EXHIBIT 2
_____________________________________
AGREEMENT AND PLAN OF MERGER
By And Among
NEWSOUTH BANCORP, INC.,
NEWSOUTH BANK
AND
WASHINGTON FINANCIAL, INC.
And
GREEN STREET FINANCIAL CORP
AND
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION
DATED AS OF AUGUST 9, 1999
_____________________________________
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is dated
as of August 9, 1999, by and among NEWSOUTH BANCORP, INC., a
Virginia corporation ("NewSouth"), NEWSOUTH BANK, a North
Carolina commercial bank and wholly owned subsidiary of NewSouth
("Bank"), and WASHINGTON FINANCIAL, INC., a North Carolina
corporation and wholly owned subsidiary of Bank ("New Sub"); and
GREEN STREET FINANCIAL CORP, a North Carolina corporation
("Company"), and HOME FEDERAL SAVINGS AND LOAN ASSOCIATION, a
Federally chartered savings association and wholly owned
subsidiary of Company ("Savings").
WHEREAS, NewSouth, a bank holding company, with principal
offices in Washington, North Carolina, owns all of the issued
and outstanding capital stock of Bank, with its principal
offices in Washington, North Carolina, and Bank owns all the
issued and outstanding capital stock of New Sub.
WHEREAS, Company, a non-diversified, unitary savings and
loan holding company, with principal offices in Fayetteville,
North Carolina, owns all of the issued and outstanding capital
stock of Savings, with its principal offices in Fayetteville,
North Carolina.
WHEREAS, NewSouth and Company desire to combine their
respective holding companies and bank subsidiaries;
WHEREAS, the parties have determined that it would be
desirable and in their respective best interests, including the
best interests of their respective shareholders, for (i) New Sub
to merge with and into Company (the "Company Merger"), pursuant
to which each of the issued and outstanding shares of common
stock of Company ("Company Common Stock") shall be automatically
by operation of law converted into the right to receive $15.25
in cash (the "Merger Consideration") and the issued and
outstanding shares of New Sub common stock shall be converted by
operation of law into an equal number of newly issued shares of
Company Common Stock all of which shall be owned by Bank, (ii)
immediately following the Company Merger, the Company shall be
liquidated into the Bank (the "Liquidation") and (iii)
immediately following the Liquidation, Savings shall be merged
with and into the Bank (the "Bank Merger").
WHEREAS, the Boards of Directors of NewSouth and the
Company (at meetings duly called and held) have determined that
this Agreement and the transactions contemplated hereby are in
the best interests of NewSouth and the Company, respectively,
and their respective stockholders and have approved this
Agreement.
WHEREAS, as a condition and inducement to NewSouth's, the
Bank's and New Sub's willingness to enter into this Agreement,
NewSouth has entered into a separate Voting Agreement (attached
as Exhibit A) with each of the directors and executive officers
of the Company
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providing that each such person shall vote, or cause to be
voted, all shares of Company Common Stock which such person
beneficially owns for approval of the Company Merger as
contemplated herein.
NOW THEREFORE, in consideration of the premises and mutual
promises hereinafter set forth, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE I
THE COMPANY MERGER AND RELATED MATTERS
1.1 The Company Merger. At the Effective Time (as
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defined in Section 1.2 hereof), New Sub shall be merged with and
into Company pursuant to the provisions herein. The Company
Merger shall be effected in accordance with any and all
applicable provisions of the North Carolina Business Corporation
Act (the "NCBCA"). Company shall thereafter continue as the
surviving corporation under the name of "Green Street Financial
Corp". Company after the Effective Time is sometimes referred
to in this Agreement as the "Surviving Corporation." At and
after the Effective Time:
(1) The separate existence of New Sub shall
cease.
(2) The Articles of Incorporation and the
Bylaws of Company in effect immediately prior to the
Company Merger shall continue as the Articles of
Incorporation and Bylaws of the Surviving
Corporation after the Company Merger.
(3) The directors and executive officers of
the Company immediately prior to the Effective Time
shall, as of the such Effective Time, submit their
written resignation and the directors and executive
officers of the Company immediately following the
Company Merger, until their successors shall be duly
elected and qualified, shall be such persons as are
appointed by the Bank.
(4) From and after the Effective Time, the
Company Merger shall have the effects as set forth
in Section 55-11-06 of the NCBCA.
