common stock on June 30, 1996.
THIS REGISTRATION STATEMENT COVERS ADDITIONAL SHARES OF THE COMMON STOCK OF
THE REGISTRANT WHICH MAY BE ISSUED TO PREVENT DILUTION RESULTING FROM A STOCK
SPLIT, STOCK DIVIDEND OR SIMILAR TRANSACTION INVOLVING THE COMMON STOCK OF THE
REGISTRANT, PURSUANT TO RULE 416.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
<PAGE>
CENTURA BANKS, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
THE LOCATION IN THE PROXY STATEMENT-PROSPECTUS OF THE RESPONSES TO THE ITEMS OF
PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION CAPTION OR LOCATION IN PROXY STATEMENT-PROSPECTUS
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Outside Front Cover of Proxy Statement; Facing Page of Registration
Statement; Cross-Reference Sheet
2. Inside Front and Outside Back Cover of
Prospectus...................................... Available Information; Documents Incorporated by Reference; Table
of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... Summary; Comparative Market Prices and Dividends; Comparative Per
Share Data
4. Terms of the Transaction........................ Summary; Description of the Merger; Effect of the Merger on Rights
of Stockholders; Description of Centura Capital Stock
5. Pro Forma Financial Information................. Documents Incorporated by Reference; Pro Forma Combined Condensed
Financial Information and Capitalization
6. Material Contacts with the Company Being
Acquired........................................ Summary; Description of the Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters.................................... Not applicable
8. Interest of Named Experts and Counsel........... Opinions
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Not applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants..... Available Information; Documents Incorporated by Reference;
Summary; Information About Centura
11. Incorporation of Certain Information by
Reference....................................... Documents Incorporated by Reference
12. Information with Respect to S-2 or S-3
Registrants..................................... Not Applicable
13. Incorporation of Certain Information by
Reference....................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants..................... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
l5. Information with Respect to S-3 Companies....... Not Applicable
16. Information with Respect to S-2 or S-3
Companies....................................... Available Information; Documents Incorporated by Reference;
Summary; Information About FirstSouth
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies............................ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents, or Authori-
zations are to be Solicited..................... Documents Incorporated by Reference; Summary; Special Meeting of
FirstSouth Stockholders; Description of the Merger; Information
About FirstSouth; Information About Centura; Description of Centura
Capital Stock
19. Information if Proxies, Consents, or Authori-
zations are not to be Solicited or in an
Exchange Offer.................................. Not Applicable
</TABLE>
<PAGE>
September 10, 1996
To the Stockholders of
FirstSouth Bank:
You are cordially invited to attend a Special Meeting of the Stockholders
(the "Special Meeting") of FirstSouth Bank ("FirstSouth") to be held at the Best
Western Motel, 770 Huffman Mill Road, Burlington, North Carolina, at 11:00 A.M.,
local time, on Tuesday, October 8, 1996, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Reorganization and Merger, dated as
of June 7, 1996 (the "Agreement"), which provides for the merger (the "Merger")
of FirstSouth with and into Centura Bank, with Centura Bank the surviving
corporation resulting from the Merger. Upon consummation of the Merger, each
share of FirstSouth common stock issued and outstanding will be exchanged for
0.56 of a share of Centura Banks, Inc. common stock (subject to possible
adjustment as described in the accompanying Proxy Statement/Prospectus), with
cash being paid in lieu of issuing fractional shares.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, (iii) Proxy for the Special Meeting, (iv) FirstSouth's
Annual Report to Stockholders for the year ended December 31, 1995, and (v)
FirstSouth's Quarterly Report on Form F-4 for the six months ended June 30,
1996. The Proxy Statement/Prospectus describes in more detail the Agreement and
the proposed Merger, including a description of the conditions to consummation
of the Merger and the effects of the Merger on the rights of FirstSouth
stockholders. Please read these materials carefully and consider thoughtfully
the information set forth in them.
The Board of Directors has unanimously approved the Agreement and
consummation of the Merger contemplated thereby, and unanimously recommends that
you vote FOR approval of the Agreement.
It is important to understand that approval of the Agreement will require
the affirmative vote of two-thirds of the votes entitled to be cast at the
Special Meeting by the holders of the issued and outstanding shares of
FirstSouth common stock. Accordingly, whether or not you plan to attend the
Special Meeting, you are urged to complete, sign, and return promptly the
enclosed proxy card. If you attend the Special Meeting, you may vote in person
if you wish, even if you previously have returned your proxy card. The proposed
Merger with Centura is a significant step for FirstSouth and your vote on this
matter is of great importance.
On behalf of the Board of Directors, I urge you to vote FOR approval of the
Agreement by marking the enclosed proxy card "FOR" item one.
We look forward to seeing you at the Special Meeting.
Sincerely,
WADE WILLIAMSON, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
FIRSTSOUTH BANK
2946 South Church Street
Burlington, North Carolina 27216
(910) 570-6006
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 11:00 A.M. ON OCTOBER 8, 1996
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the
"Special Meeting") of FirstSouth Bank ("FirstSouth") will be held at the Best
Western Motel, 770 Huffman Mill Road, Burlington, North Carolina, on Tuesday,
October 8, 1996, at 11:00 A.M., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve an Agreement and
Plan of Reorganization and Merger, dated as of June 7, 1996 (the "Agreement"),
by and among FirstSouth, Centura Bank and Centura Banks, Inc., a North Carolina
corporation ("Centura"), pursuant to which (i) FirstSouth will merge (the
"Merger") with and into Centura Bank, (ii) each share of the $3.33 1/3 par value
common stock of FirstSouth ("FirstSouth Stock") issued and outstanding at the
effective time of the Merger will be exchanged for 0.56 of a share of the no par
value common stock of Centura, subject to possible adjustment, and cash in lieu
of any fractional share, and (iii) Centura will assume the obligations of
FirstSouth under various stock plans and programs and adopt substitute plans
where appropriate, all as more fully described in the accompanying Proxy
Statement/Prospectus. A copy of the Agreement is set forth in Appendix A to the
accompanying Proxy Statement/Prospectus and is hereby incorporated by reference
herein.
2. OTHER BUSINESS. To transact such other business as may come properly
before the Special Meeting or any adjournments or postponements of the Special
Meeting.
NOTICE OF APPRAISAL RIGHTS. If Proposal 1 above is approved and the Merger
contemplated thereby is consummated, each holder of shares of FirstSouth Stock
would have the right to demand appraisal of such holder's shares of FirstSouth
Stock and would be entitled to the rights and remedies of Article 13 of the
North Carolina Business Corporation Act ("NCBCA"). The right of any such
stockholder to any such rights and remedies is contingent upon consummation of
the Merger. In addition, the right of any such stockholder to such rights and
remedies is contingent upon strict compliance with the requirements set forth in
Article 13 of the NCBCA, the full text of which is attached as Appendix B to the
accompanying Proxy Statement/Prospectus. For a summary of the requirements of
Article 13 of the NCBCA, see "DESCRIPTION OF THE MERGER -- Dissenters' Rights"
in the accompanying Proxy Statement/Prospectus.
Only stockholders of record at the close of business on August 30, 1996,
will be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Approval of the Agreement requires the
affirmative vote of two-thirds of the votes entitled to be cast at the Special
Meeting by holders of the issued and outstanding shares of FirstSouth Stock.
THE BOARD OF DIRECTORS OF FIRSTSOUTH UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
WADE WILLIAMSON, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Burlington, North Carolina
September 10, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
<PAGE>
PROSPECTUS
CENTURA BANKS, INC.
AN ESTIMATED 1,191,163 SHARES
COMMON STOCK, NO PAR VALUE
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS OF
FIRSTSOUTH BANK
This Prospectus of Centura Banks, Inc., a bank holding company organized
and existing under the laws of the State of North Carolina ("Centura"), relates
to up to 1,191,163 shares of common stock, no par value, of Centura ("Centura
Stock"), including shares to be subject to assumed options and grants, which are
issuable to the stockholders of FirstSouth Bank, a bank corporation organized
and existing under the laws of the State of North Carolina ("FirstSouth"), upon
consummation of the proposed merger (the "Merger") described herein by which
FirstSouth will merge with and into Centura Bank, a wholly-owned subsidiary of
Centura, pursuant to the terms of the Agreement and Plan of Reorganization and
Merger, dated as of June 7, 1996 (the "Agreement"), by and among FirstSouth,
Centura Bank and Centura. The full text of the Agreement is attached as Appendix
A hereto.
At the effective time of the Merger (the "Effective Time"), except as
described herein, each issued and outstanding share of common stock, par value
$3.33 1/3 per share, of FirstSouth ("FirstSouth Stock") will be converted into
and exchanged for 0.56 of a share of Centura Stock (the "Exchange Rate"),
subject to certain possible adjustments described herein. The Exchange Rate
shall be adjusted if necessary so that when the Average Closing Price (defined
below) is multiplied by the Exchange Rate, each share of FirstSouth Stock shall
be converted into a number of shares of Centura Stock having a dollar value of
not less than $19.32 nor more than $21.30. The "Average Closing Price" is
defined in the Agreement as the average of the daily closing sale prices of
Centura Stock quoted on the New York Stock Exchange -- Composite Transactions
List (as reported by the WALL STREET JOURNAL or, if not reported thereby,
another authoritative source as selected by Centura) for the ten consecutive
full trading days on which such shares are traded on the New York Stock Exchange
(the "NYSE") ending at the close of trading on the trading day immediately
preceding the Special Meeting (defined below) (the "Determination Date"). The
Exchange Rate could be greater or less than 0.56, depending on the Average
Closing Price. If the Average Closing Price is less than $34.50 or greater than
$38.04, the Exchange Rate will be adjusted. The Average Closing Price was $37.80
on August 30, 1996 which yields a per share dollar value of $21.17. Therefore,
no adjustment to the Exchange Rate would be necessary as of that date. See
"DESCRIPTION OF THE MERGER -- Possible Adjustment of Exchange Rate."
This Prospectus also serves as the Proxy Statement of FirstSouth, and is
being furnished to the stockholders of FirstSouth in connection with the
solicitation of proxies by the Board of Directors of FirstSouth for use at its
special meeting of stockholders (including any adjournment or postponement
thereof, the "Special Meeting"), to be held on October 8, 1996, to consider and
vote upon the Agreement. This Proxy Statement/Prospectus ("Proxy Statement") and
related materials enclosed herewith are being mailed to stockholders of
FirstSouth on or about September 10, 1996.
Each holder of shares of FirstSouth Stock has the right to dissent from the
Merger and to demand appraisal and payment of the fair value of such holder's
shares of FirstSouth Stock if the Merger is approved and consummated. The right
of any such stockholder to such rights and remedies is contingent upon strict
compliance with the requirements set forth in Article 13 of the North Carolina
Business Corporation Act ("NCBCA"), the full text of which is attached as
Appendix B hereto. A stockholder of FirstSouth who wishes to dissent from the
Merger (i) must give FirstSouth written notice of his intent to demand payment
for his shares if the Merger is effectuated, which notice must be actually
received by FirstSouth before the vote is taken at the Special Meeting, and (ii)
must not vote any shares of FirstSouth Stock in favor of the Merger. See
"DESCRIPTION OF THE MERGER -- Dissenters' Rights."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT. ANY REPRE SENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY. THE SECURITIES ARE NOT OBLIGATIONS OF NOR ARE THE
SECURITIES GUARANTEED BY CENTURA BANK OR CENTURA BANKS, INC. THE
SECURITIES ARE SUBJECT TO INVEST MENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL INVESTED.
The date of this Proxy Statement is September 10, 1996.
<PAGE>
AVAILABLE INFORMATION
Centura is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, is
required to file reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy and information statements, and other information can be
obtained, at prescribed rates, from the SEC by addressing written requests for
such copies to the Public Reference Section at the SEC at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
and information statements, and other information can be inspected at the public
reference facilities referred to above and at the regional offices of the SEC at
7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
shares of Centura Stock are listed on the New York Stock Exchange (the "NYSE"),
and reports, proxy and information statements, and other information concerning
Centura also may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
FirstSouth also is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Federal Deposit Insurance Corporation ("FDIC"). Such
reports, proxy statements and other information filed by FirstSouth may be
obtained from the FDIC at prescribed rates by written requests for such copies
to the FDIC, Registration and Disclosure Section, 550 17th Street, N.W., Room
F-643, Washington, D.C. 20429. In addition, such documents are exhibits to the
Registration Statement and may be inspected and copied at the public reference
facilities maintained by the SEC at the addresses set forth above.
This Proxy Statement constitutes part of the Registration Statement on Form
S-4 of Centura (including any exhibits and amendments thereto, the "Registration
Statement") filed with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the securities offered hereby. This Proxy
Statement does not include all of the information in the Registration Statement,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. For further information about Centura and the securities
offered hereby, reference is made to the Registration Statement. The
Registration Statement may be inspected and copied, at prescribed rates, at the
SEC's public reference facilities at the addresses set forth above.
All information contained in this Proxy Statement or incorporated herein by
reference with respect to Centura was supplied by Centura and all information
contained in this Proxy Statement or incorporated herein by reference with
respect to FirstSouth was supplied by FirstSouth.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION
OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF CENTURA OR FIRSTSOUTH OR THE INFORMATION SET FORTH OR INCORPORATED BY
REFERENCE HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Centura pursuant
to the Exchange Act are hereby incorporated by reference herein:
(a) Centura's Annual Report on Form 10-K for the year ended December
31, 1995, (provided that any information included or incorporated
by reference in response to Items 402(a)(8), (i), (k), or (l) of
Regulation S-K of the SEC shall not be deemed to be incorporated
herein and is not part of the Registration Statement);
(b) Centura's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1996 and June 30, 1996;
(c) Centura's Current Reports on Form 8-K dated January 8, February
28, March 12, March 20, April 3, April 16, April 18, May 17, May
24, June 14, July 2, July 12, July 29, August 16, August 22 and
September 4, 1996; and
(d) The description of Centura Stock contained in Centura's
Registration Statement on Form 8-A filed October 9, 1990, under
the Exchange Act and any other amendment or report filed for the
purpose of updating such description.
i
<PAGE>
The following documents previously filed with the FDIC by FirstSouth
pursuant to the Exchange Act are hereby incorporated by reference herein:
(a) FirstSouth's Annual Report on Form F-2 for the fiscal year ended
December 31, 1995;
(b) FirstSouth's Quarterly Reports on Form F-4 for the quarterly
periods ended March 31, 1996 and June 30, 1996;
(c) FirstSouth's Current Report on Form F-3, dated April 19, 1996.
All documents filed by Centura pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
final adjournment of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
Centura will provide without charge, upon the written or oral request of
any person including any beneficial owner, to whom this Proxy Statement is
delivered a copy of any and all information (excluding certain exhibits)
relating to Centura that has been incorporated by reference in the Registration
Statement. Such requests should be directed to Frank L. Pattillo, Chief
Financial Officer, Centura Banks, Inc., 134 North Church Street, Rocky Mount,
North Carolina 27804 (telephone (919) 977-4400). FirstSouth will provide without
charge, upon the written or oral request of any person, including any beneficial
owner, to whom this Proxy Statement is delivered, a copy of any and all
information (excluding certain exhibits) relating to FirstSouth that has been
incorporated by reference in the Registration Statement of which this Proxy
Statement is a part. Such requests should be directed to Sandra J. Frank,
Secretary, FirstSouth Bank, 2946 South Church Street, Burlington, North Carolina
27216 (telephone (910) 570-6006). In order to ensure timely delivery of the
documents, any request should be made by October 1, 1996.
FIRSTSOUTH'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995, AND FIRSTSOUTH'S QUARTERLY REPORT ON FORM F-4 FOR THE FISCAL
QUARTER ENDED JUNE 30, 1996, ACCOMPANY THIS PROXY STATEMENT.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY................................................................................................................ 1
The Parties.......................................................................................................... 1
Meeting of Stockholders.............................................................................................. 1
The Merger........................................................................................................... 2
Comparative Market Prices of Common Stock............................................................................ 5
Comparative Per Share Data........................................................................................... 5
Selected Financial Data.............................................................................................. 7
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION AND CAPITALIZATION.................................................. 10
COMPARATIVE MARKET PRICES AND DIVIDENDS................................................................................ 19
SPECIAL MEETING OF FIRSTSOUTH STOCKHOLDERS............................................................................. 20
Date, Place, Time, and Purpose....................................................................................... 20
Record Dates, Voting Rights, Required Votes, and Revocability of Proxies............................................. 20
Solicitation of Proxies.............................................................................................. 20
Recommendation....................................................................................................... 21
DESCRIPTION OF THE MERGER.............................................................................................. 21
General.............................................................................................................. 21
Possible Adjustment of Exchange Rate................................................................................. 21
Effect of the Merger on Stock Options................................................................................ 22
Background of and Reasons for the Merger............................................................................. 22
Opinion of FirstSouth's Financial Advisor............................................................................ 24
Effective Time of the Merger......................................................................................... 27
Distribution of Centura Stock Certificates........................................................................... 28
Conditions to Consummation of the Merger............................................................................. 28
Regulatory Approvals................................................................................................. 29
Waiver, Amendment, and Termination................................................................................... 29
Dissenters' Rights................................................................................................... 30
Conduct of Business Pending the Merger............................................................................... 32
Management and Operations After the Merger........................................................................... 33
Interests of Certain Persons in the Merger........................................................................... 33
Certain Federal Income Tax Consequences.............................................................................. 35
Accounting Treatment................................................................................................. 36
Expenses and Fees.................................................................................................... 36
Resales of Centura Stock............................................................................................. 36
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS......................................................................... 38
Anti-Takeover Provisions Generally................................................................................... 38
Authorized Capital Stock............................................................................................. 38
Amendment of Articles of Incorporation and Bylaws.................................................................... 39
Classified Board of Directors and Absence of Cumulative Voting....................................................... 40
Removal of Directors................................................................................................. 40
Limitations on Director Liability.................................................................................... 41
Indemnification...................................................................................................... 41
Special Meeting of Stockholders...................................................................................... 42
Constituency and Stakeholder Provisions.............................................................................. 43
Actions by Stockholders Without a Meeting............................................................................ 43
Stockholder Nominations and Proposals................................................................................ 43
Fair Price Provision................................................................................................. 44
Business Combinations................................................................................................ 45
Dissenters' Rights of Appraisal...................................................................................... 46
Stockholders' Rights to Examine Books and Records.................................................................... 47
Dividends............................................................................................................ 47
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
INFORMATION ABOUT FIRSTSOUTH........................................................................................... 47
<S> <C>
General.............................................................................................................. 47
Security Ownership of Management..................................................................................... 48
INFORMATION ABOUT CENTURA.............................................................................................. 49
General.............................................................................................................. 49
Recent Acquisitions.................................................................................................. 50
Stock Ownership of Management........................................................................................ 51
CERTAIN REGULATORY CONSIDERATIONS...................................................................................... 51
General.............................................................................................................. 51
Community Reinvestment............................................................................................... 52
Payment of Dividends................................................................................................. 53
Capital Adequacy..................................................................................................... 54
Support of Subsidiary Banks.......................................................................................... 55
Prompt Corrective Action............................................................................................. 55
FDIC Insurance Assessments........................................................................................... 56
Safety and Soundness Standards....................................................................................... 57
Depositor Preference................................................................................................. 57
DESCRIPTION OF CENTURA CAPITAL STOCK................................................................................... 57
OTHER MATTERS.......................................................................................................... 58
EXPERTS................................................................................................................ 58
OPINIONS............................................................................................................... 58
SHAREHOLDER PROPOSALS.................................................................................................. 58
APPENDICES:
Appendix A: Agreement and Plan of Reorganization and Merger
Appendix B: Article 13 of the North Carolina Business Corporation Act
Appendix C: Opinion of Smith Capital, Inc.
</TABLE>
iv
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROXY
STATEMENT AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THIS SUMMARY IS
NOT INTENDED TO BE A COMPLETE DESCRIPTION OF THE MATTERS COVERED IN THIS PROXY
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT.
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE ENTIRE PROXY STATEMENT, INCLUDING
THE APPENDICES. AS USED IN THIS PROXY STATEMENT, THE TERMS "CENTURA" AND
"FIRSTSOUTH" REFER TO THOSE ENTITIES, RESPECTIVELY, AND, WHERE THE CONTEXT
REQUIRES, TO CENTURA AND ITS SUBSIDIARIES.
THE PARTIES
FIRSTSOUTH. FirstSouth is a North Carolina bank corporation that operates
five banking offices in the Burlington, North Carolina area and offers a broad
range of banking and banking-related services. As of June 30, 1996, FirstSouth
had total assets of approximately $177.8 million, total deposits of
approximately $158.9 million, and total stockholders' equity of approximately
$17.1 million. The principal executive offices of FirstSouth are located at 2946
South Church Street, Burlington, North Carolina 27216, and its telephone number
at such address is (910) 570-6006. FirstSouth has agreed to sell its Yanceyville
branch to American National Bank and Trust Company, Danville, Virginia,
including the loans and deposits associated with that branch, which sale is
expected to occur immediately prior to the Effective Time of the Merger. At June
30, 1996, the Yanceyville branch had approximately $4.8 million in loans and
approximately $21.5 million in deposits. Centura has agreed to the sale.
Additional information with respect to FirstSouth is included in documents
incorporated by reference in this Proxy Statement. See "AVAILABLE INFORMATION,"
"DOCUMENTS INCORPORATED BY REFERENCE" and "INFORMATION ABOUT FIRSTSOUTH."
CENTURA. Centura, a North Carolina corporation, is a bank holding company
registered with the Federal Reserve under the Bank Holding Company Act (the "BHC
Act"). Centura owns all of the outstanding shares of Centura Bank, a North
Carolina bank corporation. Centura, through Centura Bank and its subsidiaries,
offers a full range of financial services through 154 offices located in 93
communities throughout North Carolina and through a variety of alternative
delivery channels. As of June 30, 1996, Centura had total consolidated assets of
approximately $5.6 billion, total consolidated deposits of approximately $4.3
billion, and total consolidated stockholders' equity of approximately $399
million.
During the first eight months of 1996, Centura (i) completed mergers with
two financial institutions, (ii) acquired approximately $71 million in North
Carolina deposits from a Virginia-based institution, (iii) announced its
agreement to purchase 49% of First Greensboro Home Equity, Inc., a mortgage
company headquartered in Greensboro, North Carolina, and (iv) announced its
agreement to acquire CLG, Inc., a technology equipment leasing company (the
"Recent Acquisitions"). Information with respect to the Recent Acquisitions is
included under "INFORMATION ABOUT CENTURA -- Recent Acquisitions" and in certain
of the documents incorporated by reference in this Proxy Statement. See
"DOCUMENTS INCORPORATED BY REFERENCE."
The principal executive offices of Centura and Centura Bank are located at
134 North Church Street, Rocky Mount, North Carolina 27804, and its telephone
number at such address is (919) 977-4400. Additional information with respect to
Centura and its subsidiary is included in documents incorporated by reference in
this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS INCORPORATED BY
REFERENCE" and "INFORMATION ABOUT CENTURA."
MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the holders of FirstSouth Stock
in connection with the solicitation by the FirstSouth Board of Directors of
proxies for use at the Special Meeting at which FirstSouth stockholders will be
asked to vote upon (i) a proposal to approve the Agreement and (ii) such other
business as may properly come before the meeting. The Special Meeting will be
held at the Best Western Motel, 770 Huffman Mill Road, Burlington, North
Carolina, at 11:00 A.M. local time, on Tuesday, October 8, 1996. See "SPECIAL
MEETING OF FIRSTSOUTH STOCKHOLDERS -- Date, Place, Time, and Purpose."
FirstSouth's Board of Directors has fixed the close of business on August
30, 1996, as the record date (the "FirstSouth Record Date") for determination of
the stockholders entitled to notice of and to vote at the Special Meeting. Only
holders of record of shares of FirstSouth Stock on the FirstSouth Record Date
will be entitled to notice of and to vote at the Special Meeting. Each share of
FirstSouth Stock is entitled to one vote. Stockholders who execute proxies
retain the right to revoke them at any time prior to being voted at the Special
Meeting. On the FirstSouth Record Date, there were 1,835,841 shares of
1
<PAGE>
FirstSouth Stock issued and outstanding. See "SPECIAL MEETING OF FIRSTSOUTH
STOCKHOLDERS -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
Approval of the Agreement requires the affirmative vote of two-thirds of
the votes entitled to be cast at the Special Meeting by the holders of the
issued and outstanding shares of FirstSouth Stock. As of June 30, 1996,
directors and executive officers of FirstSouth and their affiliates were
entitled to vote 610,235 shares (excluding options) or approximately 33.2% of
the outstanding shares of FirstSouth Stock. See "SPECIAL MEETING OF
STOCKHOLDERS -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
THE MERGER
GENERAL. The Agreement provides for the acquisition of FirstSouth by
Centura pursuant to the merger of FirstSouth with and into Centura Bank. At the
Effective Time, each share of FirstSouth Stock then issued and outstanding will
be converted into and exchanged for 0.56 of a share of Centura Stock, subject to
possible adjustment as described below. The Exchange Rate shall be adjusted if
necessary so that when the Average Closing Price is multiplied by the Exchange
Rate, each share of FirstSouth Stock shall be converted into a number of shares
of Centura Stock having a dollar value of not less than $19.32 nor more than
$21.30. The "Average Closing Price" is defined in the Agreement as the average
of the daily closing sale prices of Centura Stock quoted on the
NYSE -- Composite Transactions List (as reported by the WALL STREET JOURNAL or,
if not reported thereby, another authoritative source as selected by Centura)
for the ten consecutive full trading days on which such shares are traded on the
NYSE ending at the close of trading on the trading day immediately preceding the
Special Meeting (the "Determination Date"). The Exchange Rate could be greater
or less than 0.56, depending on the Average Closing Price. If the Average
Closing Price is less than $34.50 or greater than $38.04, the Exchange Rate will
be adjusted. The Average Closing Price was $37.80 on August 30, 1996, which
yields a per share dollar value of $21.17. Therefore, no adjustment to the
Exchange Rate would be necessary as of that date. See "DESCRIPTION OF THE
MERGER -- Possible Adjustment of Exchange Rate."
No fractional shares of Centura Stock will be issued. Rather, cash (without
interest) will be paid in lieu of any fractional share interest to which any
FirstSouth stockholder would be entitled upon consummation of the Merger, in an
amount equal to such fractional part of a share of Centura Stock multiplied by
the market value of one share of Centura Stock at the Effective Time. The market
value of one share of Centura Stock at the Effective Time shall be the Average
Closing Price. See "DESCRIPTION OF THE MERGER -- General."
The Agreement also contemplates that at the Effective Time, each option to
acquire shares of FirstSouth Stock pursuant to stock options ("FirstSouth
Options") granted by FirstSouth under the FirstSouth Stock Plans, as that term
is defined in the Agreement, which are outstanding at the Effective Time,
whether or not exercisable, will be converted into and become rights with
respect to Centura Stock on a basis adjusted to reflect the Exchange Rate. See
"DESCRIPTION OF THE MERGER -- Effect of the Merger on Stock Options."
Centura's Board has approved the repurchase in the open market of shares of
Centura Stock equal in number to up to 9.9% of the shares of Centura Stock to be
issued in the Merger and up to all of the shares (approximately 776,000 shares)
to be issued in connection with the merger with First Community Bank. See
"INFORMATION ABOUT CENTURA -- Recent Acquisitions." Under rules promulgated by
the SEC under the Exchange Act, Centura will not be permitted to purchase shares
of Centura Stock in the open market during the period commencing two business
days prior to the mailing of this Proxy Statement and ending on the date of the
Special Meeting.
As of the FirstSouth Record Date, FirstSouth had 1,835,841 shares of
FirstSouth Stock issued and outstanding and 291,235 additional shares of
FirstSouth Stock subject to options issued and outstanding under the FirstSouth
Stock Plans. Assuming an Exchange Rate of 0.56 of a share of Centura Stock for
each share of FirstSouth Stock, it is anticipated that upon consummation of the
Merger, Centura would issue approximately 1,028,070 shares of Centura Stock,
excluding shares subject to assumed options. Accordingly, Centura would then
have issued and outstanding approximately 23,527,366 shares of Centura Stock
based on the number of shares of Centura Stock issued and outstanding on June
30, 1996, and excluding the effect of any shares which may be issued by Centura
in other acquisitions or repurchased by Centura after June 30, 1996.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF DIRECTORS OF
FIRSTSOUTH. The Board of Directors of FirstSouth believes that the Agreement and
the Merger are in the best interests of FirstSouth and its stockholders. THE
FIRSTSOUTH DIRECTORS UNANIMOUSLY RECOMMEND THAT FIRSTSOUTH STOCKHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENT. The Board of Directors of FirstSouth believes that
the Merger will result in a company with expanded opportunities for profitable
growth and that the combined resources and capital of FirstSouth and Centura
will provide an enhanced ability to compete in the
2
<PAGE>
changing and competitive financial services industry. See "DESCRIPTION OF THE
MERGER -- Background of and Reasons for the Merger."
In unanimously approving the Agreement, FirstSouth's directors considered,
among other things, FirstSouth's and Centura's financial condition, the
financial terms and the income tax consequences of the Merger, the likelihood of
the Merger being approved by regulatory authorities without undue conditions or
delay, legal advice concerning the proposed Merger, the views of Smith Capital,
Inc., Charlotte, North Carolina ("Smith Capital") as to the fairness of the
Exchange Rate, from a financial point of view, to the stockholders of
FirstSouth, and in general the fairness of the terms of the Merger to FirstSouth
stockholders. See "DESCRIPTION OF THE MERGER -- Background of and Reasons for
the Merger."
OPINION OF FINANCIAL ADVISOR. Smith Capital has rendered an opinion to
FirstSouth that, based on and subject to the procedures, matters, and
limitations described in its opinion and such other matters as it considered
relevant, as of the date of its opinion, the Exchange Rate is fair, from a
financial point of view, to the stockholders of FirstSouth. The opinion of Smith
Capital dated as of September 4, 1996 is attached as Appendix C to this Proxy
Statement. FirstSouth stockholders are urged to read the opinion in its entirety
for a description of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection therewith. See "DESCRIPTION
OF THE MERGER -- Opinion of FirstSouth's Financial Advisor."
EFFECTIVE TIME. Subject to the conditions to the obligations of the parties
to effect the Merger, the Effective Time will occur on the date and at the time
that the Articles of Merger become effective with the North Carolina Secretary
of State. Unless otherwise agreed upon by FirstSouth and Centura and subject to
the conditions to the obligations of the parties to effect the Merger, the
Effective Time will occur not later than 40 days after the expiration of all
applicable waiting periods required by any regulatory authority for the Merger.
However, the Effective Time is expected to occur as soon as possible after the
expiration of all applicable waiting periods. See "DESCRIPTION OF THE
MERGER -- Effective Time of the Merger," " -- Conditions to Consummation of the
Merger," and " -- Waiver, Amendment, and Termination."
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that the other conditions precedent to the Merger
can or will be satisfied. FirstSouth and Centura anticipate that all conditions
to the consummation of the Merger will be satisfied so that the Merger can be
consummated during the fourth quarter of 1996. However, delays in the
consummation of the Merger could occur.
EXCHANGE OF STOCK CERTIFICATES. Promptly after the Effective Time, Centura
will cause Registrar and Transfer Company, Cranford, New Jersey, acting in its
capacity as exchange agent for Centura (the "Exchange Agent"), to mail to each
holder of record of a certificate or certificates (collectively, the
"Certificates") which, immediately prior to the Effective Time, represented
outstanding shares of FirstSouth Stock, a letter of transmittal and instructions
for use in effecting the surrender and cancellation of the Certificates in
exchange for certificates representing shares of Centura Stock. Cash will be
paid to the holders of FirstSouth Stock in lieu of the issuance of any
fractional shares of Centura Stock. In no event will the holder of any
surrendered Certificate(s) be entitled to receive interest on any cash to be
paid to such holder, and in no event will FirstSouth, Centura, or the Exchange
Agent be liable to any holder of FirstSouth Stock for any Centura Stock or
dividends thereon or cash delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat, or similar law.
REGULATORY APPROVALS AND OTHER CONDITIONS. The Merger is subject to
approval by the Federal Reserve and the North Carolina Commissioner of Banks
(the "Commissioner"). Applications have been filed with each of these agencies
for the requisite approvals. The Federal Reserve approved the Merger on August
30, 1996. The Commissioner approved the Merger on July 18, 1996, which approval
must be confirmed by the North Carolina Banking Commission which meets on
September 18, 1996 to vote on the Merger. THERE CAN BE NO ASSURANCE THAT SUCH
REGULATORY APPROVAL WILL BE OBTAINED OR AS TO THE TIMING OF ANY SUCH APPROVAL.
THERE ALSO CAN BE NO ASSURANCE THAT ANY SUCH APPROVAL WILL NOT IMPOSE CONDITIONS
THAT ARE DEEMED BY FIRSTSOUTH OR CENTURA TO MATERIALLY ADVERSELY IMPACT THE
ECONOMIC OR BUSINESS ASSUMPTIONS OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of FirstSouth stockholders, receipt
of an opinion of counsel as to the tax-free nature of certain aspects of the
Merger, and certain other conditions. See "DESCRIPTION OF THE
MERGER -- Regulatory Approvals" and " -- Conditions to Consummation of the
Merger."
WAIVER, AMENDMENT, AND TERMINATION. The Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time by mutual action of the
Boards of Directors of FirstSouth and Centura, or by the action of the Board of
Directors of either company under certain circumstances, including (i) if the
Merger is not consummated by December 31,
3
<PAGE>
1996, unless the failure to consummate by such time is due to a breach of the
Agreement by the party seeking to terminate or (ii) in certain circumstances, by
either of the parties in the event that the other defaults in the performance of
its representations, warranties and agreements contained in the Agreement. If
for any reason the Merger is not consummated, FirstSouth shall continue to
operate as a bank under its present management. To the extent permitted by law,
the Agreement may be amended upon the written agreement of Centura and
FirstSouth without the approval of stockholders; provided, however, that the
provisions of the Agreement relating to the manner or basis in which shares of
Centura Stock will be exchanged for FirstSouth Stock may not be amended after
the Special Meeting without the requisite approval of the holders of the issued
and outstanding shares of FirstSouth Stock entitled to vote thereon. See
"DESCRIPTION OF THE MERGER -- Possible Adjustment of Exchange Rate" and
" -- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS. Pursuant to Article 13 of the NCBCA, the holders of
FirstSouth Stock have dissenters' rights with respect to the Merger. Any
FirstSouth stockholder who does not vote in favor of the proposal to approve the
Agreement and the Merger contemplated thereby and who complies with certain
requirements of the applicable provisions of the NCBCA may have the right to an
appraisal and payment for such person's shares of FirstSouth Stock.
TO PERFECT DISSENTERS' RIGHTS OF APPRAISAL, A HOLDER OF FIRSTSOUTH STOCK
MUST STRICTLY COMPLY WITH THE APPLICABLE STATUTORY PROVISIONS, A COPY OF WHICH
PROVISIONS IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX B. A STOCKHOLDER OF
FIRSTSOUTH WHO WISHES TO DISSENT FROM THE MERGER (I) MUST GIVE FIRSTSOUTH
WRITTEN NOTICE OF HIS INTENT TO DEMAND PAYMENT FOR HIS SHARES IF THE MERGER IS
EFFECTUATED, WHICH NOTICE MUST BE ACTUALLY RECEIVED BY FIRSTSOUTH BEFORE THE
VOTE IS TAKEN AT THE SPECIAL MEETING AND (II) MUST NOT VOTE ANY SHARES OF
FIRSTSOUTH STOCK IN FAVOR OF THE MERGER. ANY HOLDER OF FIRSTSOUTH STOCK WHO
RETURNS A SIGNED PROXY BUT WHO FAILS TO PROVIDE VOTING INSTRUCTIONS WITH RESPECT
TO THE PROPOSAL TO APPROVE THE AGREEMENT WILL BE DEEMED TO HAVE VOTED IN FAVOR
OF SUCH PROPOSAL AND WILL NOT BE ENTITLED TO ASSERT DISSENTERS' RIGHTS OF
APPRAISAL. See "DESCRIPTION OF THE MERGER -- Dissenters' Rights."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of FirstSouth's
management and Board of Directors have interests in the Merger in addition to
their interests as stockholders of FirstSouth generally. Those interests relate
to, among other things, appointment of the chairman of FirstSouth's board of
directors to Centura's board of directors, change in control provisions in
existing employment agreements with FirstSouth and possible employment
agreements with Centura and provisions in the Agreement regarding
indemnification and eligibility for certain Centura employee benefits. See
"DESCRIPTION OF THE MERGER -- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. It is intended that
the Merger will be treated as a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"). Consummation of
the Merger is conditioned upon receipt by FirstSouth and Centura of an opinion
of Poyner & Spruill, L.L.P., substantially to this effect. Accordingly, no gain
or loss will be recognized by a FirstSouth stockholder upon the exchange of such
stockholder's FirstSouth Stock solely for shares of Centura Stock. Subject to
the provisions and limitations of Section 302(a) of the Code, gain or loss will
be recognized with respect to cash received in lieu of fractional shares. Gain
recognition, if any, will not be in excess of the amount of cash received. TAX
CONSEQUENCES OF THE MERGER FOR INDIVIDUAL TAXPAYERS CAN VARY, HOWEVER, AND ALL
FIRSTSOUTH STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE
THE EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS. For a further discussion of the federal income tax consequences of the
Merger, see "DESCRIPTION OF THE MERGER -- Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT. It is intended that the Merger will be accounted for
as a pooling-of-interests for accounting and financial reporting purposes. See
"DESCRIPTION OF THE MERGER -- Accounting Treatment."
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS. At the Effective Time,
FirstSouth stockholders, whose rights are governed by First South's Articles of
Incorporation and Bylaws, will automatically become Centura stockholders, and
their rights as Centura stockholders will be determined by Centura's Restated
Articles of Incorporation and Bylaws and by the NCBCA.
The rights of Centura stockholders differ from the rights of FirstSouth
stockholders in certain important respects, some of which constitute additional
anti-takeover provisions provided for in Centura's governing documents. See
"EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS."
CONDUCT OF BUSINESS PENDING THE MERGER. Each party has agreed in the
Agreement to, among other things, operate its business only in the ordinary
course and to take no action that would adversely affect its ability to perform
its covenants and agreements under the Agreement. In addition, FirstSouth has
agreed not to take certain actions relating to the operation of FirstSouth
pending consummation of the Merger, except as otherwise permitted by the
Agreement. See "DESCRIPTION OF THE MERGER -- Conduct of Business Pending the
Merger," for a description of these limitations on the conduct of FirstSouth's
business.
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<PAGE>
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of Centura Stock are traded on the NYSE under the symbol "CBC."
There is not an active trading market for the shares of FirstSouth Stock and
trades involving FirstSouth Stock have been infrequent and made primarily on the
basis of private negotiations and transactions through market makers. Stock
quotes are listed in the BURLINGTON TIMES-NEWS and the GREENSBORO NEWS & RECORD.
Scott & Stringfellow, Inc., A.G. Edwards & Sons, Inc. and J.C. Bradford & Co.
Company, registered broker-dealers, have been listed as market makers for
FirstSouth Stock. The following table sets forth the reported closing prices per
share for Centura Stock, the last bid quotation for FirstSouth Stock (as
reported in the BURLINGTON TIMES-NEWS) and the equivalent per share prices (as
explained below) for FirstSouth Stock on April 17, 1996, the last full business
day preceding the public announcement of the intention of the parties to effect
the Merger, and on August 30, 1996, the latest practicable date prior to the
mailing of this Proxy Statement.
<TABLE>
<CAPTION>
MARKET PRICE PER SHARE AT: FIRSTSOUTH STOCK CENTURA STOCK EQUIVALENT PER SHARE PRICE
<S> <C> <C> <C>
April 17, 1996.................................................... $ 14.50 $ 36.00 $ 20.16
August 30, 1996................................................... $ 17.50 $ 38.25 $ 21.42
</TABLE>
The equivalent per share price of a share of FirstSouth Stock at each
specified date represents the closing sale price of a share of Centura Stock on
such date multiplied by the Exchange Rate of 0.56. See "COMPARATIVE MARKET
PRICES AND DIVIDENDS."
There can be no assurance as to what the market price of the Centura Stock
will be if and when the Merger is consummated.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Centura and FirstSouth; (ii) a pro forma combined basis per share of Centura
Stock, giving effect to the Merger; and (iii) an equivalent pro forma basis per
share of FirstSouth Stock, giving effect to the Merger. The FirstSouth and
Centura pro forma combined information and the FirstSouth pro forma equivalent
information give effect to the Merger, assuming that the Merger had been
effected for the periods presented, on a pooling-of-interests accounting basis
and reflects the Exchange Ratio of 0.56 of a share of Centura Stock for each
share of FirstSouth Stock. See "DESCRIPTION OF THE MERGER -- Accounting
Treatment." The pro forma data are presented for information purposes only and
are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger been consummated at
the dates or during the periods indicated, nor are they necessarily indicative
of future results of operations or combined financial position. The pro forma
combined and pro forma equivalent information presented below does not include
the effects of the Recent Acquisitions. Information with respect to the Recent
Acquistions is included under "INFORMATION ABOUT CENTURA -- Recent Acquisitions"
and in certain of the documents incorporated by reference in this Proxy
Statement (see "DOCUMENTS INCORPORATED BY REFERENCE").
5
<PAGE>
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of Centura and FirstSouth, including the respective notes thereto. See
"Documents Incorporated by Reference." " -- Selected Financial Data," and
"INFORMATION ABOUT CENTURA -- Recent Acquisitions." The information shown below
does not reflect acquisitions recently completed or announced by Centura. For
the effect of those acquisitions, see "PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION AND CAPITALIZATION."
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE YEAR ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Centura Historical (1)
Primary............................................................... $ 1.39 $ 2.54 $ 2.31 $ 2.09
Fully Diluted......................................................... 1.39 2.54 2.30 2.05
FirstSouth Historical (2)
Primary............................................................... 0.52 0.95 0.76 0.64
Fully Diluted......................................................... 0.51 0.93 0.76 0.64
Centura and FirstSouth Pro Forma Combined (3)
Primary............................................................... 1.35 2.50 2.26 2.04
Fully Diluted......................................................... 1.35 2.49 2.26 2.00
FirstSouth Pro Forma Equivalent (4)
Primary............................................................... 0.76 1.40 1.27 1.14
Fully Diluted......................................................... 0.76 1.39 1.27 1.12
CASH DIVIDENDS PAID PER COMMON SHARE
Centura Historical (1)................................................... $ 0.50 $ 0.85 $ 0.74 $ 0.69
FirstSouth Historical (2)................................................ 0.14 0.24 0.20 0.16
Centura and FirstSouth Pro Forma Combined (5)............................ 0.50 0.85 0.74 0.69
FirstSouth Pro Forma Equivalent (6)...................................... 0.28 0.48 0.41 0.39
BOOK VALUE PER COMMON SHARE
Centura Historical (1)................................................... $17.73 $17.69 $15.42 $14.58
FirstSouth Historical (2)................................................ 9.33 8.91 7.89 7.37
Centura and FirstSouth Pro Forma Combined (3)............................ 17.68 17.61 15.36 14.52
FirstSouth Pro Forma Equivalent (4)...................................... 9.90 9.86 8.60 8.13
</TABLE>
(1) Centura's historical 1995, 1994 and 1993 information has been restated to
reflect the merger with First Commercial Holding Corporation, that was
consummated on February 27, 1996, and was accounted for as a
pooling-of-interests.
(2) FirstSouth's historical 1995, 1994 and 1993 per share information has been
restated to reflect the 5% stock dividend declared by FirstSouth in March
1996.
(3) Does not assume any purchases of shares of Centura Stock in the open market.
(4) Represents the Centura and FirstSouth pro forma combined information
multiplied by the Exchange Rate of 0.56 of a share of Centura Stock for each
share of FirstSouth Stock.
(5) Represents historical dividends paid per share by Centura as it is assumed
that Centura will not change its dividend policy as a result of the Merger.
(6) Represents historical dividends paid per share by Centura multiplied by the
Exchange Ratio of 0.56 of a share of Centura Stock for each share of
FirstSouth Stock.
The foregoing combined and equivalent pro forma per share data reflects an
Exchange Rate of 0.56. The FirstSouth pro forma Merger equivalent data would
change if the Exchange Rate were adjusted as described under "DESCRIPTION OF THE
MERGER -- Possible Adjustment of Exchange Rate."
6
<PAGE>
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Centura and FirstSouth. The data should be read in conjunction
with the historical financial statements, including the respective notes
thereto, and other financial information concerning Centura and FirstSouth
incorporated by reference in or accompanying this Proxy Statement. Interim
unaudited data for the six months ended June 30, 1996 and 1995, of Centura and
FirstSouth reflect, in the opinion of the respective management of Centura and
FirstSouth, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the six months ended
June 30, 1996, are not necessarily indicative of results which may be expected
for any other interim period or for the year as a whole. See "AVAILABLE
INFORMATION" and "DOCUMENTS INCORPORATED BY REFERENCE." The historical
FirstSouth financial information has been restated to reflect the 5% stock
dividend declared in March 1996. The historical Centura financial information
has been restated to reflect the merger with First Commercial Holding
Corporation that was consummated on February 27, 1996, and accounted for as a
pooling-of-interests.
7
<PAGE>
CENTURA BANKS, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(in thousands, except shares and
per share data)
Interest income.................. $ 215,915 $ 182,404 $ 394,831 $ 305,123 $ 264,188 $ 256,068 $ 271,814
Interest expense................. 101,229 79,767 181,593 114,578 103,533 114,786 149,260
Net interest income.............. 114,686 102,637 213,238 190,545 160,655 141,282 122,554
Provision for loan loss (PFLL)... 4,325 3,884 7,709 7,005 8,841 16,908 22,094
Net interest income after PFLL... 110,361 98,753 205,529 183,540 151,814 124,374 100,460
Noninterest income............... 38,767 27,421 60,703 50,115 52,459 44,057 32,740
Noninterest expense.............. 97,508 80,524 173,184 152,355 138,938 123,342 117,383
Income before income taxes....... 51,620 45,650 93,048 81,300 65,335 45,089 15,817
Income taxes..................... 19,196 16,611 33,334 29,161 22,166 14,659 4,019
Net income..................... $ 32,424 $ 29,039 $ 59,714 $ 52,139 $ 43,169 $ 30,430 $ 11,798
Cash dividends paid.............. $ 11,377 $ 8,034 $ 23,581 $ 15,411 $ 12,452 $ 9,862 $ 8,878
PER COMMON SHARE
Net income -- primary.............. $ 1.39 $ 1.27 $ 2.54 $ 2.31 $ 2.09 $ 1.57 $ 0.64
Net income -- fully diluted........ 1.39 1.27 2.54 2.30 2.05 1.54 0.64
Book value......................... 17.73 17.69 17.69 15.42 14.58 11.46 10.62
SHARES
Outstanding........................ 22,499,295 24,239,246 23,126,200 22,068,447 22,275,970 19,190,927 19,094,777
Weighted average-primary........... 23,257,200 22,885,446 23,548,920 22,614,210 20,696,145 19,405,339 18,500,557
Weighted average-fully diluted..... 23,257,200 22,915,030 23,595,644 22,678,421 21,203,238 20,323,570 18,500,557
SELECTED AVERAGE BALANCES
(in millions)
Assets............................. $ 5,508 $ 4,572 $ 4,916 $ 4,243 $ 3,729 $ 3,289 $ 3,003
Earning assets..................... 5,107 4,218 4,539 3,919 3,441 3,015 2,740
Loans.............................. 3,691 3,257 3,460 2,836 2,500 2,248 2,100
Investment securities.............. 1,392 940 1,053 1,057 887 697 609
Core deposits...................... 3,773 3,331 3,528 3,337 2,964 2,636 2,362
Total deposits..................... 4,192 3,636 3,898 3,604 3,247 2,892 2,651
Shareholders' equity............... 408 366 393 333 275 231 212
SELECTED PERIOD-END BALANCES
(in millions)
Assets............................. $ 5,631 $ 5,112 $ 5,503 $ 4,403 $ 4,304 $ 3,447 $ 3,147
Earning assets..................... 5,173 4,700 5,043 4,013 3,913 3,116 2,848
Loans.............................. 3,829 3,594 3,710 3,063 2,679 2,329 2,119
Investment securities.............. 1,311 1,055 1,293 937 1,181 716 683
Core deposits...................... 3,913 3,673 3,818 3,319 3,460 2,761 2,535
Total deposits..................... 4,275 4,047 4,292 3,607 3,754 3,022 2,801
Shareholders' equity............... 399 429 409 340 325 241 219
SELECTED RATIOS
Dividend payout ratio.............. 35.09% 27.67% 39.49% 29.56% 28.84% 32.41% 75.25%
Return on average assets (1)....... 1.18 1.28 1.21 1.23 1.16 0.93 0.39
Return on average equity (1)....... 16.00 16.00 15.18 15.67 15.70 13.20 5.56
Average equity to average assets... 7.40 8.01 8.00 7.84 7.37 7.01 7.06
Average loans to average
deposits......................... 88.05 89.57 88.76 78.69 76.99 77.73 79.19
</TABLE>
(1) data for the six months ended June 30, 1996 and 1995 is annualized.
8
<PAGE>
FIRSTSOUTH BANK
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
(in thousands, except shares and
per share data)
Interest Income............................ $ 6,828 $ 5,878 $ 12,419 $ 9,316 $ 7,819 $ 7,258
Interest Expense........................... 3,071 2,550 5,628 3,533 3,062 3,304
Net interest income........................ 3,757 3,328 6,791 5,783 4,757 3,954
Provision for loan losses.................. 125 105 195 215 310 385
Noninterest income......................... 606 551 1,125 1,059 1,272 854
Noninterest expense........................ 2,665 2,488 4,906 4,412 3,919 3,366
Income before taxes...................... 1,573 1,286 2,815 2,215 1,800 1,057
Income taxes............................. 549 464 1,002 804 659 355
Net Income............................... $ 1,024 $ 822 $ 1,813 $ 1,411 $ 1,141 $ 702
Cash dividends paid........................ $ 259 $ 204 $ 410 $ 314 $ 231 $ 0
PER COMMON SHARE
Net income -- primary...................... $ 0.52 $ 0.43 $ 0.95 $ 0.76 $ 0.64 $ 0.40
Net income -- fully diluted................ 0.51 0.43 0.93 0.76 0.64 0.40
Book Value................................. 9.33 8.39 8.91 7.89 7.37 6.84
SHARES
Outstanding................................ 1,835,841 1,800,625 1,813,090 1,772,841 1,726,471 1,724,045
Weighted average -- primary................ 1,976,682 1,896,009 1,912,278 1,852,092 1,769,616 1,759,370
Weighted average -- fully diluted.......... 1,994,926 1,896,009 1,940,321 1,861,036 1,769,616 1,759,370
SELECTED AVERAGE BALANCES
(in thousands)
Assets..................................... $ 171,415 $ 145,954 $ 153,184 $ 129,911 $ 112,678 $ 98,100
Earning Assets............................. 160,992 133,454 144,560 121,544 104,901 91,506
Loans...................................... 123,917 100,611 105,654 91,124 82,744 74,376
Investment securities...................... 30,265 28,520 29,598 24,673 17,597 11,468
Core deposits.............................. 129,719 108,583 115,423 93,172 75,067 67,201
Total deposits............................. 152,296 129,426 136,091 113,364 87,417 84,954
Shareholders' equity....................... 16,769 14,488 14,845 13,292 12,296 11,449
SELECTED PERIOD-END BALANCES
(in thousands)
Assets..................................... $ 177,780 $ 150,718 $ 169,354 $ 143,609 $ 115,904 $ 106,360
Earning assets............................. 166,635 140,219 157,826 131,170 108,332 99,111
Loans...................................... 131,799 108,350 116,166 94,687 85,271 77,874
Investment securities...................... 28,582 28,169 35,663 28,834 19,761 15,337
Core deposits.............................. 135,520 112,214 130,704 108,368 77,891 75,667
Total deposits............................. 158,927 133,395 151,372 128,560 100,241 93,420
Shareholders' equity....................... 17,124 15,100 16,146 13,989 12,721 11,791
SELECTED RATIOS
Return on average assets (1)............... 1.20% 1.14% 1.18% 1.09% 1.01% 0.72%
Return on average equity (1)............... 12.28 11.44 12.21 10.61 9.28 6.13
Average equity to average assets........... 9.78 9.93 9.69 10.23 10.91 11.67
Average loans to average deposits.......... 81.37 77.74 77.63 80.38 84.94 87.55
<CAPTION>
1991
<S> <C>
STATEMENT OF OPERATIONS
(in thousands, except shares and
per share data)
Interest Income............................ $ 7,318
Interest Expense........................... 4,017
Net interest income........................ 3,301
Provision for loan losses.................. 270
Noninterest income......................... 557
Noninterest expense........................ 3,094
Income before taxes...................... 494
Income taxes............................. 166
Net Income............................... $ 328
Cash dividends paid........................ $ 0
PER COMMON SHARE
Net income -- primary...................... $ 0.19
Net income -- fully diluted................ 0.19
Book Value................................. 6.43
SHARES
Outstanding................................ 1,714,829
Weighted average -- primary................ 1,754,349
Weighted average -- fully diluted.......... 1,754,349
SELECTED AVERAGE BALANCES
(in thousands)
Assets..................................... $ 83,058
Earning Assets............................. 76,383
Loans...................................... 60,159
Investment securities...................... 10,573
Core deposits.............................. 51,442
Total deposits............................. 70,634
Shareholders' equity....................... 10,911
SELECTED PERIOD-END BALANCES
(in thousands)
Assets..................................... $ 92,902
Earning assets............................. 84,774
Loans...................................... 65,634
Investment securities...................... 12,541
Core deposits.............................. 61,707
Total deposits............................. 80,964
Shareholders' equity....................... 11,033
SELECTED RATIOS
Return on average assets (1)............... 0.39%
Return on average equity (1)............... 3.01
Average equity to average assets........... 13.14
Average loans to average deposits.......... 85.17
</TABLE>
(1) data for the six months ended June 30, 1996 and 1995 is annualized.
9
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION AND CAPITALIZATION
The following unaudited pro forma combined condensed balance sheet (the
"pro forma balance sheet") as of June 30, 1996, and the unaudited pro forma
combined condensed income statements (the "pro forma income statements") for the
six months ended June 30, 1996, and for each of the years in the three-year
period ended December 31, 1995, combine the historical financial statements of
Centura with FirstSouth and CLG, Inc., Raleigh, North Carolina ("CLG"), after
giving effect to the merger of both entities using the pooling-of-interests
method of accounting. Pro forma adjustments to the balance sheet are computed as
if the transactions occurred at June 30, 1996, while pro forma adjustments to
the income statements are computed as if the transactions were consummated on
January 1 of the earliest period presented.
Additionally, the pro forma balance sheet as of June 30, 1996, and the pro
forma income statements for the six months ended June 30, 1996, and for the year
ended December 31, 1995, give effect to the affiliation with Centura of First
Community Bank, Gastonia, North Carolina ("FCB"), presented under the purchase
method of accounting, which requires that all assets and liabilities be adjusted
to their estimated fair value as of the date of the acquisition, and the
purchase of a 49% interest in First Greensboro Home Equity, Inc., Greensboro,
North Carolina ("EqInt"). In connection with the acquisition of FCB, management
anticipates that it will acquire up to 100% of the shares to be exchanged in the
combination, as approved by Centura's board of directors. The pro forma
financial information presented herein gives effect to the possible purchase by
Centura of these shares. Pro forma adjustments to the balance sheet are computed
as if the transactions occurred at June 30, 1996, while pro forma adjustments to
the income statements presented are computed as if the transactions were
consummated at January 1, 1995.
The pro forma information does not include the effects of the proposed sale
by FirstSouth of its Yanceyville branch immediately prior to the Merger. For a
discussion of that sale, see "INFORMATION ABOUT FIRSTSOUTH -- General". In
connection with the Merger, management anticipates it will acquire up to 9.9% of
the shares to be exchanged in the Merger, as approved by Centura's board of
directors. However, the pro forma financial information herein does not give
effect to the possible purchase by Centura of these shares.
The pro forma balance sheet details the pro forma capitalization of
Centura, giving effect to the transactions specified. Additional information
with respect to the Recent Acquisitions is included under "INFORMATION ABOUT
CENTURA -- Recent Acquisitions" and in certain of the documents incorporated by
reference in this Proxy Statement (see "DOCUMENTS INCORPORATED BY REFERENCE").
10
<PAGE>
<PAGE>
CENTURA BANKS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PURCHASES PRO FORMA
(IN THOUSANDS, EXCEPT SHARE AND CENTURA HISTORICAL FCB EQINT CENTURA
PER SHARE DATA) (1,2) FCB (1) ADJUSTMENTS (3) ADJUSTMENTS (1,6) PCB/EQINT
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks........ $ 213,693 $ 3,496 $ (231) $ $ 174,903
(12,805) (29,250)
Investment securities:
Available for sale........... 1,064,137 22,503 -- 1,086,640
Held to maturity............. 246,765 -- -- 246,765
Other interest-earning
assets....................... 32,901 9,875 -- 42,776
Loans and leases............... 3,829,120 82,864 -- 3,911,984
Less allowance for loan and
lease losses............... 56,297 1,239 -- 57,536
Net loans.................... 3,772,823 81,625 -- -- 3,854,448
Bank premises and equipment.... 87,599 2,114 -- -- 89,713
Other assets................... 213,165 1,740 15,855 29,250 260,010
Total assets............... $ 5,631,083 $121,353 $ 2,819 $ -- $ 5,755,255
LIABILITIES
Deposits:
Demand,
noninterest-bearing........ 645,354 12,675 -- 658,029
Interest-bearing............. 3,629,922 86,470 -- 3,716,392
Total deposits............. 4,275,276 99,145 -- -- 4,374,421
Borrowed funds................. 655,334 8,720 -- 664,054
Long-term debt................. 233,668 -- -- 233,668
Other liabilities.............. 67,931 986 -- 68,917
Total liabilities.......... 5,232,209 108,851 -- -- 5,341,060
SHAREHOLDERS' EQUITY
Common stock................... 157,899 3,370 (3,370) 173,355
28,261
(12,805)
Additional paid in capital..... -- 4,582 (4,582) --
Common stock acquired by
ESOP......................... (467) -- -- (467)
Unrealized securities gains
(losses), net................ (9,975) (135) -- (10,110)
Retained earnings.............. 251,417 4,685 (4,685) 251,417
Total shareholders'
equity................... 398,874 12,502 2,819 -- 414,195
Total liabilities and
shareholders' equity..... $ 5,631,083 $121,353 $ 2,819 $ -- $ 5,755,255
Outstanding common shares...... 22,499,295 808,793 22,908,585
Book value per share........... $ 17.73 $ 15.46 $ $ $ 18.08
<CAPTION>
PRO FORMA
POOLING CENTURA/ POOLING PRO FORMA
(IN THOUSANDS, EXCEPT SHARE AND HISTORICAL FIRSTSOUTH FCB/EQINT/ HISTORICAL CLG FULLY
PER SHARE DATA) FIRSTSOUTH (1) ADJUSTMENTS (4) FIRSTSOUTH CLG (1,5) ADJUSTMENTS (5) COMBINED
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks........ $ 6,254 $ -- $ 181,157 $ -- $ -- $ 181,157
Investment securities:
Available for sale........... 13,861 -- 1,100,501 -- -- 1,100,501
Held to maturity............. 14,722 -- 261,487 -- -- 261,487
Other interest-earning
assets....................... 6,253 -- 49,029 -- -- 49,029
Loans and leases............... 131,799 -- 4,043,783 97,403 (14,569) 4,126,617
Less allowance for loan and
lease losses............... 1,714 -- 59,250 135 -- 59,385
Net loans.................... 130,085 -- 3,984,533 97,268 (14,569) 4,067,232
Bank premises and equipment.... 4,009 -- 93,722 16,875 12,341 122,938
Other assets................... 2,596 -- 262,606 9,760 -- 272,366
Total assets............... $ 177,780 $ -- $ 5,933,035 $ 123,903 $ (2,228) $ 6,054,710
LIABILITIES
Deposits:
Demand,
noninterest-bearing........ 19,894 -- 677,923 -- -- 677,923
Interest-bearing............. 139,033 -- 3,855,425 -- -- 3,855,425
Total deposits............. 158,927 -- 4,533,348 -- 4,533,348
Borrowed funds................. -- -- 664,054 227 (227) 664,054
Long-term debt................. -- -- 233,668 92,511 (2,001) 324,178
Other liabilities.............. 1,729 -- 70,646 11,501 82,147
Total liabilities.......... 160,656 -- 5,501,716 104,239 (2,228) 5,603,727
SHAREHOLDERS' EQUITY
Common stock................... 6,119 9,271 188,745 5 -- 188,750
Additional paid in capital..... 9,271 (9,271) -- -- -- --
Common stock acquired by
ESOP......................... -- -- (467) -- -- (467)
Unrealized securities gains
(losses), net................ (68) -- (10,178) -- -- (10,178)
Retained earnings.............. 1,802 -- 253,219 19,659 -- 272,878
Total shareholders'
equity................... 17,124 -- 431,319 19,664 -- 450,983
Total liabilities and
shareholders' equity..... $ 177,780 $ -- $ 5,933,035 $ 123,903 $ (2,228) $ 6,054,710
Outstanding common shares...... 1,835,841 23,936,656 5,000 25,598,628
Book value per share........... $ 9.33 $ $ 18.02 $ 3,932.80 $ $ 17.62(7)
</TABLE>
See Notes to Pro Forma Balance Sheet.
11
<PAGE>
<PAGE>
CENTURA BANKS, INC.
NOTES TO PRO FORMA BALANCE SHEET
As of June 30, 1996
(1) In the opinion of mangement of the respective companies included above, all
adjustments considered necessary for a fair presentation of the financial
position and results for the period presented have been included.
Adjustments, if any, are normal and recurring in nature.
(2) Centura's historical information has been restated for the First Commercial
Holding Corp. merger that was consummated February 27, 1996 and was
accounted for as a pooling-of-interests.
(3) First Community Bank, Gastonia, NC ("FCB"):
a) The acquisition of FCB, accounted for under the purchase method of
accounting, was consummated on August 16, 1996 through the issuance of
776,441 shares of Centura Stock. The historical data and pro forma
adjustments reflect the actual consummation of this transaction.
Approximately 409,000 of the shares issued were repurchased through June 30,
1996. The pro forma adjustments reflect the assumption that simultaneously
with the acquisition, Centura will complete its repurchase of up to 100% of
the shares (i.e. approximately 367,000 shares at an estimated value of $12.8
million). Such completion of the share repurchase program, previously
approved under separate action by Centura's board of directors, will not in
actuality occur simultaneously with the consummation of the acquisition and
may result in less than a 100% repurchase. It is assumed Centura will
utilize liquid assets currently available to fund the repurchase of shares.
b) Goodwill of approximately $15.9 million was recorded, representing the
excess of cost over estimated fair value of the net assets acquired.
(4) FirstSouth Bank, Burlington, NC:
The merger of FirstSouth is presented under the pooling-of-interests method
of accounting, with the issuance of an estimated 1,028,070 shares of Centura
Stock for the outstanding shares of FirstSouth, given an exchange ratio of
.56 share of Centura Stock for each share of FirstSouth Stock.
(5) CLG, Inc., Raleigh, NC ("CLG"):
The merger of CLG is presented under the pooling-of-interests method of
accounting, with the issuance of an estimated 1,661,972 shares of Centura
Stock for the outstanding shares of CLG, given an exchange ratio of 332.3944
shares of Centura Stock for each share of CLG common stock. Since CLG is on
a fiscal year ending January 31, the data included is the financial position
of CLG at July 31, 1996. Adjustments have been made to eliminate and
reclassify intercompany business.
(6) First Greensboro Home Equity, Inc., Greensboro, NC ("EqInt"):
The purchase of 49% interest in EqInt for approximately $29 million will be
accounted for as an unconsolidated subsidiary, using the equity method of
accounting, as EqInt will retain controlling interest of the company.
(7) The pro forma fully combined equivalent book value per share is $9.87 which
represents the pro forma fully combined information multiplied by the
Exchange Rate of .56 of a share of Centura Stock for each share of
FirstSouth Stock.
12
<PAGE>
<PAGE>
CENTURA BANKS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PURCHASE
CENTURA HISTORICAL FCB EQINT
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE) (1,2) FCB (1) ADJUSTMENTS (3,4) ADJUSTMENTS (1,3,7)
<S> <C> <C> <C> <C>
Interest income........................................ $ 215,915 $4,873 $ $
Interest expense....................................... 101,229 2,195
Net interest income.................................. 114,686 2,678 -- --
Provision for loan losses (PFLL)....................... 4,325 144
Net interest income after PFLL....................... 110,361 2,534 -- --
Noninterest income..................................... 38,767 421 (1,146)
Noninterest expense.................................... 97,508 1,900 529 956
Income before income taxes............................. 51,620 1,055 (529) (2,102)
Income taxes........................................... 19,196 307 -- (138)
Net income........................................... $ 32,424 $ 748 $(529) $(1,964)
Earnings per common share:
Primary.............................................. $ 1.39 $ 0.97
Fully diluted........................................ 1.39 0.97
Average common shares:
Primary.............................................. 23,257,200 771,817
Fully diluted........................................ 23,257,200 771,817
<CAPTION>
POOLING
PRO FORMA HISTORICAL PRO FORMA POOLING PRO FORMA
CENTURA/ FIRSTSOUTH CENTURA/ HISTORICAL FULLY
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE) FCB/EQINT (1,5) FCB/EQINT/FIRSTSOUTH CLG (1,6) COMBINED
<S> <C> <C> <C> <C> <C>
Interest income........................................ $ 220,788 $6,828 $227,616 $ 5,713 $ 233,329
Interest expense....................................... 103,424 3,071 106,495 3,490 109,985
Net interest income.................................. 117,364 3,757 121,121 2,223 123,344
Provision for loan losses (PFLL)....................... 4,469 125 4,594 -- 4,594
Net interest income after PFLL....................... 112,895 3,632 116,527 2,223 118,750
Noninterest income..................................... 38,042 606 38,648 10,056 48,704
Noninterest expense.................................... 100,893 2,665 103,558 9,632 113,190
Income before income taxes............................. 50,044 1,573 51,617 2,647 54,264
Income taxes........................................... 19,365 549 19,914 1,061 20,975
Net income........................................... $ 30,679 $1,024 $ 31,703 $ 1,586 $ 33,289
Earnings per common share:
Primary.............................................. $ 1.30 $ 0.52 $ 1.28 $ 317.20 $ 1.26(8)
Fully diluted........................................ 1.30 0.51 1.28 317.20 1.26(8)
Average common shares:
Primary.............................................. 23,647,778 1,976,682 24,754,720 5,000 26,416,692
Fully diluted........................................ 23,647,778 1,994,926 24,764,937 5,000 26,426,909
</TABLE>
See Notes to Pro Forma Income Statement.
13
<PAGE>
<PAGE>
CENTURA BANKS, INC.
NOTES TO PRO FORMA INCOME STATEMENT
For the six months ended June 30, 1996
(1) In the opinion of management of the respective companies included above, all
adjustments considered necessary for a fair presentation of the financial
position and results for the period presented have been included.
Adjustments, if any, are normal and recurring in nature.
(2) Centura's historical information has been restated for the First Commercial
Holding Corp. merger that was consummated February 27, 1996 and was
accounted for as a pooling-of-interests.
(3) Pro forma adjustments have been computed assuming that the transactions
presented were completed January 1, 1995.
(4) First Community Bank, Gastonia, NC ("FCB"):
a) The pro forma adjustments assume that, simultaneously with the
acquisiton, Centura repurchased or completed its repurchase of 100% of
the shares to be issued in connection with the FCB acquisition and that
there was no price differential between the stock issued and the stock
repurchase.
b) Amortization of goodwill is over a 15-year period (the period
estimated to be benefited) using straight-line method
($1,057,000/year). Such amortization is not deductible for tax
purposes; thus, no adjustment is made for tax benefit of this expense.
c) Pro forma share and per share data are computed assuming the
issuance of 740,944 additional average shares of Centura Stock in
consummating the FCB acquisition (given exchange ratio of .96),
adjusted for shares remaining to be repurchased simultaneously upon
consummation (estimated to be 350,366 shares). Refer to
Note 3 of notes to unaudited pro forma combined condensed
balance sheet.
(5) FirstSouth Bank, Burlington, NC:
The merger of FirstSouth is presented under the pooling-of-interests method
of accounting, with the issuance of Centura Stock for FirstSouth Stock at an
exchange ratio of .56 share of Centura Stock for each share of FirstSouth
Stock.
(6) CLG, Inc., Raleigh, NC ("CLG"):
The merger of CLG is presented under the pooling-of-interests method of
accounting, with the issuance of Centura Stock for CLG common stock at an
exchange ratio of 332.3944 shares of Centura Stock for each share of CLG
common stock. Since CLG's fiscal year ends January 31, the above includes
the six-month period ending July 31, 1996. Adjustments to eliminate and
reclassify intercompany business are not material.
(7) 49% Interest in First Greensboro Home Equity, Greensboro, NC ("EqInt"):
The 49% share of EqInt's net loss is included under noninterest income.
Without a one-time prepayment penalty incurred by EqInt in 1996, Centura's
49% share of net income, tax effected, would have been $290,000. The excess
of Centura's cost of this investment over 49% of Centura's equity in the net
assets of EqInt will be amortized on a straight line basis over 15 years
($1,913,000 per year), which is not considered deductible for tax purposes.
(8) The pro forma fully combined equivalent primary and fully diluted earnings
per share is $0.71 and $0.71, respectively, which represents the pro forma
fully combined information multiplied by the Exchange Rate of .56 of a
share of Centura Stock for each share of FirstSouth Bank.
14
<PAGE>
<PAGE>
CENTURA BANKS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PURCHASES
HISTORICAL EQINT
CENTURA HISTORICAL FCB ADJUSTMENTS ADJUSTMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (1,2) FCB (1) (3,4) (1,3,7)
<S> <C> <C> <C> <C>
Interest income................................................. $394,831 $9,178 $ -- $ --
Interest expense................................................ 181,593 4,059 -- --
Net interest income........................................... 213,238 5,119 -- --
Provision for loan losses (PFLL)................................ 7,709 577 -- --
Net interest income after PFLL................................ 205,529 4,542 -- --
Noninterest income.............................................. 60,703 762 -- 716
Noninterest expense............................................. 173,184 3,418 1,057 1,913
Income before income taxes...................................... 93,048 1,886 (1,057) (1,197)
Income taxes.................................................... 33,334 542 -- 86
Net income.................................................... $ 59,714 $1,344 $(1,057) $(1,283)
Earnings per common share:
Primary....................................................... $ 2.54 $ 1.73
Fully diluted................................................. 2.54 1.70
Average common shares:
Primary....................................................... 23,548,920 774,741
Fully diluted................................................. 23,595,644 788,590
<CAPTION>
PRO FORMA POOLING PRO FORMA POOLING
CENTURA/ HISTORICAL CENTURA/ HISTORICAL
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) FCB/EQINT FIRSTSOUTH (1,5) FCB/EQINT/FIRSTSOUTH CLG (1,6)
<S> <C> <C> <C> <C>
Interest income................................................. $ 404,009 $ 12,419 $416,428 $11,276
Interest expense................................................ 185,652 5,628 191,280 6,272
Net interest income........................................... 218,357 6,791 225,148 5,004
Provision for loan losses (PFLL)................................ 8,286 195 8,481 --
Net interest income after PFLL................................ 210,071 6,596 216,667 5,004
Noninterest income.............................................. 62,181 1,125 63,306 19,752
Noninterest expense............................................. 179,572 4,906 184,478 19,545
Income before income taxes...................................... 92,680 2,815 95,495 5,211
Income taxes.................................................... 33,962 1,002 34,964 2,085
Net income.................................................... $ 58,718 $ 1,813 $ 60,531 $ 3,126
Earnings per common share:
Primary....................................................... $ 2.49 $ 0.95 $ 2.46 $625.20
Fully diluted................................................. 2.49 0.93 2.45 625.20
Average common shares:
Primary....................................................... 23,548,920 1,912,278 24,619,796 5,000
Fully diluted................................................. 23,595,644 1,940,321 24,682,224 5,000
<CAPTION>
PRO FORMA
FULLY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) COMBINED
<S> <C>
Interest income................................................. $ 427,704
Interest expense................................................ 197,552
Net interest income........................................... 230,152
Provision for loan losses (PFLL)................................ 8,481
Net interest income after PFLL................................ 221,671
Noninterest income.............................................. 83,058
Noninterest expense............................................. 204,023
Income before income taxes...................................... 100,706
Income taxes.................................................... 37,049
Net income.................................................... $ 63,657
Earnings per common share:
Primary....................................................... $ 2.42(8)
Fully diluted................................................. 2.42(8)
Average common shares:
Primary....................................................... 26,281,768
Fully diluted................................................. 26,344,196
</TABLE>
See Notes to Pro Forma Income Statement.
15
<PAGE>
<PAGE>
CENTURA BANKS, INC.
NOTES TO PRO FORMA INCOME STATEMENT
For the Year Ended December 31, 1995
(1) In the opinion of management of the respective companies included above, all
adjustments considered necessary for a fair presentation of the financial
position and results for the period presented have been included.
Adjustments, if any, are normal and recurring in nature.
(2) Centura's historical 1995 information has been restated for the First
Commercial Holding Corp. merger that was consummated February 27, 1996 and
was accounted for as a pooling-of-interests.
(3) Pro forma adjustments have been computed assuming that the transactions
presented were completed January 1, 1995.
(4) First Community Bank, Gastonia, NC ("FCB"):
a) The pro forma adjustments assume that, simultaneously with the
acquisiton, Centura repurchased or completed its repurchase of 100% of the
shares to be issued in connection with the FCB acquisition and that there
was no price differential between the stock issued and the stock
repurchased.
b) Amortization of goodwill of $15,855,000 is over a 15-year period (the
period estimated to be benefited) using straight-line method
($1,057,000/year). Such amortization is not deductible for tax purposes;
thus, no adjustment is made for tax benefit of this expense.
c) Pro forma share and per share data are computed assuming the issuance of
the shares noted above at an exchange ratio of .96, less an equivalent
number of shares repurchased simultaneously upon consummation.
(5) FirstSouth Bank, Burlington, NC:
The merger of FirstSouth is presented under the pooling-of-interests method
of accounting, with the issuance of Centura Stock for FirstSouth Stock at an
exchange ratio of .56 share of Centura Stock for each share of FirstSouth
Stock. Historical FirstSouth per share amounts and average common shares
have been restated to reflect the 5% stock dividend declared by FirstSouth
in first quarter 1996.
(6) CLG, Inc., Raleigh, NC ("CLG"):
The merger of CLG is presented under the pooling-of-interests method of
accounting, with the issuance of Centura Stock for CLG common stock at an
exchange ratio of 332.3944 shares of Centura Stock for each share of CLG
common stock. Since CLG is on a fiscal year, the above includes the
twelve-month period ending January 31, 1996. Adjustments to eliminate and
reclassify intercompany business are not material.
(7) 49% Interest in First Greensboro Home Equity, Greensboro, NC ("EqInt"):
The 49% share of EqInt's net income is included under noninterest income.
The excess of Centura's cost of this investment over 49% of Centura's equity
in the net assets of EqInt will be amortized on a straight line basis over
15 years ($1,913,000 per year), which is not considered deductible for tax
purposes.
(8) The pro forma fully combined equivalent primary and fully diluted
earnings per share is $1.36 and $1.36, respectively, which represents
the pro forma fully combined information multiplied by the Exchange
Rate of .56 of a share of Centura Stock for each share of FirstSouth
Stock.
16
<PAGE>
<PAGE>
CENTURA BANKS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
HISTORICAL
CENTURA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (1,2)
<S> <C>
Interest income........................................................................................... $ 305,123
Interest expense.......................................................................................... 114,578
Net interest income..................................................................................... 190,545
Provision for loan losses (PFLL).......................................................................... 7,005
Net interest income after PFLL.......................................................................... 183,540
Noninterest income........................................................................................ 50,115
Noninterest expense....................................................................................... 152,355
Income before income taxes................................................................................ 81,300
Income taxes.............................................................................................. 29,161
Net income.............................................................................................. $ 52,139
Earnings per common share:
Primary................................................................................................. $ 2.31
Fully diluted........................................................................................... 2.30
Average common shares:
Primary................................................................................................. 22,614,210
Fully diluted........................................................................................... 22,678,421
<CAPTION>
HISTORICAL
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) FIRSTSOUTH (1,3)
<S> <C>
Interest income........................................................................................... $9,316
Interest expense.......................................................................................... 3,533
Net interest income..................................................................................... 5,783
Provision for loan losses (PFLL).......................................................................... 215
Net interest income after PFLL.......................................................................... 5,568
Noninterest income........................................................................................ 1,059
Noninterest expense....................................................................................... 4,412
Income before income taxes................................................................................ 2,215
Income taxes.............................................................................................. 804
Net income.............................................................................................. $1,411
Earnings per common share:
Primary................................................................................................. $ 0.76
Fully diluted........................................................................................... 0.76
Average common shares:
Primary................................................................................................. 1,852,092
Fully diluted........................................................................................... 1,861,036
<CAPTION>
PRO
FORMA
CENTURA/ HISTORICAL
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) FSB CLG (1,4)
<S> <C> <C>
Interest income........................................................................................... $314,439 $ 10,511
Interest expense.......................................................................................... 118,111 5,546
Net interest income..................................................................................... 196,328 4,965
Provision for loan losses (PFLL).......................................................................... 7,220 --
Net interest income after PFLL.......................................................................... 189,108 4,965
Noninterest income........................................................................................ 51,174 12,584
Noninterest expense....................................................................................... 156,767 13,440
Income before income taxes................................................................................ 83,515 4,109
Income taxes.............................................................................................. 29,965 1,884
Net income.............................................................................................. $ 53,550 $ 2,225
Earnings per common share:
Primary................................................................................................. $ 2.26 $ 445.00
Fully diluted........................................................................................... 2.26 445.00
Average common shares:
Primary................................................................................................. 23,651,382 5,000
Fully diluted........................................................................................... 23,720,601 5,000
<CAPTION>
PRO FORMA
FULLY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) COMBINED
<S> <C>
Interest income........................................................................................... $ 324,950
Interest expense.......................................................................................... 123,657
Net interest income..................................................................................... 201,293
Provision for loan losses (PFLL).......................................................................... 7,220
Net interest income after PFLL.......................................................................... 194,073
Noninterest income........................................................................................ 63,758
Noninterest expense....................................................................................... 170,207
Income before income taxes................................................................................ 87,624
Income taxes.............................................................................................. 31,849
Net income.............................................................................................. $ 55,775
Earnings per common share:
Primary................................................................................................. $ 2.20(5)
Fully diluted........................................................................................... 2.20(5)
Average common shares:
Primary................................................................................................. 25,313,354
Fully diluted........................................................................................... 25,382,573
</TABLE>
(1) In the opinion of management of the respective companies included above, all
adjustments considered necessary for a fair presentation of the financial
position and results for the period presented have been included.
Adjustments, if any, are normal and recurring in nature.
(2) Centura's historical 1994 information has been restated for the First
Commercial Holding Corp. merger that was consummated February 27, 1996 and
was accounted for as a pooling-of-interests.
(3) FirstSouth Bank, Burlington, NC:
The merger of FirstSouth is presented under the pooling-of-interests method
of accounting, with the issuance of Centura Stock for FirstSouth Stock at an
exchange ratio of .56 share of Centura Stock for each share of FirstSouth
Stock. Historical FirstSouth per share amounts and average common shares
have been restated to reflect the 5% stock dividend declared by FirstSouth
in first quarter 1996.
(4) CLG, Inc., Raleigh, NC ("CLG"):
The merger of CLG is presented under the pooling-of-interests method of
accounting, with the issuance of Centura Stock for CLG common stock at an
exchange ratio of 332.3944 shares of Centura Stock for each share of CLG
common stock. Since CLG is on a fiscal year, the above includes the
twelve-month period ending January 31, 1995. Adjustments to eliminate and
reclassify intercompany business are not material.
(5) The pro forma fully combined equivalent primary and fully diluted
earnings per share is $1.23 and $1.23, respectively, which represents the
pro forma fully combined information multiplied by the Exchange Rate of
.56 of a share of Centura Stock for each share of FirstSouth Stock.
17
<PAGE>
<PAGE>
CENTURA BANKS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
HISTORICAL
CENTURA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (1,2)
<S> <C>
Interest income........................................................................................... $ 264,188
Interest expense.......................................................................................... 103,533
Net interest income..................................................................................... 160,655
Provision for loan losses (PFLL).......................................................................... 8,841
Net interest income after PFLL.......................................................................... 151,814
Noninterest income........................................................................................ 52,459
Noninterest expense....................................................................................... 138,938
Income before income taxes................................................................................ 65,335
Income taxes.............................................................................................. 22,166
Net income.............................................................................................. $ 43,169
Earnings per common share:
Primary................................................................................................. $ 2.09
Fully diluted........................................................................................... 2.05
Average common shares:
Primary................................................................................................. 20,696,145
Fully diluted........................................................................................... 21,203,238
<CAPTION>
HISTORICAL
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) FIRSTSOUTH (1,3)
<S> <C>
Interest income........................................................................................... $7,819
Interest expense.......................................................................................... 3,062
Net interest income..................................................................................... 4,757
Provision for loan losses (PFLL).......................................................................... 310
Net interest income after PFLL.......................................................................... 4,447
Noninterest income........................................................................................ 1,272
Noninterest expense....................................................................................... 3,919
Income before income taxes................................................................................ 1,800
Income taxes.............................................................................................. 659
Net income.............................................................................................. $1,141
Earnings per common share:
Primary................................................................................................. $ 0.64
Fully diluted........................................................................................... 0.64
Average common shares:
Primary................................................................................................. 1,769,616
Fully diluted........................................................................................... 1,769,616
<CAPTION>
PRO
FORMA
CENTURA/ HISTORICAL
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) FIRSTSOUTH CLG (1,4)
<S> <C> <C>
Interest income........................................................................................... $272,007 $ 10,812
Interest expense.......................................................................................... 106,595 5,711
Net interest income..................................................................................... 165,412 5,101
Provision for loan losses (PFLL).......................................................................... 9,151 --
Net interest income after PFLL.......................................................................... 156,261 5,101
Noninterest income........................................................................................ 53,731 12,911
Noninterest expense....................................................................................... 142,857 14,180
Income before income taxes................................................................................ 67,135 3,832
Income taxes.............................................................................................. 22,825 3,866
Net income.............................................................................................. $ 44,310 $ (34)
Earnings per common share:
Primary................................................................................................. $ 2.04 $ (6.80)
Fully diluted........................................................................................... 2.00 (6.80)
Average common shares:
Primary................................................................................................. 21,687,130 5,000
Fully diluted........................................................................................... 22,194,223 5,000
<CAPTION>
PRO FORMA
FULLY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) COMBINED
<S> <C>
Interest income........................................................................................... $ 282,819
Interest expense.......................................................................................... 112,306
Net interest income..................................................................................... 170,513
Provision for loan losses (PFLL).......................................................................... 9,151
Net interest income after PFLL.......................................................................... 161,362
Noninterest income........................................................................................ 66,642
Noninterest expense....................................................................................... 157,037
Income before income taxes................................................................................ 70,967
Income taxes.............................................................................................. 26,691
Net income.............................................................................................. $ 44,276
Earnings per common share:
Primary................................................................................................. $ 1.90(5)
Fully diluted........................................................................................... 1.86(5)
Average common shares:
Primary................................................................................................. 23,349,102
Fully diluted........................................................................................... 23,856,195
</TABLE>
(1) In the opinion of management of the respective companies included above, all
adjustments considered necessary for a fair presentation of the financial
position and results for the period presented have been included.
Adjustments, if any, are normal and recurring in nature.
(2) Centura's historical 1993 information has been restated for the First
Commercial Holding Corp. merger that was consummated February 27, 1996 and
was accounted for as a pooling-of-interests.
(3) FirstSouth Bank, Burlington, NC:
The merger of FirstSouth is presented under the pooling-of-interests method
of accounting, with the issuance of Centura Stock for FirstSouth Stock at an
exchange ratio of .56 share of Centura Stock for each share of FirstSouth
Stock. Historical FirstSouth per share amounts and average common shares
have been restated to reflect the 5% stock dividend declared by FirstSouth
in first quarter 1996.
(4) CLG, Inc., Raleigh, NC ("CLG"):
The merger of CLG is presented under the pooling-of-interests method of
accounting, with the issuance of Centura Stock for CLG common stock at an
exchange ratio of 332.3944 shares of Centura Stock for each share of CLG
common stock. Since CLG is on a fiscal year, the above includes the
twelve-month period ending January 31, 1994. Adjustments to eliminate and
reclassify intercompany business are not material.
(5) The pro forma fully combined equivalent primary and fully diluted earnings
per share is $1.06 and $1.04, respectively, which repesents the pro forma
fully combined information multiplied by the Exchange Rate of .56 of a
share of Centura Stock for each share of FirstSouth Stock.
18
<PAGE>
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
Centura Stock is traded on the NYSE under the symbol "CBC." There is not an
active trading market for the shares of FirstSouth Stock and trades involving
FirstSouth Stock have been infrequent and made primarily on the basis of private
negotiations and transactions through market makers. Stock quotes are listed in
the BURLINGTON TIMES-NEWS and the GREENSBORO NEWS & RECORD. Scott &
Stringfellow, Inc., A.G. Edwards & Sons, Inc. and J.C. Bradford & Co. Company,
registered broker-dealers, have been listed as market makers for First South
Stock. The following table sets forth, for the indicated periods, (i) the high
and low closing prices for Centura Stock as reported on the NYSE-Composite
Transactions List, (ii) the high and low bid quotations of FirstSouth Stock, as
reported by the BURLINGTON TIMES-NEWS, and (iii) the cash dividends declared per
share of Centura Stock and FirstSouth Stock for the periods indicated.
<TABLE>
<CAPTION>
CENTURA
PRICE RANGE CASH DIVIDENDS PAID
HIGH LOW PER SHARE
<S> <C> <C> <C>
1994
First Quarter........................................................................ $20.500 $18.625 $0.18
Second Quarter....................................................................... 21.750 18.000 0.18
Third Quarter........................................................................ 25.000 21.750 0.19
Fourth Quarter....................................................................... 24.375 21.000 0.19
1995
First Quarter........................................................................ $25.375 $22.500 $0.19
Second Quarter....................................................................... 27.875 25.000 0.20
Third Quarter........................................................................ 33.375 27.250 0.23
Fourth Quarter....................................................................... 35.500 33.125 0.23
1996
First Quarter........................................................................ $36.750 $33.875 $0.25
Second Quarter....................................................................... $37.500 $36.000 $0.25
Third Quarter (through August 30, 1996).............................................. $38.250 $35.125 $0.25(1)
<CAPTION>
FIRSTSOUTH
CASH DIVIDENDS
PRICE RANGE PAID
HIGH LOW PER SHARE
<S> <C> <C> <C>
1994
First Quarter........................................................................ $ 10.75 $ 10.00 $0.05
Second Quarter....................................................................... 10.75 10.75 0.05
Third Quarter........................................................................ 11.50 10.75 0.05
Fourth Quarter....................................................................... 12.00 11.50 0.05
1995
First Quarter........................................................................ $ 12.00 12.00 $0.06
Second Quarter....................................................................... 12.50 12.50 0.06
Third Quarter........................................................................ 12.50 12.50 0.06
Fourth Quarter....................................................................... 16.00 12.50 0.06
1996
First Quarter........................................................................ $ 14.875 $ 14.375 $0.07
Second Quarter....................................................................... 17.50 14.50 $0.07
Third Quarter (through August 30, 1996).............................................. $ 17.50 $ 17.50 $0.07
</TABLE>
(1) Centura has declared a cash dividend of $0.25 per share for the third
quarter of 1996, payable September 13, 1996 to shareholders of record on
August 30, 1996.
On August 30, 1996, the closing price of Centura Stock as reported on the
NYSE-Composite Transactions List and the average of the high and low bid
quotations of FirstSouth Stock (as reported by the BURLINGTON TIMES-NEWS) were
$38.25 and $17.50, respectively. On April 17, 1996, the last business day prior
to public announcement of the proposed Merger, the closing price of Centura
Stock as reported on the NYSE-Composite Transactions List and the closing bid
price of FirstSouth Stock were $36.00 and $14.50, respectively.
The holders of Centura Stock are entitled to receive dividends when and if
declared by the Board of Directors out of funds legally available therefor.
Although Centura currently intends to continue to pay quarterly cash dividends
on the Centura Stock, there can be no assurance that Centura's dividend policy
will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors. The Agreement prohibits FirstSouth from
paying dividends on FirstSouth Stock during the pendency of the Merger other
than pursuant to its prior practice with regard to dividends.
Centura is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from Centura
Bank. Centura Bank and First South are subject to certain legal restrictions on
the amount of dividends they are permitted to pay. See "CERTAIN REGULATORY
CONSIDERATIONS -- Payment of Dividends."
19
<PAGE>
<PAGE>
SPECIAL MEETING OF FIRSTSOUTH STOCKHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of FirstSouth Stock
in connection with the solicitation by the FirstSouth Board of Directors of
proxies for use at the Special Meeting at which FirstSouth stockholders will be
asked to vote upon a proposal to approve the Agreement. The Special Meeting will
be held at the Best Western Motel, 770 Huffman Mill Road, Burlington, North
Carolina, at 11:00 A.M., local time, on October 8, 1996. See "DESCRIPTION OF THE
MERGER."
RECORD DATES, VOTING RIGHTS, REQUIRED VOTES, AND REVOCABILITY OF PROXIES
The close of business on August 30, 1996, has been fixed as the FirstSouth
Record Date for determining holders of outstanding shares of FirstSouth Stock
entitled to notice of and to vote at the Special Meeting. Only holders of
FirstSouth Stock of record on the books of FirstSouth at the close of business
on the FirstSouth Record Date are entitled to notice of and to vote at the
Special Meeting. As of the FirstSouth Record Date, there were 1,835,841 shares
of FirstSouth Stock issued and outstanding and held by approximately 1,250
holders of record.
Holders of FirstSouth Stock are entitled to one vote on each matter
considered and voted upon at the Special Meeting for each share of FirstSouth
Stock held of record as of the FirstSouth Record Date. To hold a vote on any
proposal, a quorum must be assembled, which is a majority of the shares of
FirstSouth Stock issued and outstanding and entitled to vote, present in person
or represented by proxy. In determining whether a quorum exists at the Special
Meeting for purposes of all matters to be voted on, all votes "for" or
"against," as well as all abstentions, with respect to the proposal receiving
the most such votes, will be counted. The vote required for the approval of the
Agreement is two-thirds of the shares of FirstSouth Stock entitled to be cast at
the Special Meeting by holders of the issued and outstanding shares of
FirstSouth Stock. Consequently, with respect to the proposal to approve the
Agreement, abstentions and broker non-votes will be counted as part of the base
number of votes to be used in determining if the proposal has received the
requisite number of base votes for approval. Thus, an abstention and a broker
non-vote will have the same effect as a vote against the proposal.
Shares of FirstSouth Stock represented by properly executed proxies, if
such proxies are received in time and not revoked, will be voted in accordance
with the instructions indicated on the proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND, IN THE
DISCRETION OF THE PROXY HOLDER, AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY
BEFORE THE SPECIAL MEETING. IF NECESSARY, THE PROXY HOLDER MAY VOTE IN FAVOR OF
A PROPOSAL TO ADJOURN THE SPECIAL MEETING IN ORDER TO PERMIT FURTHER
SOLICITATION OF PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE
THE FOREGOING PROPOSAL AT THE TIME OF THE SPECIAL MEETING.
FAILURE BOTH TO RETURN THE PROXY CARD AND TO VOTE IN PERSON AT THE SPECIAL
MEETING WILL HAVE THE EFFECT OF A VOTE CAST AGAINST APPROVAL OF THE AGREEMENT.
A FirstSouth stockholder who has given a proxy may revoke it at any time
prior to its exercise at the Special Meeting by (i) giving written notice of
revocation to the Secretary of FirstSouth, (ii) properly submitting to
FirstSouth a duly executed proxy bearing a later date or (iii) attending the
Special Meeting and voting in person. All written notices of revocation and
other communications with respect to revocation of proxies should be addressed
as follows: FirstSouth Bank, 2946 South Church Street, Burlington, North
Carolina 27216; Attention: Sandra J. Frank , Secretary.
As of June 30, 1996, the directors and executive officers of FirstSouth and
their affiliates were entitled to vote 610,235 shares, excluding options, or
approximately 33.2% of the issued and outstanding shares of FirstSouth Stock.
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
FirstSouth by mail, in person, or by telephone or telegraph. Such persons will
receive no additional compensation for such services. FirstSouth may make
arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of FirstSouth Stock held of record by such persons. Any such
brokers, custodians, nominees, and fiduciaries will be reimbursed for the
reasonable out-of-pocket expenses incurred by them for such services. All
expenses associated with the solicitation of proxies, other expenses associated
with the Special Meeting, and expenses related to the printing and mailing of
this Proxy Statement, will be shared by Centura and FirstSouth as provided in
the Agreement. See "DESCRIPTION OF THE TRANSACTION -- Expenses and Fees."
20
<PAGE>
RECOMMENDATION
The Board of Directors of FirstSouth has unanimously approved the Agreement
and the Merger contemplated thereby, believes that the proposal to approve the
Agreement is in the best interests of FirstSouth and its stockholders, and
unanimously recommends that the FirstSouth stockholders vote FOR approval of the
proposal to approve the Agreement.
DESCRIPTION OF THE MERGER
THE FOLLOWING INFORMATION DESCRIBES CERTAIN ASPECTS OF THE MERGER. THIS
DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE APPENDICES HERETO, INCLUDING THE AGREEMENT, WHICH IS ATTACHED
AS APPENDIX A TO THIS PROXY STATEMENT AND INCORPORATED HEREIN BY REFERENCE. ALL
STOCKHOLDERS ARE URGED TO READ THE APPENDICES IN THEIR ENTIRETY.
GENERAL
The Agreement provides for the acquisition of FirstSouth by Centura
pursuant to the merger of FirstSouth with and into Centura Bank. At the
Effective Time, each share of FirstSouth Stock then issued and outstanding
(excluding shares held by FirstSouth, Centura, or Centura's subsidiaries, in
each case other than shares held in a fiduciary capacity or in satisfaction of
debts previously contracted, and excluding shares held by stockholders who
perfect their statutory rights of appraisal) will be converted into and
exchanged for 0.56 of a share of Centura Stock, subject to possible adjustment
as described below (the "Exchange Rate").
No fractional shares of Centura Stock will be issued. Rather, cash (without
interest) will be paid in lieu of any fractional share interest to which any
FirstSouth stockholder would be entitled upon consummation of the Merger, in an
amount equal to such fractional part of a share of Centura Stock multiplied by
the market value of one share of Centura Stock at the Effective Time. The market
value of one share of Centura Stock at the Effective Time shall be the Average
Closing Price (as defined below).
Centura's Board has approved the repurchase in the open market of shares of
Centura Stock equal in number to up to 9.9% of the shares of Centura Stock to be
issued in the Merger and up to all of the shares (approximately 776,000 shares)
to be issued in connection with the merger with First Community Bank. See
"INFORMATION ABOUT CENTURA -- Recent Acquisitions." Under rules promulgated by
the SEC under the Exchange Act, Centura will not be permitted to purchase shares
of Centura Stock in the open market during the period commencing two business
days prior to the mailing of this Proxy Statement and ending on the date of the
Special Meeting.
As of the FirstSouth Record Date, FirstSouth had 1,835,841 shares of
FirstSouth Stock issued and outstanding and 291,235 additional shares of
FirstSouth Stock subject to FirstSouth Options. Taking into the account the
Exchange Ratio of 0.56 of a share of Centura Stock for each share of FirstSouth
Stock, it is anticipated that upon consummation of the Merger, Centura would
issue approximately 1,028,070 shares of Centura Stock, excluding shares subject
to assumed options. Accordingly, Centura would then have issued and outstanding
approximately 23,527,366 shares of Centura Stock based on the number of shares
of Centura Stock issued and outstanding on June 30, 1996, and excluding the
effect of any shares repurchased by Centura since such time.
POSSIBLE ADJUSTMENT OF EXCHANGE RATE
At the time of negotiation of the Agreement, it was the agreement of the
parties that in connection with the Merger FirstSouth stockholders would receive
Centura Stock with an equivalent per share value (determined by multiplying the
price of Centura Stock by the Exchange Rate) of $20.30 per share. Because the
market price of Centura Stock is subject to change between the date of execution
of the Agreement and the consummation of the Merger, the parties included in the
Agreement a provision establishing a "floor" and a "ceiling" for the per share
equivalent value of Centura Stock that First South stockholders are to receive.
The Agreement provides that the Exchange Rate shall be fixed on the day
immediately preceding the Special Meeting (the "Determination Date") and shall
be adjusted if necessary so that when the Average Closing Price (defined below)
is multiplied by the Exchange Rate, the per share equivalent value of Centura
Stock to be received by FirstSouth stockholders pursuant to such computation
shall not be less than $19.32 per share nor greater than $21.30. The "Average
Closing Price" is defined in the Agreement as the average of the daily closing
sale prices of Centura Stock quoted on the NYSE -- -Composite Transactions List
(as reported by THE WALL STREET JOURNAL or, if not reported thereby, another
authoritative source as selected by Centura) for the ten consecutive full
trading days on which such shares are traded on the NYSE ending at the close of
trading on the Determination Date.
21
<PAGE>
If the Average Closing Price is not greater than $38.04 per share or less
than $34.50 per share, there will be no adjustment of the Exchange Rate, which
will remain 0.56. If the Average Closing Price is greater than $38.04, the
Exchange Rate will be reduced so that when multiplied by the Average Closing
Price, it results in an equivalent per share value of $21.30. For example, if
the Average Closing Price were $40.00, the Exchange Rate would be adjusted to
0.5325 to confer the necessary value. If, on the other hand, the Average Closing
Price is less than $34.50, the Exchange Rate will be increased so that when
multiplied by the Average Closing Price, it results in an equivalent per share
value of $19.32. For example, if the Average Closing Price were $32.00, the
Exchange Rate would be adjusted to 0.604 to confer the necessary value.
The Average Closing Price was $37.80 on August 30, 1996, and therefore, as
the per share dollar value would have been $21.17, no adjustment to the Exchange
Rate would be required if such date had been the Determination Date.
FirstSouth stockholders should be aware that the actual market value of a
share of Centura Stock at the Effective Time and at the time certificates for
those shares are delivered following surrender and exchange of certificates for
shares of FirstSouth Stock may be more or less than the Average Closing Price.
FirstSouth stockholders are urged to obtain information on the trading value of
Centura Stock that is more recent than that provided in this Proxy Statement.
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
EFFECT OF THE MERGER ON STOCK OPTIONS
The Agreement contemplates that at the Effective Time, each FirstSouth
Option granted by FirstSouth under FirstSouth's 1988 Stock Option Plan for
Directors and FirstSouth's Stock Option Plan for Key Employees (collectively,
the "FirstSouth Stock Plans"), which is outstanding at the Effective Time,
whether or not exercisable, will be converted into and become an option with
respect to Centura Stock, and Centura will assume each FirstSouth Option, in
accordance with the terms of the FirstSouth Stock Plan and stock option
agreement by which it is evidenced, except that from and after the Effective
Time (i) Centura and its Compensation Committee will be substituted for
FirstSouth and the Committee of FirstSouth's Board of Directors (including, if
applicable, the entire Board of Directors of FirstSouth) administering such
FirstSouth Stock Plan, (ii) each FirstSouth Option assumed by Centura may be
exercised solely for shares of Centura Stock, (iii) the number of shares of
Centura Stock subject to such FirstSouth Option will be equal to the number of
shares of FirstSouth Stock subject to such FirstSouth Option immediately prior
to the Effective Time multiplied by the Exchange Rate, (iv) the per share
exercise price under each such FirstSouth Option will be adjusted by dividing
the per share exercise price under each such FirstSouth Option by the Exchange
Rate and rounding up to the nearest cent, and (v) holders of FirstSouth Options
under the FirstSouth Bank 1988 Stock Option Plan for Directors shall be able to
make like kind payments for shares of Centura Stock already owned by the option
holder. Notwithstanding the provisions of clause (iii) of the preceding
sentence, Centura will not be obligated to issue any fraction of a share of
Centura Stock upon exercise of FirstSouth Options and any fraction of a share of
Centura Stock that otherwise would be subject to a converted FirstSouth Option
will represent the right to receive a cash payment equal to the product of such
fraction and the difference between the market value of one share of Centura
Stock and the per share exercise price of such Option. The market value of one
share of Centura Stock will be the closing price of Centura Stock on the
NYSE-Composite Transaction List (as reported by THE WALL STREET JOURNAL or, if
not reported thereby, any other authoritative source selected by Centura) on the
last trading day preceding the date of exercise. In addition, notwithstanding
any other term in the Agreement, each FirstSouth Option which is an "incentive
stock option" will be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h) of the
Code.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND AND FIRSTSOUTH'S REASONS FOR THE MERGER. Since its organization
in 1988, FirstSouth has operated as a community-oriented "home town" commercial
bank serving Burlington, North Carolina. The community-oriented banking
philosophy of FirstSouth generally has allowed it to compete effectively and
profitably with the other banking institutions in its local market. During the
last several years, however, competition has dramatically increased with other
types of financial institutions offering services traditionally offered only by
banks. This increased competition has created an increase in public demand for a
broader range of consumer services from community banking institutions.
Providing such services and products to customers requires significant amounts
of technology, in terms of equipment and software. Additionally, since 1991, the
federal banking agencies have imposed many additional regulations on banks. The
increased regulatory oversight has burdened FirstSouth due to its small size
relative to many of its competitors.
The increase in competition has been accelerated in the last few years
through the consolidation in the banking industry in North Carolina whereby many
smaller financial institutions have been acquired by larger state-wide or
regional banks.
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Given the rapid increase in technology and the greater size of many of
FirstSouth's competitors, FirstSouth would have to expend significant amounts of
capital to invest in the equipment and software necessary to remain competitive.
FirstSouth recognized that remaining an independent institution may not
best serve the long-term interests of FirstSouth, its shareholders, customers
and employees. In recent years, throughout North Carolina, many community
financial institutions had been acquired by state-wide banks. Additionally, the
increased competition to provide cost-effective services and products is a
challenge to FirstSouth which has fewer resources than many of its competitors
in its market area. Further, FirstSouth Stock is lightly traded, and, therefore,
FirstSouth's stockholders have limited ability to sell their FirstSouth Stock.
Given FirstSouth's attractive franchise in Burlington, various bank holding
companies in the recent past had indicated casual interest in acquiring
FirstSouth to expand their operations into the Burlington market. Consequently,
FirstSouth determined that it would be wise to engage a financial advisor to
advise it on strategic alternatives and what type of value the marketplace would
place upon FirstSouth if FirstSouth chose to be acquired. FirstSouth hired Orr
Management Company, Winston-Salem, North Carolina ("Orr Management") to assess
FirstSouth's strategic alternatives and to inquire of various bank holding
companies what potential value each would ascribe to FirstSouth and whether such
entity was interested in acquiring FirstSouth. Orr Management assessed
FirstSouth's strategic alternatives and, having contacted three bank holding
companies that expressed interest in FirstSouth, met with FirstSouth's Board of
Directors on April 17, 1996. After discussing the strategic alternatives facing
FirstSouth, the Board of Directors of FirstSouth determined that FirstSouth
could not create greater shareholder value from independent operations in the
foreseeable future. After such determination, Orr Management presented the Board
with proposals from three bank holding companies. After assessing each proposal,
the Board of Directors of FirstSouth believed that Centura's proposal was an
attractive offer because it would give shareholders of FirstSouth the
opportunity for growth in a widely-traded stock, improved cash dividend level
and ownership in a company with a good history of earnings and cash dividends.
Further, Centura's commitment to electronic banking was important to the Board
of Directors for the additional services and benefits electronic banking can
offer FirstSouth's customers. Additionally, the Board of Directors considered it
important to recognize the contribution of FirstSouth's employees to the
profitability of FirstSouth as it is to a great extent the employees who are
responsible for the satisfaction and loyalty of FirstSouth's customers, without
which FirstSouth could not have prospered; since Burlington would be a new
market for Centura, the Merger would offer the best opportunity to retain as
many of FirstSouth's existing branches and employees as possible as opposed to
an acquisition by a bank with existing branches and personnel in FirstSouth's
market area which might consolidate overlapping branches and eliminate
duplicative employees. Considering all of the factors discussed above, the Board
of Directors of FirstSouth determined it to be in the best interest of
FirstSouth and its stockholders, customers, employees, and communities to agree
to be acquired by Centura. On April 17, 1996, FirstSouth's Board of Directors
approved a letter of intent with Centura. Subsequently, FirstSouth engaged Smith
Capital to provide FirstSouth with a fairness opinion regarding the Merger. On
May 14, 1996, the Board of Directors of FirstSouth met to consider the Agreement
and the Merger, at which meeting Smith Capital gave the Board of Directors its
oral opinion that the Centura proposal was fair, from a financial viewpoint,
to FirstSouth's shareholders. At a subsequent meeting on May 17, 1996, the Board
of Directors approved the Agreement.
For a discussion of the ownership of FirstSouth Stock by the Board of
Directors and executive officers of FirstSouth, see "INFORMATION ABOUT
FIRSTSOUTH -- Security Ownership of Management."
FIRSTSOUTH'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FIRSTSOUTH
STOCKHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
CENTURA'S REASONS FOR THE MERGER. Although Centura currently is located
throughout North Carolina, it is not located or has a limited presence in
Burlington and the other markets served by FirstSouth. Accordingly, the Merger
is consistent with Centura's goal to leverage upon its existing market presence
and to expand into markets not previously served by it though acquisitions,
which expansion Centura believes will increase shareholder value. In approving
the Agreement and the Merger, the Centura Board considered a number of
additional factors concerning the benefits of the Merger. Without assigning any
relative or specific weights to the factors, the Centura Board of Directors
considered the following additional material factors:
(a) the information presented to the directors by the management of Centura
concerning the business, operations, earnings, asset quality, and financial
condition of FirstSouth, including the composition of the earning assets
portfolio of FirstSouth;
(b) the financial terms of the Merger, including the relationship of the
value of the consideration usable in the Merger to the market value, tangible
book value, and earnings per share of FirstSouth Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of FirstSouth Stock for Centura Stock for federal
income tax purposes;
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(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) the opportunity for reducing the noninterest expense of the operations
of FirstSouth and the ability of the operations of FirstSouth after the
Effective Time to contribute to the earnings of Centura through its existing
products and services and additional services offered by Centura;
(f) the attractiveness of the FirstSouth franchise, the market position of
FirstSouth in each of the markets in which it operates, and the compatibility of
the franchise of FirstSouth with the operations of Centura in the Burlington,
North Carolina area; and
(g) the compatibility of the community bank orientation of the operations
of FirstSouth to that of Centura.
The Boards of Directors of Centura and Centura Bank determined that the
Merger was in the best interest of Centura and its stockholders and of Centura
Bank and approved the material terms subsequently set forth in the Agreement on
April 17, 1996, delegating approval of the terms of the definitive Agreement to
the Executive Committee of each of such Boards. The Agreement in definitive form
was authorized and approved by the Executive Committees of Centura and Centura
Bank on May 15, 1996.
OPINION OF FIRSTSOUTH'S FINANCIAL ADVISOR
GENERAL
FirstSouth has retained Smith Capital to act as its financial advisor in
connection with rendering a fairness opinion with respect to the Merger. Smith
Capital has rendered its opinion that, based upon and subject to the various
considerations set forth therein, as of May 14, 1996 and as of September 4,
1996, the Exchange Rate was fair, from a financial point of view to the
holders of FirstSouth Stock. Smith Capital is a North Carolina-based corporation
primarily engaged in: (1) performing valuations of and valuations related to
closely held and publicly traded companies and (2) providing financial advice
related to mergers, acquisitions and divestitures of closely held and publicly
traded companies.
Smith Capital delivered its oral opinion dated as of May 14, 1996,
and its written opinion dated as of September 4, 1996, in each case to
the Board of FirstSouth, that the Exchange Rate was fair, from a
financial point of view, to the holders of FirstSouth Stock.
The full text of the opinion of Smith Capital, dated as of September 4,
1996 (the "Opinion"), which sets forth assumptions made, matters considered
and limits on the review undertaken by Smith Capital is attached hereto as
Appendix C. FirstSouth stockholders are urged to read the Opinion in its
entirety. The summary set forth in this Proxy Statement of the Opinion of Smith
Capital is qualified in its entirety by reference to the full text of the
Opinion.
In connection with the Opinion, Smith Capital reviewed among other things;
(1) FirstSouth's Annual and Quarterly Reports to Stockholders, Annual Reports on
Form F-2, Annual Proxy Statements to Stockholders and related financial
information for the three fiscal years ended December 31, 1995; (2) Centura's
Annual Reports and Quarterly Reports to Stockholders, Annual Reports on Form
10-K, Annual Proxy Statements to Stockholders and related financial information
for the three fiscal years ended December 31, 1995; (3) FirstSouth's Quarterly
Report to Stockholders and Quarterly Report on Form F-4 for the six months ended
June 30, 1996; (4) Centura's Quarterly Report to Stockholders and Quarterly
Report on Form 10-Q for the six months ended June 30, 1996; (5) certain publicly
available information with respect to historical market prices and trading
activity for FirstSouth Stock and Centura Stock and certain publicly traded
financial institutions which Smith Capital deemed relevant; (6) the Agreement;
(7) the Registration Statement on Form S-4 of Centura, including the Proxy
Statement; (8) other financial information concerning the business and
operations of Centura and FirstSouth, including certain audited financial
information, and certain internal analyses and forecasts for FirstSouth prepared
by the senior management of FirstSouth; and (9) such financial studies,
analyses, inquiries and other matters as Smith Capital deemed necessary.
Smith Capital also conducted discussions with members of senior management
of FirstSouth concerning their business and prospects and reviewed certain
publicly available business and financial information and certain other
information prepared or provided to Smith Capital in connection with the Merger.
Smith Capital relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for
purposes of its opinion. In that regard Smith Capital assumed that the financial
forecasts, provided to it were reasonably prepared on a basis reflecting the
best currently available judgment of FirstSouth. Any estimates contained in
Smith Capital's analyses are not necessarily indicative of future results or
values, nor do they purport to
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be appraisals or reflect prices at which securities could actually be bought or
sold. Smith Capital is not an expert in the evaluation of loan portfolios or the
allowances for loan losses with respect thereto and has assumed without
independent verification, that such allowances for FirstSouth and Centura are
adequate to cover such losses. In addition, Smith Capital has not reviewed
individual credit files nor has it made or obtained an independent appraisal of
the assets and liabilities of FirstSouth or Centura or any of their
subsidiaries.
The Opinion is directed to the Board of FirstSouth and does not constitute
a recommendation to any stockholder of FirstSouth as to how such stockholder
should vote with respect to the Merger. Smith Capital did not address
FirstSouth's underlying business decision to proceed with the Merger and did not
make any recommendation to FirstSouth's Board with respect to approval of the
Merger. In addition the Opinion does not address the relative merits of the
Merger as compared to any alternative business strategies that might exist for
FirstSouth, nor does it address the effect of any other business combination in
which Centura might engage.
Smith Capital evaluated the financial terms of the Merger using standard
valuation methods, including peer group analysis, market comparable acquisition
analysis, discounted future earnings, comparable acquisition analysis, and pro
forma equivalent comparison. The following is a brief summary of the analyses
performed by Smith Capital in connection with the Opinion.
COMPARATIVE ANALYSIS OF FINANCIAL CONDITION -- PEER GROUP ANALYSIS
Smith Capital analyzed certain balance sheet, asset quality and performance
data for FirstSouth and Centura, comparing these statistics to comparable data
for two separate selected groups of publicly traded banks which Smith Capital
deemed relevant. The group comparable to FirstSouth comprised 11 small publicly
traded banks with assets ranging from $96.8 million to $881 million. The
analyses showed, among other things, the following:
FirstSouth's ratio of equity to assets was 9.63% at June 30, 1996 versus
9.53% at December 31, 1995. The corresponding median peer group ratios were
9.54% and 9.96%. At June 30, 1996 FirstSouth's loan to deposit ratio was 82.93%
versus a median peer group ratio of 77.64%. The corresponding ratios at year end
1995 were 76.74% for FirstSouth and 74.39% for the peer group.
FirstSouth's net charge-offs as a percentage of average loans outstanding
ranged from 0.03% to 0.2 % for the years ended December 31, 1991 through 1995.
In the same period the allowance for loan losses to total year end loans ranged
from 1.13% to 1.55%. At June 30, 1996 the allowance for loan losses was
$1,714,243 or 1.30% of total loans. The ratio of net loan charge-offs to average
loans was 0.05%. In the group of comparable banks the median percentage of the
allowance for loan losses to total loans was 1.54% and 1.52% at December 31,
1995 and June 30, 1996, respectively, and the median net charge-off ratios were
0.19% and 0.07%, respectively. The ratio of non-performing assets to total loans
for FirstSouth was 0.06% at December 31, 1995 and 0.08% at June 30, 1996. The
corresponding median percentages for the peer group were 0.54% and 0.65%.
Smith Capital analyzed FirstSouth's loan, deposit and asset growth for the
first six months in 1996 versus the same six months in 1995.Between the six
month periods, FirstSouth's assets grew 17.95%, loans grew 21.8%, deposits grew
18.49%, net income grew 24.64% and net income per share grew 20.93%. The peer
group medians were 12.6%, 14.53%, 13.3%, 27.9% and 27.35%, respectively. For the
period 1991 through 1995, FirstSouth's assets, loans, deposits, net income, net
income per share and dividends per share grew 16.2%, 15.34%, 16.93%, 53.33%,
48.78% and 22.47%, respectively. The median peer group rates were 9.54%, 10.32%,
9.14%,10.79%,10.2% and 15.44%, respectively.
FirstSouth's annualized return on assets was 1.20% and return on equity was
12.28% for the first six months of 1996, and 1.18% and 12.21% in 1995. The
corresponding peer group medians were 1.32% and 13.13% in the first six months
of 1996 and 1.01% and 10.34% in 1995. FirstSouth's fully tax equivalent net
interest margin was 4.74% for the first six months of 1996 compared to 4.74% in
fiscal 1995. The median margins in the comparable bank group were 5.09% for the
first six months of 1996 and 5.14% for 1995. FirstSouth's noninterest expense to
average assets was 3.20% in 1995 compared to the peer group median of 3.62%, and
3.12% compared to 3.37% in the first six months of 1996. Noninterest income for
FirstSouth was 0.73% of average assets versus 0.86% for its peers in 1995 and
0.71% versus 0.96% for the peer group in the first six months of 1996.
The group of publicly traded banks that Smith Capital selected as
comparable to Centura comprised six banks. Smith Capital's comparable analyses
showed, among other things, that Centura's ratio of equity to assets was 7.08%
at June 30, 1996 versus 7.43% at December 31, 1995. The corresponding median
peer group ratios were 8.44% and 8.34%. At June 30,
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1996 Centura's loan to deposit ratio was 89.56% versus a median peer group ratio
of 80.65%. The corresponding ratios at year end 1995 were 86.43% for Centura and
77.92% for the peer group.