1.2 Effective Time of the Company Merger. As soon as
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practicable after each of the conditions set forth in Article V
hereof have been satisfied or waived, New Sub and Company will
file, or cause to be filed, articles of merger with the
Secretary of State of North Carolina, which articles of merger
shall be in the form required by and executed in accordance with
the applicable provisions of the NCBCA. The Company Merger
shall become effective at the time the articles of merger are
filed with the Secretary of State of North Carolina or at such
later time as is set forth in the articles of merger (the
"Effective Time"), which shall be immediately
2
following the Closing (as defined in Section 1.11) and on the
same day as the Closing if practicable.
1.3 Conversion of Shares. The manner and basis of the
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conversion of the respective outstanding shares of capital stock
of Company and New Sub and the consideration which the
respective record holders thereof shall be entitled to receive
pursuant to the Company Merger shall be as follows:
(a) Company Common Stock.
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(i) At the Effective Time each share of
Company Common Stock issued and outstanding immediately
prior to the Effective Time (except Dissenting Shares (as
defined in Section 1.4) and shares referred to in
subparagraph (ii) of this Section 1.3(a)), shall
automatically by virtue of the effectiveness of the
Company Merger and without the necessity of any action on
the part of the holder thereof, be canceled and converted
into the right to receive the Merger Consideration of
$15.25 in cash. After the Effective Time, the holders of
certificates representing shares of Company Common Stock
shall cease to have any rights as stockholders of the
Company, except the right to receive the Merger
Consideration as provided herein and except with respect
to rights applicable to Dissenting Shares.
(ii) Any shares of Company Common Stock which
are owned or held by Company or any of its subsidiaries
(except shares held in any 401(k) plan or employee stock
ownership plan of the Company or any of its subsidiaries
or other shares held in a fiduciary capacity or shares
held by Savings' Restricted Stock Plan) including any
shares held in a grantor trust associated with any of
Company's or Savings' Employee Plans or Benefit
Arrangements (as such terms are defined in Section 2.13
hereof) or by NewSouth or any of NewSouth's subsidiaries
(other than in a fiduciary capacity) at the Effective Time
shall cease to exist, and the certificates for such shares
shall as promptly as practicable be canceled and no Merger
Consideration shall be issued or exchanged therefor.
(b) New Sub Common Stock. Each share of common
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stock of New Sub issued and outstanding immediately prior to the
Effective Time shall, automatically by virtue of the
effectiveness of the Company Merger and without necessity of any
action on the part of the holder thereof, be canceled and
converted into an equal number of newly issued shares of common
stock of the Surviving Corporation.
(c) Company Stock Options. Upon the satisfaction
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of all conditions set forth in Article V of this Agreement,
immediately prior to the Effective Time, each holder of an
option outstanding under the Company's 1996 Stock Option Plan,
as amended on January 28, 1998 (the "Company Option Plan"),
whether or not the option is then exercisable, shall receive
from the Company in cancellation of such option (such
cancellation to be reflected in a written agreement) a cash
payment in an amount determined by multiplying the number of
shares of Company Common Stock subject to option by such holder
by an amount equal to the difference
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between the Merger Consideration and the per share exercise
price of such option, net of any cash which must be withheld
under federal and state income tax requirements. Immediately
thereafter, Company shall cancel each such option. No cash
payment for cancellation of existing stock options shall be
payable without the prior review of NewSouth.
(d) Restricted Stock Plan. With respect to
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Savings' Restricted Stock Plan and awards for 83,888 shares of
Company Common Stock pursuant thereto, which as of immediately
prior to the Effective Time will not be deemed earned and non-
forfeitable, upon the satisfaction of all conditions set forth
in Article V of this Agreement, Savings shall immediately prior
to the Effective Time pay, to each participant in such
Restricted Stock Plan who has agreed to surrender such awards
for a cash payment, for each share subject to award which is not
then earned and non-forfeitable, cash in an amount equal to
$15.25 plus any dividend equivalents payable with respect to
such shares up to the Effective Time.