Centura's net charge-offs as a percentage of average loans outstanding
ranged from a high of 0.56% to a low of 0.09% in the periods ending December 31,
1991 through 1995. In the same period the allowance for loan losses to total
year end loans ranged from1.57% to 1.42%. At June 30, 1996 the allowance for
loan losses was $56,297,000 or 1.47% of total loans. The ratio of net loan
charge-offs to average loans was 0.08% for the six months ended June 30, 1996.
In the group of comparable banks the median percentage of the allowance for loan
losses to total loans was 1.28% at both December 31, 1995 and June 30, 1996, and
the median net-charge off ratios were 0.21% and 0.22%, respectively. The ratio
of non-performing assets to total loans and foreclosed property for Centura was
0.59% at December 31, 1995 and 0.58% at June 30, 1996. The corresponding median
percentages for the peer group were 0.63% and 0.66%, respectively.
Smith Capital analyzed Centura's loan, deposit and asset growth for the
first six months of 1996 versus the same quarter in 1995. Between six month
periods, Centura's assets grew 10.2%, loans grew 6.5%, deposits grew 5.6%, net
income grew 11.7% and net income per share grew 9.4%. The peer group medians
were 3.95%, 4.75%, 2.9%, 18.0% and 14.45%, respectively. From June 30, 1995 to
June 30, 1996 Centura's dividend per share increased 28.2%, compared to a median
peer group increase of 15.0%. For the period 1991 through 1995, Centura's
assets, loans, deposits, net income, net income per share and dividend per share
grew 15.33%, 15.11%, 11.57%, 52.34%, 43.1%, and 8.87%, respectively. The median
peer group rates were 8.35%, 9.33%, 7.17%, 13.92%, 12.08%, and 11.67%,
respectively.
Centura's annualized return on assets was 1.18% and return on equity was
16.0% for the first six months of 1996 and 1.21% and 15.18%, respectively, for
the year ended December 31, 1995. The corresponding peer group medians were
1.37% and 15.0% in the first six months of 1996 and 1.22% and 13.11% in 1995.
Centura's fully tax equivalent net interest margin was 4.55% for the first six
months of 1996 compared to 4.76% in fiscal 1995. The median margins in the
comparable bank group were 4.69% for the first six months of 1996 and 4.73% for
1995. Centura's noninterest expense to average assets was 3.5% in 1995 compared
to the peer group median of 3.33%, and 3.54% (annualized) compared to 3.35% in
the first six months of 1996. Noninterest income (annualized) for Centura was
1.41% of average assets versus a lower 1.21% for its peers in the first six
months of 1996 and 1.25% versus 1.13% for the peer group in 1995.
MARKET COMPARABLE ANALYSIS.
Smith Capital compared the market valuation of FirstSouth Stock and Centura
Stock with the comparable group of publicly traded banks used in the analyses of
financial condition.
Smith Capital calculated price to earnings per share ("LTM earnings") and
earnings per share adjusted for non recurring items ("adjusted LTM earnings")
for the 12 month period ending June 30, 1996, price to book value, price to
tangible book value, dividend yield and price to assets as of June 30, 1996, for
FirstSouth's comparable group, using the market prices of the group banks at
September 3, 1996. If there was no trade in a particular stock on September 3,
1996, Smith Capital used the closing bid price. The median price multiples were
15.83x, 14.43x, 1.69x, 1.84x, 2.50% and 15.95%, respectively.
As FirstSouth shares are not traded on NASDAQ, the price quote for the
shares on a particular date may not reflect arms' length transactions, so Smith
Capital then selected the median multiples of the FirstSouth peer group, and
multiplied them by the LTM earnings, book value and assets of FirstSouth to
derive a fair market value for FirstSouth's shares. Smith Capital then weighted
the results as follows to derive a final dollar value: earnings 50% and
price/book and price/assets each 25%. The resultant value was $28,168,279. The
fully diluted value per share derived from that analysis was $14.41. The Average
Closing Price of Centura Stock on August 30, 1996 was $37.80 which equates to an
offer price of $21.17 for each share of FirstSouth Stock. This offer price of
$21.17 represented a premium of 46.9% to the derived value of $14.41.
In addition, Smith Capital compared Centura's price per share to reported
LTM earnings, adjusted LTM earnings, price to book and tangible book, dividend
yield and price to assets as of June 30, 1996 to those of Centura's peer group
using market share prices at August 14, 1996. Smith Capital found the respective
multiples for Centura to be 13.86x, 14.06x, 2.16x, 2.49x, 2.61% and 15.28%
compared to 12.96x, 12.29x, 1.71x, 1.79x, 3.47% and 15.73%.
DISCOUNTED FUTURE EARNINGS
In this analysis Smith Capital discounted future earnings of FirstSouth
using conservative and aggressive earnings estimates out to 2000. In the
conservative scenario several assumptions were made including; deposit growth of
10% per annum; loan to deposit ratio 75%; and a net interest margin of 4.7%. In
the aggressive scenario the deposit growth was increased to 15% and the other
assumptions left unchanged.
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The earnings derived were discounted at a range of values from 10% to 12%.
Earnings in 2000 were capitalized at 8% and 10%. These were then discounted at
the same discount rates ranges used for the future earnings to produce a final
net present value for FirstSouth.
The conservative forecast resulted in a range of values for FirstSouth of
$25,050,000 to $30,761,000. The fully diluted per share values were $12.50 to
$14.40. The aggressive scenario range of values was $27,516,000 to $33,952,000.
The fully diluted per share values were $13.73 to $16.94.
Smith Capital then compared Centura's offer of $21.17 per share to
FirstSouth's values derived above and found it to be a premium of 24.93% to
fully diluted value of $16.94 and 69.32% to the value of $12.50.
COMPARABLE ACQUISITION ANALYSIS
Smith Capital performed an analysis of premiums paid in 30 completed stock
for stock merger transactions between 1990 and 1996, where the buying or selling
bank was in the Carolinas or Georgia. Sellers were selected with return on
assets greater than 0.9% and equity to assets greater than 8%. The multiples
used were the price received by the seller as a multiple of its book, earnings
and assets. The median price to earnings, price to book, and price to assets
were 18.6%, 2.171% and 20.28%, respectively. These multiples were applied to the
appropriate FirstSouth value and the results weighted, 50% to earnings and 25%
each to book and assets. The resulting value was $37,049,717 or $18.49 per fully
diluted share. Centura's offer of $21.17 exceeds FirstSouth's comparable derived
acquisition value of $18.49 by 14.48%.
PRO FORMA EQUIVALENT COMPARISON
Smith Capital also calculated the pro forma book value per share, dividend
per share and LTM earnings per share for the combined company as of March 31,
1996 and multiplied each result by the exchange rate to determine the equivalent
value for FirstSouth. These values were compared to FirstSouth's premerger book
value per share, LTM earnings and dividend per share as of March 31, 1996. The
analysis indicated that the FirstSouth equivalent book value per share, dividend
per share and LTM earnings per share were $9.90, $0.14, and $1.50, respectively,
compared to $9.33, $0.07 and $1.02, respectively, before the Merger.
In connection with rendering the Opinion, Smith Capital updated certain of
the analyses used in the oral opinion of May 14, 1996 and reviewed assumptions
on which such analyses were based, and the factors considered in connection
therewith. The analyses described herein have been updated from the oral opinion
on May 14, 1996 to reflect financial information reported for the second quarter
of 1996.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the Opinion. In arriving at its fairness determination, Smith Capital
considered the results of such analyses. No company or transaction used in the
above analysis as a comparison is identical to FirstSouth or Centura or the
contemplated transaction. The analyses were prepared solely for the purposes of
Smith Capital providing its opinion to the FirstSouth Board of Directors as to
the fairness of the Exchange Rate to FirstSouth stockholders and do not purport
to be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold.
For the Opinion, FirstSouth has paid Smith Capital $10,000 for its services
and has agreed to reimburse Smith Capital for its out of pocket expenses and to
indemnify Smith Capital against certain liabilities.
THE FULL TEXT OF SMITH CAPITAL'S OPINION, WHICH SETS FORTH CERTAIN
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS ON REVIEW UNDERTAKEN IS
ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT, IS INCORPORATED HEREIN BY
REFERENCE, AND SHOULD BE READ IN ITS ENTIRETY IN CONNECTION WITH THIS PROXY
STATEMENT. THE SUMMARY OF THE OPINION SET FORTH IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION. SMITH CAPITAL'S OPINION
IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
EXCHANGE RATE TO THE STOCKHOLDERS OF FIRSTSOUTH AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF FIRSTSOUTH AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE ON THE AGREEMENT.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Time will occur on the date and at the time that the
Articles of Merger relating to the Merger become effective with the North
Carolina Secretary of State. Unless otherwise agreed upon by Centura and
FirstSouth, and subject to the conditions to the obligations of the parties to
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effect the Merger, the Effective Time will occur not later than 40 days after
the expiration of all applicable waiting periods required by any regulatory
authority required for the Merger. However, the Effective Time is expected to
occur as soon as possible after the expiration of all applicable waiting
periods.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. FirstSouth and Centura anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the fourth quarter of 1996. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either FirstSouth or Centura generally may
terminate the Agreement if the Merger is not consummated by December 31, 1996,
unless the failure to consummate by that date is the result of a breach of the
Agreement by the party seeking termination. See " -- Conditions to Consummation
of the Merger" and " -- Waiver, Amendment, and Termination."
DISTRIBUTION OF CENTURA STOCK CERTIFICATES
Promptly after the Effective Time, Centura will cause Registrar and
Transfer Company, acting in its capacity as Exchange Agent, to mail a letter of
transmittal, together with instructions for the exchange of the Certificates
representing shares of FirstSouth Stock for certificates representing shares of
Centura Stock, to the former stockholders of FirstSouth.
FIRSTSOUTH STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of certificates for FirstSouth Stock,
together with a properly completed letter of transmittal, there will be issued
and mailed to each holder of FirstSouth Stock surrendering such items a
certificate or certificates representing the number of shares of Centura Stock
to which such holder is entitled, if any, and a check for the amount to be paid
in lieu of any fractional share (without interest), together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon). After the Effective Time, to the extent permitted by law,
FirstSouth stockholders of record as of the Effective Time will be entitled to
vote at any meeting of Centura stockholders the number of whole shares of
Centura Stock into which their shares of FirstSouth Stock have been converted,
regardless of whether such stockholders have surrendered their FirstSouth Stock
certificates. Whenever a dividend or other distribution is declared by Centura
on Centura Stock, the record date for which is at or after the Effective Time,
the declaration will include dividends or other distributions on all shares
issuable pursuant to the Agreement, but no dividend or other distribution
payable after the Effective Time with respect to Centura Stock will be paid to
the holder of any unsurrendered FirstSouth Stock certificate until the holder
duly surrenders such certificate. Upon surrender of such FirstSouth Stock
certificate, however, both the Centura Stock certificate, together with all
undelivered dividends or other distributions (without interest) and any
undeliverd cash payments to be paid in lieu of fractional shares (without
interest), will be delivered and paid with respect to each share represented by
such certificate.
After the Effective Time, there will be no transfers of shares of
FirstSouth Stock on FirstSouth's stock transfer books. If Certificates
representing shares of FirstSouth Stock are presented for transfer after the
Effective Time, they will be canceled and exchanged for the shares of Centura
Stock and a check for the amount due in lieu of fractional shares and
undelivered dividends, if any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including (i)
receipt of the approval of the Agreement by the stockholders of FirstSouth as
required by North Carolina law, (ii) receipt of certain regulatory approvals
required for consummation of the Merger, (iii) receipt of a favorable opinion of
Poyner & Spruill, L.L.P., that the transaction will constitute a reorganization
under Section 368 of the Internal Revenue Code, (iv) receipt of approval of the
shares of Centura Stock issuable pursuant to the Merger for listing on the NYSE,
subject to official notice of issuance, (v) the Registration Statement being
declared effective and all necessary SEC and state approvals relating to the
issuance or trading of the shares of Centura Stock issuable pursuant to the
Merger shall have been received, (vi) the accuracy, as of the date of the
Agreement and as of the Effective Time, of the representations and warranties of
FirstSouth and Centura as set forth in the Agreement, (vii) the performance of
all agreements and the compliance with all covenants of FirstSouth and Centura
as set forth in the Agreement, (viii) receipt of all consents required for
consummation of the Merger or for the preventing of any default under any
contract or permit which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a material adverse effect; (ix) the absence of
any law or order or any action taken by any court, governmental, or regulatory
authority
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prohibiting, restricting, or making illegal the consummation of the transaction;
(x) receipt of the fairness opinion of Smith Capital; and (xi) satisfaction of
certain other conditions, including the receipt of agreements of affiliates of
FirstSouth, certain legal opinions and various certificates from the officers of
FirstSouth and Centura. See " -- Regulatory Approvals" and " -- Waiver,
Amendment, and Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so. In the event the Merger is not effected on or before
December 31, 1996, the Agreement may be terminated and the Merger abandoned by a
vote of a majority of the Board of Directors of either FirstSouth or Centura.
See " -- Waiver, Amendment, and Termination."
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. Application for the approvals described below have been
submitted to the appropriate regulatory agencies. The Merger will require the
prior approval of the Federal Reserve, pursuant to Section 3 of the BHC Act. In
evaluating the Merger, the Federal Reserve must consider, among other factors,
the financial and managerial resources and future prospects of Centura, Centura
Bank and FirstSouth and the convenience and needs of the communities to be
served. The relevant statutes prohibit the Federal Reserve from approving the
Merger if (i) it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any part of the United States or (ii) its effect in any section of
the country may be to substantially lessen competition or to tend to create a
monopoly, or if it would be a restraint of trade in any other manner, unless the
Federal Reserve finds that any anticompetitive effects are outweighed clearly by
the public interest and the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. The Merger may not be
consummated until 30 days (which the Federal Reserve may reduce to 15 days)
following the date of the Federal Reserve approval, during which time the United
States Department of Justice may challenge the transaction on antitrust grounds.
The commencement of any antitrust action would stay the effectiveness of the
approval of the agencies, unless a court of competent jurisdiction specifically
orders otherwise. The Federal Reserve approved the Merger on August 30, 1996.
The Merger also is subject to the approval of the Commissioner and the
North Carolina State Banking Commission. In its evaluation, this state agency
will take into account considerations similar to those applied by the Federal
Reserve. The Commissioner approved the Merger on July 18, 1996, and the Banking
Commission will consider the Merger at its meeting on September 18, 1996.
THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVAL WILL BE OBTAINED OR
AS TO THE TIMING OF ANY SUCH APPROVAL. There also can be no assurance that any
such approval will not impose conditions or be restricted in a manner (including
requirements relating to the raising of additional capital or the disposition of
assets) which in the reasonable judgment of the Board of Directors of either
Centura or FirstSouth would so materially adversely impact the economic or
business benefits of the transactions contemplated by the Agreement that, had
such condition or requirement been known, such party would not in its reasonable
judgment have entered into the Agreement.
FirstSouth and Centura are not aware of any material governmental approvals
or actions that are required for consummation of the Merger, except as described
above. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by applicable law, FirstSouth and Centura, with the
approval of their respective Boards of Directors, may amend the Agreement by
written agreement at any time before or after approval of the Agreement by the
FirstSouth stockholders; provided, however, that after the Special Meeting, no
amendment may alter the manner or basis in which shares of FirstSouth Stock will
be exchanged for Centura Stock without the requisite approval of the holders of
the issued and outstanding shares of FirstSouth Stock entitled to vote thereon.
In addition, prior to or at the Effective Time, either FirstSouth or Centura, or
both, acting through their respective Boards of Directors or chief executive
officers or other authorized officers may waive any default in the performance
of any term of the Agreement by the other party, may waive or extend the time
for the compliance or fulfillment by the other party of any and all of its
obligations under the Agreement, and may waive any of the conditions precedent
to the obligations of such party under the Agreement, except any condition that,
if not satisfied, would result in the violation of any applicable law or
governmental regulation. No such waiver will be effective unless written and
unless executed by a duly authorized officer of FirstSouth or Centura, as the
case may be.
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The Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time (i) by the mutual consent of the Boards of Directors of
FirstSouth and Centura; (ii) by the Board of Directors of FirstSouth or Centura
(a) in the event of any inaccuracy of any representation or warranty of the
other party contained in the Agreement which cannot be or has not been cured
within 30 days after giving written notice to the breaching party of such
inaccuracy and which inaccuracy would provide the terminating party the ability
to refuse to consummate the Merger under the applicable standards set forth in
the Agreement (provided that the terminating party is not then in breach of any
representation or warranty contained in the Agreement under the applicable
standards set forth in the Agreement or in material breach of any covenant or
other agreement contained in the Agreement), (b) in the event of a breach by the
other party of any covenant or agreement contained in the Agreement which cannot
be or has not been cured within 30 days after the giving of written notice to
the breaching party of such breach, (c) if the Merger is not consummated by
December 31, 1996, provided that the failure to consummate is not due to the
breach by the party electing to terminate, (d) if (1) any approval of any
regulatory authority required for consummation of the Merger and the other
transactions contemplated by the Agreement has been denied by final
nonappealable action, or if any action taken by such authority is not appealed
within the time limit for appeal or (2) the stockholders of FirstSouth fail to
vote their approval of the matters submitted for the approval by such
stockholders at the Special Meeting, or (e) if any of the conditions precedent
to the obligations of such party to consummate the Merger have not been
satisfied, fulfilled, or waived by the appropriate party by December 31, 1996
(provided that the terminating party is not then in breach of any representation
or warranty contained in the Agreement under the applicable standards set forth
in the Agreement or in material breach of any covenant or other agreement
contained in the Agreement).
Additionally, the Agreement may be terminated and the Merger abandoned
prior to the Effective Time by Centura if Centura believes the amount of
expenses or liability which FirstSouth could incur or for which FirstSouth could
become responsible or liable on account of any and all remediation, corrective
action or monetary damages resulting from environmental violations exceeds an
aggregate of $750,000.
If the Merger is terminated as described above, the Agreement will become
void and have no effect, except that certain provisions of the Agreement,
including those relating to the obligations to share certain expenses, maintain
the confidentiality of certain information obtained, and return all documents
obtained from the other party under the Agreement, will survive. In addition,
termination of the Agreement will not relieve any breaching party from liability
for any uncured willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination. See " -- Expenses and Fees" and " --
Option Agreement."
DISSENTERS' RIGHTS
Under the provisions of Article 13 of the NCBCA, any shareholder of
FirstSouth who (i) gives FirstSouth notice of his intent to demand payment for
his shares if the Merger is effectuated, which notice is actually received by
FirstSouth before the vote is taken at the Special Meeting and (ii) does not
vote his shares at the Special Meeting in favor of the proposal to approve the
Agreement, shall be entitled, if the Agreement is approved and the Merger
effectuated, to receive payment of the fair value of his shares upon compliance
with the procedural requirements of the Article. A stockholder of FirstSouth who
does not satisfy such requirements is not entitled to payment for his shares
under Article 13 of the NCBCA.
Specifically, Section 55-13-22 of the NCBCA provides that if proposed
corporate action creating dissenters' rights is authorized at a stockholders'
meeting, a corporation shall mail by registered or certified mail, return
receipt requested, a written dissenters' notice to all stockholders who
satisfied the requirements set forth above. The dissenters' notice must be sent
no later than 10 days after the corporate action was taken, and must supply a
form for demanding payment, state where the payment demand must be sent and
where and when certificates for certificated shares must be deposited, and set a
date by which the corporation must receive the payment demand, which date may
not be fewer than 30 nor more than 60 days after the date the dissenters' notice
is mailed. Under Section 55-13-23 of the NCBCA, a stockholder sent a dissenters'
notice must demand payment and deposit his share certificates in accordance with
the terms of the notice. A stockholder who demands payment and deposits his
share certificates in accordance with the terms of the notice retains all other
rights of a stockholder until such rights are canceled or modified by the taking
of the proposed corporate action. A stockholder who does not demand payment or
deposit his share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for his shares.
As soon as the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall offer to pay each dissenting stockholder
who complied with the requirements of Section 55-13-23 the amount the
corporation estimates to be the fair value of his shares, plus interest accrued
to the date of payment, and shall pay this amount to each dissenting stockholder
who agrees in writing to accept it in full satisfaction of his demand. However,
pursuant to Section 55-
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13-28 of the NCBCA, a dissenting stockholder may notify the corporation in
writing of his own estimate of the fair value of his shares and amount of
interest due, and demand payment of such estimate, or reject the corporation's
offer and demand payment of the fair value of his shares and interest due, if:
(i) the dissenting stockholder believes that the amount offered by the
corporation is less than the fair value of his shares or that the interest
due is incorrectly calculated;
(ii) the corporation fails to make payment to a dissenting stockholder
who accepts the corporation's offer within 30 days after the dissenting
stockholders' acceptance; or
(iii) the corporation, having failed to take the proposed action, does
not return the deposited certificates within 60 days after the date set for
demanding payment.
A dissenting stockholder waives his right to demand payment unless he
notifies the corporation of his demand in writing under subparagraph (i) above
within 30 days after the corporation offered payment for his shares or under
subparagraphs (ii) or (iii) above within 30 days after the corporation has
failed to perform its required actions in a timely fashion. A dissenting
stockholder who fails to notify the corporation of his demand under subparagraph
(i) above within such 30-day period shall be deemed to have withdrawn his
dissent and demand for payment.
If a demand for payment remains unsettled, the dissenting stockholder may
commence a proceeding within 60 days after the date of his payment demand and
petition the court to determine the fair value of the shares and accrued
interest. Upon service upon it of the petition filed with the court, the
corporation shall pay to the dissenting stockholder the amount previously
offered by the corporation. If the dissenting stockholder does not commence the
proceeding within the 60-day period, the dissenting stockholder shall have an
additional 30 days to either (i) accept in writing the amount offered by the
corporation, upon which acceptance the corporation shall pay such amount to the
dissenting stockholder in full satisfaction of his demand, or (ii) withdraw his
demand for payment and resume the status of a nondissenting stockholder. A
dissenting stockholder who takes no action within such 30-day period shall be
deemed to have withdrawn his dissent and demand for payment.
A record stockholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of such partial dissenting stockholder are determined as if
the shares as to which he dissents and his other shares were registered in the
names of different stockholders.
A beneficial stockholder may assert dissenters' rights as to shares held on
his behalf only if:
(i) he submits to the corporation the record stockholder's written
consent to dissent not later than the time the beneficial stockholder
asserts dissenters' rights; and
(ii) he does so with respect to all shares of which he is the
beneficial stockholder.
A failure to vote against approval of the Agreement will not constitute a
waiver of a stockholder's appraisal rights, provided that notice in writing of
the stockholder's intent to demand payment for his shares if the Merger is
effectuated is given to FirstSouth, which notice is actually received by
FirstSouth before the vote is taken at the Special Meeting. Voting against
approval of the Agreement will not entitle a stockholder to receive cash for his
shares unless such stockholder complies with all of the procedural requirements
discussed above. Any holder of FirstSouth Stock who returns a signed proxy but
who fails to provide voting instructions with respect to the proposal to approve
the Agreement will be deemed to have voted in favor of the Agreement and will
not be entitled to assert dissenters' rights of appraisal.
THE FOREGOING IS ONLY A SUMMARY OF THE RIGHTS OF DISSENTING HOLDERS OF
FIRSTSOUTH STOCK. ANY HOLDER OF FIRSTSOUTH STOCK WHO INTENDS TO DISSENT SHOULD
CAREFULLY REVIEW THE TEXT OF THE NORTH CAROLINA STATUTORY LAW SET FORTH IN
APPENDIX B TO THIS PROXY STATEMENT AND SHOULD ALSO CONSULT WITH HIS OR HER
ATTORNEY. THE FAILURE OF A FIRSTSOUTH STOCKHOLDER TO FOLLOW PRECISELY THE
PROCEDURES SUMMARIZED ABOVE AND SET FORTH IN APPENDIX B TO THIS PROXY STATEMENT
MAY RESULT IN LOSS OF APPRAISAL RIGHTS. NO FURTHER NOTICE OF THE EVENTS GIVING
RISE TO APPRAISAL RIGHTS OR ANY STEPS ASSOCIATED THEREWITH WILL BE FURNISHED TO
HOLDERS OF FIRSTSOUTH STOCK, EXCEPT AS INDICATED ABOVE OR OTHERWISE REQUIRED BY
LAW.
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In general, any dissenting stockholder who perfects such holder's right to
be paid the "fair value" of such holder's FirstSouth Stock in cash will
recognize taxable gain or loss for federal income tax purposes upon receipt of
such cash. See " -- Certain Federal Income Tax Consequences."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, FirstSouth has agreed that, except as otherwise
expressly contemplated in the Agreement, FirstSouth will (i) preserve and
protect its present business organization, keep available its present officers
and employees, and preserve its relationships with customers, depositors,
creditors, correspondents, suppliers, and others having business relationships
with it; (ii) maintain all its properties and equipment in customary repair,
order and condition, ordinary wear and tear excepted; (iii) maintain its books
of account and records in the usual, regular and ordinary manner in accordance
with sound business practices applied on a consistent basis; (iv) comply with
all laws, rules and regulations applicable to it, its properties and to the
conduct of its business; (v) continue to maintain in force insurance and to not
modify any bonds or policies of insurance in effect as of the date of the
Agreement unless the same, as modified, provides substantially equivalent
coverage, and not to cancel, allow to be terminated or, to the extent available,
fail to renew, any such bond or policy of insurance unless the same is replaced
with a bond or policy providing substantially equivalent coverage; and (vi)
promptly provide to Centura such information about FirstSouth and its financial
condition, results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations as Centura reasonably may request.
In addition, FirstSouth has agreed that, prior to the earlier of the
Effective Time or termination of the Agreement, FirstSouth will not, except as
expressly contemplated or permitted by the Agreement, agree or commit to do, any
of the following: (i) amend its Articles of Incorporation or Bylaws; (ii) except
for the issuance of stock pursuant to FirstSouth Options, not make any change in
its authorized capital stock, or create any other or additional authorized
capital stock or other securities, or issue, sell, purchase, redeem, retire,
reclassify, combine or split any shares of its capital stock or other securities
other than the issuance of shares upon the exercise of FirstSouth capital stock
options; (iii) not issue any options, warrants, calls, puts or other rights of
any kind relating to the purchase of its capital stock or any other securities;
(iv) not declare or pay any dividends or make any other distributions on its
shares of capital stock or otherwise to its shareholders, except in accordance
with its current cash dividend policy at current dividend levels and declaration
and payment dates; (v) except as required by law and except as allowed under the
FirstSouth Stock Plans, not enter into or become bound by any contract,
agreement or commitment for the employment or compensation of any officer,
employee or consultant which is not immediately terminable by FirstSouth without
cost or other liability on no more than 30 days' notice, or adopt, enter into or
become bound by any new or additional profit-sharing, bonus, incentive, stock
option, stock purchase, pension, retirement, insurance or similar contract or
agreement or plan with respect to or which provides for benefits for any of its
current or former directors, officers, employees or consultants, or enter into
or become bound by any contract with or commitment to any labor or trade union
or association or any collective bargaining group; (vi) except for annual merit
increases in the salary of its employees, or other payments made to the
employees or directors in connection with existing compensation or benefit
plans, and except for bonus payments under FirstSouth's Bonus Plan up to the
aggregate amount accrued by FirstSouth for such plan prior to the Effective Time
(such accrual not to exceed an aggregate of $225,000), not increase the
compensation or benefits of, or pay any bonus or other special or additional
compensation to, any of FirstSouth's directors, officers, employees, or
consultants; (vii) not make any changes in its accounting methods, practices or
procedures; (viii) not directly or indirectly acquire or merge with or acquire
any branch or all or any significant part of the assets of any other entity,
open any new branch or enter into or become bound by any contract in furtherance
thereof; (ix) except as may be required by the FDIC, the Commissioner or any
other governmental or other regulatory agency or as shall be required by
applicable law, regulation or the Agreement, FirstSouth will not change in any
material respect the nature of its business or the manner in which it conducts
its business, discontinue any material portion or line of its business, or
change in any material respect its lending, investment, asset liability
management, or other material banking or business policies; (x) not encourage,
solicit or attempt to negotiate with any entity relating to a merger or other
acquisition of FirstSouth or a significant part of its assets; (xi) not sell or
lease (as lessor) or enter into or become bound by any contract or agreement
relating to the sale, lease (as lessor) or other disposition of real estate or
other property, purchase or lease (as lessee) or enter into or become bound by
any contract relating to the purchase, lease (as lessee) or other acquisition of
any real property or other property, or sell or dispose of or enter into a
contract for the sale or disposal of any other asset of FirstSouth; (xii) except
in the ordinary course of its business consistent with past practices, incur any
debt or assume, guarantee, or endorse or otherwise become responsible or liable
for any obligation of any other person or entity; (xiii) mortgage, pledge or
subject any of its assets to any lien or any other encumbrance other than in the
ordinary course of business consistent with its past practice; (xiv) not waive,
release or compromise any material rights in its favor except in good faith for
fair value; and (xv) not enter into or become bound by any contracts or
agreements or understandings with respect to charitable contributions, any
governmental or regulatory
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agency or authority, or enter into any contract, agreement, commitment or
understanding which would obligate or commit FirstSouth to make expenditures for
more than $75,000 (other than in the ordinary course of FirstSouth's lending
operations).
The Agreement also provides that Centura may offer to acquire, enter into
agreements to acquire and acquire financial institution holding companies and
their subsidiaries, financial institutions and their subsidiaries, and the
assets and liabilities of such entities prior to the Effective Time, provided,
however, that in the event that any such acquisition should cause a condition
precedent to the consummation of the Merger as provided in the Agreement to fail
to be satisfied on or before December 31, 1996, any such failure shall be deemed
a termination of the Agreement by Centura and would be deemed to be a willful
breach of the Agreement by Centura.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present management team or
Board of Directors of Centura except that Mr. D. Earl Pardue, Chairman of
FirstSouth, will be appointed to the Board of Directors of Centura. See
" -- Interests of Certain Persons in the Merger -- Centura Directorship."
Information concerning the management of Centura is included in the documents
incorporated herein by reference. See "DOCUMENTS INCORPORATED BY REFERENCE." For
additional information regarding the interests of certain persons in the Merger,
see " -- Interests of Certain Persons in the Merger."
Centura Bank will be the surviving corporation resulting from the Merger
and shall continue to be governed by the laws of the State of North Carolina and
operate in accordance with its Articles of Incorporation and Bylaws as in effect
on the date of the Agreement until otherwise amended or repealed after the
Effective Time. FirstSouth will cease to be a separate entity.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of FirstSouth management and of the FirstSouth
Board of Directors have interests in the Merger that are in addition to any
interests they may have as stockholders of FirstSouth generally. These interests
include, among other things, provisions in the Agreement relating to
indemnification of FirstSouth directors and officers, and certain severance and
other employee benefits, as described below.
INDEMNIFICATION AND INSURANCE. The Agreement provides that Centura will
indemnify, defend and hold harmless the present and former directors, officers,
employees, and agents of FirstSouth against all liabilities arising out of
actions or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by the Agreement) to the fullest extent permitted
under law. The Agreement also provides that FirstSouth will be allowed to
purchase at reasonable cost "tail" coverage for not less than three years under
and in the same amount of coverage as is provided by FirstSouth's current
directors' and officers' liability insurance policy.
CENTURA DIRECTORSHIP. Following the Effective Time, Centura's Board of
Directors will appoint D. Earl Pardue, Chairman of FirstSouth, to serve as a
director of Centura until the 1997 annual meeting of stockholders of Centura.
For such service, Mr. Pardue shall be compensated in accordance with Centura's
then current fee schedule.
FIRSTSOUTH EXECUTIVE ARRANGEMENTS. FirstSouth has entered into an
employment contract dated March 9, 1993 with Wade Williamson, Jr., President and
Chief Executive Officer of First South. The initial term of the contract is for
a period of four years to be automatically renewed for successive periods of
four years each unless either party gives at least six months notice of
termination prior to the end of the then current term. Pursuant to the contract,
FirstSouth provides an automobile primarily for business purposes and club
membership fees for Mr. Williamson and dependent care medical insurance. The
contract provides that Mr. Williamson's base annual salary will be adjusted
annually based upon negotiations between Mr. Williamson and the Board. Mr.
Williamson's base annual salary for fiscal 1996 has been fixed at $120,000.
Following a change of control of FirstSouth, the contract provides that Mr.
Williamson will have a two year period to unilaterally terminate his employment
and upon such termination or upon an involuntary termination of employment, Mr.
Williamson will receive a sum equal to 2.95 times his average annual
compensation for the preceding five year period.
FirstSouth has entered into an employment contract dated December 14, 1992
with Charles T. Canaday, Jr., Senior Vice President of FirstSouth. The initial
term of Mr. Canaday's contract is for a period of two years to be automatically
renewed for successive periods of two years each unless either party gives at
least six months notice of termination prior to the end of the then current term
period. The contract provides that the term will automatically be equal to a two
year period upon the occurrence of a change in control of FirstSouth. Mr.
Canaday's base annual salary for the 1996 calendar year has been fixed at
$79,800. Following a change in control of FirstSouth, Mr. Canaday has a period
of one year to unilaterally terminate his employment and upon such termination
or upon an involuntary termination of employment, Mr. Canaday will receive his
monthly salary for a period of 30 months.
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FirstSouth has entered into employment contracts dated December 14, 1992
and January 1, 1995, respectively, with each of David B. Spencer, Senior Vice
President of FirstSouth, and John T. Broome, Jr., Vice President of FirstSouth.
The initial term of each contract is for a period of one year to be
automatically renewed for successive periods of one year each unless either
party gives at least three months notice of termination prior to the end of the
then current term. The contract provides that the term will automatically be
equal to a one year period upon the occurrence of a change in control of
FirstSouth. Mr. Spencer's and Mr. Broome's base annual salaries for the 1996
calendar year have been fixed at $69,400 and $64,750, respectively. Following a
change in control, each of Mr. Spencer and Mr. Broome has a period of one year
to unilaterally terminate his employment and upon such termination or upon an
involuntary termination of employment, Mr. Spencer or Mr. Broome will receive
his monthly salary for a period of 15 months.
The acquisition of FirstSouth by Centura will be deemed a "change in
control" under all of the above employment contracts and, consequently, each
employee will be able to elect to terminate his contract and receive the amount
provided in his contract. It is anticipated that Centura will negotiate
contracts with Messrs. Williamson, Canaday, Spencer and Broome to replace their
existing contracts although no assurance can be given that replacement contracts
will be executed. If the four officers elected to terminate their contracts, the
severance compensation estimated to be paid to Messrs. Williamson, Canaday,
Spencer and Broome, assuming such termination occurred at the Effective Time
(estimated to be October 1996), would be approximately $348,600, $199,500,
$86,750 and $80,940, respectively.
FirstSouth maintains an unfunded deferred compensation plan for the benefit
of Mr. Williamson. The plan provides for the payment of benefits for a period of
ten years commencing with Mr. Williamson's attainment of age of 65 years or, if
Mr. Williamson shall die while serving as an employee of FirstSouth, upon Mr.
Williamson's death. The amount of the annual benefit is equal to $100,000 times
the applicable "vested percentage". The "vested percentage" as of December 31,
1995 was 30% and for each full 12-month period thereafter during which Mr.
Williamson serves a full time employee of FirstSouth, the "vested percentage"
will be increased by 10%. FirstSouth acquired a policy insuring Mr. Williamson's
life which is payable to FirstSouth and is intended to partially recover the
cost of the payments to Mr. Williamson. Under the terms of the Agreement,
Centura has agreed to honor the terms of Mr. Williamson's deferred compensation
plan.
DIRECTOR AND OFFICER STOCK OPTIONS. FirstSouth has granted stock options to
Messrs. Williamson and Canaday and certain other officers and directors under
the FirstSouth Stock Plans. The following table sets forth with respect to
Messrs. Williamson and Canaday, all officers as a group, all outside directors
as a group, and all executive officers and directors as a group: (i) the number
of shares covered by options held by such persons, (ii) the weighted average
exercise price of all such options held by such persons, and (iii) the aggregate
value (i.e., stock price less option exercise price) of all such options based
upon the closing bid price of FirstSouth Stock of $17.50 on June 30, 1996 (as
reported in the BURLINGTON TIMES-NEWS). Of the FirstSouth Options set forth
below, 239,980 are currently exercisable and 7,294 become exercisable on January
1, 1997 and 2,214 become exercisable on January 1, 1998.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE AGGREGATE VALUE
OPTIONS HELD PER OPTION OF OPTIONS
<S> <C> <C> <C>
Wade Williamson, Jr......................................................... 50,626 $ 8.24 $ 468,797
Charles T. Canaday, Jr...................................................... 14,753 8.24 136,613
Executive Officer Group (5 persons)......................................... 82,887 8.30 762,560
Outside Directors (16 persons).............................................. 166,862 6.05 1,910,570
All executive officers and directors as a group (21 persons)................ 249,488 6.82 2,664,531
</TABLE>
(1) Based on the closing price of Centura Stock ($38.25) as listed on the
NYSE -- Composite Transactions List on August 30, 1996, assuming the
Exchange Rate is 0.56, the aggregate value of the options to Mr. Williamson,
Mr. Canaday, the five executive officers as a group, the 16 outside
directors as a group and all executive officers and directors as a group
would be $667,359, $194,464, $1,087,527, $2,564,983 and $3,642,318,
respectively.
OTHER MATTERS RELATING TO FIRSTSOUTH EMPLOYEE BENEFIT PLANS. The Agreement
also provides that, after the Effective Time, Centura will provide generally to
officers and employees of FirstSouth who, at or after the Effective Time, become
officers or employees of a Centura company, employee benefits under employee
benefit plans (other than stock option or other plans involving the potential
issuance of Centura Stock, except as set forth in the Agreement) on terms and
conditions which, when taken as a whole, are substantially similar to those
currently provided by the Centura companies to their similarly situated officers
and employees. For purposes of participation and vesting under such employee
benefit plans, the service of the employees of FirstSouth prior to the Effective
Time shall be treated as service with a Centura company participating in such
employee benefit plans. In addition, any employee of FirstSouth (other than
those serving pursuant to
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employment contracts) who, following the Merger and at Centura's discretion, is
terminated by Centura for reasons other than the employee's misconduct within
one year following the Effective Time shall be eligible for salary continuation
as a result of such termination. Salary continuation will consist of an amount
equal to two week's salary for each 12 months of active service with FirstSouth
prior to the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO FIRSTSOUTH STOCKHOLDERS. THIS SUMMARY IS BASED ON
THE FEDERAL INCOME TAX LAWS AS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT
DOES NOT TAKE INTO ACCOUNT POSSIBLE CHANGES TO SUCH LAWS OR INTERPRETATIONS,
INCLUDING AMENDMENTS TO APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN
JUDICIAL OR ADMINISTRATIVE RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT.
THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY
PERSON. IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO FIRSTSOUTH
STOCKHOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE,
AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE
COMPANIES, AND CORPORATIONS, AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY
CONSEQUENCES OF THE MERGER UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS.
FIRSTSOUTH STOCKHOLDERS, THEREFORE, ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE,
LOCAL, AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE
TAX LAWS.
The Merger is intended to constitute a "reorganization" within the meaning
of section 368(a) of the Internal Revenue Code of 1986, as amended ("the Code"),
with FirstSouth, Centura, and Centura Bank each intended to qualify as a "party
to a reorganization" under section 368(b) the Code, in which case the following
tax consequences will generally result (subject to the limitations and
qualifications referred to herein):
(a) No gain or loss will be recognized by the FirstSouth stockholders upon
the receipt of Centura Stock solely in exchange for their shares of FirstSouth
Stock.
(b) The basis of the Centura Stock to be received by FirstSouth
stockholders will be the same as the basis of the FirstSouth Stock surrendered
in the exchange.
(c) The holding period of the Centura Stock to be received by FirstSouth
stockholders will include the holding period of the FirstSouth Stock surrendered
in exchange therefor, provided that the FirstSouth Stock was held as a capital
asset on the date of the exchange.
(d) The payment of cash to FirstSouth stockholders in lieu of issuing
fractional share interests in Centura will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then were redeemed by Centura. These cash payments will be treated as having
been received as a distributions in full payment in exchange for the stock
redeemed as provided in section 302(a) of the Code. If the redemption meets one
of the four tests set forth in section 302, any gain or loss recognized will be
a capital gain or loss. If none of the four tests provided in section 302 is
met, the redemption will be treated as payment of a dividend.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service ("IRS"). Instead, Poyner & Spruill,
L.L.P., special counsel to Centura, will render an opinion to FirstSouth and
Centura concerning certain federal income tax consequences of the proposed
Merger under federal income tax law. It is such firm's opinion that, based upon
the assumption the Merger is consummated in accordance with North Carolina law
and in conformity with the representations made by the management of FirstSouth
and Centura, the transaction will constitute a "reorganization" within the
meaning of section 368(a) of the Code ("Tax Opinion"). The Tax Opinion addresses
the tax consequences of the Merger under North Carolina law, but does not
address any other state, local, or other tax consequences of the Merger. The Tax
Opinion does not bind the IRS nor preclude the IRS from adopting a contrary
position. In addition, the Tax Opinion will be subject to certain assumptions
and qualifications and will be based on the truth and accuracy of certain
representations made by the management of FirstSouth and Centura, as to, among
other things, the fact that there is no plan or intention by any of the
stockholders of FirstSouth who own one percent (1%) or more of the outstanding
FirstSouth Stock, and to the best of the knowledge of the management of
FirstSouth, the remaining FirstSouth stockholders have no plan or intention, to
sell, exchange, or otherwise dispose of a number of shares of Centura Stock that
they will receive in the Merger that will reduce on the part of the FirstSouth
stockholders such stockholders' ownership of Centura Stock to a number of shares
having an
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aggregate value as of the date of the Merger of less than 50% of the aggregate
value of all of the stock of FirstSouth outstanding immediately prior to the
Merger.
A successful IRS challenge to the "reorganization" status of the Merger
would result in a FirstSouth stockholder recognizing gain or loss with respect
to each share of FirstSouth Stock surrendered equal to the difference between
the stockholder's basis in such share and the fair market value, as of the
Effective Time of the Merger, of the Centura Stock received in exchange
therefor. In such event, a FirstSouth stockholder's aggregate basis in the
Centura Stock received would equal its fair market value and his or her holding
period for such stock would begin the day after the Merger.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a
pooling-of-interests. Under the pooling-of interests method of accounting, the
recorded amounts of the assets and liabilities of FirstSouth will be carried
forward at their previously recorded amounts, and prior period financial
statements will be restated for all periods as though FirstSouth and Centura had
been combined at the beginning of the earliest period presented.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding FirstSouth Stock
must be exchanged for Centura Stock with substantially similar terms. There are
certain other criteria that must be satisfied in order for the Merger to qualify
as a pooling-of-interests, some of which criteria cannot be satisfied until
after the Effective Time. In addition, it is a condition to closing that Centura
receive assurances from KPMG Peat Marwick LLP, in form and content satisfactory
to Centura, to the effect that the Merger will qualify for pooling-of-interests
accounting treatment.
For information concerning certain conditions to be imposed on the exchange
of FirstSouth Stock for Centura Stock in the Merger by affiliates of FirstSouth
and certain restrictions to be imposed on the transferability of the Centura
Stock received by those affiliates in the Merger in order, among other things,
to ensure the availability of pooling-of-interests accounting treatment, see
" -- Resales of Centura Stock."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that each of
Centura and FirstSouth will bear and pay one-half of the printing costs in
connection with the Registration Statement and this Proxy Statement.
Additionally, in the event either party willfully breaches the Agreement or
intentionally fails to perform or violates any of its obligations, agreements,
or covenants contained in the Agreement, the breaching party shall be obligated
to pay all expenses of the other party incurred in connection with the Merger,
together with other damages recoverable at law or in equity. Further, if the
Merger is not consummated on or before December 31, 1996, by reason of the
failure of Centura to receive any regulatory approval and such event is the
consequence of the failure of Centura or Centura Bank to satisfy their
respective obligations under the Community Reinvestment Act, the Home Mortgage
Disclosure Act, the Equal Credit Opportunity Act, the Fair Housing Act, and/ or
any regulations promulgated thereunder, Centura shall reimburse FirstSouth for
one-half of FirstSouth's costs and expenses up to a total reimbursement amount
of $125,000.
RESALES OF CENTURA STOCK
Centura Stock to be issued to stockholders of FirstSouth in connection with
the Merger will be registered under the Securities Act. All shares of Centura
Stock received by holders of FirstSouth Stock and all shares of Centura Stock
issued and outstanding immediately prior to the Effective Time, upon
consummation of the Merger will be freely transferable by those stockholders of
FirstSouth not deemed to be "Affiliates" of FirstSouth or Centura. "Affiliates"
generally are defined as persons or entities who control, are controlled by, or
are under common control with FirstSouth or Centura at the time of the Special
Meeting (generally, executive officers and directors).
Rules 144 and 145 promulgated under the Securities Act restrict the sale of
Centura Stock received in the Merger by Affiliates and certain of their family
members and related interests. Generally speaking, during the two years
following the Effective Time, Affiliates of FirstSouth or Centura may resell
publicly the Centura Stock received by them in the Merger within certain
limitations as to the amount of Centura Stock sold in any three-month period and
as to the manner of sale. After the two-year period, such Affiliates of
FirstSouth who are not affiliates of Centura may resell their shares without
restriction. The ability of Affiliates to resell shares of Centura Stock
received in the Merger under Rule 144 or 145 as
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<PAGE>
summarized herein generally will be subject to Centura's having satisfied its
Exchange Act reporting requirements for specified periods prior to the time of
sale. Affiliates will receive additional information regarding the effect of
Rules 144 and 145 on their ability to resell Centura Stock received in the
Merger. Affiliates also would be permitted to resell Centura Stock received in
the Merger pursuant to an effective registration statement under the Securities
Act or an available exemption from the Securities Act registration requirements.
This Proxy Statement does not cover any resales of Centura Stock received by
persons who may be deemed to be Affiliates of FirstSouth or Centura.
FirstSouth has agreed to use its reasonable efforts to cause each person
who may be deemed to be an Affiliate of FirstSouth to execute and deliver to
Centura prior to the Effective Time, an agreement providing that such Affiliate
will not sell, pledge, transfer, or otherwise dispose of any Centura Common
Stock obtained as a result of the Merger (i) except in compliance with the
Securities Act and the rules and regulations of the SEC thereunder and (ii) in
any case, until after results covering 30 days of post-Merger operations of
Centura have been published. Certificates representing shares of FirstSouth
Stock surrendered for exchange by any person who is an Affiliate of FirstSouth
for purposes of Rule 145(c) under the Securities Act shall not be exchanged for
certificates representing shares of Centura Stock until Centura has received
such a written agreement from such person. The stock certificates representing
Centura Stock issued to Affiliates in the Merger may bear a legend summarizing
the foregoing restrictions. See " -- Conditions to Consummation of the Merger."
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<PAGE>
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of FirstSouth Stock will be exchanging
their shares of FirstSouth Stock for shares of Centura Stock. Centura is a North
Carolina corporation governed by the NCBCA and Centura's Articles of
Incorporation and Bylaws. Certain significant differences exist between the
rights of FirstSouth stockholders and those of Centura stockholders. The
differences deemed material by FirstSouth and Centura are summarized below. In
particular, Centura's Articles and Bylaws contain several provisions that may be
deemed to have an anti-takeover effect in that they could impede or prevent an
acquisition of Centura unless the potential acquirer has obtained the approval
of Centura's Board of Directors. The following discussion is necessarily
general; it is not intended to be a complete statement of all differences
affecting the rights of stockholders and their respective entities, and it is
qualified in its entirety by reference to the NCBCA as well as to Centura's
Articles and Bylaws and FirstSouth's Articles of Incorporation and Bylaws.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of Centura's Articles and Bylaws described below under the
headings " -- Authorized Capital Stock," " -- Amendment of Articles of
Incorporation and Bylaws," " -- Classified Board of Directors and Absence of
Cumulative Voting," " -- Removal of Directors," " -- Director Exculpation,"
" -- Special Meeting of Stockholders," " -- Actions by Stockholders Without a
Meeting," " -- Stockholder Nominations and Proposals," " -- Fair Price
Provisions" and " -- Business Combinations" are referred to herein as the
"Protective Provisions." In general, the Protective Provisions make it more
likely that Centura's Board of Directors will play a central role if any group
or person attempts to acquire control of Centura, so that the Board can further
the interests of Centura and its stockholders as appropriate under the
circumstances. For example, if the Board determines that a sale of control of
Centura is in the best interests of Centura and its shareholders, the Protective
Provisions enhance the Board's ability to maximize the value to be received by
the stockholders upon such a sale.
Although Centura's management believes the Protective Provisions are
beneficial to Centura's stockholders, the Protective Provisions also may tend to
discourage some takeover bids. As a result, Centura's stockholders may be
deprived of opportunities to sell some or all of their shares at prices that
represent a premium over prevailing market prices. On the other hand, defeating
undesirable acquisition offers can be a very expensive and time-consuming
process. To the extent that the Protective Provisions discourage undesirable
proposals, Centura may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Centura
Stock temporarily, enabling stockholders to sell their shares at a price higher
than that which otherwise would prevail. In addition, the Protective Provisions
may decrease the market price of Centura Stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The Protective Provisions also
may make it more difficult and time consuming for a potential acquirer to obtain
control of Centura through replacing the Board of Directors and management.
Furthermore, the Protective Provisions may make it more difficult for Centura's
stockholders to replace the Board of Directors or management, even if a majority
of the stockholders believe such replacement is in the best interests of
Centura. As a result, the Protective Provisions may tend to perpetuate the
incumbent Board of Directors and management of Centura.
AUTHORIZED CAPITAL STOCK
CENTURA. Centura's Articles authorize issuance of up to (i) 50,000,000
shares of Centura Stock, of which 22,499,295 shares were issued and outstanding
as of June 30, 1996, and (ii) 25,000,000 of no par value preferred stock
("Centura Preferred Stock"), of which no shares are issued. Centura's Board of
Directors may authorize the issuance of additional shares of Centura Stock
without further action by Centura's stockholders, unless such action is required
in a particular case by applicable laws or regulations or by any stock exchange
upon which Centura's capital stock may be listed. Centura's stockholders do not
have the preemptive right to purchase or subscribe to any unissued authorized
shares of Centura Stock or any option or warrant for the purchase thereof.
Similarly, Centura's Board of Directors may issue, without any further
action by the stockholders, shares of Centura Preferred Stock, in one or more
classes or series, with such voting, conversion, dividend, and liquidation
rights as the board may specify. In establishing and issuing shares of Centura
Preferred Stock, Centura's Board of Directors may designate that Centura
Preferred Stock will have voting rights in excess of one vote per share or will
vote as a separate class on any or all matters, thus diluting the voting power
of the Centura Stock. The board also may designate that Centura Preferred Stock
will have dividend rights that are cumulative and that receive preferential
treatment compared to Centura Stock, and that Centura Preferred Stock will have
liquidation rights with priority over Centura Stock in the event of Centura's
liquidation.
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Subject to the rights of stockholders who perfect dissenters' rights of
appraisal and the payment of cash in lieu of fractional shares, Centura will
issue an estimated 1,191,163 shares of Centura Stock in connection with the
Merger, including shares to be subject to assumed options and grants. Based on
the number of shares of Centura Stock outstanding on June 30, 1996, it is
anticipated that, following the consummation of the Merger, a total of
approximately 23,527,366 shares of Centura Stock will be outstanding, excluding
shares subject to assumed options and excluding the effect of any shares which
may be issued by Centura in other acquisitions or repurchased by Centura after
June 30, 1996.
The authority to issue additional shares of Centura Stock provides Centura
with the flexibility necessary to meet its future needs without the delay
resulting from seeking stockholder approval. The authorized but unissued shares
of Centura Stock will be issuable from time to time for any corporate purpose,
including, without limitation, stock splits, stock dividends, employee benefit
and compensation plans, acquisitions, and public or private sales for cash as a
means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of Centura. In addition, the sale
of a substantial number of shares of Centura Stock to persons who have an
understanding with Centura concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of Centura Stock (or the
right to receive Centura Stock) to Centura stockholders, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of Centura.
FIRSTSOUTH. FirstSouth's Articles authorize the issuance of up to
15,000,000 shares of FirstSouth Stock, of which 1,835,841 shares were issued and
outstanding as of the FirstSouth Record Date. FirstSouth's Board of Directors
may authorize the issuance of additional authorized shares of FirstSouth Stock
without further action by FirstSouth's stockholders, unless such action is
required in a particular case by applicable laws or regulations or by any stock
exchange upon which FirstSouth's capital stock may be listed. FirstSouth's
stockholders do not have preemptive right to purchase or subscribe to any
unissued unauthorized shares of FirstSouth Stock or any option or warrant for
the purchase thereof.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
CENTURA. The Articles of Centura provide that amendments thereto may be
adopted only upon receiving the affirmative vote of the holders of at least
two-thirds of all the shares of capital stock of Centura issued and outstanding
and entitled to vote thereon. However, if such amendment has received the prior
approval by an affirmative vote of a majority of "Disinterested Directors," as
defined therein, then the affirmative vote of the holders of at least a majority
of all the shares of capital stock of Centura issued and outstanding and
entitled to vote, or such greater percentage approval as is required by North
Carolina law, is sufficient to amend the Articles. A "Disinterested Director" is
defined in the Articles as any member of the Board of Directors who is
unaffiliated with, and not a nominee of, a Control Person, as defined therein,
and who was a member of the Board of Directors prior to the time a Control
Person became such, and any successor of a Disinterested Director who is
unaffiliated with, and not a nominee of, a Control Person who is recommended to
succeed a Disinterested Director by a majority of Disinterested Directors then
on the Board of Directors. A "Control Person" is defined in the Articles as any
corporation, person, group, or other entity, which together with its affiliates,
prior to a Business Combination (as defined herein) beneficially owns 10% or
more of the shares of any class of equity or convertible securities of Centura,
and any affiliate of any such corporation, person, group, or other entity.
Subject to certain restrictions set forth below, either the Board of
Directors or the stockholders of Centura may amend Centura's Bylaws. The Board
of Directors may amend the Bylaws and adopt new Bylaws except that: (i) a bylaw
adopted or amended by the stockholders may not be readopted, amended, or
repealed by the Board of Directors if neither the Articles nor a bylaw adopted
by the stockholders authorizes the Board of Directors to adopt, amend, or repeal
that particular bylaw; (ii) a bylaw that fixes a greater quorum or voting
requirement for the Board of Directors may not be adopted by the Board of
Directors by a vote of less than a majority of the directors then in office and
may not itself be amended by a quorum or vote of directors less than the quorum
or vote therein prescribed by a bylaw adopted or amended by the stockholders;
and (iii) if a bylaw fixing a greater quorum or voting requirement for the Board
of Directors is originally adopted by the stockholders, it may be amended or
repealed only by the stockholders, unless the Bylaws permit amendment or repeal
by the Board of Directors. The stockholders of Centura generally may adopt,
amend, or repeal the Bylaws upon the affirmative vote of two-thirds of the
stockholders entitled to vote thereon.
FIRSTSOUTH. The Articles of FirstSouth do not contain any provisions
governing amendments to the Articles, except that FirstSouth's Articles provide
that the affirmative vote or consent of the holders of not less than 75% of the
outstanding voting shares of FirstSouth Stock shall be required to amend, alter,
change or repeal, or adopt any provisions inconsistent with the provision of
FirstSouth's Articles requiring a supermajority vote and fair price provisions
in the event of business combinations. See " -- Fair Price Provisions" and
" -- Business Combinations." Under North Carolina law, the Articles may be
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<PAGE>
amended by action of the Board of Directors of FirstSouth and without
stockholder action only for minor technical revisions. Any other amendment must
be approved by a majority of the shares voting except that if the proposed
amendment creates dissenters' rights, the vote required is a majority of the
total votes entitled to be cast.
The Board of Directors of FirstSouth may amend FirstSouth's Bylaws and
adopt new Bylaws, without stockholder approval, except as provided in the
Bylaws. The Bylaws provide that the shareholders of FirstSouth must approve
amendments to the Bylaws (i) requiring more than a majority of the voting shares
for a quorum at a meeting of stockholders or more than a simple majority of the
votes cast to constitute action by the stockholders, except where higher
percentages are required by law, and (ii) providing for the management of
FirstSouth otherwise than by the Board of Directors or its executive committee.
In addition, no bylaw adopted or amended by the stockholders of FirstSouth shall
be altered or repealed by the Board of Directors of FirstSouth.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
CENTURA. The Articles of Centura provide that Centura's Board of Directors
shall consist of not less than 15 nor more than 30 directors divided into three
classes, with each class to be as nearly equal in number as possible. The
directors in each class serve three-year terms of office. The effect of
Centura's having a classified Board of Directors is that only approximately
one-third of the members of the Board are elected each year, which effectively
requires two annual meetings for Centura's stockholders to change a majority of
the members of the Board. The purpose of dividing Centura's Board of Directors
into classes is to facilitate continuity and stability of leadership of Centura
by ensuring that experienced personnel familiar with Centura will be represented
on Centura's Board at all times , and to permit Centura's management to plan for
the future for a reasonable time. However, by potentially delaying the time
within which an acquirer could obtain working control of the Board, this
provision may discourage some potential mergers, tender offers, or takeover
attempts.
Pursuant to the Bylaws, each stockholder generally is entitled to one vote
for each share of Centura Stock held and is not entitled to cumulative voting
rights in the election of directors. With cumulative voting, a stockholder has
the right to cast a number of votes equal to the total number of such holder's
shares multiplied by the number of directors to be elected. The stockholder has
the right to distribute all of his votes in any manner among any number of
candidates or to cumulate such shares in favor of one candidate. Directors are
elected by a plurality of the total votes cast by all stockholders. With
cumulative voting, it may be possible for minority stockholders to obtain
representation on the Board of Directors. Without cumulative voting, the holders
of more than 50% of the shares of Centura Stock generally have the ability to
elect 100% of the directors. As a result, the holders of the remaining Centura
Stock effectively may not be able to elect any person to the Board of Directors.
The absence of cumulative voting thus could make it more difficult for a
stockholder who acquires less than a majority of the shares of Centura Stock to
obtain representation on Centura's Board of Directors.
FIRSTSOUTH. The Bylaws of FirstSouth provide that FirstSouth's Board of
Directors shall consist of not less than nine nor more than 21 individuals, the
exact number of directors to be elected being determined by the Board of
Directors. Currently, the Board of Directors of FirstSouth has set the number of
directors at 16. The Bylaws of FirstSouth provide that FirstSouth's Board of
Directors be divided into three classes, with each class to be as nearly equal
in number as possible. The directors in each class serve three-year terms of
office. The effect of FirstSouth having a classified Board of Directors is that
only approximately one-third of the members of the Board are elected each year
which effectively requires two annual meetings for FirstSouth's stockholders to
change a majority of the members of the Board. The purpose of dividing
FirstSouth's Board of Directors into classes is to facilitate continuity and
stability of leadership of FirstSouth by ensuring that experienced personnel
familiar with FirstSouth will be represented on FirstSouth's Board at all times,
and to permit FirstSouth's management to plan for the future for a reasonable
time. However, by potentially delaying the time within which an acquirer could
obtain working control of the Board, this provision may discourage some
potential mergers, tender offers, and takeover attempts. Pursuant to the Bylaws,
each stockholder is entitled to one vote for each share of FirstSouth Stock held
except in the election of directors, for which shareholders have cumulative
voting rights.
REMOVAL OF DIRECTORS
CENTURA. Centura's Articles provide that (i) a director may be removed by
the stockholders at any time with cause, and without cause upon the affirmative
vote of the holders of two-thirds of the voting power of all shares of capital
stock entitled to vote generally in the election of directors and (ii) vacancies
on the Board of Directors may be filled only by the Board of Directors. The
purpose of this provision is to prevent a majority stockholder from
circumventing the classified board system by removing directors and filling the
vacancies with new individuals selected by that stockholder. Accordingly, the
provision may have the effect of impeding efforts to gain control of the Board
of Directors by anyone who obtains a controlling interest
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in Centura Stock. The term of a director appointed to fill a vacancy expires at
the next meeting of stockholders at which directors are elected.
FIRSTSOUTH. FirstSouth's Bylaws provide that a director may be removed at
any time, with or without cause, by a vote of the stockholders holding a
majority of the outstanding shares entitled to vote at an election of directors.
However, unless the entire Board is removed, an individual director shall not be
removed when the number of shares voting against the proposal for removal would
be sufficient to elect a director if such shares could be voted cumulatively at
an annual election. Consequently, it would be more difficult to remove directors
representing minority stockholders.
LIMITATIONS ON DIRECTOR LIABILITY
CENTURA. Centura's Articles provide for the elimination of the personal
liability of each director arising out of an action by Centura or otherwise for
monetary damages for breach of his duty as a director, except for liability with
respect to (i) acts or omissions that the director at the time of such breach
knew or believed were clearly in conflict with the best interests of Centura,
(ii) any liability under Section 55-8-33 of the General Statutes of North
Carolina, or (iii) any transaction from which the director derived an improper
personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of his duties, if the action is among those as to
which liability is limited. This provision may reduce the likelihood of
stockholder derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duties, even though such action, if successful, might have benefited
Centura and its stockholders. The SEC has taken the position that similar
provisions added to other corporations' certificates of incorporation would not
protect those corporations' directors from liability for violations of the
federal securities laws. Similarly, the federal banking laws may not allow
directors of banks and bank holding companies to avoid liability for violations
of federal banking law or to receive indemnification for such violations.
FIRSTSOUTH. FirstSouth's Articles provide for the elimination of the
personal liability of each director to the same extent as Centura's Articles
except that no liability will be eliminated for acts or omissions where the
elimination of personal liability of directors for monetary damages would be
inconsistent with the provisions of Chapter 53 of the General Statutes of North
Carolina. This provision in FirstSouth's Articles would have the same effect as
that of Centura's provision discussed above.
INDEMNIFICATION
CENTURA. Under the NCBCA, subject to certain exceptions, a corporation may
indemnify an individual made a party to a proceeding, because he is or was a
director, against liability incurred in the proceeding if (i) he conducted
himself in good faith; (ii) he reasonably believed (a) in the case of conduct in
his official capacity with the corporation, that his conduct was in its best
interests, and (b) in all other cases, that his conduct was at least not opposed
to its best interests; and (iii) in the case of any criminal proceeding, he has
no reasonable cause to believe his conduct was unlawful. Moreover, unless
limited by its articles of incorporation, a corporation must indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with the
proceeding. Expenses incurred by a director in defending a proceeding may be
paid by the corporation in advance of the final disposition of such proceeding
as authorized by the board of directors in the specific case or as authorized or
required under any provision in the articles of incorporation or bylaws or by
any applicable resolution or contract upon receipt of an undertaking by or on
behalf of a director to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation against such
expenses. A director may also apply for court-ordered indemnification under
certain circumstances. Unless a corporation's articles of incorporation provide
otherwise, (i) an officer of a corporation is entitled to mandatory
indemnification and is entitled to apply for court-ordered indemnification to
the same extent as a director, (ii) the corporation may indemnify and advance
expenses to an officer, employee, or agent of the corporation to the same extent
as to a director and (iii) a corporation may also indemnify and advance expenses
to an officer, employee, or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract.
In addition and separate and apart from the indemnification rights
discussed above, the NCBCA further provides that a corporation may in its
articles of incorporation or bylaws or by contract or resolution indemnify or
agree to indemnify any one or more of its directors, officers, employees, or
agents against liability and expenses in any proceeding (including without
limitation a proceeding brought by or on behalf of the corporation itself)
arising out of their status as such or their activities in
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any of the foregoing capacities; provided, however, that a corporation may not
indemnify or agree to indemnify a person against liability or expenses he may
incur on account of his activities which were at the time taken known or
believed by him to be clearly in conflict with the best interests of the
corporation. A corporation may likewise and to the same extent indemnify or
agree to indemnify any person who, at the request of the corporation, is or was
serving as a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust, or other
enterprise or as a trustee or administrator under an employee benefit plan. Any
such provision for indemnification may also include provisions for recovery from
the corporation of reasonable costs, expenses, and attorneys' fees in connection
with the enforcement of rights to indemnification and may further include
provisions establishing reasonable procedures for determining and enforcing the
rights granted therein.
Centura's Bylaws provide for the mandatory indemnification, to the fullest
extent permitted by law, of any person who at any time serves or has served as a
director or officer of Centura, or, at the request of Centura, is or was serving
as a director, officer, agent, partner, trustee, administrator, or employee of
another entity in the event such person is made or is threatened to be made, a
party to any threatened, pending, or completed civil, criminal, administrative,
investigative, or arbitrative action, suit, or proceeding and any appeal therein
(and any inquiry or investigation that could lead to such action, suit, or
proceeding), whether or not brought by or on behalf of Centura, seeking to hold
such person liable by reason of the fact that such person is or was acting in
such capacity. The indemnification provision in the Centura Bylaws covers
reasonable expenses, including without limitation, all attorneys' fees actually
and necessarily incurred by such person in connection with any such action, suit
or proceeding, all reasonable payments made by such person in satisfaction of
any judgment, money decree, fine (including an excise tax assessed with respect
to an employee benefit plan), penalty, or settlement for which such person may
have become liable in such action, suit, or proceeding, and all reasonable
expenses incurred in enforcing the indemnification rights. Furthermore, Centura
may advance to such person his reasonable expenses incurred in connection with
any such action, suit or proceeding as authorized by the Board of Directors in
the specific case or as authorized or required under any Bylaw upon receipt of
an undertaking by or on behalf of such person to repay such amount unless it is
ultimately determined that such person is entitled to be indemnified by Centura
against such expenses.
Centura's Bylaws further provide that Centura may, but is not required to,
indemnify any agent, employee, or other person as the Board of Directors deems
appropriate. The Centura Board of Directors must take all such action as may be
necessary and appropriate to authorize Centura to pay the indemnification
required by the indemnification provision, including without limitation, to the
extent needed, making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity to such
claimant.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling Centura pursuant
to the foregoing provisions, Centura has been informed that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
FIRSTSOUTH. Under the NCBCA, directors and officers of FirstSouth would
have the same rights to indemnification as directors and officers of Centura.
Additionally, the Bylaws of FirstSouth provide that any person who serves as a
director or officer of FirstSouth shall have the right to be indemnified by
FirstSouth to the fullest extent permitted by law against reasonable expenses,
including attorney's fees, actually and necessarily incurred in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether or not brought by or on
behalf of FirstSouth, and payments made by such person in satisfaction of any
judgment, money decree, fine, penalty or settlement for which he may have become
liable in any such action, suit or proceeding. Furthermore, under the NCBCA
FirstSouth may advance to such person his reasonable expenses incurred in
connection with any such action, suit or proceeding as authorized by the Board
of Directors of FirstSouth in the specific case upon the receipt of an
undertaking from the person to repay such expenses if it is ultimately
determined that such person is not entitled to be indemnified by FirstSouth
against such expenses. FirstSouth's Bylaws further provide that the Board of
Directors of FirstSouth must take all such action as may be necessary and
appropriate to authorize FirstSouth to pay the indemnification required by the
indemnification provision, including without limitation, to the extent needed,
making a good faith evaluation of the manner in which the claimant for indemnity
acted and of the amount of indemnity due such claimant.
SPECIAL MEETING OF STOCKHOLDERS
CENTURA. Centura's Bylaws provide that special meetings of stockholders may
be called only by the Board of Directors, the Chairman of the Board, or the
President. Holders of Centura Stock do not have the right to call a special
meeting or to require that Centura's Board of Directors call such a meeting. As
a result, this provision, taken together with the restriction
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on the removal of directors, would prevent a substantial stockholder from
compelling stockholder consideration of any proposal (such as a proposal for a
Business Combination) over the opposition of Centura's Board of Directors by
calling a special meeting of stockholders at which such stockholder could
replace the entire Board of Directors with nominees who were in favor of such
proposal.
FIRSTSOUTH. FirstSouth's Bylaws provide that special meetings of
stockholders may be called by the President, the Board of Directors, or at the
written request of the holders of not less than one-tenth of all shares entitled
to vote at the meeting.
CONSTITUENCY AND STAKEHOLDER PROVISIONS
CENTURA. Centura's Articles expressly authorize the Board of Directors of
Centura, any committee of the Board of Directors, or any individual director, in
determining what is in the best interest of Centura and its stockholders, to
consider, in addition to the long-term and short-term interests of the
stockholders, the social and economic effects of the matter to be considered on
Centura and its subsidiaries, their employees, depositors, customers, creditors,
and the communities in which Centura and its subsidiaries operate or are
located. When evaluating a Business Combination or a proposal by another person
to make a Business Combination or a tender offer or any other proposal relating
to a potential change in control of Centura, the Board of Directors may consider
such matters as the business and financial condition and earnings prospects of
the acquiring person, 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, and the possible effect of such conditions upon Centura and
its subsidiaries and the communities in which Centura and its subsidiaries
operate or are located, the competence, experience, and integrity of the
acquiring person and its management, and the prospects for successful conclusion
of the Business Combination, offer, or proposal. The consideration of any of the
above factors is completely discretionary with the Centura Board of Directors
and does not give any constituency other than stockholders the right to be so
considered.
The constituency provision of the Articles of Centura may discourage or
make more difficult certain acquisition proposals or Business Combinations and,
therefore, may adversely affect the ability of stockholders to benefit from
certain transactions opposed by the Centura Board of Directors. The constituency
provision would allow the Centura Board of Directors to take into account the
effects of an acquisition proposal on a broad number of constituencies and to
consider any potential adverse effects in determining whether to accept or
reject such proposal.
FIRSTSOUTH. FirstSouth's Bylaws provide that, in considering the
advisability of FirstSouth entering into any combination, merger or other
affiliation with another corporation, the Board of Directors shall weigh the
effects such affiliation would have on FirstSouth's stockholders, officers,
employees, customers and public. This constituency provision of the Bylaws of
FirstSouth may discourage or make more difficult certain acquisition proposals
and, therefore, may adversely affect the ability of stockholders to benefit from
certain transactions opposed by the FirstSouth Board of Directors. The
constituency provision would allow the FirstSouth Board of Directors to take
into account the effects of an acquisition proposal on a broad number of
constituencies and to consider any potential adverse effects in determining
whether to accept or reject such proposal.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
CENTURA. The Bylaws of Centura provide that any action required or
permitted to be taken by Centura stockholders at a duly called meeting of
stockholders may be effected by the unanimous written consent of the
stockholders entitled to vote on such action.
FIRSTSOUTH. FirstSouth's Bylaws provide that any action which may be taken
at a meeting of the stockholders of FirstSouth may be taken without a meeting if
a consent in writing setting forth the action so taken shall be signed by all of
the persons who would be entitled to vote upon such action at a meeting.
STOCKHOLDER NOMINATIONS AND PROPOSALS
CENTURA. Centura's Articles and Bylaws provide that no stockholder may
nominate individuals for election to the Board of Directors.
FIRSTSOUTH. Neither FirstSouth's Articles nor its Bylaws provide for a
manner in which stockholders of FirstSouth may make nominations to the Board of
Directors. Pursuant to FDIC regulation, any such nomination would have to be
submitted in writing to FirstSouth not less than 120 days prior to the date of
any meeting called for the election of directors.
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FAIR PRICE PROVISIONS
CENTURA. The fair price provision of the Articles applies to Business
Combinations that have not received the approval of two-thirds of the full Board
of Directors and is available only to stockholders who vote against such
Business Combinations and who elect to sell their shares to Centura for cash at
the fair price of such shares. The fair price provision requires that the
consideration for such shares be paid in cash by Centura and that the price per
share be at least equal to the highest of the following:
(a) the highest price per share paid for Centura Stock during the four
years immediately preceding the Business Combination vote by any
stockholder who beneficially owned 5.0% or more of Centura Stock and who
votes in favor of the Business Combination;
(b) the cash value of the highest price per share previously offered
pursuant to a tender offer to the stockholders of Centura within the four
years immediately preceding the Business Combination vote;
(c) the aggregate earnings per share of Centura Stock during the four
fiscal quarters immediately preceding the Business Combination vote
multiplied by the highest price/earnings ratio of Centura Stock at any time
during the four fiscal quarters or up to the date the Business Combination
vote occurs;
(d) the highest price per share, including commissions and fees, paid
by a Control Person in acquiring any of its holdings of Centura Stock; or
(e) the fair value per share of Centura Stock as determined by an
investment banking or appraisal firm chosen by a majority of the members of
the Board of Directors voting against the Business Combination, such fair
value not taking into consideration the fact that the shares are held by a
majority of the Centura stockholders.
The fair price provision is designed primarily to discourage attempts to
acquire Centura in transactions utilizing two-tier pricing tactics, but the
provision may affect and potentially discourage other transactions that are not
two-tier structured. Transactions utilizing two-tier pricing tactics typically
involve the accumulation of a substantial block of a target corporation's stock
followed by a merger or other reorganization of the acquired corporation on
terms determined by the purchaser. In such two-tiered takeover attempts, the
purchaser generally pays cash to acquire a controlling interest in a corporation
and acquires the remaining interest by paying the remaining stockholders a price
lower than that paid to acquire the controlling interest. The Board of Directors
believes that the fair price provision may prevent some of the potential
inequities of two-tiered takeover attempts by encouraging persons interested in
acquiring Centura to negotiate in advance with the Board of Directors since, if
two-thirds of the full Board of Directors approves certain Business
Combinations, the fair price provision would be avoided. The Board of Directors
believes that the interests of the stockholders of Centura would be best served
by such negotiation based on careful consideration of all relevant factors.
Despite this belief, however, some stockholders may find the fair price
provision disadvantageous to the extent it discourages changes in control in
which stockholders might receive, for at least some of their shares, a
substantial premium above the market price paid to stockholders who vote against
the Business Combination and then elect to sell their shares to Centura for
cash. Furthermore, the provision may encourage stockholders to vote against a
Business Combination, which has been approved by a majority of a quorum but less
than two-thirds of the full Board of Directors. In addition, assets of Centura
could be used to reacquire shares, possibly at a substantial premium, from
stockholders who voted against the transaction, which may be to the detriment of
stockholders who voted for the transaction. Finally, if the fair price provision
has the effect of giving management more bargaining power in negotiation with a
potential acquirer, it could result in management using the bargaining power not
only to try to negotiate a favorable price for an acquisition, but also more
favorable terms for management.
FIRSTSOUTH. The fair price provision of FirstSouth's Articles applies to
any business combination that is proposed by an "interested shareholder." An
"interested shareholder" is any person or entity which beneficially owns,
directly or indirectly, 10% or more of the outstanding shares of FirstSouth
Stock. The fair price provision requires that the consideration to be received
on a per share basis by each FirstSouth stockholder shall be at least equal to
the highest amount of the following:
(i) the highest per share price (including any brokerage commissions,
transfer taxes, soliciting dealer fees and other related expenses) paid by
the interested shareholder in acquiring any shares of FirstSouth Stock,
whether acquired before or after becoming an interested shareholder;
(ii) the fair market value per share of FirstSouth Stock on the date
of the first public announcement of the proposed business combination (the
"Announcement Date");
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(iii) FirstSouth's net income per share for the four fiscal quarters
immediately preceding the Announcement Date, multiplied by the highest
price/earnings multiple of FirstSouth within the two years immediately
preceding the Announcement Date;
(iv) FirstSouth's book value per share at the end of the fiscal
quarter immediately preceding the Announcement Date multiplied by the
highest price/book multiple of FirstSouth within the two years immediately
preceding the Announcement Date;
(v) FirstSouth's net income per share for the four fiscal quarters
immediately preceding the announcement date, multiplied by the highest
price/earnings multiple of FirstSouth paid by an interested shareholder for
any share of FirstSouth Stock; or,
(vi) FirstSouth's book value per share at the end of the fiscal
quarter immediately preceding the Announcement Date, multiplied by the
highest price/book multiple of FirstSouth paid by an interested shareholder
for any share of FirstSouth Stock.
The fair price provision in FirstSouth's Articles is designed primarily to
discourage attempts to acquire FirstSouth in transactions utilizing two-tier
pricing tactics, but the provision may effect and potentially discourage other
transactions that are not two-tier structured. See the discussion regarding
Centura's fair price provision.
BUSINESS COMBINATIONS
CENTURA. The Articles of Centura provide that, unless more restrictively
required by applicable law, any Business Combination, as defined therein, must
be approved by a majority of a quorum of the Board of Directors and must receive
one of the following levels of stockholder approval: (i) at a special or annual
meeting of stockholders by an affirmative vote of the stockholders holding at
least a majority of the shares of Centura Stock issued and outstanding and
entitled to vote thereon, provided that such Business Combination has received
the prior approval by a resolution adopted by an affirmative vote of at least
two-thirds of the full Board of Directors before such Business Combination is
submitted for approval to the stockholders; or (ii) at a special or annual
meeting of stockholders by an affirmative vote of the stockholders holding at
least two-thirds of the shares of Centura Stock issued and outstanding and
entitled to vote thereon provided that such Business Combination has received
the prior approval by a resolution adopted by an affirmative vote of at least a
majority of a quorum of the Board of Directors (but less than two-thirds of the
Board of Directors). In addition, if the Business Combination is approved by an
affirmative vote of at least two-thirds of the stockholders entitled to vote and
by a majority of a quorum of the Board of Directors but less than two-thirds of
the full Board of Directors, the Business Combination must grant to stockholders
not voting to approve the Business Combination certain fair price rights.
The Articles of Centura define a "Business Combination" as (i) any merger
or consolidation of Centura into any other corporation, person, group, or other
entity where Centura is not the surviving or resulting entity; (ii) any merger
or consolidation of Centura with or into any "Control Person" (as defined in the
Articles) or with any corporation, person, group, or other entity where the
merger or consolidation is proposed by or on behalf of a Control Person; (iii)
any sale, lease, exchange, or other disposition of all or substantially all of
the assets of Centura; (iv) any sale, lease, exchange, or other disposition of
more than 10% of the total assets of Centura (determined as of the end of the
most recent fiscal year) to a Control Person; (v) the issuance of any securities
of Centura to a Control Person; (vi) the acquisition by Centura of any
securities of a Control Person unless such acquisition begins prior to the
person becoming a Control Person or is an attempt to prevent the Control Person
from obtaining greater control of Centura; (vii) the acquisition by Centura of
all or substantially all of the assets of any Control Person or any entity where
the acquisition is proposed by or on behalf of a Control Person; (viii) the
adoption of any plan or proposal for the liquidation or dissolution of Centura
which is proposed by or on behalf of a Control Person; (ix) any reclassification
of securities or recapitalization of Centura which has the effect of increasing
the proportionate share of the outstanding shares of any class of equity or
convertible securities of Centura which is beneficially owned or controlled by a
Control Person; (x) any of the above transactions which are between Centura and
any of its subsidiaries and which are proposed by or on behalf of any Control
Person; or (xi) any agreement, plan, contract, or other arrangement providing
for any of the above transactions.
The requirement of a supermajority vote of stockholders to approve certain
business transactions, as described above, may discourage a change in control of
Centura by allowing a minority of Centura's stockholders to prevent a
transaction favored by the majority of the stockholders. Also, in some
circumstances, the Board of Directors could cause a two-thirds vote to be
required to approve a transaction thereby enabling management to retain control
over the affairs of Centura and
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their positions with Centura. The primary purpose of the supermajority vote
requirement, however, is to encourage negotiations with Centura's management by
groups or corporations interested in acquiring control of Centura and to reduce
the danger of a forced merger or sale of assets.
The North Carolina Shareholder Protection Act requires, under certain
circumstances and subject to certain exceptions, the affirmative vote of at
least 95% of the voting shares of a corporation to adopt or authorize certain
business combinations with any other entity. The 95% vote requirement does not
apply if all of certain fair price and procedural requirements are satisfied.
The North Carolina Shareholder Protection Act applies to corporations that have
a class of shares registered under Section 12 of the Exchange Act (a "public
corporation") and that have not opted out of the provisions of the North
Carolina Shareholder Protection Act. Centura's Articles provide that Centura
will not be subject to the North Carolina Shareholder Protection Act.
The North Carolina Control Share Acquisition Act provides that in the event
any person or group acting in concert acquires certain designated percentage
interests of the total voting power of a corporation, the shares acquired in the
acquisition are not entitled to vote unless the right to vote such shares is
approved by a majority of all of the outstanding shares of the corporation
entitled to vote for the election of directors, excluding certain interested
shares, as that term is defined by the statute. If voting rights are granted to
the control shares, other stockholders may have their shares redeemed by the
corporation at their fair value. The North Carolina Control Share Acquisition
Act applies only to a North Carolina public corporation with certain required
contacts with North Carolina (a "covered corporation"), the bylaws or articles
of incorporation of which do not opt out of the North Carolina Control Share
Acquisition Act, and does not apply to acquisitions of stock pursuant to a
merger or tender offer approved by the Board of Directors. Centura's Articles
provide that Centura will not be subject to the North Carolina Control Share
Acquisition Act.
FIRSTSOUTH. FirstSouth's Articles provide that the affirmative vote of the
holders of not less than 75% of the outstanding shares of FirstSouth Stock
entitled to vote shall be required to authorize any Business Combination unless
the Business Combination shall have been approved by two-thirds of the Board of
Directors of FirstSouth and the fair price provisions, if applicable, are met,
in which case any Business Combination must be approved by the affirmative vote
as is required by law.
FirstSouth is subject to the North Carolina Shareholder Protection Act and
the North Carolina Control Share Acquisition Act. The Merger, however, is not
subject to the provisions of either Act.
DISSENTERS' RIGHTS OF APPRAISAL
CENTURA. Under the NCBCA, a stockholder is generally entitled to dissent
from, and obtain payment of the fair value of his shares in the event of: (i)
consummation of a plan of merger to which the corporation is a party, unless
either (a) stockholder approval is not required by the NCBCA or (b) such shares
are then redeemable by the corporation at a price not greater than the cash to
be received in exchange for such shares; (ii) consummation of a plan of share
exchange to which the corporation is a party as the corporation whose shares
will be acquired, unless such shares are then redeemable by the corporation at a
price not greater than the cash to be received in exchange for such shares;
(iii) consummation of a sale or exchange of substantially all of the
corporation's property other than in the usual and regular course of business,
including a sale in dissolution, but not including a sale pursuant to court
order or to a plan by which substantially all of the net proceeds of the sale
will be distributed in cash to the stockholders within one year after the date
of sale; (iv) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it (a)
alters or abolishes a preferential right of the shares, (b) creates, alters, or
abolishes a right in respect of redemption of the shares, (c) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities, (d) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, (e) reduces the number of shares owned by the
stockholder to a fraction of a share if the fractional share so created is to be
acquired for cash under the NCBCA, or (f) changes the corporation into a
nonprofit corporation or cooperative organization; or (v) any corporate action
taken pursuant to a stockholder vote, to the extent the articles of
incorporation, bylaws, or a resolution of the board of directors provide that
voting or nonvoting stockholders are entitled to dissent and obtain payment for
their shares. Centura's Articles and Bylaws do not provide for any such
additional dissenters' rights.
FIRSTSOUTH. Under the NCBCA, a FirstSouth stockholder is entitled to
dissent from, and obtain fair payment of the value of his shares to the same
extent discussed above for Centura stockholders. FirstSouth's Articles and
Bylaws do not provide for any additional dissenters' rights.
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STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
CENTURA. The NCBCA provides that a stockholder may inspect books and
records upon written demand under oath stating the purpose of the inspection, if
such purpose is reasonably related to such person's interest as a stockholder.
FIRSTSOUTH. FirstSouth stockholders have the same rights as Centura
stockholders under the NCBCA to inspect the books and records of FirstSouth upon
written demand under oath stating the purpose of the inspection, if such purpose
is reasonably related to such person's interest as a stockholder.
DIVIDENDS
CENTURA. Section 53-87 of the North Carolina General Statutes generally
allows Centura's subsidiary depository institution to pay cash dividends to
Centura only out of the subsidiary depository institution's undivided profits
and only if Centura's surplus is equal to at least 50% of its paid-in capital
stock. Substantially all of the funds available for the payment of dividends by
Centura are derived from its subsidiary depository institution. There are
various statutory limitations on the ability of Centura's subsidiary depository
institutions to pay dividends to Centura. See "CERTAIN REGULATORY
CONSIDERATIONS -- Payment of Dividends."
FIRSTSOUTH. The ability of FirstSouth to pay dividends is subject to
statutory and regulatory restrictions on the payment of cash dividends,
including the requirement under North Carolina banking laws that cash dividends
be paid only out of undivided profits and only if the bank has surplus of a
specified level. Federal bank regulatory authorities also have the general
authority to limit the dividends paid by insured banks if such payment may be
deemed to constitute an unsafe or unsound practice. See "CERTAIN REGULATORY
CONSIDERATIONS -- Payment of Dividends."
INFORMATION ABOUT FIRSTSOUTH
GENERAL
FirstSouth is a North Carolina-chartered commercial bank headquartered in
Burlington, North Carolina, with five banking offices bank located in
Burlington, North Carolina and surrounding communities. As of June 30, 1996,
FirstSouth had total assets of approximately $177.8 million, total deposits of
approximately $158.9 million, and total stockholders' equity of approximately
$17.1 million. FirstSouth offers a broad range of banking and banking-related
services.
FirstSouth has agreed to sell its Yanceyville branch to American National
Bank and Trust Company, Danville, Virginia, including the loans and deposits
associated with that branch, which sale is expected to occur immediately prior
to the Effective Time of the Merger. At June 30, 1996, the Yanceyville branch
had approximately $4.8 million in loans and approximately $21.5 million in
deposits. The sale of the Yanceyville branch will have no effect on the Merger,
including the Exchange Rate. The sale was negotiated by FirstSouth after
execution of the Agreement. Centura has agreed to the sale.
FirstSouth was organized under the laws of the state of North Carolina and
commenced operations in 1988. Additional information with respect to FirstSouth
is included in documents incorporated by reference in this Proxy Statement. See
"AVAILABLE INFORMATION," "DOCUMENTS INCORPORATED BY REFERENCE" and "CERTAIN
REGULATORY CONSIDERATIONS."
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of June 30, 1996, the number of shares
and percentage of FirstSouth Stock beneficially owned by each director of
FirstSouth and, in the aggregate, by all directors and executive officers of
FirstSouth as a group. Other than as set forth below, as of June 30, 1996, no
shareholder was known by management of FirstSouth to be the beneficial owner of
more than five percent of the FirstSouth Stock.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES
NUMBER OF SHARES SHARES BENEFICIALLY
NAME OF BENEFICIALLY OWNED ACQUIRABLE UNDER OWNED INCLUDING
BENEFICIAL OWNER (EXCLUDING OPTIONS) (1) STOCK OPTION PLANS (2) OPTION SHARES
<S> <C> <C> <C>
D. Earl Pardue (3)............................... 72,378 25,436 97,814
Jerome B. Taylor (4)............................. 58,269 25,433 83,702
Wade Williamson, Jr. (5)......................... 40,685 48,510 89,195
James B. Powell (6).............................. 82,096 10,790 92,886
W.E. Love, Jr. (7)............................... 55,553 10,790 66,343
Edwin B. Armstrong, Jr. (8)...................... 27,030 10,790 37,820
Eda C. Holt (9).................................. 26,010 10,790 36,800
Jack R. Lindley (10)............................. 57,479 10,790 68,269
Rose Ann Gant (11)............................... 11,446 10,790 22,236
C.C. McNeely, Jr. (12)........................... 16,696 10,790 27,486
William A. Hawks (13)............................ 37,270 10,790 48,060
James B. Crouch, Jr. (14)........................ 23,729 10,790 34,519
James R. Copeland, III (15)...................... 72,032 10,790 82,822
Troy W. Woodard, Sr.............................. 6,029 -0- 6,029
Loren A. Tompkins (16)........................... 4,368 -0- 4,368
James Y. Blackwell, Jr........................... 347 -0- 347
All directors and executive officers as a group
(21 persons, 16 of whom are listed above)...... 610,235 238,837 849,072
<CAPTION>
NAME OF
BENEFICIAL OWNER PERCENT (17)
<S> <C>
D. Earl Pardue (3)............................... 5.06
Jerome B. Taylor (4)............................. 4.36
Wade Williamson, Jr. (5)......................... 4.63
James B. Powell (6).............................. 4.82
W.E. Love, Jr. (7)............................... 3.49
Edwin B. Armstrong, Jr. (8)...................... 2.02
Eda C. Holt (9).................................. 1.97
Jack R. Lindley (10)............................. 3.59
Rose Ann Gant (11)............................... 1.20
C.C. McNeely, Jr. (12)........................... 1.48
William A. Hawks (13)............................ 2.55
James B. Crouch, Jr. (14)........................ 1.85
James R. Copeland, III (15)...................... 4.32
Troy W. Woodard, Sr.............................. 0.33
Loren A. Tompkins (16)........................... 0.24
James Y. Blackwell, Jr........................... 0.02
All directors and executive officers as a group
(21 persons, 16 of whom are listed above)...... 31.62
</TABLE>
(1) Unless otherwise noted, to the best of FirstSouth's knowledge, shares are
held of record by the persons named and such persons exercises sole voting
and investment power with respect to their shares.
(2) With respect to Messrs. Pardue, Taylor, Powell, Love, Armstrong, Lindley,
McNeely, Hawks, Crouch and Copeland and Mrs. Holt and Mrs. Gant, reflects
shares which may be acquired upon the exercise of options granted under
FirstSouth's 1988 Stock Option Plan for Directors. With respect to Mr.
Williamson, reflects shares which may be acquired by Mr. Williamson upon
the exercise of options granted to him pursuant to FirstSouth's Stock
Option Plan for Key Employees. Included within the optioned shares
beneficially owned by all directors and executive officers, as a group, are
an additional 37,339 shares subject to options granted to executive
officers pursuant to FirstSouth's Stock Option Plan for Key Employees.
(3) D. Earl Pardue exercises sole voting and investment power over 60,415
shares that he holds individually of record. Mr. Pardue exercises shared
voting and investment power over 9,095 shares held of record by his spouse,
over 819 shares held jointly with his spouse, and over 868 shares held of
record by a child residing in his household. Mr. Pardue's address is 2401
Oakwood Drive, Burlington, North Carolina 27215.
(4) Jerome B. Taylor exercises sole voting and investment power over 123 shares
that he holds individually of record. Mr. Taylor exercises sole investment
and shared voting power with respect to 47,234 shares held of record in his
individually directed accounts in qualified retirement plans. Mr. Taylor
exercises shared voting and investment power over 10,912 shares held of
record in Mr. Taylor's spouse's individually directed accounts in qualified
retirement plans.
(5) Wade Williamson exercises sole voting and investment power over 30,439
shares that he holds individually of record and over 908 shares held of
record in his individual retirement account. Mr. Williamson exercises
shared voting and investment power over 9,338 shares held of record in his
individually directed account in a qualified retirement plan.
(6) James B. Powell exercises sole voting and investment power over 73,001
shares that he holds individually of record and exercises shared voting and
investment power over 9,095 shares held of record by his spouse. Dr.
Powell's address is 358 South Main Street, Burlington, North Carolina
27215.
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(7) W.E. Love, Jr. exercises sole voting and investment power over 22,461
shares that he holds individually of record and over 4,461 shares held of
record in the W.E. Love & Associates, Inc. Employees' 401(k) Retirement
Plan and Trust of which Mr. Love is the trustee. Mr. Love exercises shared
voting and investment power over 9,460 shares held of record by his spouse.
Mr. Love exercises shared voting and investment power over 12,241 shares
held of record by W.E. Love & Associates, Inc. of which Mr. Love is the
majority shareholder and a director. Mr. Love exercises shared voting and
investment power over 6,930 shares held of record by Universal Insurance
Company, Inc. Mr. Love is a director of Universal Insurance Company, Inc.,
which is a wholly-owned subsidiary of Innovative Company of which Mr. Love
controls 50% of the voting power.
(8) Edwin B. Armstrong, Jr. exercises sole voting and investment power over
1,805 shares that he holds individually of record. Mr. Armstrong exercises
shared voting and investment power over 2,474 shares held of record by his
spouse, over 21,701 shares held of record jointly with his spouse and over
1,050 shares held jointly with his daughter.
(9) Eda C. Holt exercises sole voting and investment power over 22,981 shares
that she holds individually of record and exercises shared voting and
investment power over 3,029 shares held of record by her spouse.
(10) Jack R. Lindley exercises sole voting and investment power over 30,193
shares that he holds individually of record and exercises shared voting and
investment power over 27,286 shares held of record by his spouse.
(11) Rose Ann Gant exercises sole voting and investment power over 11,446 shares
that she holds individually of record.
(12) C.C. McNeely, Jr. exercises sole voting and investment power over 14,068
shares that he holds individually of record and exercises shared voting and
investment power over 2,268 shares held by his spouse. Mr. McNeely
exercises sole voting and investment power over 360 shares held by him as
custodian for his grandchildren under the North Carolina Uniform Transfers
to Minors Act (the "Minors Act").
(13) William A. Hawks exercises sold voting and investment power over 20,782
shares that he holds individually of record and exercises shared voting and
investment power over 9,500 shares held of record by his spouse. Mr. Hawks
exercises sole investment and voting power over 6,988 shares held of record
in his individual retirement account.
(14) James B. Crouch, Jr. exercises sole voting and investment power over 19,611
shares that he holds individually of record. Mr. Crouch exercises shared
voting and investment power with respect to 908 shares held of record in
his spouse's individual retirement account and exercises shared voting and
investment power over 2,882 shares held of record by his brother as
custodian for Mr. Crouch's children under the Minors Act.
(15) James R. Copland, III exercises sole voting and investment power over
40,020 shares that he holds individually of record and exercises shared
voting and investment power over 2,000 shares held of record by his spouse.
Mr. Copland exercises shared voting and investment power over 30,012 shares
held of record by or for his children.
(16) Loren A. Tompkins exercises sole voting and investment power over 3,213
shares that he holds individually of record and exercises shared voting and
investment power over 1,155 shares held of record by his spouse.
(17) Except as noted herein, the calculation of percentage of ownership is based
on 1,835,841 outstanding shares. In calculating the percentage ownership of
a director, the shares of FirstSouth Stock which such person can acquire
upon the exercise of options are deemed to be outstanding for the purpose
of computing such person's percentage of ownership, but are not deemed to
be outstanding for the purpose of computing the percentage of FirstSouth
Stock owned by any other person. In calculating the percentage of ownership
of all directors and executive officers, as a group, the shares of
FirstSouth Stock which can be acquired under stock options are treated as
outstanding shares.
INFORMATION ABOUT CENTURA
GENERAL
Centura, a North Carolina corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. Centura owns all of the outstanding
shares of Centura Bank, a North Carolina bank corporation. Centura, through
Centura Bank and its subsidiaries, offers a full range of financial services
through 154 offices located in 93 communities throughout North Carolina and
through a variety of alternative delivery channels. As of June 30, 1996, Centura
had total consolidated assets of approximately $5.6 billion, total consolidated
deposits of approximately $4.3 billion, and total consolidated stockholders'
equity of approximately $399 million.
Centura Bank is a North Carolina bank with deposits insured by the Bank
Insurance Fund and the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation and is a Federal Reserve member bank. Centura Bank, either
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directly or through its subsidiaries, provides a wide range of financial
services, including: full-service commercial and consumer banking services;
retail securities brokerage services; insurance brokerage services covering a
full line of personal and commercial lines; and mortgage banking services.
Centura Bank also offers services through alternative delivery channels that
include: over 200 automated teller machines throughout North Carolina; a
centralized telephone operation offering a full line of financial services; and
home banking through a telephone network operated by a third party and connected
to the personal computers of customers. In addition, through its Trust
Department, Centura Bank acts as trustee, executor, administrator, custodian,
guardian and depository for individual estates, and serves as administrator or
trustee for various types of employee benefit plans of corporations and other
organizations.
The principal executive offices of Centura and Centura Bank are located at
134 North Church Street, Rocky Mount, North Carolina 27804, and its telephone
number at such address is (919) 977-4400. Additional information with respect to
Centura and its subsidiaries is included in documents incorporated by reference
in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS INCORPORATED BY
REFERENCE," and "CERTAIN REGULATORY CONSIDERATIONS."
RECENT ACQUISITIONS
On February 27, 1996, Centura consummated its merger with First Commercial
Holding Corporation, a Delaware bank holding company with its principal offices
in Asheville, North Carolina ("FCHC"). In addition, First Commercial Bank,
FCHC's wholly-owned North Carolina state bank subsidiary, was merged with and
into Centura Bank. The merger was consummated through the issuance of 0.63 share
of Centura's common stock for each share of outstanding common stock of FCHC or
1,607,564 shares. Centura's board of directors approved the repurchase of up to
9.9% of the shares issued. The transaction was accounted for as a
pooling-of-interests.
On July 26, 1996, Centura consummated its assumption of approximately $71
million in deposit liabilities and the acquisition at book value of
approximately $74,000 of deposit-related loans of the branch offices operated by
Essex in Greensboro, Raleigh, and Wilmington, North Carolina. Centura did not
open the branch offices of Essex, but consolidated the deposits into existing
Centura branches. Centura paid a one percent deposit premium for the assumed
deposits.
On August 16, 1996, Centura consummated its acquisition of First Community
Bank, Gastonia, North Carolina. The acquisition was consummated through the
issuance of .96 of a share of Centura Stock for each issued and outstanding
share of First Community common stock. The transaction was accounted for as a
purchase and resulted in the recognition of approximately $16 million in
goodwill. First Community had approximately $121 million in assets and four
banking offices in the Gastonia area. Centura's board of directors approved the
purchase in the open market of up to all of the shares of Centura Stock to be
issued in the First Community merger.
On June 11, 1996, Centura announced that it had entered into an agreement
to purchase 49% of First Greensboro Home Equity, Inc. ("First Greensboro") for
approximately $29 million. First Greensboro is a mortgage company with its
principal headquarters in Greensboro, North Carolina. First Greensboro will
retain controlling interest of the company and will be accounted for as an
unconsolidated subsidiary. The closing date of the transaction is expected to
occur before the end of 1996 after all regulatory approvals have been obtained
and subsequent waiting periods have expired.
On August 21, 1996, Centura announced that it reached agreement to acquire
CLG, Inc., a privately-owned company that specializes in leasing computer and
technological equipment throughout the United States. Centura will exchange for
approximately 1.66 million shares of Centura Stock for all of the issued and
outstanding common stock of CLG. CLG, which has total assets of approximately
$124 million, is based in Raleigh, North Carolina, with additional offices in
Charlotte and Wilmington, North Carolina, Columbus, Georgia and Dallas, Texas.
The merger is expected to be accounted for as a pooling-of-interests, is subject
to regulatory approvals, and is expected to be completed during the fourth
quarter of 1996.
At June 30, 1996, an aggregate of approximately 400,000 shares remained
available for repurchase under the repurchase plans announced by Centura for the
above acquisitions. There can be no assurance as to whether or when Centura will
repurchase such shares. For additional information with respect to these
acquisitions, see information contained in documents referenced under "DOCUMENTS
INCORPORATED BY REFERENCE."
Centura continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations, frequently take place, and future business
combinations involving cash, debt, or equity securities can be expected. Any
future business combination or series of business combinations that Centura
might undertake may be material, in terms of assets acquired or liabilities
assumed, to Centura's financial condition. Recent business combinations in the
banking industry
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have typically involved the payment of a premium over book and market values.
This practice could result in dilution of book value and net income per share
for the acquirer.
STOCK OWNERSHIP OF MANAGEMENT
Information regarding the ownership of Centura Stock by management of
Centura is incorporated herein by reference to Centura's Annual Report on form
10-K for the year ended December 31, 1995. At February 29, 1996, directors and
executive officers of Centura beneficially owned an aggregate of 1,588,833
shares of Centura Stock which was 6.9% of the Centura Stock then outstanding. In
addition, at February 29, 1996, the Centura Bank Trust Department held 1,418,592
shares, or 6.2%, of the then outstanding shares of Centura Stock.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to Centura and FirstSouth.
GENERAL
Centura is a bank holding company registered with the Federal Reserve under
the BHC Act. As such, Centura and its non-bank subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy which is discussed below.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate
Banking Act), which became effective on September 29, 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that Centura and any other bank holding company located in North
Carolina may now acquire a bank located in any other state, and any bank holding
company located outside North Carolina may lawfully acquire any North
Carolina-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage limitations, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether. North Carolina has enacted "opt in" legislation that
permits interstate branching in North Carolina on a reciprocal basis through
June 1, 1997, and on an unlimited basis thereafter. Accordingly, the banking
subsidiary of Centura and FirstSouth are currently able to establish and operate
branches in other states that have also enacted "opt in" legislation.
The BHC Act generally prohibits Centura from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices.
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For example, factoring accounts receivable, acquiring or servicing loans,
leasing personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance in connection
with credit transactions, and performing certain insurance underwriting
activities all have been determined by the Federal Reserve to be permissible
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Centura Bank and FirstSouth are both members of the Federal Deposit
Insurance Corporation (the "FDIC"), and as such, their deposits are insured by
the FDIC to the maximum extent provided by law. Centura Bank and FirstSouth are
both subject to numerous state and federal statutes and regulations that affect
their business, activities, and operations. As a North Carolina-chartered bank
that is a member of the Federal Reserve System, Centura Bank is supervised and
examined by the Federal Reserve and the Commissioner. FirstSouth, a North
Carolina-chartered bank that is not a member of the Federal Reserve System, is
supervised and examined by the FDIC and the Commissioner. The federal banking
agencies and the Commissioner regularly examine the operations of Centura Bank
and FirstSouth and are given authority to approve or disapprove mergers,
consolidations, the establishment of branches, and similar corporate actions,
and to prevent the commencement or continuation of unsafe or unsound banking
practices or other violations of law. The federal banking agencies and the
Commissioner regulate and monitor all areas of the operations of Centura Bank
and FirstSouth, including loans, mortgages, issuances of securities, capital
adequacy, loss reserves, and compliance with the Community Reinvestment Act of
1977, as amended (the "CRA") and other laws and regulations. Interest and
certain other charges collected and contracted for by Centura Bank and
FirstSouth are also subject to state usury laws and certain federal laws
concerning interest rates.
COMMUNITY REINVESTMENT
FirstSouth and Centura are subject to the provisions of the CRA and the
federal banking agencies' implementing regulations. Under the CRA, all financial
institutions have a continuing and affirmative obligation consistent with their
safe and sound operation to help meet the credit needs for their entire
communities, including low- and moderate-income neighborhoods. The CRA does not
establish specific lending requirements or programs for financial institutions,
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community,
consistent with the CRA. The CRA requires a depository institution's federal
regulator, in connection with its examination of the institution, to assess the
institution's record in assessing and meeting the credit needs of the community
served by that institution, including low- and moderate-income neighborhoods.
The regulatory agency's assessment of the institution's record is made available
to the public. Further, such assessment is required of any institution which has
applied to: (i) charter a national bank; (ii) obtain deposit insurance coverage
for a newly chartered institution; (iii) establish a new branch office that will
accept deposits; (iv) relocate an office; or (v) merge or consolidate with, or
acquire the assets or assume the liabilities of, a federally regulated financial
institution. In the case of a bank holding company applying for approval to
acquire a bank or other bank holding company, the Federal Reserve will assess
the records of each subsidiary depository institution of the applicant bank
holding company, and such records may be the basis for denying the application.
Following their most recent CRA compliance examinations, Centura Bank and
FirstSouth each received a "Satisfactory" CRA rating.
In April 1995, the federal banking agencies adopted revised CRA regulations
in order to provide clearer guidance to depository institutions on the nature
and extent of their CRA obligations and the methods by which those obligations
would be assessed and enforced. Under the new CRA regulations, which went into
effect on January 1, 1996, the evaluation system used to judge an institution's
CRA performance consists of three tests: a lending test; an investment test; and
a service test. Each of these tests will be applied by the institution's federal
regulator in an assessment context that would take into account such factors as:
(i) demographic data about the community; (ii) the institution's capacity and
constraints; (iii) the institution's product offerings and business strategy;
and (iv) data on the prior performance of the institution and similarly-situated
lenders. The new lending test -- the most important of the three tests for all
institutions other than wholesale and limited purpose (e.g., credit card)
banks -- will evaluate an institution's lending activities as measured by its
home mortgage loans, small business and farm loans, community development loans,
and, at the option of the institution, its consumer loans. The institution's
regulator will weigh each of these lending categories to reflect its relative
importance to the institution's overall business and, in the case of community
development loans, the characteristics and needs of the institution's service
area and the opportunities available for this type of lending. Assessment
criteria for the lending test will include: (i) geographic distribution of the
institution's lending; (ii) distribution of the institution's home mortgage and
consumer loans among different economic segments of the community; (iii) the
number and amount of small business and small farm loans made by the
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institution; (iv) the number and amount of community development loans
outstanding, and (v) the institution's use of innovative or flexible lending
practices to meet the needs of low-to-moderate income individuals and
neighborhoods. At the election of an institution, or if particular circumstances
so warrant, the banking agencies will take into account in making their
assessments lending by the institution's affiliates as well as community
development loans made by the lending consortia and other lenders in which the
institution has invested. As part of the new regulation, all financial
institutions will be required to report data on their small business and small
farm loans as well as their home mortgage loans, which are currently required to
be reported under the Home Mortgage Disclosure Act.
The focus of the investment test will be the degree to which the
institution is helping to meet the needs of its service area through qualified
investments that (i) benefit low-to-moderate income individuals and small
businesses or farms, (ii) address affordable housing needs, or (iii) involve
donations of branch offices to minority or women's depository institutions.
Assessment of an institution's performance under the investment test will be
based upon the dollar amount of the institution's qualified investments, its use
of innovative or complex techniques to support community development
initiatives, and its responsiveness to credit and community development needs.
The service test will evaluate an institution's systems for delivering retail
banking services, taking into account such factors as (i) the geographic
distribution of the institution's branch offices and ATMs, (ii) the
institution's record of opening and closing branch offices and ATMs, and (iii)
the availability of alternative product delivery systems such as home banking
and loan production offices in low-to-moderate income areas. The federal
regulators also will consider an institution's community development service as
part of the service test. A separate community development test will be applied
to wholesale or limited purpose financial institutions.
Smaller institutions, those having total assets of less than $250 million,
will be evaluated under more streamlined criteria. In addition, a financial
institution will have the option of having its CRA performance evaluated based
on a strategic plan of up to five years in length that it had developed in
cooperation with local community groups. In order to be rated under a strategic
plan, the institution will be required to obtain the prior approval of its
federal regulator.
The joint agency CRA regulations provide that an institution evaluated
under a given test will receive one of five ratings for that test: outstanding,
high satisfactory, low satisfactory, needs to improve, or substantial
noncompliance. An institution will then receive a certain number of points for
its rating on each test, and the points will be combined to produce an overall
composite rating of either outstanding, satisfactory, needs to improve, or
substantial noncompliance. Under the agencies' rating guidelines, an institution
that receives an "outstanding" rating on the lending test will receive an
overall rating of at least "satisfactory", and no institution can receive an
overall rating of "satisfactory" unless it receives a rating of at least "low
satisfactory" on its lending test. In addition, evidence of discriminatory or
other illegal credit practices would adversely affect an institution's overall
rating. Under the new regulations, an institution's CRA rating would continue to
be taken into account by its regulator in considering various types of
applications.
PAYMENT OF DIVIDENDS
Centura is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow of Centura, including cash flow
to pay dividends to its stockholders, is dividends from Centura Bank. There are
statutory and regulatory limitations on the payment of such dividends to
Centura, as well as by Centura and FirstSouth to their stockholders.
Centura is not subject to any direct legal or regulatory restrictions on
dividends (other than the requirements under the NCBCA that distributions may
not be made if, after giving them effect, the corporation would not be able to
pay its debts as they become due in the usual course of business or the
corporation's total assets would be less than its liabilities). Centura Bank and
FirstSouth, as North Carolina-chartered banks, are subject to North Carolina
statutory and regulatory restrictions on the payment of cash dividends,
including the requirement that cash dividends be paid only out of undivided
profits and only if the bank has surplus of a specified level. If a bank having
capital stock of $15,000 or more has surplus of less than 50% of its paid-in
capital stock, no cash dividend may be declared until the bank has transferred
from undivided profits to surplus 25% of its undivided profits or any lesser
percentage sufficient to raise the bank's surplus to an amount equal to 50% of
its paid-in capital stock.
If, in the opinion of the federal banking regulator, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to
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become undercapitalized or if it already is undercapitalized. See " -- Prompt
Corrective Action." Moreover, the federal agencies have issued policy statements
that provide that bank holding companies and insured banks should generally only
pay dividends out of current operating earnings.
At June 30, 1996, under dividend restrictions imposed under federal and
state laws, Centura Bank and FirstSouth, without obtaining governmental
approvals, could declare aggregate dividends of approximately $56 million and
$3.3 million, respectively.
The payment of dividends by Centura and FirstSouth may also be affected or
limited by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines.
CAPITAL ADEQUACY
Centura, Centura Bank and FirstSouth are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
Centura and Centura Bank and the FDIC in the case of FirstSouth. There are two
basic measures of capital adequacy for bank holding companies and their banking
subsidiaries that have been promulgated by the Federal Reserve and the FDIC: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company or a bank to be considered in
compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guideline for the ratio ("Risk-Based Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must comprise common stock, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets ("Tier 1 Capital"). The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves ("Tier 2 Capital"). At June 30, 1996, Centura's consolidated
Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital Ratio (i.e., the
ratio of Tier 1 Capital to risk-weighted assets) were 10.33% and 9.08%,
respectively, and FirstSouth's Risk-Based Capital and Tier 1 Risk-Based Capital
Ratios were 13.26% and 12.01%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis points.
Centura's and FirstSouth's respective Leverage Ratios at June 30, 1996, were
6.43% and 8.99%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. Furthermore, the Federal
Reserve has indicated that it will consider a "tangible Tier 1 Capital Leverage
Ratio" (deducting all intangibles) and other indicia of capital strength in
evaluating proposals for expansion or new activities.
The risk-based and leverage capital requirements adopted by the Federal
Reserve and the FDIC for Centura Bank and FirstSouth, respectively, are
substantially similar to those adopted by the Federal Reserve for bank holding
companies. Both Centura Bank and FirstSouth were in compliance with applicable
minimum capital requirements as of June 30, 1996. Neither Centura, Centura Bank,
nor FirstSouth has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements. See " -- Prompt
Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal banking agencies have, pursuant to FDICIA,
proposed an amendment to the risk-based capital standards that would calculate
the change in an institution's net economic value attributable to
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increases and decreases in market interest rates and would require banks with
excessive interest rate risk exposure to hold additional amounts of capital
against such exposures.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, Centura is expected to act as a source of
financial strength for, and to commit resources to support, Centura Bank. This
support may be required at times when, absent such Federal Reserve policy,
Centura may not be inclined to provide it. In addition, any capital loans by a
bank holding company to any of its banking subsidiaries are subordinate in right
of payment to deposits and to certain other indebtedness of such banks. In the
event of a bank holding company's bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a banking
subsidiary will be assumed by the bankruptcy trustee and entitled to a priority
of payment. In addition, the Federal Deposit Insurance Act provides that any
financial institution whose deposits are insured by the FDIC generally shall be
liable for any loss incurred by the FDIC in connection with the default of, or
any assistance provided by the FDIC to, a commonly controlled financial
institution.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system the federal banking
regulators are required to establish five capital categories (well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized) and to take certain mandatory supervisory actions,
and are authorized to take other discretionary actions, with respect to
institutions in the three undercapitalized categories, the severity of which
will depend upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, FDICIA requires the banking regulator
to appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Risk-Based Capital Ratio of 10% or
greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage
Ratio of 5.0% or greater and (ii) is not subject to any written agreement,
order, capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be well capitalized. An
institution with a Risk-Based Capital Ratio of 8.0% or greater, a Tier 1
Risk-Based Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or
greater is considered to be adequately capitalized. A depository institution
that has a Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based
Capital Ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is
considered to be undercapitalized. A depository institution that has a
Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of
less than 3.0%, or a Leverage Ratio of less than 3.0%. is considered to be
significantly undercapitalized, and an institution that has a tangible equity
capital to assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for
55
<PAGE>
appointing a conservator or receiver; (iii) restrict certain transactions with
banking affiliates as if the "sister bank" exception to the requirements of
Section 23A of the Federal Reserve Act did not exist; (iv) otherwise restrict
transactions with bank or non-bank affiliates; (v) restrict interest rates that
the institution pays on deposits to "prevailing rates" in the institution's
"region;" (vi) restrict asset growth or reduce total assets; (vii) alter,
reduce, or terminate activities; (viii) hold a new election of directors; (ix)
dismiss any director or senior executive officer who held office for more than
180 days immediately before the institution became undercapitalized, provided
that in requiring dismissal of a director or senior officer, the agency must
comply with certain procedural requirements, including the opportunity for an
appeal in which the director or officer will have the burden of proving his or
her value to the institution; (x) employ "qualified'' senior executive officers;
(xi) cease accepting deposits from correspondent depository institutions; (xii)
divest certain non-depository affiliates which pose a danger to the institution;
or (xiii) be divested by a parent holding company. In addition, without the
prior approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At June 30, 1996, both Centura Bank and FirstSouth had the requisite
capital levels to qualify as well capitalized under the regulations implementing
the prompt corrective action provisions of FDICIA.
FDIC INSURANCE ASSESSMENTS
FDIC insurance premiums are based on an assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: (i) well capitalized;
(ii) adequately capitalized; and (iii) undercapitalized. These three categories
are substantially similar to the prompt corrective action categories described
above, with the undercapitalized category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the risk-based assessment system there are nine assessment
risk classifications (i.e., combinations of capital groups and supervisory
subgroups) to which different assessment rates are applied. Assessment rates for
members of both the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF") for the first half of 1995, as they had been during
1994, ranged from 23 basis points (0.23% of deposits) for an institution in the
highest category (i.e., "well capitalized" and "healthy") to 31 basis points
(0.31% of deposits) for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern"). These rates were
established for both funds to achieve a designated ratio of reserves to insured
deposits (i.e., 1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached during May 1995, the FDIC
was authorized to reduce the minimum assessment rate below 23 basis points and
to set future assessment rates at such levels that would maintain the BIF's
reserve ratio at the designated level. In August 1995, the FDIC adopted final
regulations reducing the assessment rates for BIF-member banks. Under the
revised schedule, BIF-insured banks, starting with the second half of 1995, paid
assessments ranging from 4.0 basis points to 31 basis points, with an average
assessment rate of 4.5 basis points. At the same time, the FDIC elected to
retain the pre-existing assessment rate of 23 to 31 basis points for SAIF
members for the foreseeable future given the undercapitalized nature of that
insurance fund. More recently, on November 14, 1995, the FDIC announced that,
beginning in 1996, it would further reduce the deposit insurance premiums for
BIF members in the highest capital and supervisory categories to $2,000 per
year, regardless of deposit size.