1.4 Dissenting Shares. Any shares of Company Common
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Stock held by a holder who dissents from the Company Merger and
becomes entitled to obtain payment for the value of such shares
of Company Common Stock pursuant to the applicable provisions of
the NCBCA shall be herein called "Dissenting Shares." Any
Dissenting Shares shall not, after the Effective Time, be
entitled to vote for any purpose or receive any dividends or
other distributions, shall not be entitled to receive the
Company Merger Consideration and shall be entitled only to such
rights as are set forth in the NCBCA; provided however, that
shares of Company Common Stock held by a dissenting stockholder
who subsequently withdraws a demand for payment, fails to comply
fully with the requirements of the NCBCA, or otherwise fails to
establish the right of such stockholder to be paid the value of
such stockholders' shares under the NCBCA shall be deemed to be
converted into the right to receive the Merger Consideration
pursuant to the terms and conditions referred to above. All
negotiations with respect to payment for Dissenting Shares shall
be handled by NewSouth.
1.5 Right to Revise the Structure of the Transaction.
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NewSouth, Bank and New Sub shall, in their reasonable
discretion, have the unilateral right to revise the structure of
the corporate reorganization contemplated by this Agreement in
order to achieve tax benefits or for any other reason which they
may deem advisable; provided, however, that NewSouth, Bank and
New Sub shall not have the right to make any revision to the
structure of the reorganization which (i) changes the form or
amount of the consideration payable hereunder, (ii) would
unreasonably impede or delay consummation of the transactions
contemplated herein or (iii) would result in treatment for
Federal income tax purposes of receipt by a shareholder of
Company of the Merger Consideration set forth herein as a
taxable dividend. NewSouth, Bank and New Sub may exercise this
right of revision by giving written notice to Company and
Savings in the manner provided in Section 8.4 of this Agreement,
which notice shall be in the form of an amendment to this
Agreement.
1.6 Exchange of Shares for Cash
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(a) The parties hereto agree that the Bank will
act as the exchange agent (the "Exchange Agent") for the
exchange by Company stockholders of their shares of Company
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Common Stock for the Merger Consideration, pursuant to the terms
of the letter agreement between the Bank and the Company
attached hereto as Exhibit B.
(b) After the Effective Time, holders of
certificates theretofore evidencing outstanding shares of
Company Common Stock (other than Dissenting Shares or as
provided in Section 1.3(a)(ii)), upon surrender of such
certificates to the Exchange Agent, shall be entitled to receive
cash payable for the Merger Consideration, all as provided in
Section 1.3 hereof. As soon as practicable after the Effective
Time, but not more than three (3) business days thereafter, the
Exchange Agent will send a notice and transmittal form to each
Company shareholder of record at the Effective Time whose
Company Common Stock shall have been converted into the Merger
Consideration advising such shareholder of the effectiveness of
the Company Merger and the procedure for surrendering to the
Exchange Agent outstanding certificates formerly evidencing
Company Common Stock in exchange for the Merger Consideration.
Upon surrender, each certificate evidencing Company Common Stock
shall be canceled. The Exchange Agent shall pay by check to the
Company shareholders who submit their stock certificates
pursuant to these instructions an amount equal to 100% of the
Merger Consideration for each of their shares within three (3)
business days following receipt of the stock certificate(s).
Such checks shall be sent by first class mail.
(c) All payments to Company shareholders pursuant
to clause (b) of this Section 1.6 shall be sent to the
shareholder's address as shown on the stock records of the
Company, or to such other address as a shareholder may specify
in a written instruction submitted with the shareholder's stock
certificates.
(d) The Merger Consideration paid upon the
surrender for exchange of Company Common Stock in accordance
with the above terms and conditions shall be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock. No interest will be paid or
accrued on the cash payable upon surrender of such certificates.
(e) If payment for Company Common Stock is to be
made to any person other than the registered holder of Company
Common Stock surrendered as aforesaid, the amount of any stock
transfer or similar taxes (whether imposed on the registered
holder or such person) payable on account of the transfer of
Company Common Stock will be deducted from the amount to be paid
by the Exchange Agent or the Exchange Agent may refuse to make
such payment unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted to the Exchange
Agent. Shares as to which dissenting shareholders' rights have
been properly perfected shall be treated in the manner provided
by Section 1.4.