On July 28, 1995 the FDIC, the Treasury Department and the OTS released
statements outlining a proposed plan ("Proposed Plan") to recapitalize the SAIF,
certain features of which were subsequently agreed upon by members of the
Banking Committees of the U.S. House of Representatives and the Senate on
November 7, 1995 in negotiations to reconcile differences in bills on the issue
that had been introduced or partially adopted by each body. Under the agreement,
all SAIF-member institutions will pay a special assessment to the SAIF of
approximately 80 basis points (0.80%), the amount that would enable the SAIF to
attain its designated reserve ratio of 1.25%. The special assessment would be
payable on January 1, 1996, based on the amount of SAIF-insured deposits held as
of March 31, 1995. Most BIF-insured institutions holding SAIF-assessed deposits
would receive a 20% reduction in the assessment rate and would pay a one-time
assessment of approximately 64 basis points on their SAIF-assessed deposits. The
agreement also provides that the assessment base for the bonds issued in the
late 1980s to recapitalize the now defunct Federal Savings and Loan Insurance
Corporation would be expanded
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to include the deposits of both BIF- and SAIF-insured institutions, with BIF
members paying approximately 75% of the interest on such obligations. The
committee members further agreed that the BIF and SAIF should be merged on
January 1, 1998, with such merger being conditioned upon the prior elimination
of the federal thrift charter. At this time, Centura is not able to predict the
timing or exact amount of any SAIF special assessment that might be required.
However, if a 64 basis point assessment were levied against the existing
SAIF-assessed deposits of Centura Bank as of June 30, 1996, the SAIF special
assessment paid by the bank (on a pre-tax basis) would be approximately $9.6
million.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
The FDIA requires the federal bank regulatory agencies to prescribe
standards, by regulations or guidelines, relating to internal controls,
information systems and internal audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, asset quality,
earnings, stock valuation and compensation, fees and benefits and such other
operational and managerial standards as the agencies deem appropriate. The
federal bank regulatory agencies have adopted a set of guidelines prescribing
safety and soundness standards pursuant to FDICIA, as amended. The guidelines
establish general standards relating to internal controls and information
systems, internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation, fees, and benefits. In
general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the
guidelines. The guidelines prohibit excessive compensation as an unsafe and
unsound practice and describe compensation as excessive when the amounts paid
are unreasonable or disproportionate to the services performed by an executive
officer, employee, director, or principal stockholders. The federal banking
agencies determined that stock valuation standards were not appropriate. In
addition, the agencies adopted regulations that authorize, but do not require,
an agency to order an institution that has been given notice by an agency that
it is not satisfying any of such safety and soundness standards to submit a
compliance plan. If, after being so notified, an institution fails to submit an
acceptable compliance plan, the agency must issue an order directing action to
correct the deficiency and may issue an order directing other actions of the
types to which an undercapitalized association is subject under the prompt
correction action provisions of FDICIA. See " -- Prompt Corrective Action." If
an institution fails to comply with such an order, the agency may seek to
enforce such order in judicial proceedings and to impose civil money penalties.
The federal bank regulatory agencies also proposed guidelines for asset quality
and earnings standards.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other general
unsecured claims against such an institution in the "liquidation or other
resolution" of such an institution by any receiver.
DESCRIPTION OF CENTURA CAPITAL STOCK
Centura is authorized to issue 50,000,000 shares of Centura Stock, of which
22,499,295 shares were issued and outstanding as of June 30, 1996. Centura is
also authorized to issue 25,000,000 shares of Centura no par value preferred
stock, none of which is issued and outstanding. The shares of Centura Stock are
nonassessable. In the event of the liquidation of Centura, holders of Centura
Stock would be entitled to share ratably in any of the assets or funds of
Centura that are available for distribution to Centura stockholders after the
satisfaction of Centura's liabilities (or after adequate provision is made
therefor) and after preferences of any outstanding preferred stock.
Holders of Centura Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefore. The
ability of Centura to pay dividends is affected by the ability of its subsidiary
depository institution to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At June 30, 1996, under such
requirements and guidelines, Centura's subsidiary depository institution had $56
million of undivided profits legally available for the payment of dividends. See
"CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
For a further description of Centura Stock, See "EFFECT OF THE MERGER ON
RIGHTS OF STOCKHOLDERS."
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OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of
FirstSouth knows of no matters that will be presented for consideration at the
Special Meeting other than as described in this Proxy Statement. However, if any
other matters shall properly come before the Special Meeting or any adjournment
thereof and be voted upon, the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
EXPERTS
The consolidated financial statements of Centura Banks, Inc. and subsidiary
as of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, have been incorporated by reference herein and
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the consolidated financial statements
as of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, refers to the fact that on December 31, 1993,
Centura Banks, Inc. adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
The consolidated financial statements of FirstSouth as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1995, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering the consolidated financial statements as of December
31, 1995 and 1994, and for each of the years in the three-year period ended
December 31, 1995, refers to the fact that on January 1, 1994, FirstSouth
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
OPINIONS
The legality of the shares of Centura Stock to be issued in the Merger will
be passed upon by Joseph A. Smith, Jr., Rocky Mount, North Carolina. Mr. Smith
is General Counsel and Secretary of Centura. As of March 31, 1996, Mr. Smith
beneficially owned an aggregate of 1,036 shares of Centura Stock and was the
holder of options to purchase 4,415 shares of Centura Common Stock.
Certain tax consequences of the transaction have been passed upon by Poyner
& Spruill, L.L.P., Raleigh, North Carolina.
Certain legal matters will be passed upon for FirstSouth by Moore & Van
Allen, PLLC, Raleigh, North Carolina.
Charles T. Lane, a partner of Poyner & Spruill, is a director of Centura
and Centura Bank. As of March 31, 1996, Mr. Lane owned beneficially 26,082
shares of Centura Stock and other members of Poyner & Spruill beneficially owned
65,132 shares of Centura Stock. No other expert or counsel employed by Centura
or FirstSouth had, or is to receive in connection with the Merger, a substantial
interest, direct or indirect, in Centura or FirstSouth or is otherwise connected
with Centura or FirstSouth.
SHAREHOLDER PROPOSALS
If the Merger is not consummated for any reason, FirstSouth expects to hold
its 1997 annual meeting of shareholders in April 1997. In such event, any
proposal of a shareholder that is intended to be presented at the 1997 annual
meeting of shareholders must be received by FirstSouth at its main office in
Burlington, North Carolina no later than January 24, 1997 in order that any such
proposal be timely received for inclusion in the proxy statement and appointment
of proxy to be issued in connection with such meeting.
If the Merger is consummated, Centura expects to hold its 1997 annual
meeting of shareholders in April 1997. Any proposal of a shareholder of Centura
which is intended to be presented at the 1997 annual meeting, must be received
by Centura at its principal executive office in Rocky Mount, North Carolina not
later than January 24, 1997 in order to be included in Centura's proxy statement
and form of appointment of proxy to be issued in connection with that meeting.
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APPENDIX A
AGREEMENT AND PLAN
OF REORGANIZATION AND MERGER
By and Among
FIRSTSOUTH BANK
and
CENTURA BANK
and
CENTURA BANKS, INC.
June 7, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. AGREEMENT TO MERGE.......................................................................... 2
1.01. Names of Merging Corporations................................................ 2
1.02. Nature of Transaction........................................................ 2
1.03. Effect of Merger; Surviving Corporation...................................... 2
1.04. Assets and Liabilities of FirstSouth......................................... 2
1.05. Conversion and Exchange of Stock............................................. 2
a. Conversion of FirstSouth Stock............................................... 2
b. Exchange Procedures.......................................................... 3
c. Treatment of Fractional Shares............................................... 4
d. Surrender of Certificates.................................................... 4
e. Antidilutive Adjustments..................................................... 5
f. Dissenters................................................................... 5
g. Lost Certificates............................................................ 5
h. Treatment of FirstSouth's Stock Options...................................... 5
i. Outstanding Centura Stock and Bank Stock..................................... 7
1.06. Articles, By-Laws and Management............................................. 7
1.07. Closing; Plan of Merger; Effective Time...................................... 8
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF FIRSTSOUTH.............................................. 8
2.01. Organization; Standing; Power............................................... 8
2.02. Capital Stock................................................................ 9
2.03. Principal Shareholders....................................................... 8
2.04. Subsidiaries................................................................. 8
2.05. Convertible Securities, Options, Etc......................................... 8
2.06. Authorization and Validity of Agreement..................................... 9
2.07. Validity of Transactions; Absence of Required
Consents or Waivers....................................................... 9
2.08. FirstSouth Books and Records................................................ 10
2.09. FirstSouth Reports.......................................................... 10
2.10. FirstSouth Financial Statements............................................. 11
2.11. Tax Returns and Other Tax Matters........................................... 11
2.12. Absence of Material Adverse Changes or
Certain Other Events......................................................12
2.13. Absence of Undisclosed Liabilities.......................................... 12
2.14. Compliance with Existing Obligations........................................ 12
2.15. Litigation and Compliance with Law...........................................12
2.16. Real Properties............................................................. 13
2.17. Loans, Accounts, Notes and Other Receivables................................ 14
2.18. Securities Portfolio and Investments........................................ 15
2.19. Personal Property and Other Assets.......................................... 16
2.20. Patents and Trademarks...................................................... 16
2.21. Environmental Matters....................................................... 16
2.22. Absence of Brokerage or Finders Commissions................................. 18
2.23. Material Contracts.......................................................... 18
2.24. Employment Matters; Employee Relations...................................... 19
2.25. Employee Agreements; Employee Benefit Plans................................. 20
2.26. Insurance................................................................... 21
2.27. Insurance of Deposits....................................................... 21
2.28. Affiliates...................................................................22
2.29. Obstacles to Regulatory Approval, Accounting
Treatment or Tax Treatment.................................................22
2.30. Disclosure...................................................................22
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<PAGE>
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CENTURA AND
THE HOLDING COMPANY............................................................... 22
3.01. Organization; Standing; Power............................................... 22
3.02. Capital Stock............................................................... 23
3.03. Authorization and Validity of Agreement..................................... 23
3.04. Validity of Transactions; Absence of Required
Consents or Waivers....................................................... 23
3.05 Holding Company Books and Records........................................... 24
3.06. Holding Company Reports..................................................... 24
3.07. Holding Company Financial Statements........................................ 25
3.08. Absence of Material Adverse Changes......................................... 25
3.09. Litigation and Compliance with Law.......................................... 26
3.10 Absence of Brokerage or Finders Commissions................................. 27
3.11. Obstacles to Regulatory Approval, Accounting
Treatment or Tax Treatment................................................ 27
3.12. Disclosure.................................................................. 27
ARTICLE IV. COVENANTS OF FIRSTSOUTH................................................................... 28
4.01. Affirmative Covenants of FirstSouth......................................... 28
a. "Affiliates" of FirstSouth.................................................. 28
b. Conduct of Business Prior to Effective Time................................. 28
c. Periodic Information Regarding Loans........................................ 29
d. Notice of Certain Changes or Events......................................... 30
e. Consents to Assignment of Leases............................................ 30
f. Further Action; Instruments of Transfer, etc................................ 30
g. Dissolution of Subsidiary................................................... 31
4.02. Negative Covenants of FirstSouth............................................ 31
a. Amendments to Articles of Incorporation or
Bylaws.....................................................................31
b. Change in Capital Stock..................................................... 31
c. Options, Warrants and Rights................................................ 31
d. Dividends................................................................... 31
e. Employment, Benefit or Retirement Agreements
or Plans.................................................................. 31
f. Increase in Compensation;
Additional Compensation................................................... 32
g. Accounting Practices........................................................ 32
h. Acquisitions; Additional Branch Offices..................................... 32
i. Changes in Business Practices............................................... 32
j. Exclusive Merger Agreement.................................................. 33
k. Acquisition or Disposition of Assets........................................ 33
l. Debt; Liabilities........................................................... 34
m. Liens; Encumbrances......................................................... 34
n. Waiver of Rights............................................................ 34
o. Other Contracts............................................................. 34
ARTICLE V. COVENANTS OF CENTURA AND THE HOLDING COMPANY............................................... 35
5.01. Board of Directors.......................................................... 35
a. Appointment of Director..................................................... 35
b. Local Advisory Board........................................................ 35
5.02. New York Stock Exchange Notification of Listing
of Additional Shares of Centura Stock...................................... 35
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<PAGE>
ARTICLE VI. MUTUAL AGREEMENTS.................................................................................. 35
6.01. Shareholders' Meeting; Registration
Statement; Proxy Statement/Prospectus......................................... 35
a. Meeting of Shareholders....................................................... 35
b. Preparation and Distribution of Proxy
Statement/Prospectus....................................................... 36
c. Registration Statement and "Blue Sky"
Approvals.................................................................. 36
d. Recommendation of FirstSouth's Board of
Directors.................................................................. 36
e. Information for Proxy Statement/Prospectus and
Registration Statement.................................................... 37
6.02. Regulatory Approvals........................................................ 37
6.03. Access...................................................................... 38
6.04. Costs....................................................................... 38
6.05. Announcements............................................................... 38
6.06. Environmental Studies....................................................... 39
6.07. Employees; Severance Payments; Employee
Benefits................................................................. 40
a. Employment of FirstSouth Employees.......................................... 40
b. Severance Compensation...................................................... 40
c. Employee Benefits........................................................... 41
d. Other Agreements............................................................ 42
6.08. Confidentiality............................................................. 42
6.09. Reorganization for Tax Purposes............................................. 43
6.10. Accounting Treatment........................................................ 43
6.11. Directors' and Officers' Liability Insurance................................ 43
6.12. Other Permissible Transactions.............................................. 43
ARTICLE VII. CONDITIONS PRECEDENT TO MERGER........................................................... 43
7.01. Conditions to all Parties' Obligations...................................... 43
a. Approval by Governmental or Regulatory
Authorities; No Disadvantageous Conditions......................................... 43
b. Adverse Proceedings, Injunction, Etc........................................ 44
c. Approval by Boards of Directors and
Shareholders....................................................................... 44
d. Fairness Opinion............................................................ 44
e. Tax Opinion................................................................. 45
f. No Termination or Abandonment............................................... 45
g. New York Stock Exchange Listing............................................. 45
7.02. Additional Conditions to FirstSouth's
Obligations............................................................. 45
a. Material Adverse Change..................................................... 45
b. Compliance with Laws........................................................ 46
c. The Holding Company's and Centura's
Representations and Warranties and
Performance of Agreements; Officers'
Certificate............................................................. 46
d. Legal Opinion of the Holding Company and
Centura Counsel......................................................... 46
e. Other Documents and Information from
the Holding Company and Centura......................................... 46
f. Articles of Merger; Other Actions........................................... 46
g. Acceptance by FirstSouth's Counsel.......................................... 47
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<PAGE>
7.03. Additional Conditions to the Holding
Company's and Centura's Obligations....................................... 47
a. Material Adverse Change..................................................... 47
b. Compliance with Laws; Adverse Proceedings,
Injunction, Etc............................................................ 47
c. FirstSouth's Representations and Warranties
and Performance of Agreements; Officers'
Certificate................................................................ 47
d. Effectiveness of Registration Statement;
Compliance with Securities and Other "Blue
Sky" Requirements.......................................................... 47
e. Agreements from FirstSouth Affiliates....................................... 48
f. Accounting Treatment........................................................ 48
g. Legal Opinion of FirstSouth Counsel......................................... 48
h. Other Documents and Information from
FirstSouth................................................................. 48
i. Consents to Assignment of Real Property
Leases..................................................................... 48
j. Acceptance by the Holding Company's and
Centura's Counsel.......................................................... 49
ARTICLE VIII. TERMINATION; BREACH; REMEDIES........................................................... 49
8.01. Mutual Termination.......................................................... 49
8.02. Unilateral Termination...................................................... 49
a. Termination by the Holding Company or
Centura.................................................................. 49
b. Termination by FirstSouth................................................... 50
c. Extension of Expiration Date...............................................51
8.03. Breach; Remedies............................................................ 51
ARTICLE IX. INDEMNIFICATION........................................................................... 52
9.01. Indemnification Following Effective Time.................................... 52
9.02 Procedure for Claiming Indemnification.......................................52
ARTICLE X. MISCELLANEOUS PROVISIONS................................................................... 52
10.01 Previously Disclosed Information.............................................52
10.02. Survival of Representations, Warranties,
Indemnification and Other Agreements...................................... 52
a. Representations, Warranties and Other
Agreements................................................................ 53
b. Indemnification............................................................. 53
10.03. Waiver...................................................................... 53
10.04. Amendment................................................................... 53
10.05. Notices..................................................................... 53
10.06. Further Assurance........................................................... 54
10.07. Headings and Captions....................................................... 54
10.08. Entire Agreement............................................................ 54
10.09. Severability of Provisions.................................................. 55
10.10. Assignment.................................................................. 55
10.11. Counterparts................................................................ 55
10.12. Governing Law............................................................... 55
10.13. Inspection...................................................................55
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
By and Among
FIRSTSOUTH BANK
and
CENTURA BANK
and
CENTURA BANKS, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
(hereinafter called "Agreement") entered into as of the 7th day of June, 1996,
by and among FIRSTSOUTH BANK ("FirstSouth"), CENTURA BANK ("Centura") and
CENTURA BANKS, INC. (the "Holding Company").
WHEREAS, FirstSouth is a North Carolina banking corporation
with its principal office and place of business located in Burlington, North
Carolina; and,
WHEREAS, Centura is a North Carolina banking corporation with
its principal office and place of business located in Rocky Mount, North
Carolina; and,
WHEREAS, the Holding Company is a North Carolina business
corporation with its principal office and place of business located in Rocky
Mount, North Carolina, and is the parent company of Centura; and,
WHEREAS, the Holding Company, Centura and FirstSouth have
agreed that it is in their mutual best interests and in the best interests of
their respective shareholders for FirstSouth to be merged into Centura with the
effect that each of the outstanding shares of FirstSouth's common stock will be
converted into newly issued shares of the Holding Company' common stock, all in
the manner and upon the terms and conditions contained in this Agreement; and,
WHEREAS, to effectuate the foregoing, the Holding Company,
Centura and FirstSouth desire to adopt this Agreement as a plan of
reorganization in accordance with the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended; and,
WHEREAS, while FirstSouth's Board of Directors has approved
this Agreement, FirstSouth has executed this Agreement subject to the approval
of its shareholders and has agreed to call a special meeting of its shareholders
for the purpose of voting on the Agreement and will recommend to its
shareholders that they approve the Agreement and the transactions described
herein; and,
WHEREAS, the Holding Company's and Centura's Boards of
Directors have approved this Agreement and the transactions described herein,
including the issuance by the Holding Company of shares of its common stock to
FirstSouth's shareholders to effectuate such transactions.
NOW, THEREFORE, in consideration of the premises, the
mutual benefits to be derived from this Agreement, and of the
<PAGE>
representations, warranties, conditions, covenants and promises herein
contained, and subject to the terms and conditions hereof, the Holding Company,
Centura and FirstSouth hereby adopt and make this Agreement and mutually agree
as follows:
ARTICLE I. AGREEMENT TO MERGE
1.01. Names of Merging Corporations. The names of the
corporations proposed to be merged are FIRSTSOUTH BANK
("FirstSouth") and CENTURA BANK ("Centura").
1.02. Nature of Transaction. Subject to the provisions of
this Agreement, at the "Effective Time" (as defined in Paragraph
1.07. below), FirstSouth shall be merged into and with Centura
pursuant to N.C. Gen. Stat. ss. 53-12 (the "Merger").
1.03. Effect of Merger; Surviving Corporation. At the
Effective Time and as provided in N.C. Gen. Stat.ss. 53-13, by
reason of the Merger the separate corporate existence of FirstSouth
shall cease while the corporate existence of Centura as the
surviving corporation in the Merger shall continue with all of its
purposes, objects, rights, privileges, powers and franchises, all
of which shall be unaffected and unimpaired by the Merger.
Following the Merger, Centura shall continue to operate as the
wholly-owned banking subsidiary of the Holding Company and, as a
North Carolina banking corporation, will continue to conduct its
business at the then legally established branches and main offices
of Centura and FirstSouth. The duration of the corporate existence
of Centura, as the surviving corporation, shall be perpetual and
unlimited.
1.04. Assets and Liabilities of FirstSouth. At the
Effective Time and by reason of the Merger, and in accordance with
N.C. Gen. Stat. ss.ss. 53-13, 53-17 and 55-11-06, all of FirstSouth's
property, assets and rights of every kind and character (including
without limitation all real, personal or mixed property, all debts
due on whatever account, all other choses in action and all and
every other interest of or belonging to or due to FirstSouth,
whether tangible or intangible) shall be transferred to and vest in
Centura, and Centura shall succeed to all the rights, privileges,
immunities, powers, purposes and franchises of a public or private
nature (including all trust and fiduciary properties, powers and
rights) of FirstSouth, all without any conveyance, assignment or
further act or deed; and, Centura shall become responsible for all
of the liabilities, duties and obligations of every kind, nature
and description (including duties as trustee or fiduciary) of
FirstSouth as of the Effective Time.
1.05. Conversion and Exchange of Stock.
a. Conversion of FirstSouth Stock. At the Effective
Time, all rights of FirstSouth's shareholders with respect to all
then outstanding shares of FirstSouth's common stock ($3.33 1/3 par value)
("FirstSouth Stock") shall cease to exist, and, as
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<PAGE>
consideration for and to effectuate the Merger (and except as otherwise provided
below) each such outstanding share of FirstSouth Stock (other than any shares
held by FirstSouth as treasury shares or shares held by the Holding Company or
as to which rights of dissent and appraisal are properly exercised as provided
below) shall be converted, without any action on the part of the holder of such
share, the Holding Company, Centura or FirstSouth, into 0.56 (the "Exchange
Rate") newly issued shares of the Holding Company's no par value common stock
(the "Centura Stock"). Notwithstanding anything contained herein to the
contrary, the Exchange Rate shall be adjusted so that when the Average Closing
Price (as defined herein) is multiplied by the Exchange Rate, each share of
FirstSouth Stock shall be converted into a number of shares of Centura Stock
with a dollar value of not less than $19.32 nor more than $21.30. The Exchange
Rate shall be fixed on the day immediately prior to the Shareholder Meeting (as
defined in Paragraph 6.01.a. hereof) . For purposes of this Paragraph 1.05.a.,
the "Average Closing Price" shall mean the average of the daily closing sales
prices of Centura Stock as reported on the New York Stock Exchange - Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, another authoritative source as chosen by Centura) for the ten (10)
consecutive full trading days in which such shares are traded on the New York
Stock Exchange ending at the close of trading on the day immediately prior to
the Shareholder Meeting.
At the Effective Time, and without any action by FirstSouth,
Centura, the Holding Company or any holder thereof, FirstSouth's stock transfer
books shall be closed as to holders of FirstSouth Stock immediately prior to the
Effective Time and, thereafter, no transfer of FirstSouth Stock by any such
holder may be made or registered; and the holders of shares of FirstSouth Stock
shall cease to be, and shall have no further rights as, stockholders of
FirstSouth other than as provided herein. Following the Effective Time,
certificates representing shares of FirstSouth Stock outstanding at the
Effective Time (herein sometimes referred to as "Old Certificates") shall
evidence only the right of the registered holder thereof to receive, and may be
exchanged for, (i) certificates for the number of whole shares of the Centura
Stock to which such holders shall have become entitled on the basis set forth
above, plus cash for any fractional share interests as provided herein, (ii) in
the case of shares as to which rights of dissent and appraisal are properly
exercised (as provided below), cash as provided in Article 13 of the North
Carolina Business Corporation Act.
b. Exchange Procedures. As promptly as practicable
following the Effective Time, the Holding Company shall cause the
exchange agent selected by the Holding Company (the "Exchange Agent") to mail to
each former shareholder of FirstSouth of record immediately prior to the
Effective Time written instructions and transmittal materials (a "Transmittal
Letter") for use in surrendering Old Certificates to the Exchange Agent. Upon
the proper delivery to the Exchange Agent (in accordance with the above
instructions, and accompanied by a properly completed Transmittal
- 3 -
<PAGE>
Letter) by a former shareholder of FirstSouth of his or her Old Certificates,
the Exchange Agent shall register in the name of such shareholder the shares of
the Centura Stock and deliver said New Certificates to the individual
shareholder entitled thereto upon and in exchange for the surrender and delivery
to the Exchange Agent by said individual shareholder of his or her Old
Certificates.
c. Treatment of Fractional Shares. No scrip or
certificates representing fractional shares of the Centura Stock
will be issued to any former shareholder of FirstSouth, and, except as provided
below, no such shareholder will have any right to vote or receive any dividend
or other distribution on, or any other right with respect to, any fraction of a
share of the Centura Stock resulting from the above exchange. In the event the
exchange of shares would result in the creation of fractional shares, then, in
lieu of the issuance of fractional shares of the Centura Stock, the Holding
Company shall deliver cash to the Exchange Agent in an amount equal to the
aggregate market value of all such fractional shares, and the Exchange Agent
shall divide such cash among and remit it (without interest) to the former
shareholders of FirstSouth in accordance with their respective interests. For
purposes of this Paragraph 1.05.c., the "aggregate market value" of all
fractional shares of the Centura Stock shall be equal to the total of such
fractional shares multiplied by the Average Closing Price.
d. Surrender of Certificates. Subject to Paragraph 1.05.f.
below, no certificate for any shares, or cash for any fractional share, of the
Centura Stock shall be delivered to any former shareholder of FirstSouth unless
and until such shareholder shall have properly surrendered to the Exchange Agent
the Old Certificate(s) formerly representing his or her shares of FirstSouth
Stock, together with a properly completed Transmittal Letter in such form as
shall be provided to the shareholder by the Holding Company for that purpose.
Further, until such Old Certificate(s) are so surrendered, no dividend or other
distribution payable to holders of record of the Centura Stock as of any date
subsequent to the Effective Time shall be delivered to the holder of such Old
Certificate(s). However, upon the proper surrender of such Old Certificate(s)
the Exchange Agent shall pay to the registered holder of the shares of the
Centura Stock represented by such Old Certificate(s) the amount of any such
cash, dividends or distributions which have accrued but remain unpaid with
respect to such shares. Neither the Holding Company, Centura, FirstSouth, nor
the Exchange Agent, shall have any obligation to pay any interest on any such
cash, dividends or distributions for any period prior to such payment. Further,
and notwithstanding any other provision of this Agreement, neither the Holding
Company, Centura, FirstSouth, nor the Exchange Agent shall be liable to a former
holder of FirstSouth Stock for any amount paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat, or similar law.
- 4 -
<PAGE>
e. Antidilutive Adjustments. If, following the date of this
Agreement, the Holding Company shall change the number of outstanding shares of
the Centura Stock as a result of a dividend payable in shares of the Centura
Stock, a stock split, a reclassification or other subdivision or combination of
outstanding shares, and if the record date of such event occurs prior to the
Effective Time, then an appropriate and proportionate adjustment will be made to
increase or decrease the number of shares of the Centura Stock to be issued in
exchange for each of the shares of FirstSouth Stock.
f. Dissenters. Any shareholder of FirstSouth who has and
properly exercises the right of dissent and appraisal with respect to the Merger
as provided in Article 13 of the North Carolina Business Corporation Act
("Dissenters Rights") shall be entitled to receive payment of the fair value of
his or her shares of FirstSouth Stock in the manner and pursuant to the
procedures provided therein. Shares of FirstSouth Stock held by persons who
exercise Dissenters Rights shall not be converted into Centura Stock as provided
in Paragraph 1.05.a. above. However, if any shareholder of FirstSouth who
exercises Dissenters Rights shall fail to perfect his or her right to receive
cash as provided above, or effectively shall waive or lose such right, then each
of his or her shares of FirstSouth Stock, at the Holding Company' sole option,
shall be deemed to have been converted into the right to receive Centura Stock
as of the Effective Time as provided in Paragraph 1.05.a. above.
g. Lost Certificates. Any shareholder of FirstSouth whose
certificate evidencing shares of FirstSouth Stock has been lost, destroyed,
stolen or otherwise is missing shall be entitled to receive a certificate
representing the shares of Centura Stock to which he or she is entitled in
accordance with and upon compliance with conditions imposed by the Exchange
Agent or the Holding Company pursuant to the provisions of N.C. Gen. Stat.
ss. 25-8-405 and N.C. Gen. Stat. ss. 25-8-104 (including without limitation a
requirement that the shareholder provide a lost instruments indemnity or surety
bond in form, substance and amount satisfactory to the Exchange Agent and the
Holding Company).
h. Treatment of FirstSouth's Stock Options. (i) At the
Effective Time, each option or other right to purchase shares of FirstSouth
Stock pursuant to stock options ("FirstSouth Options") granted by FirstSouth
under the FirstSouth Bank Amended and Restated Stock Option Plan for Key
Employees and the FirstSouth Bank 1988 Stock Option Plan for Directors
(collectively, the "FirstSouth Stock Plans"), which are outstanding at the
Effective Time, whether or not exercisable, shall be converted into and become
rights with respect to Centura Common Stock, and Centura shall assume each
FirstSouth Option, in accordance with the terms of the FirstSouth Stock Plans
and stock option agreement by which it is evidenced, except that from after the
Effective Time (A) Centura and its Compensation Committee shall be substituted
for FirstSouth and the Committee of FirstSouth's Board of Directors (including,
if applicable, the entire Board of Directors of
- 5 -
<PAGE>
FirstSouth) administering such FirstSouth Stock Plans, (B) each FirstSouth
Option assumed by Centura may be exercised solely for shares of Centura Common
Stock, (C) the number of shares of Centura Common Stock subject to such
FirstSouth Option shall be equal to the number of shares of FirstSouth Common
Stock subject to such FirstSouth Option immediately prior to the Effective Time
multiplied by the Exchange Rate, (D) the per share exercise price under each
such FirstSouth Option shall be adjusted by dividing the per share exercise
price under each such FirstSouth Option by the Exchange Rate and rounding up to
the nearest cent, and (E) holders of FirstSouth Options under the FirstSouth
Bank 1988 Stock Option Plan for Directors shall be able to make like kind
payments for shares of Centura Common Stock through delivery of shares of
Centura Common Stock already owned by the option holder. Notwithstanding the
provisions of clause (C) of the preceding sentence, Centura shall not be
obligated to issue any fraction of a share of Centura Common Stock upon exercise
of FirstSouth Options and any fraction of a share of Centura Common Stock that
otherwise would be subject to a converted FirstSouth Option shall represent the
right to receive a cash payment upon exercise of such converted FirstSouth
Option equal to the product of such fraction and the difference between the
market value of one share of Centura Common Stock at the time of exercise of
such Option and the per share exercise price of such Option. The market value of
one share of Centura Common Stock at the time of exercise of an Option shall be
the closing price of Centura Common Stock on the NYSE-Composite Transactions
List (as reported by The Wall Street Journal or, if not reported thereby, any
other authoritative source) on the last trading day preceding the date of
exercise.
(ii) As soon as practicable after the Effective Time, Centura shall
deliver to the participants in each FirstSouth Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants pursuant
to such FirstSouth Stock Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by Paragraph 1.05.a. after
giving effect to the Merger. At or prior to the Effective Time, the Holding
Company shall take all corporate action necessary to reserve for issuance
sufficient shares of Centura Common Stock for delivery upon exercise of
FirstSouth Options assumed by it in accordance with this Paragraph 1.05.h. As
soon as practicable after the Effective Time, the Holding Company shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Centura
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.
(iii) All restrictions or limitations on transfer with respect to
FirstSouth Common Stock awarded under the FirstSouth Stock Plans or any other
plan, program, or arrangement of FirstSouth, to the extent that such
restrictions or limitations shall not have already lapsed, and except as
otherwise expressly provided in such plan, program, or arrangement, shall remain
in
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<PAGE>
full force and effect with respect to shares of Centura Common Stock into which
such restricted stock is converted pursuant to this Agreement.
(iv) Notwithstanding the foregoing provisions of this Paragraph
1.05.h., in no event shall options to purchase more than 309,692 shares of
FirstSouth Stock be converted into options to purchase Centura Stock in
connection with the transactions contemplated by this Agreement. FirstSouth
agrees to cooperate with Centura to insure the implementation of this Paragraph
1.05.h.
.
i. Outstanding Centura Stock and Bank Stock. The
status of the shares of Centura Stock and the shares of the capital
stock of Centura which are outstanding immediately prior to the Effective Time
shall not be affected by the Merger.
1.06. Articles, By-Laws and Management. The Articles of
Incorporation and By-Laws of Centura in effect at the Effective
Time shall be the Articles of Incorporation and By-Laws of Centura as the
surviving corporation. The officers and directors of Centura in office at the
Effective Time shall continue to hold such offices until removed as provided by
law or until the election or appointment of their respective successors.
1.07. Closing; Articles of Merger; Effective Time. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Moore & Van Allen, PLLC in Raleigh, North Carolina, or at such
other place as the Holding Company shall designate, on a date specified by the
Holding Company (the "Closing Date") after the expiration of any and all
required waiting periods following the effective date of required approvals of
the Merger by governmental or regulatory authorities (but in no event more than
thirty (30) days following the expiration of all such required waiting periods).
At the Closing, the Holding Company, Centura and FirstSouth shall take such
actions (including without limitation the delivery of certain closing documents)
as are required herein and as shall otherwise be required by law to consummate
the Merger and cause it to become effective, and shall execute Articles of
Merger under North Carolina law which shall contain a "Plan of Merger"
substantially in the form attached as Schedule A hereto.
Subject to the terms and conditions set forth herein (including without
limitation the receipt of all required approvals of government and regulatory
authorities), the Merger shall be effective on the date and at the time (the
"Effective Time") designated in the Articles of Merger executed at the Closing
and filed with the North Carolina Secretary of State in accordance with law;
provided, however, that the date and time so specified as the Effective Time
shall in no event be more than ten (10) days following the Closing Date. If the
Articles of Merger do not designate a date or specific time as the Effective
Time, then the Effective Time shall be that date and time when the Articles of
Merger are properly filed with the North Carolina Secretary of State.
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<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF FIRSTSOUTH
Except as otherwise specifically provided herein or as "Previously
Disclosed" (as defined in Paragraph 10.01. below) to Centura, FirstSouth hereby
makes the following representations and warranties to Centura and the Holding
Company:
2.01. Organization; Standing; Power. FirstSouth (i) is duly
organized and incorporated, validly existing and in good standing as a banking
corporation under the laws of North Carolina; (ii) has all requisite power and
authority (corporate and other) to own, lease and operate its properties and to
carry on its business as now being conducted; (iii) is duly qualified to do
business and is in good standing in each other jurisdiction in which the
character of the properties owned, leased or operated by it therein or in which
the transaction of its business makes such qualification necessary, except where
failure so to qualify would not have a material adverse effect on FirstSouth;
and (iv) is not transacting business or operating any properties owned or leased
by it in violation of any provision of federal or state law or any rule or
regulation promulgated thereunder, which violation would have a material adverse
effect on FirstSouth.
2.02. Capital Stock. FirstSouth's authorized capital
stock consists of 15,000,000 shares of common stock, $3.331/3 par
value per share. As of March 31, 1996, 1,829,218 shares of FirstSouth Stock were
issued and outstanding, which constitute FirstSouth's only issued and
outstanding securities. FirstSouth has 339,118 shares of FirstSouth Stock
available for issuance under the FirstSouth Stock Plans and options to purchase
309,692 shares of FirstSouth Stock are outstanding. Additionally, FirstSouth may
issue shares of FirstSouth Common Stock pursuant to the FirstSouth Dividend
Reinvestment and Cash Withdrawal Plan and the First South Bank 401(k) Plan.
Each outstanding share of FirstSouth Stock (i) has
been duly authorized and is validly issued and outstanding, and is fully paid
and nonassessable (except to the extent assessable under applicable North
Carolina banking law), (ii) has not been issued in violation of the preemptive
rights of any shareholder, and (iii) has been issued pursuant to and in
compliance with the requirement of an applicable exemption from registration
requirements under the Securities Act of 1933, as amended (the "1933 Act").
2.03. Principal Shareholders. No person or entity is
known to FirstSouth to beneficially own, directly or indirectly,
more than 5% of the outstanding shares of FirstSouth Stock.
2.04. Subsidiaries. FirstSouth does not have any
active subsidiary (direct or indirect), and does not own any stock
or other equity interest in any corporation, service corporation,
joint venture, partnership or other entity.
2.05. Convertible Securities, Options, Etc.. With
the exception of options to purchase an aggregate of 309,692 shares
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<PAGE>
of FirstSouth Stock which have been issued and are outstanding under the
FirstSouth Stock Plans, FirstSouth does not have any outstanding (i) securities
or other obligations (including debentures or other debt instruments) which are
convertible into shares of FirstSouth Stock or any other securities of
FirstSouth, (ii) options, warrants, rights, calls or other commitments of any
nature which entitle any person to receive or acquire any shares of FirstSouth
Stock or any other securities of FirstSouth, or (iii) plan, agreement or other
arrangement pursuant to which shares of FirstSouth Stock or any other securities
of FirstSouth, or options, warrants, rights, calls or other commitments of any
nature pertaining thereto, have been or may be issued.
2.06. Authorization and Validity of Agreement. This
Agreement has been duly and validly approved by FirstSouth's Board
of Directors and executed and delivered on FirstSouth's behalf.
Subject only to approval of this Agreement by the shareholders of
FirstSouth in the manner required by law (as contemplated by
Paragraph 6.01.a. below), (i) FirstSouth has the corporate power
and authority to execute and deliver this Agreement and to perform
its obligations and agreements and carry out the transactions
described herein, (ii) all corporate proceedings and approvals
required to authorize FirstSouth to enter into this Agreement and
to perform its obligations and agreements and carry out the
transactions described herein have been duly and properly completed
or obtained, and (iii) this Agreement has been executed on behalf
of FirstSouth and constitutes a valid and binding agreement of
FirstSouth enforceable in accordance with its terms (except to the
extent enforceability may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to
time in effect which affect creditors' rights generally, (B) by
legal and equitable limitations on the availability of injunctive
relief, specific performance and other equitable remedies, and (C)
general principles of equity and applicable laws or court decisions
limiting the enforceability of indemnification provisions).
2.07. Validity of Transactions; Absence of Required
Consents or Waivers. Except where the same would not have a
material adverse effect on FirstSouth, neither the execution and
delivery of this Agreement, nor the consummation of the transactions described
herein, nor compliance by FirstSouth with any of its obligations or agreements
contained herein, will: (i) conflict with or result in a breach of the terms and
conditions of, or constitute a default or violation under any provision of,
FirstSouth's Articles of Incorporation or Bylaws, or any contract, agreement,
lease, mortgage, note, bond, indenture, license, or obligation or understanding
(oral or written) to which FirstSouth is bound or by which it, its business,
capital stock or any of its properties or assets may be affected; (ii) result in
the creation or imposition of any lien, claim, interest, charge, restriction or
encumbrance upon any of FirstSouth's properties or assets; (iii) violate any
applicable federal or state statute, law, rule or regulation, or any judgment,
order, writ, injunction or decree of any court, administrative or regulatory
agency or governmental body; (iv) result in the acceleration of any obligation
or
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<PAGE>
indebtedness of FirstSouth; or (v) interfere with or otherwise adversely affect
FirstSouth's ability to carry on its business as presently conducted.
No consents, approvals or waivers are required to be obtained
from any person or entity in connection with FirstSouth's execution and delivery
of this Agreement, or the performance of its obligations or agreements or the
consummation of the transactions described herein, except for required approvals
of FirstSouth's shareholders as described in Paragraph 7.01.c. below and of
governmental or regulatory authorities as described in Paragraph 7.01.a. below.
2.08. FirstSouth Books and Records. FirstSouth's books of
account and business records have been maintained in substantial compliance with
all applicable legal and accounting requirements and in accordance with good
business practices, and such books and records are complete and reflect
accurately in all material respects FirstSouth's items of income and expense and
all of its assets, liabilities and stockholders' equity. The minute books of
FirstSouth accurately reflect in all material respects the corporate actions
which its shareholders and board of directors, and all committees thereof, have
taken during the time periods covered by such minute books. All such minute
books have been or will be made available to Centura and its representatives.
2.09. FirstSouth Reports. Since January 1, 1991, and where the
failure to file has had or could have a material and adverse effect on
FirstSouth, FirstSouth has filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that were
required to be filed with (i) the Federal Deposit Insurance Corporation (the
"FDIC"), (ii) the North Carolina Commissioner of Banks (the "Commissioner"), or
(iii) any other governmental or regulatory authorities having jurisdiction over
FirstSouth. All such reports, registrations and statements filed by FirstSouth
with the FDIC, the Commissioner or other such regulatory authority are
collectively referred to herein as the "FirstSouth Reports." As of their
respective dates, each FirstSouth Report complied in all material respects with
all the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which it was filed and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and FirstSouth has not
been notified that any such FirstSouth Report was deficient in any material
respect as to form or content. Following the date of this Agreement, FirstSouth
shall deliver to the Holding Company, simultaneous with the filing thereof, a
copy of each report, registration, statement or other regulatory filing made by
it with the FDIC, the Commissioner or any other such regulatory authority.
The FirstSouth Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"); FirstSouth is subject to the periodic
reporting requirements of the Exchange Act.
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<PAGE>
2.10. FirstSouth Financial Statements. FirstSouth
has delivered to Centura a copy (i) of its balance sheets as of
December 31, 1994 and December 31, 1995, and its statements of
operations, changes in stockholders' equity and cash flows for the
years ended December 31, 1993, December 31, 1994 and December 31,
1995, together with notes thereto (the "FirstSouth Financial
Statements"), and (ii) a copy of its balance sheet as of March 31,
1996 and its statement of operations for the three months ended
March 31, 1996 (the "FirstSouth Interim Financial Statements");
and, following the date of this Agreement, FirstSouth promptly will
deliver to Centura all other annual or interim financial statements
prepared by or for FirstSouth. The FirstSouth Financial Statements
and the FirstSouth Interim Financial Statements (including any
related notes and schedules thereto) (i) are in accordance with
FirstSouth's books and records, and (ii) were prepared in
accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated and
present fairly in all material respects FirstSouth's financial
condition, assets and liabilities, results of operations, changes
in stockholders' equity and changes in cash flows as of the dates
indicated and for the periods specified therein. The FirstSouth
Financial Statements have been audited and certified by
FirstSouth's independent certified public accountants, KPMG Peat
Marwick LLP.
2.11. Tax Returns and Other Tax Matters. (i)
FirstSouth has timely filed or caused to be filed all federal,
state and local tax returns and reports which are required by law
to have been filed, and, to the best knowledge and belief of
management of FirstSouth, all such returns and reports were true,
correct and complete and contained all material information
required to be contained therein; (ii) all federal, state and local
income, profits, franchise, sales, use, occupation, property,
excise and other taxes (including interest and penalties), charges
and assessments which have become due from or been assessed or
levied against FirstSouth or its property have been become fully
paid, and, with respect to any such taxes to become due from
FirstSouth for any period or periods through and including March
31, 1996, adequate provision has been made for the payment of all
such taxes and such provision is reflected in the FirstSouth
Financial Statements; (iii) FirstSouth's tax returns and reports
have been examined or closed by applicable statutes of limitations
through the tax year ended December 31, 1991, and FirstSouth has
not received any indication of the pendency of any audit or
examination in connection with any tax return or report and has no
knowledge that any such return or report is subject to adjustment;
and (iv) FirstSouth has not executed any waiver or extended the
statute of limitations (or been asked to execute a waiver or extend
a statute of limitation) with respect to any tax year, the audit of
any tax return or report or the assessment or collection of any
tax. Any deferred taxes of FirstSouth have been provided for in
the FirstSouth Financial Statements in all material respects.
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<PAGE>
2.12. Absence of Material Adverse Changes or Certain
Other Events.
(i) Since December 31, 1995, FirstSouth has
conducted its business only in the ordinary course, and there has been no
material adverse change, and there has occurred no event or development and, to
the best knowledge of management of FirstSouth, there currently exists no
condition or circumstance which, with the lapse of time or otherwise, may or
could cause, create or result in a material adverse change, in or affecting the
financial condition of FirstSouth or in its results of operations, prospects,
business, assets, loan portfolio, investments, properties or operations.
(ii) Since December 31, 1995, and other than in
the ordinary course of its business, including its normal salary review for
1996, FirstSouth has not incurred any material liability or engaged in any
material transaction or entered into any material agreement, increased the
salaries, compensation or general benefits payable to its employees, suffered
any loss, destruction or damage to any of its properties or assets, or made a
material acquisition or disposition of any assets or entered into any material
contract or lease.
2.13. Absence of Undisclosed Liabilities. FirstSouth
has no liabilities or obligations, whether known or unknown,
matured or unmatured, accrued, absolute, contingent or otherwise,
whether due or to become due (including without limitation tax
liabilities or unfunded liabilities under employee benefit plans or
arrangements), other than (i) those reflected in the FirstSouth
Financial Statements and the FirstSouth Interim Financial
Statements, or (ii) obligations or liabilities incurred in the
ordinary course of its business since March 31, 1996, and which are
not, individually or in the aggregate, material to FirstSouth.
2.14. Compliance with Existing Obligations. FirstSouth has
performed in all material respects all obligations required to be performed by
it under, and it is not in default in any respect under, or in violation in any
respect of, the terms and conditions of its Articles of Incorporation or Bylaws,
and/or any contract, agreement, lease, mortgage, note, bond, indenture, license,
obligation, understanding or other undertaking (whether oral or written) to
which FirstSouth is bound or by which it, its business, capital stock or any of
its properties or assets may be affected.
2.15. Litigation and Compliance with Law.
(i) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to the best knowledge
and belief of management of FirstSouth, any facts or circumstances which
reasonably could result in such), including without limitation any such action
by any governmental or regulatory authority, which currently exists or is
ongoing, pending or, to the best knowledge and belief of management of
FirstSouth threatened, contemplated or probable of assertion, against,
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relating to or otherwise affecting FirstSouth or any of its properties or assets
which, if determined adversely, could result in liability on the part of
FirstSouth for, or subject it to, monetary damages, fines or penalties, or an
injunction, and which could have a material adverse effect on FirstSouth's
financial condition, results of operations, prospects, business, assets, loan
portfolio, investments, properties or operations or on the ability of FirstSouth
to consummate the Merger;
(ii) FirstSouth has all licenses, permits,
orders, authorizations or approvals ("Permits") of any federal, state, local or
foreign governmental or regulatory body that are material to or necessary for
the conduct of its business or to own, lease and operate its properties; all
such Permits are in full force and effect; no violations are or have been
recorded in respect of any such Permits; and no proceeding is pending or, to the
best knowledge of management of FirstSouth, threatened or probable of assertion
to suspend, cancel, revoke or limit any Permit;
(iii) FirstSouth is not subject to any
supervisory agreement, enforcement order, writ, injunction, capital directive,
supervisory directive, memorandum of understanding or other similar agreement,
order, directive, memorandum or consent of, with or issued by any regulatory or
other governmental authority (including without limitation the FDIC or the
Commissioner) relating to its financial condition, directors or officers,
operations, capital, regulatory compliance or otherwise; there are no judgments,
orders, stipulations, injunctions, decrees or awards against FirstSouth which in
any manner limit, restrict, regulate, enjoin or prohibit any present or past
business or practice of FirstSouth; and FirstSouth has not been advised and has
no reason to believe that any regulatory or other governmental authority or any
court is contemplating, threatening or requesting the issuance of any such
agreement, order, injunction, directive, memorandum, judgment, stipulation,
decree or award; and,
(iv) FirstSouth is not in violation or default
in any material respect under, and each has complied in all material respects
with, all laws, statutes, ordinances, rules, regulations, orders, writs,
injunctions or decrees of any court or federal, state, municipal or other
governmental or regulatory authority having jurisdiction or authority over it or
its business operations, properties or assets (including without limitation all
provisions of North Carolina law relating to usury, the Consumer Credit
Protection Act, and all other laws and regulations applicable to extensions of
credit by FirstSouth) and there is no basis for any claim by any person or
authority for compensation, reimbursement or damages or otherwise for any
violation of any of the foregoing that would have any material adverse effect on
the financial condition of FirstSouth.
2.16. Real Properties. FirstSouth has Previously
Disclosed to Centura a listing of all real property owned or leased
by FirstSouth (including FirstSouth's banking facilities and all
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other real estate or foreclosed properties owned by FirstSouth) (the "Real
Property") and all leases, if any, pertaining to any such Real Property to which
FirstSouth is a party (the "Real Property Leases"). With respect to all Real
Property owned by FirstSouth, FirstSouth has good and marketable fee simple
title to such Real Property and owns the same free and clear of all mortgages,
liens, leases, encumbrances, title defects and exceptions to title other than
(i) the lien of current taxes not yet due and payable, and (ii) such
imperfections of title and restrictions, covenants and easements (including
utility easements) which do not affect materially the value of the Real Property
and which do not and will not materially detract from, interfere with or
restrict the present or future use of the properties subject thereto or affected
thereby. With respect to each Real Property Lease (i) such lease is valid and
enforceable in accordance with its terms, (ii) there currently exists no
circumstance or condition which constitutes an event of default by FirstSouth or
its lessor or which, with the passage of time or the giving of required notices
will or could constitute such an event of default, and (iii) subject to any
required consent of FirstSouth's lessor, each such Real Property Lease may be
assigned to Centura and the execution and delivery of this Agreement does not
constitute an event of default thereunder.
To the best of the knowledge and belief of
management of FirstSouth, the Real Property complies in all material respects
with all applicable federal, state and local laws, regulations, ordinances or
orders of any governmental authority, including those relating to zoning,
building and use permits, and the Real Property may be used under applicable
zoning ordinances for commercial banking facilities as a matter of right rather
than as a conditional or nonconforming use.
All improvements and fixtures included in or on the
Real Property are in good condition and repair, ordinary wear and tear excepted,
and, except as may have been Previously Disclosed under Paragraph 2.21 hereof,
there does not exist any condition which interferes with FirstSouth's use or
affects the economic value thereof.
2.17. Loans, Accounts, Notes and Other Receivables.
(i) All loans, accounts, notes and other
receivables reflected as assets on FirstSouth's books and records (A) have
resulted from bona fide business transactions in the ordinary course of
FirstSouth's operations, (B) in all material respects were made in accordance
with FirstSouth's standard loan policies and procedures, and (C) are owned by
FirstSouth free and clear of all liens, encumbrances, assignments, participation
or repurchase agreements or other exceptions to title or to the ownership or
collection rights of any other person or entity.
(ii) All records of FirstSouth regarding all
outstanding loans, accounts, notes and other receivables, and all
other real estate owned, are accurate in all material respects,
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and, with respect to each loan which FirstSouth's loan documentation indicates
is secured by any real or personal property or property rights ("Loan
Collateral"), such loan is secured by valid, perfected and enforceable liens on
all such Loan Collateral having the priority described in FirstSouth's records
of such loan.
(iii) To the best knowledge of management of
FirstSouth, each loan reflected as an asset on FirstSouth's books, and each
guaranty therefor, is the legal, valid and binding obligation of the obligor or
guarantor thereon, and no defense, offset or counterclaim has been asserted with
respect to any such loan or guaranty.
(iv) FirstSouth has Previously Disclosed to Centura
a listing of (A) each loan, extension of credit or other asset of FirstSouth
which, as of March 31, 1996, is classified by the FDIC, the Commissioner or by
FirstSouth as "Loss", "Doubtful", "Substandard" or "Special Mention" (or
otherwise by words of similar import), or which FirstSouth has designated as a
special asset or for special handling or placed on any "watch list" because of
concerns regarding the ultimate collectibility or deteriorating condition of
such asset or any obligor or Loan Collateral therefor, and (B) each loan or
extension of credit of FirstSouth which, as of March 31, 1996, was past due
thirty (30) days or more as to the payment of principal and/or interest, or as
to which any obligor thereon (including the borrower or any guarantor) otherwise
was in default, is the subject of a proceeding in bankruptcy or otherwise has
indicated any inability or intention not to repay such loan or extension of
credit. Each such listing is accurate and complete as of the date indicated.
(v) To the best knowledge and belief of
FirstSouth's management, each of FirstSouth's loans and other extensions of
credit (with the exception of those loans and extensions of credit specified in
the written listings described in Subparagraph (iv) above) is collectible in the
ordinary course of FirstSouth's business in an amount which is not less than the
amount at which it is carried on FirstSouth's books and records.
(vi) FirstSouth's reserve for possible loan losses
(the "Loan Loss Reserve") shown in the FirstSouth Interim Financial Statements
has been established in conformity with GAAP, sound banking practices and all
applicable requirements of the FDIC and rules and policies of the Commissioner
and, in the best judgment of FirstSouth's management, is reasonable in view of
the size and character of FirstSouth's loan portfolio, current economic
conditions and other relevant factors, and is adequate to provide for losses
relating to or the risk of loss inherent in FirstSouth's loan portfolio and
other real estate owned.
2.18. Securities Portfolio and Investments. All
securities owned by FirstSouth (whether owned of record or
beneficially) are held free and clear of all mortgages, liens,
pledges, encumbrances or any other restriction or rights of any
other person or entity, whether contractual or statutory, which
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would materially impair the ability of FirstSouth to dispose freely of any such
security and/or otherwise to realize the benefits of ownership thereof at any
time (other than pledges of securities in the ordinary course of FirstSouth's
business to secure public funds deposits and in connection with repurchase
agreements with customers). There are no voting trusts or other agreements or
undertakings to which FirstSouth is a party with respect to the voting of any
such securities. With respect to all "repurchase agreements" to which FirstSouth
has "purchased" securities under agreement to resell (if any), FirstSouth has a
valid, perfected first lien or security interest in the government securities or
other collateral securing the repurchase agreement, and the value of the
collateral securing each such repurchase agreement equals or exceeds the amount
of the debt owed to FirstSouth which is secured by such collateral.
Except for fluctuations in the market values of United States Treasury and
agency or municipal securities, since March 31, 1996, there has been no
significant deterioration or material adverse change in the quality, or any
material decrease in the value, of FirstSouth's securities portfolio.
2.19. Personal Property and Other Assets. All assets
of FirstSouth (including without limitation all banking equipment,
data processing equipment, vehicles, and all other personal
property located in or used in the operation of each office of
FirstSouth or otherwise used by FirstSouth in the operation of its
business) are owned by FirstSouth free and clear of all liens,
leases, encumbrances, title defects or exceptions to title. All of
FirstSouth's banking equipment is in good operating condition and
repair, ordinary wear and tear excepted.
2.20. Patents and Trademarks. FirstSouth owns, possesses or
has the right to use any and all patents, licenses, trademarks, trade names,
copyrights, trade secrets and proprietary and other confidential information
necessary to conduct its business as now conducted; and FirstSouth has not
violated, and is not currently in conflict with, any patent, license, trademark,
trade name, copyright or proprietary right of any other person or entity.
2.21. Environmental Matters. FirstSouth has Previously
Disclosed and provided to Centura copies of all written reports, correspondence,
notices or other materials, if any, in its possession pertaining to
environmental reports, surveys, assessments, notices of violation, notices of
regulatory requirements, penalty assessments, claims, actions or proceedings,
past or pending, of the Real Property or any of its Loan Collateral and any
improvements thereon, or to any violation of Environmental Laws (as defined
below) on, affecting or otherwise involving the Real Property, any Loan
Collateral or otherwise involving FirstSouth.
To the best of the knowledge and belief of management of FirstSouth:
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(i) there has been no presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, emission, discharge,
release, threatened release, control or clean-up, in a reportable or regulated
quantity, of any hazardous, toxic or otherwise regulated materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, oil or other petroleum products or byproducts,
asbestos or materials containing (or presumed to contain) asbestos,
polychlorinated biphenyls, or radioactive materials, and/or any hazardous,
toxic, regulated or dangerous waste, substance or material defined as such by
the United States Environmental Protection Agency or any other federal, state or
local government or agency or political subdivision thereof, or for the purpose
of any Environmental Laws (as defined herein), as may now or hereafter (through
the Effective Time) be defined or in effect ("Hazardous Substances") by any
person on, from or relating to any parcel of the Real Property;
(ii) FirstSouth has not violated any federal,
state or local law, rule, regulation, order, permit or other requirement
relating to health, safety or the environment or imposing liability,
responsibility or standards of conduct applicable to environmental conditions
(all such laws, rules, regulations, orders and other requirements being herein
collectively referred to as "Environmental Laws"), and, there has been no
violation of any Environmental Laws (including any violation with respect to or
relating to any Loan Collateral) by any other person or entity for whose
liability or obligation with respect to any particular matter or violation
FirstSouth is or may be responsible or liable;
(iii) FirstSouth is not subject to any claims,
demands, causes of action, suits, proceedings, losses, damages, penalties,
liabilities, obligations, costs or expenses of any kind and nature which arise
out of, under or in connection with, or which result from or are based upon the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control or clean-up of any
Hazardous Substances on, from or relating to the Real Property or any Loan
Collateral, by FirstSouth or any other person or entity; and,
(iv) no facts, events or conditions relating to
the Real Property or any Loan Collateral, or the operations of FirstSouth at any
of its office locations, will prevent, hinder or limit continued compliance with
Environmental Laws, or give rise to any investigatory, remedial or corrective
actions, obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental Laws.
For purposes of this Agreement, "Environmental Laws" shall
include:
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(i) all federal, state and local statutes,
regulations, ordinances, orders, decrees, and similar provisions
having the force or effect of law,
(ii) all contractual agreements, and
(iii) all common law,
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all standards of
conduct and bases of obligations relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, discharge, release,
threatened release, control or clean-up of any Hazardous Substances (including
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act, the Superfund Amendment and Reauthorization Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the Clean Water
Act, the Clean Air Act, the Toxic Substances Control Act, the Oil Pollutant Act,
the Coastal Zone Management Act, any "Superfund" or "Superlien" law, the North
Carolina Oil Pollution and Hazardous Substances Control Act, the North Carolina
Water and Air Resources Act and the North Carolina Occupational Safety and
Health Act, including any amendments thereto from time to time) as such may now
or hereafter (through the Effective Time) be defined or in effect.
2.22. Absence of Brokerage or Finders Commissions. (i) All
negotiations relative to this Agreement and the transactions described herein
have been carried on by FirstSouth directly with Centura and the Holding
Company; (ii) no person or firm has been retained by or has acted on behalf of,
pursuant to any agreement, arrangement or understanding with, or under the
authority of, FirstSouth or its Board of Directors, as a broker, finder or agent
or has performed similar functions or otherwise is or may be entitled to receive
or claim a brokerage fee or other commission in connection with the transactions
described herein; and, (iii) FirstSouth has not agreed to pay any brokerage fee
or other commission to any person or entity in connection with the transactions
described herein.
2.23. Material Contracts. Except for leases on FirstSouth's
branch offices, FirstSouth is not a party to or bound by any agreement involving
money or other property in an amount or with a value in excess of $50,000 (i)
which is not to be performed in full prior to December 31, 1996, (ii) which
calls for the provision of goods or services to FirstSouth and cannot be
terminated without material penalty upon written notice to the other party
thereto, (iii) which is material to FirstSouth and has not entered into in the
ordinary course of business, (iv) which involves hedging, options or any similar
trading activity, or interest rate exchanges or swaps, (v) which commits
FirstSouth to extend any loan or credit (with the exception of letters of
credit, lines of credit and loan commitments extended in the ordinary
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course of FirstSouth's business), (vi) which involves the purchase or sale of
any assets of FirstSouth, or the purchase, sale, issuance, redemption or
transfer of any capital stock or other securities of FirstSouth, or (vii) with
any director, officer or principal shareholder of FirstSouth (including without
limitation any employment or consulting agreement, but not including any
agreement relating to loans or other banking services which were made in the
ordinary course of FirstSouth's business and on substantially the same terms and
conditions as were prevailing at that time for similar agreements with unrelated
persons).
FirstSouth is not in default in any material respect, and
there has not occurred any event which with the lapse of time or giving of
notice or both would constitute such a default, under any contract, lease,
insurance policy, commitment or arrangement to which it is a party or by which
it or its property is or may be bound or affected or under which it or its
property receives benefits, where the consequences of such default would have a
material adverse effect on the financial condition, results of operations,
prospects, business, assets, loan portfolio, investments, properties or
operations of FirstSouth.
2.24. Employment Matters; Employee Relations. FirstSouth (i)
has paid in full to or accrued on behalf of all its directors, officers and
employees all wages, salaries, commissions, bonuses, fees, sick pay, severance
pay, all other amounts promised to the extent required by law or when FirstSouth
has a policy of making such payments and other direct compensation for all
services performed by them to the date of this Agreement and (ii) is in
compliance with all federal, state and local laws, statutes, rules and
regulations with regard to employment and employment practices, terms and
conditions, and wages and hours and other compensation matters; and, no person
has, to the knowledge of management of FirstSouth, asserted that FirstSouth is
liable in any amount for any arrearages in wages or employment taxes or for any
penalties for failure to comply with any of the foregoing.
There is no action, suit or proceeding by any person
pending or, to the best knowledge of management of FirstSouth, threatened,
against FirstSouth (or any of its employees), involving employment
discrimination, sexual harassment, wrongful discharge or similar claims.
FirstSouth is not a party to or bound by any
collective bargaining agreement with any of its employees, any labor union or
any other collective bargaining unit or organization. There is no pending or
threatened labor dispute, work stoppage or strike involving FirstSouth and any
of its employees, or any pending or threatened proceeding in which it is
asserted that FirstSouth has committed an unfair labor practice; and FirstSouth
is not aware of any activity involving it or any of its employees seeking to
certify a collective bargaining unit or engaging in any other labor organization
activity.
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2.25. Employment Agreements; Employee Benefit Plans.
(i) FirstSouth is not a party to or bound by any
employment agreements with any of its directors, officers or
employees.
(ii) FirstSouth has Previously Disclosed and has delivered or
made available to Centura prior to the execution of this Agreement copies, in
each case, of all pension, stock ownership, severance pay, vacation, bonus, or
other incentive plan, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" as that term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by FirstSouth for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "FirstSouth Benefit Plans"). Any of the FirstSouth Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "FirstSouth ERISA Plan." No FirstSouth ERISA
Plan is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) or is or has been a multi-employer plan within the
meaning of Section 3(37) of ERISA. Neither FirstSouth nor any affiliate of
FirstSouth has ever been required to contribute to a multi-employer plan, as
defined in Section 3(37) of ERISA.
(iii) All FirstSouth Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
laws, rules or regulations, the breach or violation of which are reasonably
likely to have, individually or in the aggregate, a material adverse effect on
FirstSouth. Each FirstSouth ERISA Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and FirstSouth is not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. To the knowledge of FirstSouth, FirstSouth has not engaged
in a transaction with respect to any FirstSouth Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
FirstSouth to a tax imposed by either Section 4975 of the Internal Revenue Code
or Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a material adverse effect on FirstSouth.
(iv) FirstSouth has no liability for retiree health and life
benefits under any of the FirstSouth Benefit Plans and there are no restrictions
on the rights of FirstSouth to amend or terminate any such Plan without
incurring any liability thereunder,
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which liability is reasonably likely to have a material adverse
effect on FirstSouth.
(v) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (A) result in any payment (including severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director or
any employee of FirstSouth from FirstSouth under any FirstSouth Benefit Plan or
otherwise, (B) increase any benefits otherwise payable under any FirstSouth
Benefit Plan or otherwise, or (C) result in any acceleration of the time of
payment or vesting of any such benefit, where such payment, increase, or
acceleration is reasonably likely to have, individually or in the aggregate, a
material adverse effect on FirstSouth.
(vi) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of FirstSouth and their respective beneficiaries have been
fully reflected on the FirstSouth Financial Statements to the extent required by
and in accordance with GAAP.
2.26. Insurance. FirstSouth has in effect a "banker's blanket
bond" and such other policies of general liability, casualty, directors and
officers liability, employee fidelity, errors and omissions and other property
and liability insurance as have been Previously Disclosed to Centura (the
"Policies"). The Policies provide coverage in such amounts and against such
liabilities, casualties, losses or risks as is customary or reasonable for
entities engaged in FirstSouth's business or as is required by applicable law or
regulation; and, in the reasonable opinion of management of FirstSouth, the
insurance coverage provided under the Policies is considered reasonable and
adequate in all respects for FirstSouth. Each of the Policies is in full force
and effect and is valid and enforceable in accordance with its terms, and is
underwritten by an insurer of recognized financial responsibility and which is
qualified to transact business in North Carolina; and FirstSouth has taken all
requisite actions (including the giving of required notices) under each such
Policy in order to preserve all rights thereunder with respect to all matters.
FirstSouth is not in default under the provisions of, has not received notice of
cancellation or nonrenewal of or any premium increase on, or has any knowledge
of any failure to pay any premium on or any inaccuracy in any application for
any Policy. There are no pending claims with respect to any Policy (and
FirstSouth is not aware of any facts which would form the basis of any such
claim), and FirstSouth has no knowledge of any state of facts or of the
occurrence of any event that is reasonably likely to form the basis for any such
claim.
2.27. Insurance of Deposits. All deposits of
FirstSouth are insured by the Bank Insurance Fund of the FDIC to
the maximum extent permitted by law, all deposit insurance premiums
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due from FirstSouth to the FDIC have been paid in full in a timely fashion, and,
to the best of the knowledge and belief of FirstSouth's executive officers, no
proceedings have been commenced or are contemplated by the FDIC or otherwise to
terminate such insurance.
2.28. Affiliates. FirstSouth has Previously Disclosed to
Centura a listing of those persons deemed by FirstSouth and its counsel as of
the date of this Agreement to be "Affiliates" of FirstSouth (as that term is
defined in Rule 405 promulgated under the Securities Act of 1933), including
persons, trusts, estates, corporations or other entities related to persons
deemed to be Affiliates of FirstSouth.
2.29. Obstacles to Regulatory Approval, Accounting Treatment
or Tax Treatment. To the best of the knowledge and belief of management of
FirstSouth, there exists no fact or condition (including FirstSouth's record of
compliance with the Community Reinvestment Act) relating to FirstSouth that may
reasonably be expected to (i) prevent or materially impede or delay the Holding
Company, Centura or FirstSouth from obtaining the regulatory approvals required
in order to consummate transactions described herein, (ii) prevent the Merger
from qualifying to be a reorganization under Section 368(a)(1)(A) of the Code,
or (iii) prevent the Merger from being treated as a "pooling-of-interests" for
accounting purposes; and, if any such fact or condition becomes known to
FirstSouth, FirstSouth shall promptly (and in any event within three days after
obtaining such knowledge) communicate such fact or condition to the President of
the Holding Company.
2.30. Disclosure. To the best of the knowledge and belief of
FirstSouth, no written statement, certificate, schedule, list or other written
information furnished by or on behalf of FirstSouth at any time to the Holding
Company or Centura in connection with this Agreement (including without
limitation information "Previously Disclosed" by FirstSouth), when considered as
a whole, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. Each document delivered or to be delivered by
FirstSouth to the Holding Company or Centura is or will be a true and complete
copy of such document, unmodified except by another document delivered by
FirstSouth.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CENTURA AND THE
HOLDING COMPANY
Except as otherwise specifically described herein or as "Previously
Disclosed" (as defined in Paragraph 10.01. below) to FirstSouth, Centura and the
Holding Company each hereby makes the following representations and warranties
to FirstSouth.
3.01. Organization; Standing; Power. Centura and the
Holding Company each (i) is duly organized and incorporated,
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validly existing and in good standing (as a banking corporation and a business
corporation, respectively) under the laws of North Carolina, (ii) has all
requisite power and authority (corporate and other) to own its respective
properties and conduct its respective businesses as now being conducted, (iii)
is duly qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its respective businesses makes such
qualification necessary, except where failure so to qualify would not have a
material adverse effect on the Holding Company and its subsidiaries considered
as one enterprise, and (iv) is not transacting business, or operating any
properties owned or leased by it, in violation of any provision of federal or
state law or any rule or regulation promulgated thereunder, which violation
would have a material adverse effect on the Holding Company and its subsidiaries
considered as one enterprise.
3.02. Capital Stock. The Holding Company's authorized capital
stock consists of 50,000,000 shares of Centura Stock and 25,000,000 shares of no
par preferred stock. As of March 31, 1996, an aggregate of 22,875,050 shares of
Centura Stock were issued and outstanding, and no shares of Preferred Stock were
issued or outstanding. The Holding Company's outstanding capital stock has been
duly authorized and validly issued, and is fully paid and nonassessable, and the
shares of Centura Stock issued to FirstSouth's shareholders pursuant to this
Agreement, when issued as described herein, will be duly authorized, validly
issued, fully paid and nonassessable.
All outstanding shares of Centura's common stock ("Bank
Stock") have been validly issued and are owned by the Holding Company.
3.03. Authorization and Validity of Agreement. This
Agreement has been duly and validly approved by the Holding
Company's and Centura's Boards of Directors and executed and
delivered on the Holding Company's and Centura's behalf. (i) The
Holding Company and Centura each has the corporate power and
authority to execute and deliver this Agreement and to perform its
obligations and agreements and carry out the transactions described
herein, (ii) all corporate proceedings required to be taken to
authorize the Holding Company and Centura to enter into this
Agreement and to perform its obligations and agreements and carry
out the transactions described herein have been duly and properly
taken, and (iii) this Agreement constitutes the valid and binding
agreement of the Holding Company and Centura enforceable in
accordance with its terms (except to the extent enforceability may
be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in
effect which affect creditors' rights generally, (B) by legal and
equitable limitations on the availability of injunctive relief,
specific performance and other equitable remedies, and (C) general
principles of equity and applicable laws or court decisions
limiting the enforceability of indemnification provisions).
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3.04. Validity of Transactions; Absence of Required Consents
or Waivers. Except where the same would not have a material adverse effect on
the Holding Company and its subsidiaries considered as one enterprise, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions described herein, nor compliance by the Holding Company or Centura
with any of its obligations or agreements contained herein, will: (i) conflict
with or result in a breach of the terms and conditions of, or constitute a
default or violation under any provision of, the Holding Company's or Centura's
Articles of Incorporation or Bylaws, or any contract, agreement, lease,
mortgage, note, bond, indenture, license, or obligation or understanding (oral
or written) to which the Holding Company or Centura is bound or by which it, its
business, capital stock or any of its properties or assets may be affected; (ii)
result in the creation or imposition of any lien, claim, interest, charge,
restriction or encumbrance upon any of the Holding Company's or Centura's
properties or assets; (iii) violate any applicable federal or state statute,
law, rule or regulation, or any order, writ, injunction or decree of any court,
administrative or regulatory agency or governmental body; (iv) result in the
acceleration of any obligation or indebtedness of the Holding Company or
Centura; or (v) interfere with or otherwise adversely affect the Holding
Company's or Centura's ability to carry on its business as presently conducted.
No consents, approvals or waivers are required to be obtained
from any person or entity in connection with the Holding Company's or Centura's
execution and delivery of this Agreement, or the performance of its obligations
or agreements or the consummation of the transactions described herein, except
for the required approvals of governmental or regulatory authorities described
in Paragraph 7.01.a. below.
3.05. Holding Company Books and Records. The Holding
Company's and Centura's books of account and business records have
been maintained in substantial compliance with all applicable legal and
accounting requirements and in accordance with good business practices, and such
books and records are complete and reflect accurately in all material respects
the Holding Company's and Centura's respective items of income and expense and
all of their respective assets, liabilities and stockholders' equity. The minute
books of the Holding Company and Centura accurately reflect in all material
respects the corporate actions which their respective shareholders and board of
directors, and all committees thereof, have taken during the time periods
covered by such minute books. All such minute books have been or will be made
available to FirstSouth and its representatives.
3.06. Holding Company Reports. Since January 1, 1991, and
where the failure to file has had or could have a material and adverse effect on
the Holding Company and its subsidiaries considered as one enterprise, the
Holding Company and its consolidated subsidiaries have filed all reports,
registrations and statements, together with any amendments that were required to
be made with respect thereto, that were required to be filed with
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(i) the Securities and Exchange Commission (the "SEC"), (ii) the Board of
Governors of the Federal Reserve System (the "FRB"), (iii) the FDIC, (iv) the
Commissioner, and (v) any other governmental or regulatory authorities having
jurisdiction over the Holding Company or its subsidiaries. All such reports and
statements filed with the SEC, the FRB, the FDIC, the Commissioner or other such
regulatory authority are collectively referred to herein as the "Holding Company
Reports." As of their respective dates, the Holding Company Reports complied in
all material respects with all the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and the Holding Company has not been notified that any such the
Holding Company Reports were deficient in any material respect as to form or
content. Following the date of this Agreement, the Holding Company shall deliver
to FirstSouth upon its request a copy of any report, registration, statement or
other regulatory filing made by the Holding Company or Centura with the SEC, the
FRB, the FDIC, the Commissioner or any other such regulatory authority.
3.07. Holding Company Financial Statements. The
Holding Company has delivered to FirstSouth (i) a copy of the
Holding Company's consolidated balance sheets as of December 31,
1994 and December 31, 1995, and its consolidated statements of
income, changes in shareholders' equity, and cash flows for the
years ended December 31, 1993, December 31, 1994 and December 31,
1995 (the "Holding Company Financial Statements"), and 1995 (the
"Holding Company Financial Statements") and (ii) a copy of the
Holding Company's balance sheet as of March 31, 1996 and its
statement of operations for the three months ended March 31, 1996
(the "Holding Company Interim Financial Statements"). The Holding
Company Financial Statements and the Holding Company Interim
Financial Statements were prepared in accordance with GAAP applied
on a consistent basis throughout the periods indicated and have
been audited and certified by the Holding Company's independent
accountants, KPMG Peat Marwick LLP, and the Holding Company
Financial Statements present fairly in all material respects the
Holding Company's consolidated financial condition, assets and
liabilities, results of operations, changes in stockholders' equity
and changes in cash flows as of the dates and for the periods
specified therein.
3.08. Absence of Material Adverse Changes. Since
March 31, 1996 there has been no material adverse change, and there
has occurred no event or development and, to the best knowledge of
management of the Holding Company or Centura, there currently
exists no condition or circumstance which, with the lapse of time
or otherwise, may or could cause, create or result in a material
adverse change, in or affecting the Holding Company's consolidated
financial condition or results of operations, or in its prospects,
business, assets, loan portfolio, investments, properties or
operations.
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3.09. Litigation and Compliance with Law.
(i) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to the best knowledge
and belief of management of the Holding Company or Centura, any facts or
circumstances which reasonably could result in such), including without
limitation any such action by any governmental or regulatory authority, which
currently exists or is ongoing, pending or, to the best knowledge and belief of
management of the Holding Company or Centura, threatened, contemplated or
probable of assertion, against, relating to or otherwise affecting the Holding
Company or Centura or any of their properties or assets which, if determined
adversely, could result in liability on the part of the Holding Company or
Centura for, or subject it to, monetary damages, fines or penalties, an
injunction, and which could have a material adverse change, in or affecting the
Holding Company's consolidated financial condition or results of operations, or
in its prospects, business, assets, loan portfolio, investments, properties or
operations or on the ability of the Holding Company or Centura to consummate the
Merger;
(ii) the Holding Company and Centura each has
all licenses, permits, orders, authorizations or approvals ("Permits") of any
federal, state, local or foreign governmental or regulatory body that are
material to or necessary for the conduct of its business or to own, lease and
operate its properties; all such Permits are in full force and effect; no
violations are or have been recorded in respect of any such Permits; and no
proceeding is pending or, to the best knowledge of management of the Holding
Company or Centura, threatened or probable of assertion to suspend, cancel,
revoke or limit any Permit;
(iii) neither the Holding Company nor Centura is
subject to any supervisory agreement, enforcement order, writ, injunction,
capital directive, supervisory directive, memorandum of understanding or other
similar agreement, order, directive, memorandum or consent of, with or issued by
any regulatory or other governmental authority (including without limitation the
FDIC, the FRB or the Commissioner) relating to its financial condition,
directors or officers, operations, capital, regulatory compliance or otherwise;
there are no judgments, orders, stipulations, injunctions, decrees or awards
against the Holding Company or Centura which in any manner limit, restrict,
regulate, enjoin or prohibit any present or past business or practice of the
Holding Company or Centura; and, neither the Holding Company nor Centura has
been advised or has any reason to believe that any regulatory or other
governmental authority or any court is contemplating, threatening or requesting
the issuance of any such agreement, order, injunction, directive, memorandum,
judgment, stipulation, decree or award; and,
(iv) Neither the Holding Company nor Centura is
in violation or default in any material respect under, and each has complied in
all material respects with, all laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions or
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decrees of any court or federal, state, municipal or other governmental or
regulatory authority having jurisdiction or authority over it or its business
operations, properties or assets (including without limitation all provisions of
North Carolina law relating to usury, the Consumer Credit Protection Act, and
all other laws and regulations applicable to extensions of credit by Centura)
and there is no basis for any claim by any person or authority for compensation,
reimbursement or damages or otherwise for any violation of any of the foregoing
that would have any material effect on the consolidated financial condition of
the Holding Company.
3.10. Absence of Brokerage or Finders Commissions.
(i) All negotiations relative to this Agreement and the transactions described
herein have been carried on by the Holding Company and Centura directly with
FirstSouth; (ii) no person or firm has been retained by or has acted on behalf
of, pursuant to any agreement, arrangement or understanding with, or under the
authority of, the Holding Company or Centura or their respective Boards of
Directors, as a broker, finder or agent or has performed similar functions or
otherwise is or may be entitled to receive or claim a brokerage fee or other
commission in connection with the transactions described herein; and, (iii)
neither the Holding Company nor Centura has agreed to pay any brokerage fee or
other commission to any person or entity in connection with the transactions
described herein.
3.11. Obstacles to Regulatory Approval, Accounting Treatment
or Tax Treatment. To the best of the knowledge and belief of the executive
officers of the Holding Company and Centura, no fact or condition (including
Centura's record of compliance with the Community Reinvestment Act) relating to
the Holding Company or Centura exists that may reasonably be expected to (i)
prevent or materially impede or delay the Holding Company, Centura or FirstSouth
from obtaining the regulatory approvals required in order to consummate the
transactions described herein, (ii) prevent the Merger from qualifying to be a
reorganization under Section 368(a)(1)(A) of the Code, or (iii) prevent the
Merger from being treated as a "pooling-of-interests" for accounting purposes;
and, if any such fact or condition becomes known to the executive officers of
the Holding Company or Centura, it promptly (and in any event within three days
after obtaining such knowledge) shall communicate such fact or condition to the
Chairman of FirstSouth.
3.12. Disclosure. To the best of the knowledge and belief of
the Holding Company and Centura, no written statement, certificate, schedule,
list or other written information furnished by or on behalf of the Holding
Company or Centura at any time to FirstSouth in connection with this Agreement
(including without limitation information "Previously Disclosed" by the Holding
Company and Centura), when considered as a whole, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the
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statements herein or therein, in light of the circumstances under which they
were made, not misleading. Each document delivered or to be delivered by the
Holding Company or Centura to FirstSouth is or will be a true and complete copy
of such document, unmodified except by another document delivered by the Holding
Company or Centura.
ARTICLE IV. COVENANTS OF FIRSTSOUTH
4.01. Affirmative Covenants of FirstSouth. FirstSouth
hereby covenants and agrees as follows with the Holding Company and
Centura.
a. "Affiliates" of FirstSouth. FirstSouth will use its best
efforts to cause each person who shall be deemed by the Holding Company or its
counsel, in their sole discretion, to be an Affiliate of FirstSouth (as defined
in Paragraph 2.28 above), to execute and deliver to the Holding Company at least
thirty (30) days prior to the Closing a written agreement (the "Affiliates'
Agreement") relating to restrictions on shares of Centura Stock to be received
by such Affiliates pursuant to this Agreement and which Affiliates' Agreement
shall be in form and content reasonably satisfactory to the Holding Company and
substantially in the form attached as Schedule B to this Agreement. Certificates
for the shares of Centura Stock issued to Affiliates of FirstSouth shall bear a
restrictive legend (substantially in the form as shall be set forth in the
Affiliates' Agreement) with respect to the restrictions applicable to such
shares.
b. Conduct of Business Prior to Effective Time. While
the parties recognize that the operation of FirstSouth until the
Effective Time is the responsibility of FirstSouth and its Board of
Directors and officers, FirstSouth agrees that, between the date of
this Agreement and the Effective Time, FirstSouth will carry on its
business, in and only in the regular and usual course in
substantially the same manner as such business heretofore was
conducted, and, to the extent consistent with such business and
within its ability to do so, FirstSouth agrees that it will:
(i) preserve intact its present business
organization, keep available its present officers and employees, and preserve
its relationships with customers, depositors, creditors, correspondents,
suppliers, and others having business relationships with it;
(ii) maintain all its properties and equipment in
customary repair, order and condition, ordinary wear and tear
excepted;
(iii) maintain its books of account and records in
the usual, regular and ordinary manner in accordance with sound
business practices applied on a consistent basis;
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(iv) comply with all laws, rules and regulations
applicable to it, its properties and to the conduct of its
business;
(v) continue to maintain in force insurance such as
is described in Paragraph 2.26. above; will not modify any bonds or policies of
insurance in effect as of the date hereof unless the same, as modified, provides
substantially equivalent coverage; and will not cancel, allow to be terminated
or, to the extent available, fail to renew, any such bond or policy of insurance
unless the same is replaced with a bond or policy providing substantially
equivalent coverage; and,
(vi) promptly provide to the Holding Company and
Centura such information about FirstSouth and its financial condition, results
of operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations, as they reasonably shall request.
c. Periodic Information Regarding Loans. All new
extensions of credit in excess of $750,000 will be submitted by
FirstSouth to Centura on an after-the-fact basis for Centura's
review within ten (10) business days of the date of the extension
of credit.
Additionally, FirstSouth agrees to make available
and provide to the Holding Company and Centura the following information with
respect to FirstSouth's loans and other extensions of credit (such assets herein
referred to as "Loans") as of March 31, 1996, and each month thereafter until
the Effective Time, such information for each month to be in form and substance
as is usual and customary in the conduct of FirstSouth's business and to be
furnished within twenty (20) days of the end of each month ending after the date
hereof:
(i) a list of Loans past due for sixty (60) days
or more as to principal or interest;
(ii) an analysis of the Loan Loss Reserve and
management's assessment of the adequacy of the
Loan Loss Reserve, which analysis and
assessment shall include a list of all
classified or "watch list" Loans, along with
the outstanding balance and amount
specifically allocated to the Loan Loss
Reserve for each such classified or "watch
list" Loan;
(iii) a list of Loans in nonaccrual status;
(iv) a list of all Loans over $50,000 without
principal reduction for a period of longer
than one year;
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(v) a list of all foreclosed real property or
other real estate owned and all repossessed
personal property;
(vi) a list of reworked or restructured Loans over
$50,000 and still outstanding, including
original terms, restructured terms and status;
and
(vii) a list of any actual or threatened
litigation by or against FirstSouth
pertaining to any Loans or credits, which
list shall contain a description of
circumstances surrounding such litigation,
its present status and management's
evaluation of such litigation.
d. Notice of Certain Changes or Events. Following the
execution of this Agreement and up to the Effective Time,
FirstSouth promptly will notify Centura in writing of and provide
to it such information as it shall request regarding (i) any
material adverse change in its financial condition, results of
operations, prospects, business, assets, loan portfolio,
investments, properties or operations, or of the actual or
prospective occurrence of any condition or event which, with the
lapse of time or otherwise, may or could cause, create or result in
any such material adverse change, or of (ii) the actual or
prospective existence or occurrence of any condition or event
which, with the lapse of time or otherwise, has caused or may or
could cause any statement, representation or warranty of FirstSouth
herein, or any information that has been Previously Disclosed by
FirstSouth to Centura, to be or become materially inaccurate,
misleading or incomplete, or which has resulted or may or could
cause, create or result in the material breach or violation of any
of FirstSouth's covenants or agreements contained herein or in the
failure of any of the conditions described in Paragraphs 7.01. or
7.03. below.
e. Consents to Assignment of Leases. FirstSouth will use its
best efforts to obtain all required consents of its landlords to the assignment
to Centura of FirstSouth's rights and obligations under the Real Property
Leases, each of which consents shall be in such form as shall be specified by
Centura.
f. Further Action; Instruments of Transfer, etc. FirstSouth
covenants and agrees with the Holding Company and Centura that it (i) will use
its best efforts in good faith to take or cause to be taken all action required
of it hereunder as promptly as practicable so as to permit the consummation of
the transactions described herein at the earliest possible date, (ii) shall
perform all acts and execute and deliver to the Holding Company and Centura all
documents or instruments required herein or as otherwise shall be reasonably
necessary or useful to or requested by either of them in consummating such
transactions, and, (iii) will cooperate with the Holding Company and Centura in
every
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way in carrying out, and will pursue diligently the expeditious
completion of, such transactions.
g. Dissolution of Subsidiary. FirstSouth shall use its
best efforts to liquidate and dissolve its inactive subsidiary,
FirstSouth Investment Services, Inc., prior to the Effective Time.
4.02. Negative Covenants of FirstSouth. FirstSouth hereby covenants and
agrees that, between the date hereof and the Effective Time, FirstSouth will not
do any of the following things or take any of the following actions without the
prior written consent and authorization of the President of the Holding Company.
a. Amendments to Articles of Incorporation or Bylaws.
FirstSouth will not amend its Articles of Incorporation or Bylaws.
b. Change in Capital Stock. Except for FirstSouth Stock to be
issued under the FirstSouth Option Plans, the FirstSouth Dividend Reinvestment
and Cash Withdrawal Plan (not to exceed 10,000 shares) and the FirstSouth Bank
401(k) Plan (not to exceed 1,000 shares), FirstSouth will not (i) make any
change in its authorized capital stock, or create any other or additional
authorized capital stock or other securities, or (ii) issue, sell, purchase,
redeem, retire, reclassify, combine or split any shares of its capital stock or
other securities, other than the issuance of shares upon the exercise of stock
options which are outstanding as of the date of this Agreement (including
securities convertible into capital stock), or enter into any agreement or
understanding with respect to any such action.
c. Options, Warrants and Rights. FirstSouth will not grant or
issue any options, warrants, calls, puts or other rights of any kind relating to
the purchase, redemption or conversion of shares of its capital stock or any
other securities (including securities convertible into capital stock) or enter
into any agreement or understanding with respect to any such action.
d. Dividends. FirstSouth will not declare or pay any
dividends or make any other distributions on or in respect of any
shares of its capital stock or otherwise to its shareholders,
except in accordance with its current cash policy, cash dividend
level and cash dividend declaration and payment dates.
e. Employment, Benefit or Retirement Agreements or Plans.
Except as required by law and except as may occur under the FirstSouth Stock
Plans, FirstSouth will not (i) enter into or become bound by any contract,
agreement or commitment for the employment or compensation of any officer,
employee or consultant which is not immediately terminable by FirstSouth without
cost or other liability on no more than thirty (30) days notice; (ii) adopt,
enter into or become bound by any new or additional profit-sharing, bonus,
incentive, change in control or "golden parachute", stock option, stock
purchase, pension, retirement, insurance (hospitalization, life or other) or
similar contract, agreement, commitment, understanding, plan or arrangement
(whether formal or
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informal) with respect to or which provides for benefits for any of its current
or former directors, officers, employees or consultants; or (iii) enter into or
become bound by any contract with or commitment to any labor or trade union or
association or any collective bargaining group.
f. Increase in Compensation; Additional Compensation. Except
as otherwise provided herein, FirstSouth will not increase the compensation or
benefits of, or pay any bonus or other special or additional compensation to,
any of its directors, officers, employees or consultants. Notwithstanding
anything contained herein to the contrary, this Paragraph 4.02.f. shall not
prohibit annual merit increases in the salaries of its employees or other
payments made to employees or directors in connection with existing compensation
or benefit plans, so long as such increases or payments are effected at such
times and in such manner and amounts as shall be consistent with FirstSouth's
past compensation policies and practices and, in the case of payments made
pursuant to compensation or benefit plans, consistent with the terms of those
plans and provided that if the Merger occurs prior to such compensation or
benefit plans' normal anniversary date, payments made pursuant to those
compensation or benefit plans shall be made on a pro rata basis for the
appropriate portion of the fiscal year prior to the Merger; and provided that
FirstSouth shall be allowed to make bonus payments under its Bonus Plan
(including payments to officers and other employees) without regard to the
specific terms of such plan up to the aggregate amount accrued by FirstSouth for
such plan immediately prior to the Effective Time (such accrual not to exceed an
aggregate of $225,000).
g. Accounting Practices. FirstSouth will not make any
changes in its accounting methods, practices or procedures or in
depreciation or amortization policies, schedules or rates
heretofore applied (except as required by generally accepted
accounting principles or governmental regulations).
h. Acquisitions; Additional Branch Offices. FirstSouth
will not directly or indirectly (i) acquire or merge with, or
acquire any branch or all or any significant part of the assets of,
any other person or entity, (ii) open any new branch office, or
(iii) enter into or become bound by any contract, agreement,
commitment or letter of intent relating to, or otherwise take or
agree to take any action in furtherance of, any such transaction or
the opening of a new branch office.
i. Changes in Business Practices. Except as may be
required by the FDIC, the Commissioner or any other governmental or
other regulatory agency or as shall be required by applicable law,
regulation or this Agreement, FirstSouth will not (i) change in any
material respect the nature of its business or the manner in which
it conducts its business, (ii) discontinue any material portion or
line of its business, or (iii) change in any material respect its
lending, investment, asset-liability management or other material
banking or business policies (except to the extent required by
Paragraph 4.01.b. above).
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j. Exclusive Merger Agreement. FirstSouth will not, directly
nor indirectly, through any person (i) encourage, solicit or attempt to initiate
or procure discussions, negotiations or offers with or from any person or entity
(other than the Holding Company or Centura) relating to a merger or other
acquisition of FirstSouth, or the purchase or acquisition of any FirstSouth
Stock, any branch office of FirstSouth or all or any significant part of
FirstSouth's assets; or provide assistance to any person in connection with any
such offer; (ii) disclose to any person or entity any information not
customarily disclosed to the public concerning FirstSouth or its business, or
afford to any other person or entity access to its properties, facilities, books
or records; (iii) sell or transfer any branch office of FirstSouth or all or any
significant part of its assets to any other person or entity, or (iv) enter into
or become bound by any contract, agreement, commitment or letter of intent
relating to, or otherwise take or agree to take any action in furtherance of,
any such transaction.
k. Acquisition or Disposition of Assets. FirstSouth
will not, without the prior written consent of Centura, which
consent shall not be unreasonably withheld:
(i) sell or lease (as lessor), or enter into or
become bound by any contract, agreement, option or commitment relating to the
sale, lease (as lessor) or other disposition of any real estate; or sell or
lease (as lessor), or enter into or become bound by any contract, agreement,
option or commitment relating to the sale, lease (as lessor) or other
disposition of any equipment or any other fixed or capital asset (other than
real estate) having a value on FirstSouth's books or a fair market value,
whichever is greater, of more than $75,000 for any individual item or asset, or
more than $150,000 in the aggregate for all such items or assets;
(ii) purchase or lease (as lessee), or enter into
or become bound by any contract, agreement, option or commitment relating to the
purchase, lease (as lessee) or other acquisition of any real property; or
purchase or lease (as lessee), or enter into or become bound by any contract,
agreement, option or commitment relating to the purchase, lease (as lessee) or
other acquisition of any equipment or any other fixed assets (other than real
estate) having a purchase price, or involving aggregate lease payments, in
excess of $75,000 for any individual item or asset, or more than $150,000 in the
aggregate for all such items or assets;
(iii) enter into any purchase commitment for
supplies or services which calls for prices of goods or fees for services
materially higher than current market prices or fees or which obligates
FirstSouth for a period longer than 12 months;
(iv) sell, purchase or repurchase, or enter into or
become bound by any contract, agreement, option or commitment to sell, purchase
or repurchase, any loan or other receivable or any participation in any loan or
other receivable (with the exception
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of investment securities and residential mortgage loans sold in the
ordinary course of FirstSouth's business); or
(v) sell or dispose of, or enter into or become
bound by any contract, agreement, option or commitment relating to the sale or
other disposition of, any other asset of FirstSouth (whether tangible or
intangible, and including without limitation any trade name, copyright, service
mark or intellectual property right or license); or assign its right to or
otherwise give any other person its permission or consent to use or do business
under FirstSouth's corporate name or any name similar thereto; or release,
transfer or waive any license or right granted to it by any other person to use
any trademark, trade name, copyright or intellectual property right.
l. Debt; Liabilities. Except in the ordinary course of its
business consistent with its past practices (including routine borrowings for
liquidity purposes from the Federal Home Loan Bank of Atlanta and other
correspondent banks), FirstSouth will not (i) enter into or become bound by any
promissory note, loan agreement or other agreement or arrangement pertaining to
its borrowing of money, (ii) assume, guarantee, endorse or otherwise become
responsible or liable for any obligation of any other person or entity, or (iii)
incur any other liability or obligation (absolute or contingent).
m. Liens; Encumbrances. FirstSouth will not mortgage, pledge
or subject any of its assets to, or permit any of its assets to become or
(except as Previously Disclosed) remain subject to, any lien or any other
encumbrance (other than in the ordinary course of business consistent with its
past practices in connection with securing of public funds deposits, securities
repurchase agreements or other similar operating matters).
n. Waiver of Rights. FirstSouth will not waive, release or
compromise any material rights in its favor (except in the ordinary course of
business) except in good faith for fair value in money or money's worth, nor
waive, release or compromise any rights against or with respect to any of its
officers, directors or shareholders or members of families of officers,
directors or shareholders.
o. Other Contracts. FirstSouth will not enter into or become
bound by any contracts, agreements, commitments or understandings (other than
those described elsewhere in this Paragraph 4.02.) (i) for or with respect to
any charitable contributions; (ii) with any governmental or regulatory agency or
authority; (iii) pursuant to which FirstSouth would assume, guarantee, endorse
or otherwise become liable for the debt, liability or obligation of any other
person; (iv) which is entered into other than in the ordinary course of its
business; and (v) which, in the case of any one contract, agreement, commitment
or understanding and whether or not in the ordinary course of its business,
would obligate or commit FirstSouth to make expenditures
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of more than $75,000 (other than contracts, agreements, commitments or
understandings entered into in the ordinary course of FirstSouth's lending
operations).
ARTICLE V. COVENANTS OF CENTURA AND THE HOLDING COMPANY
Centura and the Holding Company each hereby covenants and agrees as
follows with FirstSouth.
5.01. Board of Directors.
a. Appointment of Director. Following the
Effective Time, the Holding Company's Board of Directors will appoint Mr. D.
Earl Pardue to serve as a director of the Holding Company until the 1997 annual
meeting of shareholders of the Holding Company. Mr. Pardue's service as a
director of the Holding Company for such period shall be subject to customary
regulatory approvals, his qualifications to serve as a director under applicable
banking regulations and to the Holding Company's Articles of Incorporation and
Bylaws. For his services as a director of the Holding Company, Mr. Pardue shall
be compensated in accordance with the Holding Company's then current fee
schedule.
b. Local Advisory Board. Each of the members of
FirstSouth's Board of Directors at the Effective Time (other than directors who
also are employees of FirstSouth or who do not desire to serve as such) shall be
appointed to serve at Centura's pleasure as members of Centura's Alamance County
advisory board. Each such director's service as an advisory director shall be at
the pleasure of Centura and shall be subject to Centura's corporate policies
relating to the appointment, compensation and service of such directors.
Notwithstanding the foregoing, FirstSouth directors who accept appointment as
Centura advisory directors will be exempt from Centura's mandatory retirement
policy for directors for one (1) year following the Effective Date.
5.02. New York Stock Exchange Notification of Listing of
Additional Shares of Centura Stock. On or before the fifteenth day prior to the
Effective Time, the Holding Company shall file with the New York Stock Exchange
such notifications and other materials (and shall pay such fees) as shall be
required for the listing on the New York Stock Exchange of the shares of Centura
Stock to be issued to FirstSouth's shareholders at the Effective Time.
ARTICLE VI. MUTUAL AGREEMENTS
6.01. Shareholders' Meeting; Registration Statement; Proxy
Statement/Prospectus.
a. Meeting of Shareholders. FirstSouth shall cause a
meeting of its shareholders (the "Shareholder Meeting", which may
be a regular annual meeting or a specially called meeting) to be
held as soon as reasonably possible (but in no event less than
twenty (20) days following the mailing to FirstSouth's shareholders
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of the "Proxy Statement/Prospectus" described below) for the purpose of
FirstSouth's shareholders voting on the approval of the Agreement and the
Merger. In connection with the call and conduct of and all other matters
relating to the Shareholder Meeting (including the solicitation of proxies),
FirstSouth shall fully comply with all provisions of applicable law and
regulations and with FirstSouth's Articles of Incorporation and By-laws.
b. Preparation and Distribution of Proxy Statement/Prospectus.
The Holding Company and FirstSouth jointly will prepare a "Proxy
Statement/Prospectus" for distribution to FirstSouth's shareholders as
FirstSouth's proxy statement relating to FirstSouth's solicitation of proxies
for use at the Shareholder Meeting and as the Holding Company's prospectus
relating to the offer and distribution of Centura Stock as described herein. The
Proxy Statement/ Prospectus shall be in such form and shall contain or be
accompanied by such information regarding the Shareholder Meeting, this
Agreement, the parties hereto, the Merger and other transactions described
herein as is required by applicable law and regulations and otherwise as shall
be agreed upon by the Holding Company and FirstSouth. The Holding Company shall
include the Proxy Statement/Prospectus as the prospectus in its "Registration
Statement" described below; and, each party hereto will cooperate with the other
in good faith and will use their best efforts to cause the Proxy
Statement/Prospectus to comply with any comments of the SEC thereon.
The Holding Company and FirstSouth will mail the Proxy
Statement/Prospectus to FirstSouth's shareholders not less than twenty (20) days
prior to the scheduled date of the Shareholder Meeting; provided, however, that
no such materials shall be mailed to FirstSouth's shareholders unless and until
the Holding Company shall have determined to its own satisfaction that the
conditions specified in Paragraph 7.03.d. below have been satisfied and shall
have approved such mailing.
c. Registration Statement and "Blue Sky" Approvals. As
soon as practicable following the execution of this Agreement, the
Holding Company will prepare and file with the SEC a registration
statement on Form S-4 (or on such other form as the Holding Company
shall determine to be appropriate) (the "Registration Statement")
covering the Centura Stock to be issued to shareholders of
FirstSouth pursuant to this Agreement. Additionally, the Holding
Company shall take all such other actions, if any, as shall be
required by applicable state securities or "blue sky" laws (i) to
cause the Centura Stock to be issued upon consummation of the
Merger, at the time of the issuance thereof, to be duly qualified
or registered (unless exempt) under such laws, (ii) to cause all
conditions to any exemptions from qualification or registration
under such laws to have been satisfied, and (iii) to obtain any and
all required approvals or consents to the issuance of such stock.
d. Recommendation of FirstSouth's Board of Directors.
Unless, due to a material change in circumstances or for any other
reason FirstSouth's Board of Directors reasonably believes that
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such a recommendation would violate the directors' duties or obligations as such
to FirstSouth or to its shareholders, FirstSouth's Board of Directors will
recommend to and actively encourage FirstSouth's shareholders that they vote
their shares of FirstSouth Stock at the Shareholder Meeting to ratify and
approve this Agreement and the Merger, and the Proxy Statement/Prospectus mailed
to FirstSouth's shareholders will so indicate and state that FirstSouth's Board
of Directors considers the Merger to be advisable and in the best interests of
FirstSouth and its shareholders.
e. Information for Proxy Statement/Prospectus and Registration
Statement. The Holding Company, Centura and FirstSouth each agrees to respond
promptly, and to use its best efforts to cause its directors, officers,
accountants and affiliates to respond promptly, to requests by any other such
party and its counsel for information for inclusion in the various applications
for regulatory approvals and in the Proxy Statement/Prospectus. The Holding
Company, Centura and FirstSouth each hereby covenants with the others that none
of the information provided by it for inclusion in the Proxy
Statement/Prospectus will, at the time of its mailing to FirstSouth's
shareholders, contain any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not false or misleading; and, at all times following such mailing up
to and including the Effective Time, none of such information contained in the
Proxy Statement/Prospectus, as it may be amended or supplemented, will contain
an untrue statement of a material fact or omit any material fact required to be
stated therein or necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not false or
misleading.
6.02. Regulatory Approvals. Promptly following the date
of this Agreement, Centura, the Holding Company and FirstSouth each
shall use their respective best efforts in good faith to (i)
prepare and file, or cause to be prepared and filed, all applications for
regulatory approvals and actions as may be required of them, respectively, by
applicable law and regulations with respect to the transactions described herein
(including applications to the FRB, the Commissioner and the North Carolina
State Banking Commission, and to any other applicable federal or state banking,
securities or other regulatory authority), and (ii) obtain all necessary
regulatory approvals required for consummation of the transactions described
herein. Each such party shall cooperate with each other party in the preparation
of all applications to regulatory authorities and, upon request, promptly shall
furnish all documents, information, financial statements or other material that
may be required by any other party to complete any such application; and, before
the filing therefore, each party to this Agreement shall have the right to
review and comment on the form and content of any such application to be filed
by any other party. Should the appearance of any of the officers, directors,
employees or counsel of any of the parties hereto be requested by
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any other party or by any governmental agency at any hearing in connection with
any such application, such party shall promptly use its best efforts to arrange
for such appearance.
6.03. Access. Following the date of this Agreement and to and including
the Effective Time, FirstSouth shall provide the Holding Company and Centura and
their employees, accountants and counsel, access to all its books, records,
files and other information (whether maintained electronically or otherwise), to
all its properties and facilities, and to all its employees, accountants,
counsel and consultants, for purposes of the conduct of such reasonable
investigation and review as they shall, in their sole discretion, consider to be
necessary or appropriate; provided, however, that any such review conducted by
the Holding Company and Centura shall be performed in such a manner as will not
interfere unreasonably with FirstSouth's normal operations, or with FirstSouth's
relationship with its customers or employees, and shall be conducted in
accordance with procedures established by the parties having due regard for the
foregoing.
6.04. Costs. Subject to the provisions of Paragraph 8.03. below, and
whether or not this Agreement shall be terminated or the Merger shall be
consummated, FirstSouth, the Holding Company and Centura each shall pay its own
legal, accounting and financial advisory fees and all its other costs and
expenses incurred or to be incurred in connection with the execution and
performance of its obligations under this Agreement or otherwise in connection
with this Agreement and the transactions described herein (including without
limitation all accounting fees, legal fees, filing fees, printing costs, travel
expenses, and, in the case of FirstSouth, all fees owed to Orr Management, Inc.
and Smith Capital, Inc. ("Smith Capital") the cost of FirstSouth's "Fairness
Opinion" described in Paragraph 7.01.d. below, and, in the case of the Holding
Company and Centura, the cost of the "Environmental Survey" described in
Paragraph 6.06. below). However, subject to the provisions of Paragraph 8.03.
below, all costs incurred in connection with the printing and mailing of the
Proxy Statement/Prospectus shall be deemed to be incurred and shall be paid
fifty percent (50%) by FirstSouth and fifty percent (50%) by the Holding
Company; provided, however, that if the Merger is not consummated on or before
December 31, 1996 by reason of the failure of the Holding Company or Centura to
receive any regulatory approval as described in Paragraph 7.01.a. hereof and
such event is a consequence of the failure of the Holding Company or any the
Holding Company subsidiary to satisfy its obligations under the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Equal Credit Opportunity
Act, the Fair Housing Act and/or the regulations promulgated thereunder, the
Holding Company and Centura shall reimburse FirstSouth for one-half of
FirstSouth's costs and expenses up to a total reimbursement amount of $125,000.
6.05. Announcements. FirstSouth, the Holding Company and
Centura each agrees that no person other than the parties to this
Agreement is authorized to make any public announcements or
statements about this Agreement or any of the transactions
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described herein, and that, without the prior review and consent of the others
(which consent shall not unreasonably be denied or delayed), no party hereto may
make any public announcement, statement or disclosure as to the terms and
conditions of this Agreement or the transactions described herein, except for
such disclosures as may be required incidental to obtaining the prior approval
of any regulatory agency or official to the consummation of the transactions
described herein. However, notwithstanding anything contained herein to the
contrary, prior review and consent shall not be required if in the good faith
opinion of counsel to the Holding Company any such disclosure by the Holding
Company or Centura is required by law or otherwise is prudent.
6.06. Environmental Studies. At its option Centura may
cause to be conducted Phase I environmental assessments of the Real
Property, the real estate subject to any Real Property Lease, or the Loan
Collateral, or any portion thereof, together with such other studies, testing
and intrusive sampling and analyses as the Holding Company or Centura shall deem
necessary or desirable (collectively, the "Environmental Survey"). Centura shall
complete all such Phase I environmental assessments within thirty (30) days
following the date of this Agreement and thereafter conduct and complete any
such additional studies, testing, sampling and analyses within thirty (30) days
following completion of all Phase I environmental assessments. Subject to the
provisions of Paragraph 8.03. below, the costs of the Environmental Survey shall
be paid by the Holding Company and Centura. If (i) the final results of any
Environmental Survey (or any related analytical data) reflect that there likely
has been any discharge, disposal, release or emission by any person of any
Hazardous Substance on, from or relating to any of the Real Property, real
estate subject to a Real Property Lease or Loan Collateral at any time prior to
the Effective Time, or that any action has been taken or not taken, or a
condition or event likely has occurred or exists, with respect to any of the
Real Property, real estate subject to a Real Property Lease or Loan Collateral
which constitutes or would or may constitute a violation of any Environmental
Laws, and if, (ii) based on the advice of their legal counsel or other
consultants, the Holding Company or Centura believes that FirstSouth could
become responsible for the remediation of such discharge, disposal, release or
emission or for other corrective action with respect to any such violation, or
that FirstSouth could become liable for monetary damages (including without
limitation any civil or criminal penalties or assessments) resulting therefrom
(or that, in the case of any of the Loan Collateral, FirstSouth could incur any
such liability if it acquired title to such Loan Collateral), and if, (iii)
based on the advice of their legal counsel or other consultants, the Holding
Company or Centura believes the amount of expenses or liability which FirstSouth
could incur or for which FirstSouth could become responsible or liable on
account of any and all such remediation, corrective action or monetary damages
at any time or over any period of time could equal or exceed an aggregate of
$750,000, then the Holding Company or Centura shall give FirstSouth written
notice thereof (together with all information in its possession relating
thereto) within five (5) days of the
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completion of the Environmental Survey and, at the Holding Company's or
Centura's sole option and discretion, at any time thereafter and up to the
Effective Time, the Holding Company or Centura may terminate this Agreement
without further obligation or liability to FirstSouth or its shareholders.
6.07. Employees; Severance Payments; Employee Benefits.
a. Employment of FirstSouth Employees. Provided they remain
employed by FirstSouth at the Effective Time, Centura will attempt in good
faith, but shall have no obligation, to locate suitable positions for and to
offer employment (at an office of Centura located within a reasonable commuting
distance from their respective job locations at the Effective Time) to, all
employees of FirstSouth, other than employees who have employment agreements
with FirstSouth. Any employment so offered by Centura to an employee of
FirstSouth shall be in such a position, at such location within Centura's
state-wide branch system, and for such rate of compensation as Centura shall
determine in its sole discretion. Each such person's employment with Centura
shall be on an "at-will" basis, and nothing in this Agreement shall be deemed to
constitute an employment agreement with any such person or to obligate Centura
to employ any such person for any specific period of time or in any specific
position or to restrict Centura's right to terminate the employment of any such
person at any time and for any reason satisfactory to it.
b. Severance Compensation. An employee of FirstSouth
as of the Effective Time (other than employees who have employment
agreements with FirstSouth) who, following the Merger and at Centura's sole
discretion, is terminated by Centura for reasons other than the employee's own
Misconduct within one (1) year following the Effective Time (a "Terminated
Employee") shall be eligible for Salary Continuation as a result of such
termination. Any employee of FirstSouth who, following the Merger and at
Centura's sole discretion, is employed by Centura (a "New Employee") and who is
terminated after such one-year period shall be eligible to receive Salary
Continuation and other benefits to the same extent as other similarly situated
employees of Centura and, in computing the Salary Continuation and other
benefits to be so provided, such persons shall be credited with twelve (12)
months of credited service to Centura for each twelve (12) months of Active
Service to FirstSouth prior to the Merger. For purposes of this Paragraph
6.07.c., "Salary Continuation" shall be defined to mean a payment to such
Terminated Employee in the amount of two (2) weeks (ten (10) working days)
Salary for each twelve (12) months of Active Service with FirstSouth prior to
the Merger and with Centura following the Merger and prior to such termination.
For purposes of this Paragraph 6.07.c., "Misconduct," "Salary," and "Active
Service" shall have the same meaning as such terms have in the Centura Banks,
Inc. Salary Continuation Policy in effect as of the date of this Agreement,
unless and except as otherwise modified herein. To the extent FirstSouth
maintains any plan or arrangement for the payment of severance or salary
continuation benefits to
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employees, such plan or arrangement (unless specifically provided to the
contrary hereunder) shall be terminated at the Effective Time.
Centura shall consult with FirstSouth and then shall
determine which of FirstSouth's employees will and will not be offered
employment with Centura following the Effective Time and, within ninety (90)
days following the date of this Agreement, to notify each of FirstSouth's
employees of its determination with respect to that employee and to issue the
written requests described above to certain of FirstSouth's employees.
Notwithstanding anything contained herein to the contrary, no payment of
severance compensation shall be made to any person who does not remain an
employee of FirstSouth at the Effective Time.
c. Employee Benefits. Except as otherwise provided
herein, any New Employee shall become entitled to receive all
employee benefits and to participate in all benefit plans provided
by Centura on the same basis (including costs) and subject to the
same eligibility and vesting requirements, and to the same conditions,
restrictions and limitations, as generally are in effect and applicable to other
newly hired employees of Centura. Prior to the Effective Time, FirstSouth shall
discontinue contributions under and terminate any employee defined contribution
plan maintained by FirstSouth. As of the Effective Time, in Holding Company's
sole discretion, FirstSouth shall appoint the Holding Company as plan
administrator and Centura as trustee of any such plans for the purpose of
winding down and liquidating such plans following termination. FirstSouth agrees
that it will not cause such plans to make distributions on account of plan
termination until it or the Holding Company has received a favorable Internal
Revenue Service determination letter with respect to the termination of such
plans.
All New Employees will be eligible to participate in the pension and
401(k) plans of the Holding Company and Centura, as applicable, in accordance
with the terms of such plans and will be credited for purposes of vesting and
eligibility (but not for purposes of benefit accruals) under such plans with one
year of service to Centura for each year of service to FirstSouth prior to the
Effective Time.
The number of days of vacation and sick leave, respectively, which
shall be available to any New Employee during 1996 as an employee of Centura
shall be reduced by the number of days of vacation or sick leave used by such
New Employee during 1996 prior to the Effective Time as an employee of
FirstSouth, and, except as provided below, the New Employee shall not be
entitled to any credit with Centura for unused vacation leave, sick leave or
other paid leave from FirstSouth for 1996 or years prior thereto; provided,
however, that no New Employee shall receive in any year less vacation than he or
she was receiving from FirstSouth at the Effective Time.
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d. Other Agreements. At the Effective Time, Centura
will assume FirstSouth's obligations under that existing deferred
compensation agreement between Wade Williamson, Jr. and FirstSouth
and maintain the existing insurance policy intended to fund the Agreement, or as
soon as possible after the Effective Time, establish a new insurance policy to
fund the Agreement. In addition, Centura hereby agrees that, immediately prior
to the Effective Time, FirstSouth shall transfer to Wade Williamson, Jr. title
to the automobile owned by FirstSouth on the date of this Agreement and being
used by Mr. Williamson.
6.08. Confidentiality. The Holding Company, Centura and
FirstSouth each agrees that it will treat as confidential and not
disclose to any unauthorized person any documents or other information obtained
from or learned about the others during the course of the negotiation of this
Agreement and the carrying out of the events and transactions described herein
(including any information obtained during the course of any due diligence
investigation or review provided for herein or otherwise) and which documents or
other information relates in any way to the business, operations, personnel,
customers or financial condition of such other parties; and, that it will not
use any such documents or other information for any purpose except for the
purposes for which such documents and information were provided to it and in
furtherance of the transactions described herein. However, the above obligations
of confidentiality shall not prohibit the disclosure of any such document or
information by any party to this Agreement to the extent (i) such document or
information is then available generally to the public is already known to the
person or entity to whom disclosure is proposed to be made (other than through
the previous actions of such party in violation of this Paragraph 6.08), (ii)
such document or information was available to the disclosing party on a
nonconfidential basis prior to the same being obtained pursuant to this
Agreement, (iii) disclosure is required by subpoena or order of a court or
regulatory authority of competent jurisdiction, or by the SEC or regulatory
authorities in connection with the transactions described herein, or (iv) to the
extent that, in the reasonable opinion of legal counsel to such party,
disclosure otherwise is required by law.
In the event this Agreement is terminated for any reason, then
each of the parties hereto immediately shall return to the other parties all
copies of any and all documents or other written materials or information of or
relating to such other parties which were obtained from them during the course
of the negotiation of this Agreement and the carrying out of the events and
transactions described herein (whether during the course of any due diligence
investigation or review provided for herein or otherwise) and which documents or
other information relates in any way to the business, operations, personnel,
customers or financial condition of such other parties.
The parties' obligations of confidentiality under this
Paragraph 6.08 shall survive and remain in effect following any termination of
this Agreement
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6.09. Reorganization for Tax Purposes. The Holding Company, Centura and
FirstSouth each undertakes and agrees to use its best efforts to cause the
Merger to qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code, and that it will not intentionally take any action
that would cause the Merger to fail to so qualify.
6.10. Accounting Treatment. The Holding Company, Centura and FirstSouth
each undertakes and agrees to use its best efforts to cause the Merger to
qualify to be treated as a "pooling-of-interests" for accounting purposes and
that it will not intentionally take any action that would cause the Merger to
fail to so qualify.
6.11. Directors' and Officers' Liability Insurance. The Holding Company,
Centura and FirstSouth agree that, to the extent the same can be purchased at a
reasonable cost, then immediately prior to the Closing Date either FirstSouth
shall purchase "tail" coverage (for not less than three (3) years) under and in
the same amount of coverage as is provided by its then current directors' and
officers' liability insurance policy, or Centura shall purchase such coverage
from its insurer, all effective as of the Effective Time.
6.12. Other Permissible Transactions. The Holding Company, Centura and
FirstSouth agree that the Holding Company and Centura may offer to acquire,
enter into agreements to acquire and acquire financial institution holding
companies and their subsidiaries, financial institutions and their subsidiaries,
and/or the assets and liabilities of such entities (each a "Proposed
Acquisition") prior to the Effective Time; provided, however, that in the event
a Proposed Acquisition shall cause a condition set forth in Article VII hereof
to fail to be satisfied on or before December 31, 1996, any such failure shall
be deemed a termination of this Agreement by the Holding Company and Centura as
described and with the effects set forth in Section 8.03.b hereof.