(f) In the event any certificate for Company
Common Stock shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that
fact by the holder thereof, the Merger Consideration as may be
required pursuant hereto; provided, however, that NewSouth may,
in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against
NewSouth, the Company, the
5
Exchange Agent or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
1.7 Status of Certificates. At and after the Effective
----------------------
Time, each outstanding certificate which previously represented
shares of Company Common Stock (except any Dissenting Shares,
which Dissenting Shares will evidence only the rights specified
in Section 1.4 hereof, and as set forth in Section 1.3(a)(ii)
hereof), shall until surrendered for exchange pursuant to this
Article I be deemed for all purposes to evidence only the right
to receive cash in accordance with the provisions of this
Agreement and shall not be deemed to confer upon the holder
thereof any voting, dividend or other rights of a shareholder of
the Surviving Corporation. After the Effective Time, there
shall be no further registration or transfer on the records of
the Surviving Corporation of shares of Company Common Stock
(except the shares of common stock of the Surviving Corporation
issued pursuant to Section 1.3(b) hereof), and if a certificate
formerly representing such shares is presented to NewSouth, it
shall be forwarded to the Exchange Agent for cancellation and
exchange for the Merger Consideration.
1.8 Shareholders' Meeting. The Company shall, at the
---------------------
earliest practicable date, hold a meeting of its shareholders
(the "Company Shareholders' Meeting") to submit for shareholder
approval this Agreement and the Company Merger and all related
matters necessary to the consummation of the transactions
contemplated hereby.
1.9 Proxy Statement.
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(a) For the purpose of holding the Company
Shareholders' Meeting, the parties hereto shall cooperate in the
preparation of an appropriate proxy statement satisfying all
applicable requirements of the Securities Exchange Act of 1934,
as amended (the "1934 Act") and the rules and regulations
thereunder (the "Proxy Statement").
(b) NewSouth shall furnish such information
concerning NewSouth and the NewSouth Subsidiaries (as defined in
Section 3.1 hereof) as is necessary in order to cause the Proxy
Statement, insofar as it relates to such corporations, to comply
with Section 1.9(a) hereof. NewSouth agrees promptly to advise
the Company if at any time prior to the Company Shareholders'
Meeting any information provided by NewSouth in the Proxy
Statement becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such
inaccuracy or omission.
(c) NewSouth shall have the right to review and
comment on the form of Proxy Statement prior to its filing with
the SEC and prior to its mailing to Company shareholders.
1.10 Cooperation; Regulatory Approvals. The parties
---------------------------------
shall cooperate and use reasonable best efforts to complete the
transactions contemplated hereunder at the earliest practicable
date. Each party shall cause each of their affiliates and
subsidiaries to cooperate in the preparation and submission by
them, as promptly as reasonably practicable, of such
applications, petitions, and other documents and materials as
any of them may reasonably deem
6
necessary or desirable to the Office of Thrift Supervision
("OTS"), Federal Deposit Insurance Corporation ("FDIC"), Federal
Reserve Board ("FRB"), the North Carolina Office of the
Commissioner of Banks ("Commission"), Federal Trade Commission
("FTC"), Department of Justice ("DOJ"), SEC, applicable
Secretary of State, other regulatory authorities, holders of the
voting shares of common stock of NewSouth and the Company, and
any other persons for the purpose of obtaining any approvals or
consents necessary to consummate the transactions contemplated
by this Agreement. At the date hereof, none of the parties is
aware of any reason that the Governmental Approvals (as such
term is defined in Section 5.1(c) herein) required to be
obtained by it would not be obtained in a timely manner.
1.11 Closing. If (i) Company shareholder approvals have
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been received, and (ii) all conditions of this Agreement have
been satisfied or waived, a closing (the "Closing") shall take
place as promptly as practicable thereafter at the principal
office of NewSouth or at such other place as the parties hereto
may mutually agree at which the parties hereto will exchange
certificates, opinions, letters and other documents as required
hereby and will make the filings described in Section 1.2
hereof. Such Closing will take place as soon as practicable as
agreed by the parties, provided, however, that the Closing shall
be no more than thirty (30) days after the satisfaction or
waiver of all conditions and/or obligations contained in Article
V of this Agreement.
1.12 Closing of Transfer Books. At the Effective Time,
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the transfer books for Company Common Stock shall be closed and
no transfer of shares of Company Common Stock shall thereafter
be made on such books.
1.13 Liquidation Account. The liquidation account
-------------------
established by Savings pursuant to the plan of conversion
adopted by it in connection with its conversion from a mutual
federal savings and loan association to a stock savings and loan
association shall, to the extent required by applicable law, be
maintained by Bank after the Bank Merger for the benefit of
those persons and entities who were savings account holders of
Savings on the eligibility and supplemental eligibility record
dates for such conversion and who continue, from time to time,
to have rights therein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SAVINGS
Company and Savings represent and warrant to NewSouth, the
Bank and New Sub that, except as disclosed in Schedule I
attached hereto and except that Savings does not make any
representation or warranty regarding the Company:
2.1 Organization, Good Standing, Authority, Insurance, Etc.
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The Company is a corporation organized, validly existing
and in good standing under the laws of the State of North
Carolina. Section 2.1 of Schedule I lists each "subsidiary" of
the Company and Savings within the meaning of Section
10(a)(1)(G) of HOLA, (individually a "Company Subsidiary" and
collectively the "Company Subsidiaries") (unless otherwise noted
herein all references to a
7
"Company Subsidiary" or to the "Company Subsidiaries" shall
include Savings). Each of the Company Subsidiaries is
organized, validly existing, and in good standing under the laws
of the respective jurisdiction under which it is organized, as
set forth in Section 2.1 of Schedule I. The Company and each
Company Subsidiary has all requisite power and authority and is
duly qualified and licensed to own, lease and operate its
properties and conduct its business as it is now being
conducted. The Company has delivered to NewSouth a true,
complete and correct copy of the certificate of incorporation,
charter, or other organizing document and of the bylaws, as in
effect on the date of this Agreement, of Company and each
Company Subsidiary. The Company and each Company Subsidiary is
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which qualification is
necessary under applicable law, except to the extent that any
failures to so qualify would not, in the aggregate, have a
material adverse effect on the business, financial condition or
results of operations of the Company and the Company
Subsidiaries, taken as a whole. Savings is a member in good
standing of the Federal Home Loan Bank of Atlanta and all
eligible accounts issued by Savings are insured by the Savings
Association Insurance Fund ("SAIF") to the maximum extent
permitted under applicable law. Savings is a "domestic
building and loan association" as defined in Section 7701(a)(19)
of the Code and is a "qualified thrift lender" as defined in
Section 10(m) of the HOLA and the Thrift Regulations. The
Company is registered as a savings and loan holding company
under the HOLA.
The minute books of the Company and the Company's
Subsidiaries contain complete and accurate records of all
meetings and other corporate actions held or taken by their
respective shareholders and Boards of Directors (including the
committees of such Boards).
2.2 Capitalization. The authorized capital stock of the
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Company consists of (i) 10,000,000 shares of common stock, no
par value, of which 3,879,269 shares were issued and outstanding
as of the date of this Agreement, and (ii) 1,000,000 shares of
Preferred Stock, no par value, of which no shares were
outstanding as of the date of this Agreement. All outstanding
shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
Except for outstanding options to purchase 429,812 shares of
Company Common Stock under the Company Option Plan and awards
for 103,147 shares of Company Common Stock under the Savings
Restricted Stock Plan, which awards as of the date hereof are
not deemed earned and non-forfeitable, as of the date of this
Agreement, there are no options, convertible securities,
warrants, or other rights (preemptive or otherwise) to purchase
or acquire any of the Company's capital stock from the Company
and no oral or written agreement, contract, arrangement,
understanding, plan or instrument of any kind (collectively,
"Stock Contract") to which the Company or any of its affiliates
is subject with respect to the issuance, voting (other than the
Voting Agreement contemplated herein) or sale of issued or
unissued shares of the Company's capital stock. A true and
complete copy of the Company Option Plan, as in effect on the
date of this Agreement, is attached as Section 2.2 of Schedule
I.
2.3 Ownership of Subsidiaries. All the outstanding
-------------------------
shares of the capital stock of the Company Subsidiaries are
validly issued, fully paid, nonassessable and owned beneficially
and of record by the Company or a Company Subsidiary free and
clear of any lien, claim, charge,
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restriction or encumbrance (collectively, "Encumbrance").