ARTICLE VII. CONDITIONS PRECEDENT TO MERGER
7.01. Conditions to all Parties' Obligations. Notwithstanding any other
provision of this Agreement to the contrary, the obligations of each of the
parties to this Agreement to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date.
a. Approval by Governmental or Regulatory Authorities; No
Disadvantageous Conditions. (i) The Merger and other transactions described
herein shall have been approved, to the extent required by law, by the FRB, the
Commissioner and the North Carolina State Banking Commission, and by all other
governmental or regulatory agencies or authorities having jurisdiction over such
transactions, (ii) no governmental or regulatory agency or authority shall have
withdrawn its approval of such transactions or imposed any condition on such
transactions or conditioned its
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approval thereof, which condition is reasonably deemed by the Holding Company or
Centura to be materially disadvantageous or burdensome or to impact so adversely
the economic or business benefits of this Agreement to the Holding Company and
Centura as to render it inadvisable for them to consummate the Merger; (iii) all
waiting periods required following necessary approvals by governmental or
regulatory agencies or authorities shall have expired, and, in the case of the
waiting period following approval by the FRB, no unwithdrawn objection to the
Merger shall have been raised by the U.S. Department of Justice; and (iv) all
other consents, approvals and permissions, and the satisfaction of all of the
requirements prescribed by law or regulation, necessary to the carrying out of
the transactions contemplated herein shall have been procured.
b. Adverse Proceedings, Injunction, Etc. There shall not be
(i) any order, decree or injunction of any court or agency of competent
jurisdiction which enjoins or prohibits the Merger or any of the other
transactions described herein or any of the parties hereto from consummating any
such transaction, (ii) any pending or threatened investigation of the Merger or
any of such other transactions by the U.S. Department of Justice, or any actual
or threatened litigation under federal antitrust laws relating to the Merger or
any other such transaction; or (iii) any suit, action or proceeding by any
person (including any governmental, administrative or regulatory agency),
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit FirstSouth, the Holding Company or Centura from
consummating the Merger or carrying out any of the terms or provisions of this
Agreement, or (iv) any other suit, claim, action or proceeding pending or
threatened against FirstSouth, the Holding Company or Centura or any of their
officers or directors which shall reasonably be considered by FirstSouth, the
Holding Company or Centura to be materially burdensome in relation to the
proposed Merger or materially adverse in relation to the financial condition of
either such corporation, and which has not been dismissed, terminated or
resolved to the satisfaction of all parties hereto within ninety (90) days of
the institution or threat thereof.
c. Approval by Boards of Directors and Shareholders. The
Boards of Directors of FirstSouth, the Holding Company and Centura shall have
duly approved and adopted this Agreement by appropriate resolutions, and the
shareholders of FirstSouth and Centura shall have duly approved, ratified and
confirmed this Agreement, all to the extent required by and in accordance with
the provisions of this Agreement, applicable law, and applicable provisions of
their respective Articles of Incorporation and ByLaws.
d. Fairness Opinion. FirstSouth shall have received
from Smith Capital a written opinion (the "Fairness Opinion"),
dated as of a date preceding the mailing of the Proxy Statement/Prospectus to
FirstSouth's shareholders in connection with the Shareholder Meeting, to the
effect that the terms of the Merger are fair, from a financial point of view, to
FirstSouth and
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its shareholders; and Smith Capital shall have delivered a letter to FirstSouth,
dated as of a date within five days preceding the Closing Date, to the effect
that it remains its opinion that the terms of the Merger are fair, from a
financial point of view, to FirstSouth and its shareholders.
e. Tax Opinion. The Holding Company and FirstSouth
shall have received, in form and substance satisfactory to them, an
opinion of Poyner & Spruill, L.L.P. substantially to the effect
that: (i) for federal income tax purposes, consummation of the
Merger will constitute a "reorganization" as defined in ss. 368(a)(1)(A) of the
Code; (ii) that no taxable gain will be recognized by a shareholder of
FirstSouth upon such shareholder's receipt of Centura Stock in exchange for his
or her FirstSouth Stock; (iii) that the basis of the Centura Stock received by
the shareholder in the Merger will be the same as his or her FirstSouth Stock
surrendered in exchange therefor; (iv) that, if FirstSouth Stock is a capital
asset in the hands of the shareholder at the Effective Time, then the holding
period of the Centura Stock received by the shareholder in the Merger will
include the holding period of FirstSouth Stock surrendered in exchange therefor;
and (v) a shareholder who receives cash in lieu of a fractional share of Centura
Stock will recognize gain or loss equal to any difference between the amount of
cash received and the shareholder's basis in the fractional share interest. In
rendering its opinion, Poyner & Spruill, L.L.P. may rely on representations
contained in certificates of officers of the Holding Company, Centura and
FirstSouth.
f. No Termination or Abandonment. This Agreement shall
not have been terminated by any party hereto.
g. New York Stock Exchange Listing. The Holding
Company shall have satisfied all requirements for the shares of
Centura Stock to be issued to the shareholders of FirstSouth in
connection with the Merger to be listed on the New York Stock
Exchange as of the Effective Time.
7.02. Additional Conditions to FirstSouth's Obligations.
Notwithstanding any other provision of this Agreement to the contrary,
FirstSouth's separate obligation to consummate the transactions described herein
shall be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date.
a. Material Adverse Change. There shall not have been any
material adverse change in the financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or
operations of the Holding Company and its consolidated subsidiaries considered
as one enterprise, and there shall not have occurred any event or development
and there shall not exist any condition or circumstance which, with the lapse of
time or otherwise, may or could cause, create or result in any such material
adverse change.
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b. Compliance with Laws. The Holding Company and Centura shall
have complied in all material respects with all federal and state laws and
regulations applicable to the transactions described herein and where the
violation of or failure to comply with any such law or regulation could or may
have a material adverse effect on the financial condition, results of
operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations of the Holding Company and its consolidated
subsidiaries considered as one enterprise.
c. The Holding Company's and Centura's Representations and
Warranties and Performance of Agreements; Officers' Certificate. Unless waived
in writing by FirstSouth as provided in Paragraph 10.03. below, each of the
respective representations and warranties of the Holding Company and Centura
contained in this Agreement shall have been true and correct as of the date
hereof and shall remain true and correct on and as of the Effective Time with
the same force and effect as though made on and as of such date, except (i) for
changes which are not, in the aggregate, material and adverse to the financial
condition, results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations of the Holding Company and its
consolidated subsidiaries considered as one enterprise, and (ii) as otherwise
contemplated by this Agreement; and the Holding Company and Centura each shall
have performed in all material respects all its respective obligations,
covenants and agreements hereunder to be performed by it on or before the
Closing Date.
FirstSouth shall have received a certificate dated
as of the Closing Date and executed by the Holding Company and Centura and their
respective Presidents and Chief Financial Officers to the foregoing effect.
d. Legal Opinion of the Holding Company and Centura Counsel.
FirstSouth shall have received from Joseph A. Smith, Jr., Esq., General Counsel
of the Holding Company and Centura, a written opinion dated as of the Closing
Date and substantially in the form of Schedule C attached hereto or otherwise in
form and substance reasonably satisfactory to FirstSouth.
e. Other Documents and Information from the Holding Company
and Centura. The Holding Company and Centura shall have provided to FirstSouth
correct and complete copies of their respective Bylaws, Articles of
Incorporation and board resolutions (all certified by their respective
Secretaries), together with certificates of the incumbency of their respective
officers and such other closing documents and information as may be reasonably
requested by FirstSouth or its counsel.
f. Articles of Merger; Other Actions. Articles of
Merger in the form described in Paragraph 1.07. above shall have
been duly executed and delivered by Centura as provided in that
Paragraph.
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g. Acceptance by FirstSouth's Counsel. The form and
substance of all legal matters described herein or related to the
transactions contemplated herein shall be reasonably acceptable to
FirstSouth's legal counsel.
7.03. Additional Conditions to the Holding Company's and Centura's
Obligations. Notwithstanding any other provision of this Agreement to the
contrary, the Holding Company's and Centura's separate obligations to consummate
the transactions described herein shall be conditioned upon the satisfaction of
each of the following conditions precedent on or prior to the Closing Date.
a. Material Adverse Change. There shall not have occurred any
material adverse change in the financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or
operations of FirstSouth, and there shall not have occurred any event or
development and there shall not exist any condition or circumstance which, with
the lapse of time or otherwise, may or could cause, create or result in any such
material adverse change.
b. Compliance with Laws; Adverse Proceedings, Injunction, Etc.
FirstSouth shall have complied in all material respects with all federal and
state laws and regulations applicable to the transactions described herein and
where the violation of or failure to comply with any such law or regulation
could or may have a material adverse effect on the financial condition, results
of operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations of FirstSouth.
c. FirstSouth's Representations and Warranties and Performance
of Agreements; Officers' Certificate. Unless waived in writing by the Holding
Company or Centura as provided in Paragraph 10.03. below, each of the
representations and warranties of FirstSouth contained in this Agreement shall
have been true and correct as of the date hereof and shall remain true and
correct on and as of the Effective Time with the same force and effect as though
made on and as of such date, except (i) for changes which are not, in the
aggregate, material and adverse to the financial condition, results of
operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations of FirstSouth, and (ii) as otherwise contemplated by
this Agreement; and FirstSouth shall have performed in all material respects all
its obligations, covenants and agreements hereunder to be performed by it on or
before the Closing Date.
The Holding Company and Centura shall have received
a certificate dated as of the Closing Date and executed by FirstSouth and its
Chairman and Chief Financial Officer to the foregoing effect and as to such
other matters as may be reasonably requested by the Holding Company and Centura.
d. Effectiveness of Registration Statement; Compliance
with Securities and Other "Blue Sky" Requirements. The
Registration Statement shall be effective under the 1933 Act and no
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stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC. The Holding Company shall have taken all such other
actions, if any, as it shall consider to be required by applicable state
securities laws (i) to cause the Centura Stock to be issued upon consummation of
the Merger, at the time of the issuance thereof, to be duly qualified or
registered (unless exempt) under such laws, (ii) to cause all conditions to any
exemptions from qualification or registration under such laws to have been
satisfied, and (iii) to obtain any and all required approvals or consents with
respect to the issuance of such stock, and any such required approvals or
consents shall have been obtained and shall remain in effect.
e. Agreements from FirstSouth Affiliates. The Holding
Company shall have received the written Affiliates' Agreements in
form and content satisfactory to the Holding Company and signed by
all persons who are deemed by the Holding Company or its counsel to
be Affiliates of FirstSouth as provided in Paragraph 4.01.a. above.
f. Accounting Treatment. (i) The Holding Company shall have
received assurances from KPMG Peat Marwick LLP, in form and content satisfactory
to it, to the effect that the Merger will qualify to be treated as a
"pooling-of-interests" for accounting purposes; (ii) if requested by the Holding
Company, FirstSouth's independent public accountants shall have delivered to the
Holding Company a letter in form and content satisfactory to it to the effect
that such accountants are not aware of any fact or circumstance that might cause
the Merger not to qualify for such treatment; and (iii) it shall not have come
to the attention of management of the Holding Company that any event has
occurred or that any condition or circumstance exists that makes it likely that
the Merger may not so qualify.
g. Legal Opinion of FirstSouth Counsel. The Holding Company
and Centura shall have received from FirstSouth's special counsel, Moore & Van
Allen, PLLC, a written opinion, dated as of the Closing Date and substantially
in the form of Schedule D attached hereto or otherwise in form and substance
reasonably satisfactory to the Holding Company and Centura. In rendering such
opinion, Moore & Van Allen, PLLC may rely upon or provide instead the opinion of
local counsel for FirstSouth as to certain matters more appropriately opined on
by local counsel.
h. Other Documents and Information from FirstSouth. FirstSouth
shall have provided to the Holding Company and Centura correct and complete
copies of FirstSouth's Articles of Incorporation, Bylaws and board and
shareholder resolutions (all certified by FirstSouth's Secretary), together with
certificates of the incumbency of FirstSouth's officers and such other closing
documents and information as may be reasonably requested by the Holding Company
or Centura or its counsel.
i. Consents to Assignment of Real Property Leases.
FirstSouth shall have obtained all required consents to the
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assignment to Centura of its rights and obligations under the Real Property
Leases, under the terms, rates and conditions of such Real Property Leases in
effect as of the date of this Agreement, and such consents shall be in such form
and substance as shall be satisfactory to the Holding Company and Centura; and,
each of FirstSouth's lessors shall have confirmed in writing that FirstSouth is
not in default under the terms and conditions of the Real Property Lease between
such lessor and FirstSouth.
j. Acceptance by the Holding Company's and Centura's
Counsel. The form and substance of all legal matters described
herein or related to the transactions contemplated herein shall be
reasonably acceptable to the Holding Company's and Centura's legal
counsel.
ARTICLE VIII. TERMINATION; BREACH; REMEDIES
8.01. Mutual Termination. At any time prior to the
Effective Time (and whether before or after approval hereof by the
shareholders of FirstSouth), this Agreement may be terminated by
the mutual agreement of the Holding Company, Centura and FirstSouth. Upon any
such mutual termination, all obligations of FirstSouth, the Holding Company and
Centura hereunder shall terminate and each party shall pay costs and expenses as
provided in Paragraph 6.04. above.
8.02. Unilateral Termination. This Agreement may be
terminated by either the Holding Company, Centura or FirstSouth
(whether before or after approval hereof by FirstSouth's shareholders) upon
written notice to the other parties and under the circumstances described below.
a. Termination by the Holding Company or Centura. This
Agreement may be terminated by the Holding Company or Centura by
action of its respective Board of Directors or Executive Committee:
(i) if FirstSouth shall have violated or
failed to fully perform any of its obligations, covenants or agreements
contained in Article IV or Article VI herein in any material respect;
(ii) if the Holding Company or Centura
determines at any time that any of FirstSouth's representations or warranties
contained in Article II or in any other certificate or writing delivered
pursuant to this Agreement shall have been false or misleading in any material
respect when made, or that there has occurred any event or development or that
there exists any condition or circumstance which has caused or, with the lapse
of time or otherwise, may or could cause any such representations or warranties
to become false or misleading in any material respect;
(iii) if, notwithstanding the Holding Company's
satisfaction of its obligations under Paragraphs 6.01.b., 6.01.c.
and 6.01.e. above, FirstSouth's shareholders do not ratify and
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approve this Agreement and approve the Merger at the Shareholder
Meeting;
(iv) under the circumstances described in
Paragraph 6.06. above; or,
(v) if any of the conditions of the
obligations of the Holding Company or Centura (as set forth in Paragraph 7.01.
or 7.03. above) shall not have been satisfied or effectively waived in writing
by the Holding Company and Centura, or if the Merger shall not have become
effective, on or before December 31, 1996, unless such date is extended as
evidenced by the written mutual agreement of the parties hereto.
However, before the Holding Company or Centura may terminate
this Agreement for any of the reasons specified above in (i) or (ii) of this
Paragraph 8.02.a., it shall give written notice to FirstSouth as provided herein
stating its intent to terminate and a description of the specific breach,
default, violation or other condition giving rise to its right to so terminate,
and, such termination by the Holding Company or Centura shall not become
effective if, within thirty (30) days following the giving of such notice,
FirstSouth shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of the Holding Company and Centura.
b. Termination by FirstSouth. This Agreement may be
terminated by FirstSouth by action of its Board of Directors:
(i) if the Holding Company or Centura shall
have violated or failed to fully perform any of their respective obligations,
covenants or agreements contained in Article V or VI herein in any material
respect;
(ii) if FirstSouth determines that any of the
Holding Company's or Centura's respective representations and warranties
contained in Article III herein or in any other certificate or writing delivered
pursuant to this Agreement shall have been false or misleading in any material
respect when made, or that there has occurred any event or development or that
there exists any condition or circumstance which has caused or, with the lapse
of time or otherwise, may or could cause any such representations or warranties
to become false or misleading in any material respect;
(iii) if, subject to FirstSouth's satisfaction
of its obligations contained in Paragraphs 6.01.a., 6.01.b.,
6.01.d. and 6.01.e above, its shareholders do not ratify and
approve this Agreement and approve the Merger at the Shareholder
Meeting; or,
(iv) if any of the conditions of the
obligations of FirstSouth (as set forth in Paragraph 7.01. or 7.02.
above) shall not have been satisfied or effectively waived in
writing by FirstSouth, or if the Merger shall not have become
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effective, on or before December 31, 1996, unless such date is extended as
evidenced by the written mutual agreement of the parties hereto.
However, before FirstSouth may terminate this
Agreement for any of the reasons specified above in clause (i) or (ii) of this
Paragraph 8.02.b., it shall give written notice to the Holding Company and
Centura as provided herein stating its intent to terminate and a description of
the specific breach, default, violation or other condition giving rise to its
right to so terminate, and, such termination by FirstSouth shall not become
effective if, within thirty (30) days following the giving of such notice, the
Holding Company or Centura shall cure such breach, default or violation or
satisfy such condition the reasonable satisfaction of FirstSouth.
c. Extension of Expiration Date. Except as otherwise
shall be agreed among the parties, in the event the Holding
Company, Centura and FirstSouth mutually shall agree to extend the December 31,
1996 expiration date described in Paragraphs 8.02.a.v and 8.02.b.iv above, then,
notwithstanding anything contained in this Agreement to the contrary and to the
extent permitted by applicable law and regulations, during the period beginning
December 31, 1996, and ending at the Effective Time, in the event the Holding
Company declares and pays a quarterly dividend, the Exchange Rate will be
increased to include the cash dividend declared and paid by the Holding Company
multiplied by the Exchange Rate.
8.03. Breach; Remedies.
a. In the event of a breach by FirstSouth of any of its
representations or warranties contained in Article II of this Agreement, or in
the event of its failure to perform or violation of any of its obligations,
agreements or covenants contained in Articles IV or VI of this Agreement, then
the Holding Company's and Centura's sole right and remedy shall be to terminate
this Agreement prior to the Effective Time as provided in Paragraph 8.02. above,
or, in the case of a failure to perform or violation of any obligations,
agreements or covenants, to seek specific performance thereof.
Likewise, in the event of a breach by the Holding Company or
Centura of any of its representations or warranties contained in Article III of
this Agreement, or in the event of its failure to perform or violation of any of
its obligations, agreements or covenants contained in Articles V or VI of this
Agreement, then FirstSouth's sole right and remedy shall be to terminate this
Agreement prior to the Effective Time as provided in Paragraph 8.02. above, or,
in the case of a failure to perform or violation of any obligations, agreements
or covenants, to seek specific performance thereof.
b. Notwithstanding anything contained herein to the
contrary, if any party to this Agreement breaches this Agreement by
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wilfully or intentionally failing to perform or violating any of its
obligations, agreements or covenants contained in Articles IV, V or VI of this
Agreement, such party shall be obligated to pay all expenses of the other
party(ies) described in Paragraph 6.04., together with other damages recoverable
at law or in equity.
ARTICLE IX. INDEMNIFICATION
9.01. Indemnification Following Effective Time. Following
the Effective Time, without releasing any insurance carrier and
after exhaustion of all applicable director and officer liability
insurance coverage for FirstSouth and its directors or officers,
Centura agrees that it will indemnify FirstSouth's former officers
and directors to the fullest extent of the law against liabilities
arising from actions in their official capacities as officers and
directors of FirstSouth. This Paragraph 9.01. is intended to
create personal rights in the directors and officers of FirstSouth,
who shall be deemed to be third-party beneficiaries hereof.
9.02. Procedure for Claiming Indemnification. Any party
seeking to be indemnified hereunder promptly shall give written
notice and furnish adequate documentation to the other party of any claims in
respect of which indemnity is sought. The indemnifying party, through its own
counsel and at its own expense, shall defend any such claim and shall have
exclusive control over the investigation, preparation, and defense of such claim
and all negotiations relating to its settlement or compromise. The obligations
of either party to indemnify the other hereunder apply only if the party seeking
to be indemnified cooperates with and assists the indemnifying party in all
reasonably necessary respects in the conduct of the suit.
ARTICLE X. MISCELLANEOUS PROVISIONS
10.01. "Previously Disclosed" Information. "Previously
Disclosed" shall mean, as to FirstSouth or as to the Holding
Company and Centura, the disclosure of information in a letter delivered by such
party to the other prior to the date of this Agreement and which specifically
refers to this Agreement and is arranged in paragraphs corresponding to the
Paragraphs, subparagraphs and items of this Agreement applicable thereto, all of
which documents are incorporated herein by reference.
Information disclosed in either party's letter described above
shall be deemed to have been Previously Disclosed by such party for the purpose
of any given Paragraph, subparagraph or item of this Agreement only to the
extent that information is expressly set forth in such party's letter described
above and that, in connection with such disclosure, a specific reference is made
in the letter to that Paragraph, subparagraph or item.
10.02. Survival of Representations, Warranties,
Indemnification and Other Agreements.
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a. Representations, Warranties and Other Agreements.
None of the representations, warranties or agreements herein shall
survive the effectiveness of the Merger, and no party shall have
any right after the Effective Time to recover damages or any other
relief from any other party to this Agreement by reason of any
breach of representation or warranty, any nonfulfillment or
nonperformance of any agreement contained herein, or otherwise;
provided, however, that the parties' agreements contained in
Paragraphs 6.07. and 6.08. and Articles VIII and IX above, and the
Holding Company's representations and warranties contained in
Paragraph 3.02. above, shall survive the effectiveness of the
Merger.
b. Indemnification. Centura's indemnification
agreements and obligations pursuant to Paragraph 9.1. above shall
become effective only at the Effective Time, and Centura shall not
have any obligation under that Paragraph prior to the Effective
Time or in the event of or following termination of this Agreement
prior to the Effective Time.
10.03. Waiver. Any term or condition of this Agreement may be waived
(except as to matters of regulatory approvals and approvals required by law),
either in whole or in part, at any time by the party which is, and whose
shareholders are, entitled to the benefits thereof; provided, however, that any
such waiver shall be effective only upon a determination by the waiving party
(through action of its Board of Directors) that such waiver would not adversely
affect the interests of the waiving party or its shareholders; and, provided
further, that no waiver of any term or condition of this Agreement by any party
shall be effective unless such waiver is in writing and signed by the waiving
party, or be construed to be a waiver of any succeeding breach of the same term
or condition. No failure or delay of any party to exercise any power, or to
insist upon a strict compliance by any other party of any obligation, and no
custom or practice at variance with any terms hereof, shall constitute a waiver
of the right of any party to demand a full and complete compliance with such
terms.
10.04. Amendment. This Agreement may be amended, modified or
supplemented at any time or from time to time prior to the Effective Time, and
either before or after its approval by the shareholders of FirstSouth, by an
agreement in writing approved by a majority of the Board of Directors of the
Holding Company, Centura and FirstSouth executed in the same manner as this
Agreement; provided however, that, except with the further approval of
FirstSouth's shareholders of that change or as otherwise provided herein,
following approval of this Agreement by the shareholders of FirstSouth no change
may be made in the number of shares of Centura Stock into which each share of
FirstSouth Stock will be converted.
10.05. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or by courier, or mailed by certified
mail, postage prepaid, as follows:
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a. If to FirstSouth, to:
FirstSouth Bank
2946 South Church Street
Burlington, North Carolina 27216
Attention: Wade Williamson, Jr., President and
Chief Executive Officer
With copies to: Alexander M. Donaldson, Esq.
Moore & Van Allen, PLLC
One Hannover Square, Suite 1700
Raleigh, NC 27601
Dorn C. Pittman, Jr.
Wishart, Norris, Henninger &
Pittman, P.A.
3120 South Church Street
Burlington, NC 27216
b. If to either the Holding Company or Centura, to:
Centura Banks, Inc.
134 North Church Street
Post Office Box 1220
Rocky Mount, North Carolina 27802
Attention: Joseph A. Smith, Jr., General Counsel
10.06. Further Assurance. FirstSouth, the Holding Company
and Centura each agree to furnish to the others such further
assurances with respect to the matters contemplated herein and their respective
agreements, covenants, representations and warranties contained herein,
including the opinion of legal counsel, as such other parties may reasonably
request.
10.07. Headings and Captions. Headings and captions of
the sections and paragraphs of this Agreement have been inserted
for convenience of reference only and do not constitute a part
hereof.
10.08. Entire Agreement. This Agreement (including all schedules and
exhibits attached hereto and all documents incorporated herein by reference)
contains the entire agreement of the parties with respect to the transactions
described herein and supersedes any and all other oral or written agreement(s)
heretofore made, and there are no representations or inducements by or to, or
and agreements between, any of the parties hereto other than those contained
herein in writing.
10.09. Severability of Provisions. The invalidity or
unenforceability of any term, phrase, clause, paragraph,
restriction, covenant, agreement or other provision hereof shall in no way
affect the validity or enforceability of any other provision or part hereof.
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10.10. Assignment. This Agreement may not be assigned by
any party hereto except with the prior written consent of the other
parties hereto.
10.11. Counterparts. Any number of counterparts of this
Agreement may be signed and delivered, each of which shall be
considered an original and which together shall constitute one
agreement.
10.12. Governing Law. This Agreement is made in and shall
be construed and enforced in accordance with the laws of North
Carolina.
10.13. Inspection. Any right of the Holding Company, Centura or
FirstSouth hereunder to investigate or inspect the assets, books, records, files
and other information of the other in no way shall establish any presumption
that the Holding Company, Centura or FirstSouth should have conducted any
investigation or that such right has been exercised by the Holding Company,
Centura, FirstSouth, their respective agents, representatives or others. Any
investigations or inspections that have been made by the Holding Company,
Centura or FirstSouth or their respective agents, representatives or others
prior to the Closing Date shall not be deemed in any way in derogation or
limitation of the covenants, representations and warranties made by or on behalf
of the Holding Company, Centura or FirstSouth in this Agreement.
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IN WITNESS WHEREOF, FirstSouth, the Holding Company and Centura each
has caused this Agreement to be executed in its name by its duly authorized
officers as of the date first above written.
CENTURA BANK
By:
Robert R. Mauldin
Chairman and Chief Executive Officer
ATTEST:
Secretary
CENTURA BANKS, INC.
By:
Robert R. Mauldin
Chairman and Chief Executive Officer
ATTEST:
Secretary
FIRSTSOUTH BANK
By:
Wade Williamson, Jr.
President and Chief Executive Officer
ATTEST:
Secretary
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SCHEDULE A
to Agreement and Plan of Reorganization and Merger
dated June 7, 1996
Plan of Merger
PLAN OF MERGER
OF
FIRSTSOUTH BANK
WITH AND INTO
CENTURA BANK
A. Names of Merging Corporations. The names of the
corporations proposed to be merged are FIRSTSOUTH BANK, a North
Carolina banking corporation ("FirstSouth") and CENTURA BANK, a
North Carolina banking corporation ("Centura").
B. Nature of Transaction. Subject to the provisions of this
Plan of Merger, FirstSouth shall be merged into and with Centura
pursuant to N.C. Gen. Stat. ss. 53-12 (the "Merger") and with the
effect provided under N.C. Gen. Stat. ss.ss. 55-11-06 and 53-13.
C. Name of Surviving Corporation. Centura shall be the
surviving corporation in the Merger and shall exist under the name
"Centura Bank."
D. Terms and Conditions of the Merger.
1. The Merger shall be effected pursuant to the terms and
conditions of this Plan of Merger and of the Agreement and Plan of
Reorganization and Merger dated as of June 7, 1996, by and among Centura Banks,
Inc. (the "Holding Company"), FirstSouth and Centura (the "Agreement"). As
provided herein and in the Agreement, except insofar as the same may be
continued by law and except as continued in and merged into Centura, at the
effective time of the Merger (the "Effective Time") the separate corporate
existence of FirstSouth shall cease and the corporate existence of Centura shall
continue with all of its purposes, objects, rights, privileges, powers and
franchises, all of which shall be unaffected and unimpaired by the Merger.
2. At the Effective Time and by reason of the Merger, all of
FirstSouth's property, assets and rights of every kind and character (including
without limitation all real, personal or mixed property, all debts due on
whatever account, all other choses in action and all and every other interest of
or belonging to or due to FirstSouth, whether tangible or intangible) shall be
transferred to and vest in Centura, and Centura shall succeed to all the rights,
privileges, immunities, powers, purposes and franchises of a public or private
nature (including all trust and fiduciary properties, powers and rights) of
FirstSouth, all without any conveyance, assignment or further act or deed; and,
Centura shall become responsible for all of the liabilities, duties and
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obligations of every kind, nature and description (including duties as trustee
or fiduciary) of FirstSouth as of the Effective Time.
3. The Articles of Incorporation and Bylaws of Centura in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation and Bylaws of Centura as the surviving corporation in the Merger
and shall continue in full force and effect following the Effective Time until
amended in accordance with applicable laws. The officers and directors of
Centura in office at the Effective Time shall continue to hold such offices as
the officers and directors of Centura as the surviving corporation until removed
as provided by law or until their respective successors have been elected or
appointed.
E. Conversion and Exchange of Shares.
1. At the Effective Time, all rights of FirstSouth's
shareholders with respect to all then outstanding shares of FirstSouth's common
stock ($3.33 1/3 par value) ("FirstSouth Stock") shall cease to exist, and, as
consideration for and to effectuate the Merger (and except as otherwise provided
below), each such outstanding share of FirstSouth Stock (other than any shares
held by FirstSouth as treasury shares or shares held by the Holding Company or
as to which rights of dissent and appraisal are properly exercised as provided
below) shall be converted, without any action on the part of the holder of such
share, the Holding Company, Centura or FirstSouth, into ______ (the "Exchange
Rate") of a newly issued share of the Holding Company's no par value common
stock ("Centura Stock").
2. At the Effective Time, and without any action by
FirstSouth, Centura, the Holding Company or any holder thereof, FirstSouth's
stock transfer books shall be closed as to holders of FirstSouth Stock
immediately prior to the Effective Time and, thereafter, no transfer of
FirstSouth Stock by any such holder may be made or registered; and the holders
of shares of FirstSouth Stock shall cease to be, and shall have no further
rights as, stockholders of FirstSouth other than as provided herein. Following
the Effective Time, certificates representing shares of FirstSouth Stock
outstanding at the Effective Time (herein sometimes referred to as "Old
Certificates") shall evidence only the right of the registered holder thereof to
receive, and may be exchanged for, (a) certificates for the number of whole
shares of Centura Stock to which such holders shall have become entitled on the
basis set forth above, plus cash for any fractional share interests as provided
herein, (b) in the case of shares as to which rights of dissent and appraisal
are properly exercised (as provided below), cash as provided in Article 13 of
the North Carolina Business Corporation Act.
3. As promptly as practicable following the Effective Time,
the Holding Company shall cause the exchange agent selected by the Holding
Company (the "Exchange Agent") to mail to each former shareholder of FirstSouth
of record immediately prior to the Effective Time written instructions and
transmittal materials (a "Transmittal Letter") for use in surrendering Old
Certificates to
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the Exchange Agent. Upon the proper delivery to the Exchange Agent (in
accordance with the above instructions, and accompanied by a properly completed
Transmittal Letter) by a former shareholder of FirstSouth of his or her Old
Certificates, the Exchange Agent shall register in the name of such shareholder
the shares of Centura Stock and deliver said New Certificates to the individual
shareholder entitled thereto upon and in exchange for the surrender and delivery
to the Exchange Agent by said individual shareholder of his or her Old
Certificates.
4. (i) At the Effective Time, each option or other right to
purchase shares of FirstSouth Stock pursuant to stock options ("FirstSouth
Options") granted by FirstSouth under the FirstSouth Bank Stock Option Plan and
the FirstSouth Bank Employees' Omnibus Stock Option Plan of 1994 (collectively,
the "FirstSouth Stock Plans"), which are outstanding at the Effective Time,
whether or not exercisable, shall be converted into and become rights with
respect to Centura Common Stock, and Centura shall assume each FirstSouth
Option, in accordance with the terms of the FirstSouth Stock Plans and stock
option agreement by which it is evidenced, except that from after the Effective
Time (A) Centura and its Compensation Committee shall be substituted for
FirstSouth and the Committee of FirstSouth's Board of Directors (including, if
applicable, the entire Board of Directors of FirstSouth) administering such
FirstSouth Stock Plans, (B) each FirstSouth Option assumed by Centura may be
exercised solely for shares of Centura Common Stock, (C) the number of shares of
Centura Common Stock subject to such FirstSouth Option shall be equal to the
number of shares of FirstSouth Common Stock subject to such FirstSouth Option
immediately prior to the Effective Time multiplied by the Exchange Rate, (D) the
per share exercise price under each such FirstSouth Option shall be adjusted by
dividing the per share exercise price under each such FirstSouth Option by the
Exchange Rate and rounding up to the nearest cent, and (E) holders of FirstSouth
Options under the FirstSouth Bank 1988 Stock Option Plan for Directors shall be
able to make like kind payment for shares of Centura Common Stock through
delivery of shares of Centura Common Stock already owned by the option holder.
Notwithstanding the provisions of clause (C) of the preceding sentence, Centura
shall not be obligated to issue any fraction of a share of Centura Common Stock
upon exercise of FirstSouth Options and any fraction of a share of Centura
Common Stock that otherwise would be subject to a converted FirstSouth Option
shall represent the right to receive a cash payment upon exercise of such
converted FirstSouth Option equal to the product of such fraction and the
difference between the market value of one share of Centura Common Stock at the
time of exercise of such Option and the per share exercise price of such Option.
The market value of one share of Centura Common Stock at the time of exercise of
an Option shall be the closing price of Centura Common Stock on the
NYSE-Composite Transactions List (as reported by The Wall Street Journal or, if
not reported thereby, any other authoritative source) on the last trading day
preceding the date of exercise.
(ii) All restrictions or limitations on transfer with respect
to FirstSouth Common Stock awarded under the FirstSouth Stock Plans
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or any other plan, program, or arrangement of any FirstSouth Company, to the
extent that such restrictions or limitations shall not have already lapsed, and
except as otherwise expressly provided in such plan, program, or arrangement,
shall remain in full force and effect with respect to shares of Centura Common
Stock into which such restricted stock is converted pursuant to this Agreement.
(iii) Notwithstanding the foregoing provisions of this Paragraph E.4,
in no event shall options to purchase more than 309,692 shares of FirstSouth
Stock be converted into options to purchase Centura Stock in connection with the
transactions contemplated by this Agreement.
5. No scrip or certificates representing fractional shares of
Centura Stock will be issued to any former shareholder of FirstSouth, and,
except as provided herein, no such shareholder will have any right to vote or
receive any dividend or other distribution on, or any other right with respect
to, any fraction of a share of Centura Stock resulting from the above exchange.
In lieu of the issuance of fractional shares of Centura Stock, at the Effective
Time the Holding Company shall deliver cash to the Exchange Agent in an amount
equal to the aggregate market value of all such fractional shares, and,
following the Effective Time, the Exchange Agent shall divide such cash among
and remit it (without interest) to the former shareholders of FirstSouth in
accordance with their respective interests therein. The "aggregate market value"
of all fractional shares of Centura Stock shall be equal to the total of such
fractional shares multiplied by $______.
6. No certificate for any shares, or cash for any fractional
share, of Centura Stock shall be delivered to any former shareholder of
FirstSouth unless and until such shareholder shall have properly surrendered to
the Exchange Agent the Old Certificate(s) formerly representing his or her
shares of FirstSouth Stock, together with properly completed transmittal
materials in such form as shall be provided to the shareholder by the Holding
Company for that purpose. Further, until such Old Certificate(s) are so
surrendered, no dividend or other distribution payable to holders of record of
Centura Stock as of any date subsequent to the Effective Time shall be delivered
to the holder of such Old Certificate(s). However, upon the proper surrender of
such Old Certificate(s), the Exchange Agent shall pay to the registered holder
of the shares of Centura Stock represented by such Old Certificate(s) the amount
of any such cash, dividends or distributions which have accrued but remain
unpaid with respect to such shares. Neither the Holding Company, Centura,
FirstSouth, nor the Exchange Agent, shall have any obligation to pay any
interest on any such cash, dividends or distributions for any period prior to
such payment.
7. Any shareholder of FirstSouth who properly exercises the
right of dissent and appraisal with respect to the merger as provided in Article
13 of the North Carolina Business Corporation Act ("Dissenters Rights") shall be
entitled to receive payment of the fair value of his or her shares of FirstSouth
Stock in the
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manner and pursuant to the procedures provided therein. Shares of FirstSouth
Stock held by persons who exercise Dissenters Rights shall not be converted into
Centura Stock. However, if any shareholder of FirstSouth who exercises
Dissenters Rights shall fail to perfect his or her right to receive cash as
provided above, or effectively shall waive or lose such right, then each of his
or her shares of FirstSouth Stock, at the Holding Company's sole option, shall
be deemed to have been converted into the right to receive Centura Stock as of
the Effective Time as provided above.
8. Any shareholder of FirstSouth whose certificate
evidencing shares of FirstSouth Stock has been lost, destroyed,
stolen or otherwise is missing shall be entitled to receive a
certificate representing the shares of Centura Stock to which he or
she is entitled in accordance with and upon compliance with
conditions imposed by the Exchange Agent or the Holding Company
pursuant to the provisions of N.C. Gen. Stat. ss. 25-8-405 and N.C.
Gen. Stat. ss. 25-8-104.
9. The status of the shares of Centura Stock and the shares of
the capital stock of Centura which are outstanding immediately prior to the
Effective Time shall not be affected by the Merger.
F. Abandonment. This Plan of Merger may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
upon termination of the Agreement as provided therein.
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SCHEDULE B
to Agreement and Plan of Reorganization and Merger
dated June 7, 1996
Affiliate's Letter
_________________, 1996
Centura Banks, Inc.
134 North Church Street
Rocky Mount, North Carolina 27802
Dear Sirs:
Pursuant to the terms of that certain Agreement and Plan of Reorganization and
Merger dated June 7, 1996 (the "Agreement") by and among Centura Banks, Inc.
(the "Holding Company"), Centura Bank ("Centura") and FirstSouth Bank
("FirstSouth"), (i) FirstSouth will be merged into and with Centura (the
"Merger"), and (ii) each outstanding share of FirstSouth's common stock ("Bank
Stock") (other than shares held by shareholders who exercise their right of
dissent and appraisal under North Carolina law) will be converted into and
exchanged for a fraction (determined as provided in the Agreement) of a newly
issued share of the Holding Company's no par value common stock ("Centura
Stock").
Based upon the list of persons submitted by FirstSouth and approved by the
Holding Company, the undersigned "Affiliate" is considered an "affiliate" of
FirstSouth as that term is defined and used for purposes of Rule 145 promulgated
by the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). As required by the Agreement,
this Affiliates' Agreement is being delivered to the Holding Company in
connection with and as a condition of its execution and delivery of the
Agreement.
The undersigned (jointly and severally if more than one) hereby represents and
warrants to the Holding Company as follows:
A. The names of all "Persons", if any, having a relationship to
the Affiliate as described under the definition of "Person"
attached as Exhibit A hereto and who may receive shares of the
Centura Stock in connection with the Merger (the Affiliate's
"Related Persons") are listed on the signature page hereto and
also have signed this letter agreement;
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B. The Affiliate and each of the Related Persons, if any, have
carefully read this letter and have discussed its requirements
and other applicable limitations upon the sale, transfer or
other disposition of Centura Stock to be received by them in
connection with the Merger, to the extent they deem necessary,
with their own legal counsel;
As an inducement for Centura and the Holding Company to enter into the Agreement
and to consummate the Merger and for the Holding Company to issue the Centura
Stock as provided in the Agreement, the undersigned (jointly and severally if
more than one) hereby covenants and agrees with Centura and the Holding Company
as follows:
A. The Affiliate and each of the Related Persons, if any,
has been informed that, since at the time the Merger is
to be submitted to a vote of FirstSouth's shareholders
the Affiliate and each such Related Person will be
considered to be an "affiliate" of FirstSouth, any resale
by the Affiliate or a Related Person of any such Centura
Stock would require either (i) the registration under the
Act of the Centura Stock to be sold, (ii) compliance by
the Affiliate or such Related Person with the
requirements of Rule 145(d) promulgated under the Act, or
(iii) the availability of another exemption from the
registration requirements of the Act;
B. Neither the Affiliate nor any of the Related Persons, if
any, (i) will make any sale, transfer or other
disposition of Centura Stock during the 30 days prior to
the date of the Merger, or, (ii) following the date of
the Merger, will make any sale, transfer or other
disposition of Centura Stock acquired by them in
connection with the Merger except in compliance with the
requirements of the Act and the rules and regulations of
the Commission (including Rule 145) promulgated
thereunder;
C. Notwithstanding compliance with the requirements of the
Act, neither the Affiliate nor any of the Related
Persons, if any, shall make any sale, transfer or other
disposition of the Centura Stock acquired by them in
connection with the Merger until such time as
consolidated financial statements covering the Holding
Company's operations for a period of at least thirty (30)
days following the Merger either have been (i) filed with
the Commission in a Quarterly Report on Form 10-Q,
(ii) sent to the shareholders of the Holding Company, or
(iii) published in newspapers of general circulation in
accordance with the Holding Company's normal practices
for releasing financial information to the general
public;
D. The Affiliate and each of the Related Persons, if any,
understands and agrees that the Holding Company is under
no obligation to register the sale, transfer or other
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disposition of the Centura Stock for them or on their behalf
or to take any other action necessary in order to render
available an exemption from the registration requirements of
the Act. Therefore, they may be compelled to hold such shares
for a period of at least three years after which such shares
may be sold, transferred, or otherwise disposed of without
restriction, provided that at the time of any such sale,
transfer or other disposition they are not considered to be
"affiliates" of the Holding Company. However, for the period
that the sale, transfer or other disposition of such shares is
so restricted, it is understood and agreed that the Holding
Company will file on a timely basis with the Commission all
reports required to be filed by it pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder; and,
E. The Holding Company may place stock transfer restrictions on
the shares of Centura Stock held by the Affiliate and each of
the Related Persons, if any, which are subject to this
Agreement, and there will be placed on the certificates
evidencing such shares, and any substitutions therefor, a
legend stating in substance as follows:
"The shares represented by this certificate were
issued pursuant to a business combination which was
accounted for as a "pooling-of-interests" and may not
be sold, nor may the owner hereof reduce the owner's
risks relative hereto in any way, until Centura
Banks, Inc. ("Centura") has published the financial
results covering at least thirty (30) days of
combined operations after ____ 1996. In addition, the
shares represented by this certificate may not be
sold, transferred, or otherwise disposed of except or
unless (1) covered by an effective registration
statement under the Securities Act of 1933, as
amended, (2) in accordance with (i) Rule 145(d) (in
the case of shares issued to an individual who is not
an affiliate of Centura) or (ii) Rule 144 (in the
case of shares issued to an individual who is an
affiliate of Centura) of the Rules and Regulations of
such Act, or (3) in accordance with a legal opinion
satisfactory to counsel for Centura that such sale or
transfer is otherwise exempt from the
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registration requirements of such
Act."
The legend may be removed from the certificates evidencing the
Centura Stock to which this letter agreement applies by the
delivery of new certificates without such legend in
substitution therefor if the holder thereof delivers to the
Holding Company an opinion of legal counsel acceptable to the
Holding Company, and in form and substance acceptable to the
Holding Company, to the effect that the restrictions described
above are no longer applicable to such person and that such
legend is not or is no longer required for purposes of the
Act.
Yours very truly,
By:
"Related Persons", if any:
(Seal)
(Seal)
(Seal)
(Seal)
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EXHIBIT A
Rule 145 of the Securities Act of 1933, as amended, incorporates by reference
the definition of "person" set forth under Paragraph (a)(2) of Rule 144, as
follows:
"(2) The term "person" when used with reference to a person for whose
account securities are to be sold in reliance upon this rule includes,
in addition to such person, all of the following persons:
(A) Any relative or spouse of such person, or any
relative of such spouse, any of whom has the same
home as such person;
(B) Any trust or estate in which such person or any
of the persons specified in (A) collectively own ten
percent (10%) or more of the total beneficial
interest or of which any of such persons serve as
trustee, executor or in any similar capacity; and,
(C) Any corporation or other organization (other than
the issuer) in which such person or any of the
persons specified in (A) are the beneficial owners
collectively of ten percent (10%) or more of any
class of equity securities or ten percent (10%) or
more of the equity interest."
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SCHEDULE C
to Agreement and Plan of Reorganization and Merger
dated June 7, 1996
Form of Legal Opinion of Counsel for the
Holding Company and Centura
, 1996
FirstSouth Bank
2946 South Church Street
Burlington, North Carolina 27216
Gentlemen:
I am General Counsel of Centura Banks, Inc. (the "Holding Company") and
its bank subsidiary, Centura Bank ("Centura") and, in such capacity, I have
reviewed that certain Agreement and Plan of Reorganization and Merger dated June
7, 1996, by and among FirstSouth Bank ("FirstSouth"), Centura and the Holding
Company (the "Agreement", including the Plan of Merger referenced therein).
Pursuant to and in accordance with the terms and conditions of the Agreement,
FirstSouth is proposed to be merged into and with Centura (the "Merger") and the
outstanding shares of FirstSouth's common stock will be converted into shares of
the Holding Company's common stock. This letter is delivered in connection with
the consummation and closing of the Merger and other transactions described in
the Agreement (the "Closing"). Capitalized terms appearing herein and not
otherwise defined are used as defined in the Agreement.
As counsel to Centura and the Holding Company, I have examined originals or
copies of their Articles of Incorporation, By-Laws and corporate minute books,
the Agreement, the Registration Statement (No. ____) on Form S-4 (the
"Registration Statement") filed by the Holding Company with the Securities and
Exchange Commission (the "Commission") and containing the Prospectus/Proxy
Statement, dated ______, 1996, the corporate minute books of the Holding Company
and Centura, certificates and written statements of officers and agents of
Centura and the Holding Company, certificates of public officials, and such
other documents and records of the Holding Company and Centura as I have deemed
necessary for the purpose of giving the opinions hereinafter expressed.
In giving certain of the opinions set forth below, I have relied solely upon
certifications and letters provided to me by public officials. As to matters of
fact set forth below, and matters of fact which form the basis for any opinion
set forth below, I have
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relied solely upon (i) certificates and statements of officers, employees and
accountants of the Holding Company and Centura, (ii) the representations and
warranties of the Holding Company and Centura set forth in the Agreement, and
(iii) a letter dated _________, 1996, from The New York Stock Exchange ("NYSE")
with respect to approval of the Holding Company's Notification to the NYSE with
respect to the listing of shares of Centura Stock to be issued in connection
with the Merger. Except as expressly stated herein, I have not independently
verified any factual matters in connection with the giving of the opinions set
forth below.
Based upon and subject to the foregoing and the qualifications set forth below,
it is my opinion that, except as described in the Registration Statement or the
Agreement or as Previously Disclosed by the Holding Company or Centura to
FirstSouth:
1. Centura and the Holding Company each (i) is duly organized
and incorporated and validly existing (as a banking corporation and a business
corporation, respectively) under the laws of North Carolina, (ii) has all
requisite power and authority (corporate and other) to own its respective
properties and conduct its respective businesses as now being conducted, (iii)
is duly qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its respective businesses makes such
qualification necessary, except where failure so to qualify would not have a
material adverse effect on the Holding Company and its subsidiaries considered
as one enterprise, and (iv) to my Actual Knowledge, is not transacting business,
or operating any properties owned or leased by it, in violation of any provision
of federal or state law or any rule or regulation promulgated thereunder, which
violation would have a material adverse effect on the Holding Company and its
subsidiaries considered as one enterprise.
2. The Holding Company's authorized capital stock consists of
50,000,000 shares of Centura Stock and 25,000,000 shares of no par preferred
stock. The Holding Company's Board of Directors has reserved and authorized the
issuance of the shares of Centura Stock into which the outstanding shares of
FirstSouth Stock will be converted in connection with the Merger and which may
be purchased upon the exercise of outstanding options which are converted into
rights to purchase Centura Stock as provided in the Agreement, and such shares
(i) have been approved for listing on the NYSE and, (ii) when issued as
described in the Agreement, will be duly authorized, validly issued, fully paid
and nonassessable.
3. (i) The Holding Company and Centura each has the corporate
power and authority to execute and deliver the Agreement and to perform its
obligations and agreements and carry out the transactions described therein,
(ii) all corporate proceedings required to be taken to authorize the Holding
Company and Centura to enter into the Agreement and to perform its obligations
and agreements and carry out the transactions described therein have been duly
and properly taken, and (iii) the Agreement constitutes
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<PAGE>
the valid and binding agreement of the Holding Company and Centura enforceable
in accordance with its terms.
4. Except where the same would not have a material adverse
effect on the Holding Company and its subsidiaries considered as one enterprise,
neither the execution and delivery of the Agreement, nor the consummation of the
transactions described therein, nor compliance by the Holding Company or Centura
with any of its obligations or agreements contained therein, will: (i) conflict
with or result in a breach of the terms and conditions of, or constitute a
default or violation under any provision of, the Holding Company's or Centura's
Articles of Incorporation or Bylaws, or, to my Actual Knowledge, any contract,
agreement, lease, mortgage, note, bond, indenture, license, or obligation or
understanding (oral or written) to which the Holding Company or Centura is bound
or by which it, its business, capital stock or any of its properties or assets
may be affected; (ii) to my Actual Knowledge, result in the creation or
imposition of any lien, claim, interest, charge, restriction or encumbrance upon
any of the Holding Company's or Centura's properties or assets; (iii) violate
any applicable federal or state statute, law, rule or regulation, or any
judgment order, writ, injunction or decree of any court, administrative or
regulatory agency or governmental body; or (iv) to my Actual Knowledge, result
in the acceleration of any obligation or indebtedness of the Holding Company or
Centura.
5. No consents, approvals or waivers are required to be
obtained from any person or entity in connection with the Holding Company's or
Centura's execution and delivery of the Agreement, or the performance of their
respective obligations or agreements or the consummation of the transactions
described therein, except for required approvals of governmental or regulatory
authorities ("Regulatory Approvals").
6. All Regulatory Approvals required to be obtained by the
Holding Company or Centura for the consummation of the transactions contemplated
by the Agreement (other than the filing of Articles of Merger) have been
obtained, all conditions imposed on the Holding Company or Centura in connection
therewith that are required to be satisfied prior to consummation of such
transactions have been satisfied or waived, and, to my Actual Knowledge, all
such regulatory approvals are in full force and effect; and, no other consents,
approvals, authorizations or other orders of any court or any governmental
agency are required to be obtained by the Holding Company or Centura for the
consummation of the transactions contemplated by the Agreement (other than the
filing of Articles of Merger with respect to the Merger);
7. (i) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to my Actual
Knowledge, any facts or circumstances which reasonably could result in such),
including without limitation any such action by any governmental or regulatory
authority, which currently exists or is ongoing, pending or, to my Actual
Knowledge, threatened, contemplated or probable of assertion, against, relating
to or otherwise affecting the Holding Company or Centura or any of their
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properties or assets which, if determined adversely, could result in liability
on the part of the Holding Company or Centura for, or subject it to, monetary
damages, fines or penalties, an injunction, or which could have a material
adverse effect on the Holding Company's or Centura's financial condition,
results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations or on the ability of the Holding Company
or Centura to consummate the Merger; and
(ii) neither the Holding Company nor Centura is
subject to any supervisory agreement, enforcement order, writ, injunction,
capital directive, supervisory directive, memorandum of understanding or other
similar agreement, order, directive, memorandum or consent of, with or issued by
any regulatory or other governmental authority (including without limitation the
FDIC or the Administrator) relating to its financial condition, directors or
officers, operations, capital, regulatory compliance or otherwise; there are no
judgments, orders, stipulations, injunctions, decrees or awards against the
Holding Company or Centura which in any manner limit, restrict, regulate, enjoin
or prohibit any present or past business or practice of the Holding Company or
Centura; and, to my Actual Knowledge, neither the Holding Company nor Centura
has been advised or has any reason to believe that any regulatory or other
governmental authority or any court is contemplating, threatening or requesting
the issuance of any such agreement, order, injunction, directive, memorandum,
judgment, stipulation, decree or award.
8. When Articles of Merger have been duly executed by
FirstSouth and Centura and have been filed with the Secretary of State of North
Carolina in accordance with law, the Merger will become effective at the time of
such filing or, if later, at the time specified in such Articles of Merger.
Additionally, I have reviewed the Registration Statement and the Proxy Statement
and have considered the matters required to be stated therein and the statements
contained therein and, based on the foregoing (and, in certain circumstances
relying as to materiality on the opinions of officers and representatives of the
Holding Company and Centura) nothing has come to my attention which would lead
me to believe that the Registration Statement at the time it became effective,
or the Proxy Statement at the time it was distributed to FirstSouth's
shareholders, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that I make no statement regarding any
information included in the Registration Statement regarding FirstSouth or
regarding any of the Holding Company's or Centura's financial statements or
other financial, accounting or statistical data).
In giving the opinions set forth above, I have assumed, without independent
verification, that:
a. FirstSouth is duly organized, validly existing and in
good standing as a commercial bank under the laws of
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North Carolina and all other applicable laws to which it is
subject. FirstSouth has the full power and authority
(corporate and otherwise) to enter into and perform its
obligations under the Agreement and to consummate the
transactions described therein. The Agreement and all other
documents and instruments executed by FirstSouth in connection
therewith have been duly and validly executed and delivered on
behalf of and are enforceable in accordance with their terms
against FirstSouth;
b. Other than persons executing documents on behalf of the
Holding Company or Centura, the signatures of all persons
signing any document or instrument delivered in
connection with the Agreement or the consummation of the
transactions described therein are genuine, and all such
persons executing such documents have been duly
authorized to execute and deliver such documents and
instruments;
c. All natural persons executing any document or instrument
delivered in connection with the Agreement or the consummation
of the transactions described therein, or on whose behalf any
such documents were executed, had and continue to have legal
competency to do so and to become legally bound thereby;
d. All documents submitted to us as originals are authentic,
and all documents submitted to us as certified or
photostatic copies conform to the original documents,
which are themselves authentic;
e. No event will take place subsequent to the date hereof that
would cause any action taken in connection with the Agreement
or the transactions described therein to fail to comply with
any law, rule, regulation, order, judgment, decree or duty, or
that would permit any party to cancel, rescind or otherwise
avoid any act;
f. FirstSouth has complied or will comply with all conditions of
all required approvals of regulatory authorities having
jurisdiction over FirstSouth, the Holding Company, Centura and
the transactions described in the Agreement.
g. All certificates of public officials have been properly
given and are accurate and complete; and
h. There has been no mutual mistake of fact, fraud, duress
or undue influence in connection with the Agreement or
the transactions described therein, and the conduct of
the parties to the Agreement has complied with any
requirement of good faith, fair dealing and
conscionability. Each party to the Agreement has acted
without notice of any defense against the enforcement of
any rights created thereby; and there are no agreements
or understandings, or any usage of trade or course of
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<PAGE>
dealing, among the parties that, in either case, would define,
supplement or qualify the terms of the Agreement.
In addition, all opinions and statements set forth in this letter are expressly
limited and qualified as follows:
a. The opinions expressed herein are limited to matters of North
Carolina law and the federal laws of the United States of
America, and no opinion is expressed as to any matter that is
governed by the laws of any other jurisdiction or to the
effect of any such laws on the matters dealt with herein.
b. As used in any paragraph of this letter, the phrase
"Actual Knowledge" means that, in giving the opinion
contain in such paragraph, I have relied with your
consent exclusively on certificates of officers of
Centura and the Holding Company, certificates of others
as to the existence or non-existence of the circumstances
upon which this opinion is predicated, or various
representations and warranties contained in the Agreement
(and I have not conducted any independent investigation
in this regard), and that I have no actual conscious
awareness of any information to the contrary.
c. My opinions are limited to the matters expressly stated
herein, and no opinion may be inferred or implied beyond
the matters expressly stated.
d. The enforceability of all or various provisions of the
Agreement may be limited by (A) the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect relating to or
limiting the enforcement of creditors' rights generally,
(B) by legal and equitable limitations on the
availability of injunctive relief, specific performance
and other equitable remedies, (C) general principles of
equity and applicable laws or court decisions limiting
the availability of specific performance, injunctive
relief and other equitable remedies (including the
enforceability of indemnification provisions, regardless
of whether such enforceability is considered in a
proceeding in equity or at law), and (D) federal and/or
state bank holding company, commercial bank, savings bank
and deposit insurance laws and regulations and the
application of principles of public policy underlying
such laws and regulation
e. I express no opinion with respect to compliance by the Holding
Company or Centura with any federal, state or local law, rule,
regulation, ordinance, order or decree relating to hazardous
substances, hazardous wastes, hazardous materials or the
protection of the environment, or with respect to any
Environmental Law.
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f. These opinions are delivered to you pursuant to Section
7.02.d. of the Agreement and in connection with
consummation of the transactions described therein and
are solely for your benefit. No other person shall be
entitled to rely on my opinions herein, and you are not
entitled to rely on such opinions in any other context or
for any other purpose. No copy of this letter or any
portion thereof may be delivered to any other person, or
quoted, published or otherwise disseminated, without my
prior written consent.
g. Except as otherwise expressly specified herein, the opinions
herein are limited to matters in existence as of the date
hereof, and I undertake no responsibility to revise or
supplement this letter or the opinions herein to reflect any
change in the law or facts.
Yours truly,
Joseph A. Smith, Jr.
General Counsel
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SCHEDULE D
to Agreement and Plan of Reorganization and Merger
dated June 7, 1996
Form of Legal Opinion of Counsel for FirstSouth
, 1996
Centura Banks, Inc.
134 North Church Street
Rocky Mount, North Carolina 27802
Gentlemen:
We have acted as special counsel to FirstSouth Bank ("FirstSouth"), a
North Carolina banking corporation, in connection with the transactions
described in that certain Agreement and Plan of Reorganization and Merger dated
June 7, 1996, by and among FirstSouth, Centura Bank ("Centura") and Centura
Banks, Inc. (the "Holding Company") (the "Agreement", including the Plan of
Merger referenced therein). Pursuant to and in accordance with the terms and
conditions of the Agreement, FirstSouth is proposed to be merged into and with
Centura (the "Merger") and the outstanding shares of FirstSouth's common stock
will be converted into shares of the Holding Company's common stock. This letter
is delivered in connection with the consummation and closing of the Merger and
other transactions described in the Agreement (the "Closing"). Capitalized terms
appearing herein and not otherwise defined are used as defined in the Agreement.
As counsel to FirstSouth, we have examined originals or copies of
FirstSouth's Articles of Incorporation, By-Laws and corporate minute books, the
Agreement, the Registration Statement (No. ) on Form S-4 (the "Registration
Statement") filed by the Holding Company with the Securities and Exchange
Commission (the "Commission") and containing the Prospectus/Proxy Statement,
dated
, 1996, certificates and written statements of officers and agents of
FirstSouth, certificates of public officials, and such other documents and
records of FirstSouth as we have deemed necessary for the purpose of giving the
opinions hereinafter expressed.