Except as set forth in Section 2.3 of Schedule I, there are no
options, convertible securities, warrants, or other rights
(preemptive or otherwise) to purchase or acquire any capital
stock of any Company Subsidiary and no contracts to which the
Company or any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of the
capital stock of any of the Company Subsidiaries. Neither the
Company nor any Company Subsidiary owns any material investment
of the capital stock or other equity securities (including
securities convertible or exchangeable into such securities) of
or profit participations in any "company" (as defined in Section
10(a)(1)(C) of the HOLA) other than the Federal Home Loan Bank
of Atlanta except as set forth in Section 2.3 of Schedule I.
2.4 Financial Statements and Reports.
--------------------------------
(a) No registration statement, proxy statement,
schedule or report filed by the Company with the SEC under the
1933 Act or the 1934 Act ("SEC Reports"), on the date of
effectiveness in the case of such registration statements, or on
the date of filing in the case of such reports or schedules, or
on the date of mailing in the case of such proxy statements,
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, in light of the circumstances
under which they were made, not misleading. The Company and the
Company Subsidiaries have timely filed all reports and documents
required to be filed by them with the SEC, the OTS, or the FDIC
under various securities and banking laws and regulations for
the last five years (or such shorter period as they may have
been subject to such filing requirements), except to the extent
that all failures to so file, in the aggregate, would not have a
material adverse effect on the business, financial condition or
results of operations of the Company and the Company
Subsidiaries, taken as a whole. All such documents, as finally
amended, complied in all material respects with applicable
requirements of law and, as of their respective date or the date
as amended, with respect to the SEC Reports, 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, with respect to reports and
documents filed with banking regulatory agencies, were accurate
in all material respects. Except to the extent stated therein,
all financial statements and schedules included in the documents
referred to in the preceding sentences (or to be included in
similar documents to be filed after the date hereof) (i) are or
will be (with respect to financial statements in respect of
periods ending after March 31, 1999) in accordance with the
Company's books and records and those of any of the Company
Subsidiaries, and (ii) present (and in the case of financial
statements in respect of periods ending after March 31, 1999,
will present) fairly the consolidated statement of financial
condition and the consolidated statements of income,
stockholders' equity and cash flows of the Company and the
Company Subsidiaries as of the dates and for the periods
indicated in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods
(except for the omission of notes to unaudited statements, year
end adjustments to interim results and changes to generally
accepted accounting principles). The consolidated financial
statements of the Company at September 30, 1998 and for the
three years then ended and the consolidated financial statements
for all periods thereafter up to the Closing reflect or
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will reflect, as the case may be, all liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted),
as of their respective dates, of the Company and the Company
Subsidiaries required to be reflected in such financial
statements according to generally accepted accounting principles
and in the opinion of Company management contain or will contain
adequate reserves for losses on loans and properties acquired in
settlement of loans, taxes and all other material accrued
liabilities and for all reasonably anticipated material losses,
if any as of such date. There exists no set of circumstances
that could reasonably be expected to result in any liability or
obligation material to the Company or the Company Subsidiaries,
taken as a whole, except as disclosed in such consolidated
financial statements at September 30, 1998 or for transactions
effected or actions occurring or omitted to be taken after
September 30, 1998 (i) in the ordinary course of business, or
(ii) as permitted by this Agreement.
(b) The Company has delivered to NewSouth each SEC
Report filed, used or circulated by it with respect to periods
since November 1996 through the date of this Agreement and will
promptly deliver each such SEC Report filed, used or circulated
after the date hereof, each in the form (including exhibits and
any amendments thereto) filed with the SEC (or, if not so filed,
in the form used or circulated), including, without limitation,
its Annual Reports on Form 10-K and its Quarterly Reports on
Form 10-Q.
(c) Except (i) as disclosed in Section 2.4 of
Schedule I, (ii) as reflected, noted or adequately reserved
against in the financial statements referred to in this Section
2.4, or (iii) for deposits incurred in the ordinary course of
business consistent with past practice, Company and the Company
Subsidiaries do not have any material liabilities (whether
accrued, absolute, contingent or otherwise).
2.5 Absence of Changes.
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(a) Except as disclosed in Section 2.4 of Schedule
I, since September 30, 1998 and through the date hereof, there
has been no material adverse change in the business, properties,
financial condition, results of operations or assets of the
Company and the Company Subsidiaries, taken as a whole. Except
as disclosed in Section 2.4 of Schedule I, since September 30,
1998 and through the date hereof, there is no occurrence, event
or development of any nature existing or, to the best knowledge
of the Company, threatened, which may reasonably be expected to
have a material adverse effect upon the business, properties,
financial condition, operations or assets of the Company or any
Company Subsidiary, taken as a whole.