In giving certain of the opinions set forth below, we have relied
solely upon certifications and letters provided to us by public officials. As to
matters of fact set forth below, and matters of fact which form the basis for
any opinion set forth below, we have relied solely upon (i) certificates and
statements
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of officers, employees and accountants of FirstSouth, and (ii) the
representations and warranties of FirstSouth set forth in the Agreement. Except
as expressly stated herein, we have not independently verified any factual
matters in connection with the giving of the opinions set forth below.
Subject to the qualifications and limitations set forth herein, and
except as set forth in the Registration Statement or the Agreement or as
Previously Disclosed by FirstSouth to Centura and the Holding Company in
connection therewith, we are of the opinion that:
1. FirstSouth (i) is duly organized and incorporated and
validly existing as a commercial bank under the laws of North Carolina; (ii) has
all requisite power and authority (corporate and other) to own, lease and
operate its properties and to conduct its business as now being conducted; (iii)
is duly qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned, leased or operated
by it therein or in which the transaction of its respective businesses makes
such qualification necessary, except where failure so to qualify would not have
a material adverse effect on FirstSouth; and (iv) to our Actual Knowledge, is
not transacting business or operating any properties owned or leased by it in
violation of any provision of federal or state law or any rule or regulation
promulgated thereunder, which violation would have a material adverse effect on
FirstSouth.
2. FirstSouth's authorized capital stock consists of
15,000,000 shares of common stock, $3.331/3 par value per share
("FirstSouth Stock").
Each outstanding share of FirstSouth Stock (i) has been duly
authorized and is validly issued and outstanding, and is fully paid and
nonassessable (except to the extent FirstSouth's stock is assessable under North
Carolina banking law), (ii) has not been issued in violation of the preemptive
rights of any shareholder, and (iii) has been issued pursuant to and in
compliance with the requirement of an applicable exemption from registration
requirements under the Securities Act of 1933, as amended (the "1933 Act").
3. FirstSouth has a wholly-owned subsidiary, FirstSouth
Investment Services, Inc. To our Actual Knowledge, FirstSouth has
no other subsidiary (direct or indirect).
4. Except for options to purchase shares of FirstSouth Stock
issued and outstanding under the FirstSouth Stock Plans, FirstSouth has no
outstanding (i) securities or other obligations (including debentures or other
debt instruments) which are convertible into shares of FirstSouth Stock or any
other securities of FirstSouth, (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person to receive or acquire any
shares of FirstSouth Stock or any other securities of FirstSouth, or (iii) plan,
agreement or other arrangement pursuant
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to which shares of FirstSouth Stock or any other securities of FirstSouth, or
options, warrants, rights, calls or other commitments of any nature pertaining
thereto, have been or may be issued.
5. (i) FirstSouth has the corporate power and authority to
execute and deliver the Agreement and to perform its obligations and agreements
and carry out the transactions described therein, (ii) all corporate proceedings
and approvals required to authorize FirstSouth to enter into the Agreement and
to perform its obligations and agreements and carry out the transactions
described therein have been duly and properly completed or obtained, and (iii)
the Agreement constitutes the valid and binding agreement of FirstSouth
enforceable in accordance with its terms.
6. Except where the same would not have a material adverse
effect on FirstSouth, neither the execution and delivery of the Agreement, nor
the consummation of the transactions described therein, nor compliance by
FirstSouth with any of its obligations or agreements contained therein, will:
(i) conflict with or result in a breach of the terms and conditions of, or
constitute a default or violation under any provision of, FirstSouth's Articles
of Incorporation or Bylaws, or, to our Actual Knowledge, any contract,
agreement, lease, mortgage, note, bond, indenture, license, or obligation or
understanding (oral or written) to which FirstSouth is bound or by which it, its
business, capital stock or any of its properties or assets may be affected; (ii)
to our Actual Knowledge, result in the creation or imposition of any lien,
claim, interest, charge, restriction or encumbrance upon any of FirstSouth's
properties or assets; (iii) violate any applicable federal or state statute,
law, rule or regulation, or any judgment, order, writ, injunction or decree of
any court, administrative or regulatory agency or governmental body; or (iv) to
our Actual Knowledge, result in the acceleration of any obligation or
indebtedness of FirstSouth.
7. No consents, approvals or waivers are required to be
obtained from any person or entity in connection with FirstSouth's execution and
delivery of the Agreement, or the performance of its obligations or agreements
or the consummation of the transactions described therein, except for approvals
of FirstSouth's Board of Directors and shareholders and required approvals of
governmental or regulatory authorities ("Regulatory Approvals").
8. The Agreement has been duly and validly approved by
FirstSouth's Board of Directors and shareholders to the extent and in the manner
required by applicable law, and the Agreement has been executed and delivered on
FirstSouth's behalf.
9. All Regulatory Approvals required to be obtained by
FirstSouth for the consummation of the transactions contemplated by the
Agreement (other than the filing of Articles of Merger) have been obtained, all
conditions imposed on FirstSouth in connection therewith that are required to be
satisfied prior to consummation of such transactions have been satisfied or
waived, and, to our
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Actual Knowledge, all such regulatory approvals are in full force and effect;
and, no other consents, approvals, authorizations or other orders of any court
or any governmental agency are required to be obtained by FirstSouth for the
consummation of the transactions contemplated by the Agreement (other than the
filing of Articles of Merger with respect to the Merger);
10. (i) To our Actual Knowledge, there are no actions, suits,
arbitrations, controversies or other proceedings or investigations (or any facts
or circumstances which reasonably could result in such), including without
limitation any such action by any governmental or regulatory authority, which
currently exists or is ongoing, pending or threatened, contemplated or probable
of assertion, against, relating to or otherwise affecting FirstSouth or any of
its properties or assets which, if determined adversely, could result in
liability on the part of FirstSouth for, or subject it to, monetary damages,
fines or penalties, an injunction, or which could have a material adverse effect
on FirstSouth's financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or operations or on
the ability of FirstSouth to consummate the Merger; and
(ii) FirstSouth is not subject to any supervisory
agreement, enforcement order, writ, injunction, capital directive, supervisory
directive, memorandum of understanding or other similar agreement, order,
directive, memorandum or consent of, with or issued by any regulatory or other
governmental authority (including without limitation the FDIC or the
Commissioner) relating to its financial condition, directors or officers,
operations, capital, regulatory compliance or otherwise; there are no judgments,
orders, stipulations, injunctions, decrees or awards against FirstSouth which in
any manner limit, restrict, regulate, enjoin or prohibit any present or past
business or practice of FirstSouth; and, to our Actual Knowledge, FirstSouth has
not been advised or has any reason to believe that any regulatory or other
governmental authority or any court is contemplating, threatening or requesting
the issuance of any such agreement, order, injunction, directive, memorandum,
judgment, stipulation, decree or award.
Additionally, we have reviewed the Registration Statement and the Proxy
Statement and have considered the matters required to be stated therein and the
statements contained therein and, based on the foregoing (and, in certain
circumstances relying as to materiality on the opinions of officers and
representatives of FirstSouth) nothing has come to our attention which would
lead us to believe that the Registration Statement at the time it became
effective, or the Proxy Statement at the time it was distributed to FirstSouth's
shareholders, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that we make no statement regarding
any information included in the Registration Statement regarding the Holding
Company or Centura or regarding any of FirstSouth's financial statements or
other financial, accounting or statistical data).
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In giving the opinions set forth above, we have assumed, without
independent verification, that the following is true:
a. Centura and the Holding Company each is duly organized,
validly existing and in good standing as a corporation
under the laws of North Carolina and all other applicable
laws to which it is subject. Centura and the Holding
Company each has the full power and authority to enter
into and perform its obligations under the Agreement and
to consummate the transactions described therein. The
Agreement and all other documents and instruments
executed by Centura and the Holding Company in connection
therewith have been duly and validly executed and
delivered on behalf of and are enforceable in accordance
with their terms against Centura and the Holding Company;
b. Other than persons executing documents on behalf of
FirstSouth, the signatures of all persons signing any document
or instrument delivered in connection with the Agreement or
the consummation of the transactions described therein are
genuine, and all such persons executing such documents have
been duly authorized to execute and deliver such documents and
instruments;
c. All natural persons executing any document or instrument
delivered in connection with the Agreement or the consummation
of the transactions described therein, or on whose behalf any
such documents were executed, had and continue to have legal
competency to do so and to become legally bound thereby;
d. All documents submitted to us as originals are authentic,
and all documents submitted to us as certified or
photostatic copies conform to the original documents,
which are themselves authentic;
e. No event will take place subsequent to the date hereof that
would cause any action taken in connection with the Agreement
or the transactions described therein to fail to comply with
any law, rule, regulation, order, judgment, decree or duty, or
that would permit any party to cancel, rescind or otherwise
avoid any act;
f. The Holding Company and Centura have complied or will
comply with all conditions of all required approvals of
regulatory authorities having jurisdiction over
FirstSouth, the Holding Company, Centura and the
transactions described in the Agreement;
g. All certificates of public officials have been properly
given and are accurate and complete; and
h. There has been no mutual mistake of fact, fraud, duress
or undue influence in connection with the Agreement or
the transactions described therein, and the conduct of
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the parties to the Agreement has complied with any requirement
of good faith, fair dealing and conscionability. Each party to
the Agreement has acted without notice of any defense against
the enforcement of any rights created thereby; and there are
no agreements or understandings, or any usage of trade or
course of dealing, among the parties that, in either case,
would define, supplement or qualify the terms of the
Agreement.
In addition, all opinions and statements set forth in this letter are
expressly limited and qualified as follows:
a. The opinions expressed herein are limited to matters of North
Carolina law and the federal laws of the United States of
America, and no opinion is expressed as to any matter that is
governed by the laws of any other jurisdiction or to the
effect of any such laws on the matters dealt with herein.
b. As used in any paragraph of this letter, the phrase
"Actual Knowledge" means that, in giving the opinion
contain in such paragraph, we have relied with your
consent exclusively on certificates of officers of
FirstSouth as to the existence or non-existence of the
circumstances upon which this opinion is predicated, or
various representations and warranties contained in the
Agreement (and we have not conducted any independent
investigation in this regard), and that we have no actual
conscious awareness of any information to the contrary.
c. Our opinions are limited to the matters expressly stated
herein, and no opinion may be inferred or implied beyond
the matters expressly stated.
d. The enforceability of all or various provisions of the
Agreement may be limited by (A) the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect relating to or
limiting the enforcement of creditors' rights generally,
(B) by legal and equitable limitations on the
availability of injunctive relief, specific performance
and other equitable remedies, (C) general principles of
equity and applicable laws or court decisions limiting
the availability of specific performance, injunctive
relief and other equitable remedies (including the
enforceability of indemnification provisions, regardless
of whether such enforceability is considered in a
proceeding in equity or at law), and (D) federal and/or
state bank holding company, commercial bank, savings bank
and deposit insurance laws and regulations and the
application of principles of public policy underlying
such laws and regulation
e. We express no opinion with respect to compliance by
FirstSouth with any federal, state or local law, rule,
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regulation, ordinance, order or decree relating to hazardous
substances, hazardous wastes, hazardous materials or the
protection of the environment, or with respect to any
Environmental Law.
f. These opinions are delivered to you pursuant to Section
7.03.f. of the Agreement and in connection with
consummation of the transactions described therein and
are solely for your benefit. No other person shall be
entitled to rely on my opinions herein, and you are not
entitled to rely on such opinions in any other context or
for any other purpose. No copy of this letter or any
portion thereof may be delivered to any other person, or
quoted, published or otherwise disseminated, without our
prior written consent.
h. Except as otherwise expressly specified herein, the opinions
herein are limited to matters in existence as of the date
hereof, and we undertake no responsibility to revise or
supplement this letter or the opinions herein to reflect any
change in the law or facts.
Yours truly,
MOORE & VAN ALLEN, PLLC
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APPENDIX B
PROVISIONS OF NORTH CAROLINA BUSINESS CORPORATION
ACT RELATING TO DISSENTERS' RIGHTS
ARTICLE 13.
Dissenters' Rights.
Part l. Right to Dissent and Obtain Payment for Shares.
(Section Mark) 55-13-01. Definitions.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
(Section Mark) 55-13-02. Right to Dissent.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporation actions:
(1) Consummation of a plan of merger to which the corporation
(other than a parent corporation in a merger under G.S. 55-11-04) is a
party unless (i) approval by the shareholders of that corporation is
not required under G.S. 55-11-03(g) or (ii) such shares are then
redeemable by the corporation at a price not greater than the cash to
be received in exchange for such shares;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, unless such shares are then redeemable by the corporation at
a price not greater than the cash to be received in exchange for such
shares;
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than as
permitted by G.S. 55-12-01, including a sale in dissolution, but not
including a sale pursuant to court order or a sale pursuant to a plan
by which all or substantially all of the net proceeds of the sale will
be distributed in cash to the shareholders within one year after the
date of sale:
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(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it (i) alters or abolishes a preferential right of the
shares; (ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares; (iii) alters or abolishes a
preemptive right of the holder of the shares to acquire shares or other
securities; (iv) excludes or limits the right of the shares to vote on
any matter, or to cumulate votes; (v) reduces the number of shares
owned by the shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under G.S. 55-6-04; or (vi)
changes the corporation into a nonprofit corporation or cooperative
organization;
(5) Any corporate action taken pursuant to a shareholder vote
to the extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting shareholders
are entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(Section Mark) 55-13-03. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any other person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
(Section Mark) 55-13-04 to 55-13-19: Reserved for future codification purposes.
Part 2. Procedures for Exercise of Dissenters' Rights.
(Section Mark) 55-13-20. Notices of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02
is taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G. S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this
section, such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
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(Section Mark) 55-13-21. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must
actually receive, before the vote is taken written notice of his intent
to demand payment for his shares if the proposed action is effectuated;
and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this Article.
(Section Mark) 55-13-22. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more than 60
days after the date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
(Section Mark) 55-13-23. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22
must demand payment and deposit his share certificates in accordance with the
terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
(Section Mark) 55-13-24. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(Section Mark) 55-13-25. Offer of payment.
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(a) As soon as the proposed corporate action is taken, or upon receipt
of a payment demand, the corporation shall offer to pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment, and shall pay
this amount to each dissenter who agrees in writing to accept it in full
satisfaction of his demand.
(b) The offer of payment must be accompanied by:
(1) The corporation's most recent available balance sheet as
of the end of a fiscal year ending not more than 16 months before the
date of offer of payment, an income statement for that year, a
statement of cash flows for that year, and the latest available interim
financial statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under G.S. 55-13-28; and
(5) A copy of this Article.
(Section Mark) 55-13-26. Failure to take action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
(Section Mark) 55-13-27: Reserved for future codification purposes.
(Section Mark) 55-13-28. Procedure if shareholder dissatisfied with
corporation's offer or failure to perform.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate or reject the corporation's offer under G.S. 55-13-25
and demand payment of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under G.S.
55-13-25 is less than the fair value of his shares or that the interest
due is incorrectly calculated;
(2) The corporation fails to make payment to a dissenter who
accepts the corporation's offer under G.S. 55-13-25 within 30 days
after the dissenter's acceptance; or
(3) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60 days
after the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation offered payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
(Section Mark) 55-13-29: Reserved for future codification purposes.
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Part 3. Judicial Appraisal of Shares.
(Section Mark) 55-13-30. Court action.
(a) If a demand for payment under G.S. 55-13-28 remains
unsettled, the dissenter may commence a proceeding within 60 days after
the date of his payment demand under G.S. 55-13-28 and petition the
court to determine the fair value of the shares and accrued interest.
Upon service upon it of the petition filed with the court, the
corporation shall pay to the dissenter the amount offered by the
corporation under G.S. 55-13-25.
(a1) If the dissenter does not commence the proceeding within
60-day period, the dissenter shall have an additional 30 days to either
(i) accept in writing the amount offered by the corporation under G.S.
55-13-25, upon which the corporation shall pay such amount to the
dissenter in full satisfaction of his demand, or (ii) withdraw his
demand for payment and resume the status of a nondissenting
shareholder. A dissenter who takes no action within such 30-day period
shall be deemed to have withdrawn his dissent and demand for payment.
(b) Reserved for future codification purposes.
(c) the court shall have the discretion to make all dissenters
(whether or not residents of this State) whose demands remain unsettled
parties to the proceeding as in an action against their shares and all
parties must be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as provided by
law.
(d) the jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any amendment
to it. The parties are entitled to the same discovery rights as parties
in other civil proceedings. However, in a proceeding by a dissenter in
a public corporation, there is no right to trial by jury.
(e) Each dissenter made a party to the proceeding is entitled
to judgment for the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation.
(Section Mark) 55-13-31. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under G.S.
55-13-30 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the
court, and shall assess the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court finds
equitable:
(1) Against the corporation and in favor of any or
all dissenters if the court finds the corporation did not
substantially comply with the requirements of G.S. 55-13-20
through 55-13-28; or
(2) Against either the corporation or a dissenter, in
favor of either or any other party, if the court finds that
the party against whom the fees and expenses are assessed act
arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this Article.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to these counsel
reasonable fees to be paid out of the amounts awarded the dissenters
who were benefited.
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APPENDIX C
SMITH CAPITAL, INC.
200 HARGETT COURT
CHARLOTTE, NORTH CAROLINA 28211
TEL: 704 362-1563 FAX: 704 364-3451
The Board of Directors
FirstSouth Bank
P.O. Drawer 2957
Burlington, North Carolina 27216
September 4, 1996
Gentlemen:
FirstSouth Bank ( "FirstSouth"), Centura Bank and Centura Banks, Inc.
("Centura") have entered into an Agreement and Plan of Reorganization and Merger
dated as of June 7, 1996 ("the Agreement"), pursuant to which Centura will
acquire FirstSouth by means of the merger ("Merger") of FirstSouth with and into
Centura Bank, a wholly owned subsidiary of Centura and the conversion of each of
the outstanding shares of the $3 1/3 par value common stock of FirstSouth
("FirstSouth Common Stock") into 0.56 shares (the "Exchange Rate") of the no par
value Centura common stock ("Centura Common Stock"), subject to adjustment as
provided in the Agreement.
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of FirstSouth Common Stock of the Exchange Rate.
Smith Capital, Inc. is a North Carolina -based corporation primarily
engaged in: (1) performing valuations of and valuations related to closely held
and publicly traded companies and (2) providing financial advice related to
mergers, acquisitions and divestitures of closely held and publicly traded
companies.
In arriving at our opinion set forth below, we have conducted discussions
with members of senior management of FirstSouth concerning their business and
prospects and have reviewed certain publicly available business and financial
information and certain other information prepared or provided to us in
connection with the proposed Merger, including, among other things, the
following:
(1) FirstSouth's Annual and Quarterly Reports to Stockholders, Annual Reports on
Form F-2, Annual Proxy Statements to Stockholders and related financial
information for the three fiscal years ended December 31, 1995;
(2) Centura's Annual Reports and Quarterly Reports to Stockholders, Annual
Reports on Form 10-K, Annual Proxy Statements to Stockholders and related
financial information for the three fiscal years ended December 31, 1995;
(3) FirstSouth's Quarterly Report to Stockholders and Quarterly Report on Form
F-4 for the six months ended June 30, 1996;
(4) Centura's Quarterly Report to Stockholders and Quarterly Report on Form 10-Q
for the six months ended June 30, 1996;
(5) Certain publicly available information with respect to historical market
prices and trading activity for FirstSouth and Centura and certain publicly
traded financial institutions which Smith Capital, Inc. deemed relevant;
(6) The Agreement;
(7) The Registration Statement on Form S-4 of Centura, including the Proxy
Statement/Prospectus;
(8) Other financial information concerning the business and operations of
Centura and FirstSouth, including certain audited financial information, and
certain internal analyses and forecasts for FirstSouth prepared by the senior
management of FirstSouth;
(9) Such financial studies, analyses, inquiries and other matters as we deemed
necessary.
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Smith Capital, Inc. relied without independent verification upon the
accuracy and completeness of all the financial and other information reviewed by
it for purposes of its opinion. In that regard Smith Capital, Inc. assumed that
the financial forecasts, provided to it were reasonably prepared on a basis
reflecting the best currently available judgment of FirstSouth. Any estimates
contained in Smith Capital, Inc.'s analyses are not necessarily indicative of
future results or values, nor do they purport to be appraisals or reflect prices
at which securities could actually be bought or sold. Smith Capital, Inc. is not
an expert in the evaluation of loan portfolios or the allowances for loan losses
with respect thereto and has assumed, without independent verification, that
such allowances for FirstSouth and Centura are adequate to cover such losses. In
addition, Smith Capital, Inc. has not reviewed individual credit files nor has
it made or obtained an independent appraisal of the assets and liabilities of
FirstSouth or Centura or any of their subsidiaries. Our opinion is necessarily
based upon market, economic, and other conditions as they exist and can be
evaluated on the date hereof and the information made available to us through
the date hereof.
Smith Capital, Inc.'s opinion is directed only to the fairness, from a
financial point of view, of the Exchange Rate to the stockholders of FirstSouth
and does not constitute a recommendation to any stockholder of FirstSouth as to
how such stockholder should vote with respect to the Merger. Our opinion does
not address the relative merits of the Merger as compared to any alternative
business strategies that might exist for FirstSouth, nor does it address the
effect of any other business combination in which Centura might engage.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof the Exchange Rate is fair, from a financial point of view, to the
stockholders of FirstSouth.
Very truly yours,
Smith Capital, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 55-8-50 through 55-8-58 of the General States of North Carolina
provide for indemnification of directors, officers, employees, and agents of a
North Carolina corporation. Subject to certain exceptions, a corporation may
indemnify an individual made a party to a proceeding because he is or was a
director against liability incurred in the proceeding if (i) he conducted
himself in good faith; and (ii) he reasonably believed (a) in the case of
conduct in his official capacity with the corporation, that his conduct was in
its best interests, and (b) in all other cases, that his conduct was at least
not opposed to its best interests; and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Moreover, unless limited by its articles of incorporation, a corporation must
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he was a party because he is or was a
director of the corporation against reasonable expenses incurred by him in
connection with the proceeding. Expenses incurred by a director in defending a
proceeding may be paid by the corporation in advance of the final disposition of
such proceeding as authorized by the board of directors in the specific case or
as authorized or required under any provision in the articles of incorporation
or bylaws or by any applicable resolution or contract upon receipt of an
undertaking by or on behalf of a director to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation against such expenses. A director may also apply for court-ordered
indemnification under certain circumstances.
Unless a corporation's articles of incorporation provide otherwise, (i) an
officer of a corporation is entitled to mandatory indemnification and is
entitled to apply for court-ordered indemnification to the same extent as a
director, (ii) the corporation may indemnify or advance expenses to an officer,
employee, or agent of a corporation to the same extent as to a director, and
(iii) a corporation may also indemnify or advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.
In addition, and separate and apart from the indemnification rights
discussed above, the above-cited statutes further provide that a corporation
may, in its articles of incorporation or bylaws, or by contract or resolution,
indemnify or agree to indemnify any one of its directors, officers, employees,
or agents against liability and expenses in any proceeding (including without
limitation a proceeding brought by or on behalf of the corporation itself)
arising out of their status as such or their activities in any of the foregoing
capacities; provided, however, that a corporation may not indemnify or agree to
indemnify a person against liability or expenses he may incur on account of his
activities which were at the time taken known or believed by him to be clearly
in conflict with the best interests of the corporation. A corporation may
likewise and to the same extent indemnify or agree to indemnify any person who,
at the request of the corporation, is or was serving as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or as a trustee or
administrator under an employee benefit plan. Any such provision for
indemnification may also include provisions for recovery from the corporation of
reasonable costs, expenses, and attorneys' fees in connection with the
enforcement of rights to indemnification and may further include provisions
establishing reasonable procedures for determining and enforcing the rights
granted therein.
As permitted by the North Carolina statutory provisions explained above,
Article IX, Section 4 of the Bylaws of the Registrant provides as follows:
Any person who at any time serves or has served as a director or
officer of the Corporation, or at the request of the Corporation is or was
serving as an officer, director, agent, partner, trustee, or employee for
any other foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise, shall be indemnified by
the Corporation to the fullest extent from time to time permitted by law in
the event he is made, or is threatened to be made, a party to any
threatened pending or completed civil, criminal, administrative,
investigative or arbitrative action, suit, or proceeding and any appeal
therein (and any inquiry or investigation that could lead to such action,
suit or proceeding), whether or not brought by or on behalf of the
Corporation, seeking to hold him liable by reason of the fact that he is or
was acting in such capacity. In addition, the board may provide such
indemnification for other employees and agents of the Corporation as it
deems appropriate.
The rights of those receiving indemnification hereunder shall, to the
fullest extent from time to time permitted by law, cover (i) reasonable
expenses, including without limitation all attorney's fee's actually and
necessarily incurred by him in connection with any such action, suit or
proceeding, (ii) all reasonable payments made by him in satisfaction of any
judgment, money decree, fine (including an excise tax assessed with respect
to an employee benefit plan), penalty,
II-1
<PAGE>
or settlement for which he may have become liable in such action, suit, or
proceeding; and (iii) all reasonable expenses incurred in enforcing the
indemnification rights provided herein.
Expenses incurred by anyone entitled to receive indemnification under
this section in defending a proceeding may be paid by the Corporation in
advance of the final disposition of such proceeding as authorized by the
board of directors in the specific case or as authorized or required under
any provision in the bylaws or by any applicable resolution or contracts
upon receipt of an undertaking by or on behalf of the director to repay
such amount unless it shall ultimately be determined that be is entitled to
be indemnified by the Corporation against such expenses.
The board of directors of the Corporation shall take all such action
as may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this bylaw, including without limitation, to
the extent needed, making a good faith evaluation of the manner in which
the claimant for indemnify acted and of the reasonable amount of indemnity
due him.
Any person who at any time serves or has served in any of the
aforesaid capacities for or on behalf of the Corporation shall be deemed to
be doing or to have done so in reliance upon, and as consideration for, the
right of indemnification provided herein. Any repeal or modification of
these indemnification provisions shall not affect any rights or obligations
existing at the time of such repeal or modification. The rights provided
for herein shall inure to the benefit of the legal representatives of any
such person and shall not be exclusive of any other rights to which such
person may be entitled apart from the provisions of this bylaw.
The rights granted herein shall not be limited by the provisions
contained in N.C. Gen. Stat. 55-8-51 (or its successor).
As permitted by applicable statutes, the Registrant has purchased a
standard directors' and officers' liability policy that will, subject to certain
limitations, indemnify the Registrant and its officers and directors for damages
they become legally obligated to pay as a result of any negligent act, error, or
omission committed by directors or officers while acting in their capacities as
such.
The indemnification provisions in the Bylaws may be sufficiently broad to
permit indemnification of the Registrant's officers and directors for
liabilities arising under the 1933 Act.
ITEM 21. EXHIBITS
The following exhibits are filed herein or have been, as noted, previously
filed:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
2.1 Agreement and Plan of Reorganization and Merger, dated as of June 7, 1996, by and among FirstSouth Bank, Centura
Bank and Centura Banks, Inc. (included as Appendix A to Prospectus/Proxy Statement contained in Part I).
5.1 Opinion of Joseph A. Smith, Jr. as to the validity of the shares of Centura Stock.*
8.1 Opinion of Poyner & Spruill, L.L.P. as to federal income tax consequences.
13.1 FirstSouth Bank Annual Report on Form F-2 for the fiscal year ended December 31, 1995.*
13.2 FirstSouth Bank Quarterly Report on Form F-4 for the quarterly period ended March 31, 1996.*
13.3 FirstSouth Bank Current Report on Form F-3, dated April 19, 1996.*
13.4 FirstSouth Bank Quarterly Report on Form F-4 for the quarterly period ended June 30, 1996.
23.1 Consent of KPMG Peat Marwick LLP independent certified public accountants for Centura Banks, Inc.
23.2 Consent of KPMG Peat Marwick LLP independent certified public accountants for FirstSouth Bank.
23.3 Consent of Joseph A. Smith, Jr. (Contained in Exhibit 5.1).
23.4 Consent of Poyner & Spruill, L.L.P.
23.5 Consent of Smith Capital, Inc.
99.1 Form of proxy of FirstSouth Bank.
</TABLE>
* Previously filed.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
D. (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such prospectus will contain the information called for
by the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
E. The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form within one business day of receipt of such
request
II-3
<PAGE>
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
F. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this pre-effective amendment no. 1 to its registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Rocky Mount, State of North Carolina on this the 3rd day of September,
1996.
REGISTRANT
CENTURA BANKS, INC.
By: /s/ ROBERT R. MAULDIN
ROBERT R. MAULDIN
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
pre-effective amendment no.1 to its registration statement has been signed below
by the following persons in the capacities indicated on September 3, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ROBERT R. MAULDIN Chairman of the Board, Director and Chief September 3, 1996
ROBERT R. MAULDIN Executive Officer
/s/ CECIL W. SEWELL, JR. Director, President, and Chief Operating September 3, 1996
CECIL W. SEWELL, JR. Officer
/s/ FRANK L. PATTILLO Director, Group Executive Officer and Chief September 3, 1996
FRANK L. PATTILLO Financial Officer
/s/ WILLIAM H. WILKERSON Director and Group Executive Officer September 3, 1996
WILLIAM H. WILKERSON
/s/ ANN K. LAWSON Principal Accounting Officer September 3, 1996
ANN K. LAWSON
*/s/ RICHARD H. BARNHARDT Director September 3, 1996
RICHARD H. BARNHARDT
*/s/ C. WOOD BEASLEY Director September 3, 1996
C. WOOD BEASLEY
*/s/ THOMAS A. BETTS, JR. Director September 3, 1996
THOMAS A. BETTS, JR.
*/s/ H. TATE BOWERS Director September 3, 1996
H. TATE BOWERS
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*/s/ ERNEST L. EVANS Director September 3, 1996
ERNEST L. EVANS
*/s/ J. RICHARD FUTRELL, JR. Director September 3, 1996
J. RICHARD FUTRELL, JR.
*/s/ JOHN H. HIGH Director September 3, 1996
JOHN H. HIGH
*/s/ WILLIAM D. HOOVER Director September 3, 1996
WILLIAM D. HOOVER
*/s/ ROBERT L. HUBBARD Director September 3, 1996
ROBERT L. HUBBARD
*/s/ WILLIAM H. KINCHELOE Director September 3, 1996
WILLIAM H. KINCHELOE
*/s/ CHARLES T. LANE Director September 3, 1996
CHARLES T. LANE
*/s/ JACK A. MOODY Director September 3, 1996
JACK A. MOODY
*/s/ CLIFTON H. MOORE Director September 3, 1996
CLIFTON H. MOORE
*/s/ JOSEPH H. NELSON Director September 3, 1996
JOSEPH H. NELSON
*/s/ O. TRACY PARKS III Director September 3, 1996
O. TRACY PARKS III
*/s/ WILLIAM H. REDDING, JR. Director September 3, 1996
WILLIAM H. REDDING, JR.
*/s/ CHARLES M. REEVES III Director September 3, 1996
CHARLES M. REEVES III
*/s/ GEORGE T. STRONACH III Director September 3, 1996
GEORGE T. STRONACH III
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*/s/ ALEXANDER P. THORPE III Director September 3, 1996
ALEXANDER P. THORPE III
*/s/ JOSEPH L. WALLACE, JR. Director September 3, 1996
JOSEPH L. WALLACE, JR.
*/s/ CHARLES P. WILKINS Director September 3, 1996
CHARLES P. WILKINS
By: /s/ JOSEPH A. SMITH, JR.
JOSEPH A. SMITH, JR., AS ATTORNEY-IN-FACT
PURSUANT TO POWER OF ATTORNEY.
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
<C> <S> <C>
5.1 Opinion of Joseph A. Smith, Jr. as to the validity of the shares of Centura Stock*
8.1 Opinion of Poyner & Spruill, L.L.P. as to federal income tax consequences
13.1 FirstSouth Bank Annual Report on Form F-2 for the fiscal year ended December 31, 1995*
13.2 FirstSouth Bank Quarterly Report on Form F-4 for the quarterly period ended March 31, 1996*
13.3 FirstSouth Bank Current Report on Form F-3, dated April 19, 1996*
13.4 FirstSouth Bank Quarterly Report on Form F-4 for the quarterly period ended June 30, 1996
23.1 Consent of KPMG Peat Marwick LLP independent certified public accountants for Centura Banks, Inc.
23.2 Consent of KPMG Peat Marwick LLP independent certified public accountants for FirstSouth Bank
23.3 Consent of Joseph A. Smith, Jr. (Contained in Exhibit 5.1)
23.4 Consent of Poyner & Spruill
23.5 Consent of Smith Capital, Inc.
99.1 Form of proxy of FirstSouth Bank
</TABLE>
* Filed previously.
EXHIBIT 8.1
August 27, 1996
Centura Banks, Inc.
Centura Bank
134 North Church Street
Rocky Mount, North Carolina 27804
FirstSouth Bank
2946 South Church Street
Burlington, North Carolina 27216
Gentlemen:
We have served as tax counsel to Centura Banks, Inc. ("Centura"), a
bank holding company organized under the laws of the State of North Carolina,
and Centura Bank, a wholly-owned subsidiary of Centura, in connection with the
adoption of the Agreement and Plan of Reorganization and Merger, dated as of
June 7, 1996 (the "Agreement"), by and among Centura, Centura Bank and
FirstSouth Bank ("FSB"), a North Carolina banking corporation. Except to the
extent otherwise defined herein, capitalized terms used herein have the same
meaning as set forth in the Agreement.
The Agreement provides for the merger of FSB with and into Centura Bank
(the "Merger"). Centura Bank will be the surviving corporation resulting from
the Merger. Pursuant to the Agreement, all the issued and outstanding shares of
FSB Common Stock will be converted and exchanged for shares of Centura Common
Stock. The exchange ratio ("Exchange Ratio") for such exchange will be 0.56
shares of Centura Common Stock for each share of Common Stock of FSB, subject to
adjustments as described in the Agreement. All steps referred to in the
Agreement are collectively referred to herein as the "Reorganization". Following
the Reorganization, Centura Bank will succeed to all of the rights, assets,
liabilities, and obligations of FSB.
Cash will be paid by Centura to certain FSB shareholders in lieu of
fractional shares of Centura Common Stock. Cash may be paid by FSB to certain
FSB shareholders who exercise dissenter's rights with respect to the
Reorganization. In the event of payments to dissenting FSB shareholders, Centura
will advance such funds to FSB.
In rendering this opinion we have assumed, without independent
verification, the genuineness of all signatures, the authenticity of original
documents submitted to us as originals, and the conformity to the originals of
all documents submitted to us as certified, conformed, or photostatic copies. We
have further assumed that each of the parties to the Agreement has the requisite
corporate power and authority to enter into and to perform the
<PAGE>
Centura Banks, Inc./Centura Bank
FirstSouth Bank
August 27, 1996
Page 2
Agreement and the transactions contemplated thereby, that the Agreement has been
duly authorized, executed, and delivered by and constitutes a legal, valid and
binding obligation of each of the parties thereto, and that all requisite
regulatory approvals have been duly obtained.
We have been provided with a copy of separate letters, both dated
August 27, 1996, in which the General Counsel of Centura and Centura Bank and
the President of FSB, respectively, on behalf of their respective institutions,
make certain representations regarding the transaction (the "Representations").
We have relied upon the accuracy of the Representations in rendering the
opinions expressed herein. A copy of both of these letters is attached to this
letter.
In rendering the opinions set forth below, we have considered the
Agreement, the Representations, applicable case law and applicable provisions of
(i) the Internal Revenue Code of 1986, as amended and as presently in effect
(the "Code"), (ii) the regulations adopted under the Code, (iii) the Revenue
Rulings and Revenue Procedures published under and with respect to the Code, and
(iv) the North Carolina General Statutes as presently in effect and regulations
promulgated thereunder. No assurance can be given that legislative,
administrative, or judicial decisions or interpretations may not be forthcoming
that would significantly change the opinions set forth herein. Any such changes
may retroactively and adversely affect such opinions. In addition, it should be
noted that an opinion of counsel represents only that counsel's best legal
judgment and has no binding effect on the Internal Revenue Service or North
Carolina Department of Revenue nor has official status of any kind.
Based upon the matters and resources we have considered, we are of the
opinion that, upon consummation of the Reorganization in strict accordance with
all the terms and conditions of the Agreement and in conformity with the
Representations, the transaction will be treated as follows for federal income
tax purposes:
<PAGE>
Centura Banks, Inc./Centura Bank
FirstSouth Bank
August 27, 1996
Page 3
(a) The Merger will constitute a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. FSB, Centura and
Centura Bank will each be a party to the Reorganization within the meaning of
Section 368(b) of the Code.
(b) No gain or loss will be recognized by FSB on the transfer
of assets to Centura Bank in exchange for Centura Common Stock and the
assumption by Centura Bank of the liabilities of FSB. No gain or loss will be
recognized by FSB on the distribution of Centura Common Stock to the FSB
shareholders.
(c) No gain or loss will be recognized by Centura Bank upon
the receipt by Centura Bank of the assets of FSB in exchange for Centura Common
Stock and the assumption of liabilities of FSB.
(d) The tax basis of the assets of FSB in the hands of Centura
Bank will be the same as the tax basis of those assets in the hands of FSB
immediately prior to the Merger.
(e) The holding period of the assets of FSB in the hands of
Centura Bank will include the period during which such assets were held by FSB.
(f) No gain or loss will be recognized by those FSB
shareholders who receive solely Centura Common Stock (including fractional
shares) in exchange for their FSB Common Stock.
(g) The tax basis of the Centura Common Stock (including
fractional shares) received by the FSB shareholders will be the same as the tax
basis of the FSB Common Stock surrendered in exchange therefor decreased by the
amount of cash, if any, received by the shareholder for the FSB Common Stock and
increased by the amount, if any, that was treated as a dividend and the amount
of gain, if any, recognized to the shareholder on the exchange.
(h) The holding period of the Centura Common Stock (including
fractional shares) received by the FSB shareholders will include the period
during which the FSB Common Stock surrendered in exchange therefor was held,
provided that the FSB Common Stock was held as a capital asset on the date of
consummation of the Reorganization.
<PAGE>
Centura Banks, Inc./Centura Bank
FirstSouth Bank
August 27, 1996
Page 4
(i) The payment of cash to a FSB shareholder in lieu of the
actual issuance of fractional shares of Centura Common Stock will be treated for
federal income tax purposes as if such fractional shares were in fact
distributed as part of the exchange and the cash was then distributed by Centura
in redemption of such fractional shares subject to Section 302 of the Code. If
the redemption meets one of the four tests set forth in that section, the
shareholder will be treated as if he sold such fractional shares of Centura
Common Stock for the amount of cash received, and such shareholder will
recognize gain (or loss) to the extent that the amount of the cash received
exceeds (or is less than) the shareholder's tax basis allocable to such
fractional shares. Any gain or loss recognized will be capital gain or loss,
assuming that the fractional shares of Centura Common Stock would have been a
capital asset in the hands of the shareholder. If none of the four tests
provided in Section 302 is met, the assumed redemption will be treated as a
dividend, and the shareholder will most likely be required to recognize as
ordinary income the full amount of the cash received.
(j) A dissenting FSB shareholder who receives cash for his FSB
Common Stock will be treated either (i) as having exchanged his shares in FSB
for Centura Common Stock which is then redeemed by Centura, subject to the
provisions and limitations of Section 302 of the Code; or (ii) as having his
shares of FSB Common Stock redeemed by FSB immediately before the Merger,
subject to the provisions and limitations of Section 302 of the Code. In either
case, if the redemption meets one of the four tests set forth in that section,
the shareholder will be treated as if he sold his shares of Centura Common Stock
for the amount of cash received, and such shareholder will recognize gain (or
loss) to the extent that the amount of the cash received exceeds (or is less
than) the shareholder's tax basis applicable to his shares of Centura Common
Stock which will be the same as his tax basis in his FSB Common Stock. Any gain
or loss recognized will be capital gain or loss, assuming that the shares of FSB
Common Stock are a capital asset in the hands of the shareholder. If none of the
four tests provided in Section 302 is met, the assumed redemption will be
treated as a dividend, and the shareholder will most likely be required to
recognize as ordinary income the full amount of the cash received.
(k) The taxable year of FSB will end on the effective
date of the Merger.
<PAGE>
Centura Banks, Inc./Centura Bank
FirstSouth Bank
August 27, 1996
Page 5
(l) Centura Bank will succeed to and take into account the
items of FSB described in Section 381(c) of the Code, subject to the provisions
and limitations specified in Sections 381, 382, 383, and 384 of the Code and the
Regulations thereunder.
(m) Small banks such as FSB are subject to the provisions of
the Code in the same general manner as other corporations. However, institutions
such as FSB which meet certain definitional tests may benefit from certain
favorable provisions regarding their deductions from taxable income for annual
additions to their bad debt reserve. We understand that FSB has used the
experience method of calculating its addition to reserves for bad debts. Larger
banks, such as Centura Bank, are not permitted to use the experience method. As
a result, upon the Merger, Centura Bank will succeed to the bad debt reserve of
FSB and must "recapture" such reserve into income for tax purposes over a
four-year period.
We are of the further opinion that the Reorganization will be treated
in substantially the same manner for North Carolina income tax purposes as for
federal income tax purposes.
Except to the extent specifically provided herein, no opinion is
expressed or implied concerning the federal income tax consequences of the
transactions described in the Agreement or the consequences under any other
federal, state, or local tax laws.
The opinions expressed herein are for the exclusive benefit of Centura,
Centura Bank, FSB, and the shareholders of FSB in connection with the
transactions described in the Agreement, and may not be relied upon by them for
any other purpose, or used, circulated, quoted, or relied upon by any other
person or entity for any purpose without our prior consent. We consent to the
filing of this letter as an exhibit to the Registration Statement.
This opinion is specifically limited to those matters expressed herein,
effective as of the date hereof. We assume no duty to inform you of any changes
in our opinion hereafter due to any change in law or facts that may hereafter
occur or come to our attention.
Very truly yours,
Poyner & Spruill, L.L.P.
<PAGE>
EXHIBIT 13.4
Federal Deposit Insurance Corporation
Washington, DC 20549
FORM F-4
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Jun 1996 FDIC Certificate Number 27245
FIRSTSOUTH BANK
(Exact name of Bank as specified in its charter)
North Carolina 56-1597145
(State of Incorporation) (I.R.S. Employer Identification)
2946 South Church Street
P O Box 2957
Burlington, NC 27216
(address of principal executive offices)
(zip code)
Bank's telephone number, including area code (910) 570-6000
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate the number of shares outstanding of each of the Bank's classes of
common stock, as of the latest practicable date.
Common Stock, $3.33 PAR VALUE 1,835,841
(Shares outstanding as
of Jun 30, 1996)
<PAGE>
FIRSTSOUTH BANK
FORM F-4
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets Jun 30, 1996 and Dec 31, 1995 1
Consolidated Statements of Operations
Three months ended Jun 30, 1996 and Jun 30, 1995 2
Consolidated Statements of Operations
Year to date ended Jun 30, 1996 and Jun 30, 1995 3
Statement of Changes in Stockholders' Equity
Year to date ended Jun 30, 1996 and Jun 30, 1995 4
Statement of Cash Flows
Year to date ended Jun 30, 1996 and Jun 30, 1995 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Signature 7
</TABLE>
<PAGE>
FIRSTSOUTH BANK
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
JUN 30, DEC 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,253,484 $ 6,392,955
Interest-bearing deposits with other financial institutions 2,253,374 4,622,195
Federal funds sold 4,000,000 1,375,000
Investment securities 28,074,467 35,232,572
Stock in the Federal Home Loan Bank 508,000 430,700
Loans 131,799,100 116,166,005
Allowance for loan losses (1,714,243) (1,617,819)
Net loans 130,084,857 114,548,186
Bank premises and equipment, net 4,009,383 4,128,453
Other assets 2,595,960 2,623,865
Total assets $ 177,779,524 $ 169,353,926
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 19,894,056 $ 19,795,352
Interest-bearing demand 30,029,481 29,118,200
Savings 10,724,773 10,077,904
Time 98,278,402 92,380,321
Total deposits 158,926,712 151,371,777
Advances from the Federal Home Loan Bank 0 0
Accrued expenses and other liabilities 1,728,726 1,836,015
Total liabilities 160,655,438 153,207,792
Shareholders' equity:
Common stock, $3.33 par value. Authorized
15,000,000 shares; issued 1,835,841 and
1,813,090 respectively 6,119,409 5,755,783
Paid -in capital 9,270,508 8,013,011
Retained earnings 1,802,186 2,367,491
Unrealized gain (loss) on securities available-for-sale (68,017) 9,849
Total shareholders' equity 17,124,086 16,146,134
Total liabilities and shareholders' equity $ 177,779,524 $ 169,353,926
Stand-by letters of credit $ 1,109,798 $ 429,748
Reflects a 5% stock dividend paid on April 15, 1996 to shareholders of record on
April 1, 1996
-1-
<PAGE>
FIRSTSOUTH BANK
CONSOLIDATED
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Jun 30,
1996 1995
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,970,973 $2,568,215
Interest on Federal funds sold 93,920 94,350
Interest on U.S. Treasury and Agency securities 361,728 349,697
Interest on State and Local Government Securities 34,780 19,994
Other securities 7,947 6,349
Total interest income 3,469,348 3,038,605
INTEREST EXPENSE
Interest on demand deposits 176,563 185,445
Interest on savings deposits 65,632 60,955
Interest on time deposits 1,285,609 1,099,278
Interest on other borrowings 6,927 6,430
Total interest expense 1,534,731 1,352,108
Net interest income 1,934,617 1,686,497
Provision for loan losses 60,000 50,000
Net interest income after provision for loan losses 1,874,617 1,636,497
NONINTEREST INCOME
Service charges on deposit accounts 210,962 187,250
Mortgage loan fees 56,053 54,281
Other income 37,519 52,310
Total noninterest income 304,534 293,841
NONINTEREST EXPENSE
Salaries and employee benefits 692,916 625,596
Occupancy 105,233 107,747
Furniture and equipment 111,363 134,957
Other operating 466,846 380,172
Total noninterest expense 1,376,358 1,248,472
Income before income taxes 802,793 681,866
Income taxes 279,000 246,203
Net income $ 523,793 $ 435,663
Net income per share $ 0.26 $ 0.22
Reflects a 5% stock dividend paid on April 15, 1996 to shareholders of record on
April 1, 1996.
-2-
<PAGE>
FIRSTSOUTH BANK
CONSOLIDATED
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year to Date Ended Jun 30,
1996 1995
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $5,783,902 $4,911,018
Interest on Federal funds sold 169,672 207,875
Interest on U.S. Treasury and Agency securities 798,769 702,193
Interest on State and Local Government Securities 60,237 44,783
Other securities 15,818 12,486
Total interest income 6,828,398 5,878,355
INTEREST EXPENSE
Interest on demand deposits 342,293 376,268
Interest on savings deposits 129,635 124,788
Interest on time deposits 2,583,864 2,034,376
Interest on other borrowings 15,580 14,889
Total interest expense 3,071,372 2,550,321
Net interest income 3,757,026 3,328,034
Provision for loan losses 125,000 105,000
Net interest income after provision for loan losses 3,632,026 3,223,034
NONINTEREST INCOME
Service charges on deposit accounts 409,189 366,912
Mortgage loan fees 121,601 87,558
Other income 75,674 96,658
Total noninterest income 606,464 551,128
NONINTEREST EXPENSE
Salaries and employee benefits 1,335,316 1,212,175
Occupancy 207,889 204,590
Furniture and equipment 237,426 276,724
Other operating 884,432 794,619
Total noninterest expense 2,665,063 2,488,108
Income before income taxes 1,573,427 1,286,054
Income taxes 549,000 464,203
Net income $1,024,427 $ 821,851
Net income per share $ 0.52 $ 0.43
</TABLE>
reflects a 5% stock dividend paid on April 15, 1996 to shareholders of record on
April 1, 1996.
-3-
<PAGE>
FIRSTSOUTH BANK
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR TO DATE JUN 30, 1996
<TABLE>
<CAPTION>
Additional Unrealized Total
Common Paid-In Retained Gain (Loss) Stockholders'
Stock Capital Earnings on Securities Equity
---------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance Dec 31, 1995 $ 5,755,783 $ 8,013,011 $ 2,367,491 $ 9,849 $ 16,146,134
Additional stock sales 75,279 215,397
290,676
Net Income 1,024,427 1,024,427
Cash dividend (259,286) (259,286)
Stock Dividend 288,347 $ 1,042,100 (1,330,447) 0
Securities gain or loss (77,866) (77,866)
Balance Jun 30, 1996 $ 6,119,409 $ 9,270,508 $ 1,802,185 $ (68,017) $ 17,124,085
</TABLE>
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR TO DATE JUN 30, 1995
<TABLE>
<CAPTION>
Additional Unrealized Total
Common Paid-In Retained Gain(Loss) Stockholders'
Stock Capital Earnings on Securities Equity
-------------- ---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance Dec 31, 1994 $ 5,628,034 $ 7,684,637 $ 965,268 $ (289,353) $ 13,988,586
Additional stock sales 87,666 206,510 294,176
Net income 821,851 821,851
Cash dividend (203,760) (203,760)
Securities gain or loss 198,767 198,767
Balance Jun 30, 1995 $ 5,715,700 $ 7,891,147 $ 1,583,359 $ (90,586) $ 15,099,620
</TABLE>
-4-
<PAGE>
STATEMENT OF CASH FLOWS
AS OF JUN 30, 1996
<TABLE>
<CAPTION>
FISCAL YEAR TO DATE
ENDING JUN 30,
1996 1995
<S> <C> <C>
Operating Activities
Net income $ 1,024,427 $ 821,851
Adjustments to reconcile net income to net cash provided:
Depreciation 200,000 217,134
Amortization of premiums and discounts, net 31,286 46,605
Unrealized gain (loss) AFS 77,866 (301,163)
Net deferred loan origination costs (43,255) (22,344)
Amortization of net deferred loan origination costs 15,817 14,749
Provision for loan losses 125,000 105,000
Loss on sales of bank premises and equipment 0 13,079
Deferred income tax provision (51,341) (17,124)
Increase in other assets 32,511 (155,492)
Increase in accrued expenses and other liabilities (107,289) 435,202
Total adjustments to reconcile net earnings to cash 280,595 (335,646)
Net cash provided (used by operating activity 1,305,022 1,157,497
Investing Activities
Purchase of investment securities (4,333,552) (2,586,977)
Proceeds from maturity of investments 11,305,205 3,506,381
Net increase in loans from origination and principal repay (15,634,233) (13,678,132)
Purchase of bank premises and equipment (34,194) (199,533)
Proceeds from sales of bank premises and equipment 0 30,000
Net cash provided (used )by investing activities (8,696,774) (12,988,261)
Financing Activities
Net increase in deposits 7,554,935 5,,562,720
Proceeds from FHLB Advances 0 0
Cash dividend paid on common stock (259,286) (203,760)
Proceeds from sale of stock (77,866) 294,176
Unrealized gain (loss) on AFS 290,676 (198,767)
Net cash provided by financing activity 7,508,459 19,361,378
Net increase cash and cash equivalents 116,707 5,978,861
Cash and cash equivalents, beginning of period 12,390,150 14,840,493
Cash and cash equivalents, end of period $ 12,506,857 $ 8,861,632
============ ============
Supplemental cash flow disclosure:
Interest paid year-to-date $ 3,219,051 $ 2,094,031
</TABLE>
-5-
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Results of Operations:
The second quarter of 1996 proved to be another period of significant growth and
profitability for FirstSouth Bank. Net income increased 20% from the same period
in 1995, and total assets increased 18% to $177.8 million. In addition to the
strong financial performance during the second quarter, representatives from
both FirstSouth and Centura have made great strides in the planning for the
proposed merger of our two banks.
In anticipation of a proposed merger date of October 11, many significant
decisions are being made to make the transaction for our customers and
shareholders smooth and eficient. Centura has begun interviewing all of the
FirstSouth employees in an effort to keep the FirstSouth staff intact. Where
Centura's products and rates are more attractive, efforts have been made to
offer these benefits to our customers in advance of the October 11 date.
During the second quarter, American National Bank and Trust Company in Danville,
Virginia submitted an aggressive offer to acquire FirstSouth's Yanceyville
branch office. With Danville being only 12 miles from Yanceyville, this
acquisition will futher formalize the ties which have long existed between the
Yanceyville and Danville communities. At the July meeting of the Board of
Directors, the board voted to accept the offer from American National. The
expected conversion date will coincide with the Centura conversion on October
11, 1996.
Despite the tremendous efforts required by both FirstSouth and Centura,
FirstSouth remains committed to each of our customers and shareholders. The
strong financial performance for the second quarter is evidence of this
continuing commitment. Net income for the quarter ending June 30, 1996 was
$523,793 compared with $435,663 for the second quarter in 1995. On a per share
basis, FirstSouth Bank earned $.26 versus $.22 during the comparable quarter in
1995, an increase of 18%. Year -to-date net income totaled $1,024,427, a 25%
increase over the $821,851 earned during the same six month period in 1995. Per
share net income was $.52 versus $.43 in 1995, an increase or 21%. All per share
amounts have been adjusted for the 5% stock dividend paid on April 15, 1996.
At June 30, 1996, total assets were $177.8 million, an increase of 18% from the
$150.7 million reported a year earlier. Total loans increased 22%, while total
deposits grew 18% to finish the quarter at $158.9 million. Shareholders' equity
totaled $17.1 million at June 30, 1996, up from $15.1 million at June 30, 1995
and $16.7 million at December 31, 1995.
During the second quarter of 1996, the Board of Directors declared a quarterly
cash dividend of $.07 per share for all shareholders on record as of July 31, to
be paid on August 15, 1996.
-6-
<PAGE>
Under requirements of the Securities Exchange Act of 1934, the bank has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
FirstSouth Bank
Date: 8/13/96 By: /s/ Nancy E Walker
Nancy E Walker
Assistant Vice President
Cashier
Date: 8/13/96 By: /s/ David B Spencer
David B Spencer
Senior Vice President
Chief Financial Officer
-7-
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Centura Banks, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Registration Statement
as filed with the Securities and Exchange Commission and the Federal Deposit
Insurance Corporation. Our report refers to the fact that on December 31,
1993, Centura Banks, Inc. adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
KPMG Peat Marwick LLP
Raleigh, North Carolina
September 4, 1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
FirstSouth Bank
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Registration Statement
as filed with the Securities and Exchange Commission and the Federal Deposit
Insurance Corporation. Our report refers to the fact that on January 1,
1994, FirstSouth Bank changed its method of accounting for securities to adopt
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
KPMG Peat Marwick LLP
Greensboro, North Carolina
September 4, 1996
Exhibit 23.4
CONSENT OF POYNER & SPRUILL, L.L.P.
We hereby consent to the filing of our opinion as Exhibit
23.4 to the Registration Statement on Form S-4 of Centura Banks, Inc.
relating to the issuance of shares of common stock in connection with the
acquisition of FirstSouth Bank and to reference to such opinion and our
firm under the headings "SUMMARY - Certain Federal Income Tax Consequences,"
"DESCRIPTION OF THE TRANSACTION - Certain Federal Income Tax Consequences,"
and "LEGAL MATTERS." By giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1833 or the rules and regulations of
the Securities and Exchange Commission thereunder.
Poyner & Spruill, L.L.P.
Raleigh, North Carolina /s/ Poyner & Spruill, L.L.P.
September 4, 1996
<PAGE>
EXHIBIT 23.5
SMITH CAPITAL, INC.
200 HARGETT COURT
CHARLOTTE, NORTH CAROLINA 28211
TEL: 704 362 1563 FAX: 704 364 3451
The Board of Directors
FirstSouth Bank
P.O. Drawer 2957
Burlington, North Carolina 27216
September 4, 1996
Gentlemen:
We have delivered a fairness opinion to you as of September 4, 1996, in
connection with the merger of FirstSouth Bank and Centura Bank and Centura
Banks, Inc. We hereby consent to the inclusion of the opinion and the
references to it in the Pre Effective Amendment No. 1 to the Registration
Statement on Form S-4 (Registration No. 333-8503).
Very truly yours,
Smith Capital, Inc.
(Signature of Smith Capital, Inc.)
<PAGE>
EXHIBIT 99.1
FIRSTSOUTH BANK
REVOCABLE PROXY
The undersigned hereby constitutes and appoints D. Earl Pardue, Jerome B.
Taylor and Wade Williamson, Jr., or any of them, as proxies, each with full
power of substitution, to vote the number of shares of common stock of
FirstSouth Bank ("FirstSouth") which the undersigned would be entitled to vote
if personally present at the Special Meeting of FirstSouth Shareholders to be
held at the Best Western Motel, 770 Huffman Mill Road, Burlington, North
Carolina, at 11:00 A.M., local time, on Tuesday, October 8, 1996, and at any
adjournment or postponement thereof (the "Special Meeting") upon the proposals
described in the Proxy Statement/Prospectus and the Notice of Special Meeting of
Shareholders, both dated September 10, 1996, the receipt of which is
acknowledged in the manner specified below.
1. MERGER. To consider and vote upon a proposal to approve an Agreement and
Plan of Reorganization and Merger, dated as of June 7, 1996 (the
"Agreement"), by and between FirstSouth, Centura Bank and Centura Banks,
Inc., a North Carolina corporation ("Centura"), pursuant to which (i)
FirstSouth will merge (the "Merger") with and into Centura Bank, (ii)
each share of the $3.33 1/3 par value common stock of FirstSouth
("FirstSouth Stock") issued and outstanding at the effective time of the
Merger will be exchanged for 0.56 of a share of the no par value common
stock of Centura, subject to possible adjustment, and cash in lieu of any
fractional share, and (iii) Centura will assume the obligations of
FirstSouth under various stock plans and programs and adopt substitute
plans where appropriate, all as more fully described in the accompanying
Proxy Statement/Prospectus.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
(continued on other side)
<PAGE>
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held jointly,
both should sign. When signing as attorney, executor, administrator,
trustee or guardian please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
DATED: , 1996
Signature
Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FIRSTSOUTH BANK,
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