(b) Since September 30, 1998, each of the Company
and the Company Subsidiaries has owned and operated their
respective assets, properties and businesses in the ordinary
course of business and consistent with past practice.
2.6 Proxy Statement. At the time the Proxy Statement is
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mailed to the shareholders of the Company for the solicitation
of proxies for the approvals referred to in Section 1.8 hereof
and at all times subsequent to such mailings up to and including
the times of such
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approval, such Proxy Statement (including any supplements
thereto), with respect to all information set forth therein
relating to the Company (including the Company Subsidiaries),
its shareholders and representatives, Company Common Stock and
all other transactions contemplated hereby, will:
(a) Comply in all material respects with
applicable provisions of the 1934 Act and the rules and
regulations under such Act; and
(b) Not contain any statement which, at the time
and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact or which
omits to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect
to the solicitation of a proxy for the Company Shareholders'
Meeting which has become false or misleading.
2.7 No Broker's or Finder's Fees. Except as set forth
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in Section 2.7 of Schedule I (which shall also include a copy of
any engagement agreement), no agent, broker, investment banker,
person or firm acting on behalf or under authority of the
Company or any of the Company Subsidiaries is or will be
entitled to any broker's or finder's fee or any other commission
or similar fee directly or indirectly in connection with the
Company Merger or any other transaction contemplated hereby.
2.8 Litigation and Other Proceedings. Except as set
--------------------------------
forth in Section 2.8 of Schedule I and except for matters which
would not have a material adverse effect on the business,
financial condition or results of operations of the Company and
the Company Subsidiaries taken as a whole, neither the Company
nor any Company Subsidiary is a defendant in, nor is any of its
property subject to, any pending, or, to the best knowledge of
the management of the Company, threatened, claim, action, suit,
investigation, or proceeding, or subject to any judicial order,
judgment or decree.
2.9 Compliance with Law.
-------------------
(a) The Company and the Company Subsidiaries are
in compliance in all material respects with all material laws
and regulations applicable to their respective business or
operations or with respect to which compliance is a condition of
engaging in the business thereof, and neither the Company nor
any Company Subsidiary has received notice from any federal,
state or local government or governmental agency of any material
violation of, and does not know of any material violations of,
any of the above.
(b) The Company and each of its Subsidiaries have
all material permits, licenses, certificates of authority,
orders and approvals of, and have made all material filings,
applications and registrations with, all federal, state and
local governmental or regulatory bodies that are required in
order to permit them to carry on their respective business as
they are presently conducted.
11
2.10 Corporate Actions.
-----------------
(a) The Boards of Directors of the Company and
Savings have duly authorized their respective officers to
execute and deliver this Agreement and to take all action
necessary to consummate the Company Merger and the other
transactions contemplated hereby. The Board of Directors of the
Company has by appropriate resolutions made the provisions of
Article XIII of the Company's Articles of Incorporation
inapplicable to this Agreement and the Company Merger and has
authorized and directed the submission for shareholders'
approval of this Agreement, together with the Company Merger and
any other action requiring such approvals. All corporate
authorization by the Board of Directors of the Company required
for the consummation of the Company Merger has been obtained or
will be given when required by applicable law. Savings has
taken, or shall take prior to the Effective Time, all necessary
actions to approve and effectuate an amendment to Section 9 of
its Federal Stock Charter to make its provisions inapplicable to
NewSouth and the Company Merger and the Bank Merger (the
"Charter Amendment").
(b) The Company's Board of Directors has taken or
will take all necessary action to exempt this Agreement, the
Company Merger, the Bank Merger and the transactions
contemplated hereby and thereby from, (i) any applicable state
takeover laws, (ii) any North Carolina laws limiting or
restricting the voting rights of shareholders, (iii) any North
Carolina laws requiring a shareholder approval vote in excess of
the vote normally required in transactions of similar type not
involving a "related person," "interested shareholder" or person
or entity of similar type, and (iv) any provision in its or any
of the Company Subsidiaries' articles/certificate of
incorporation, charter or bylaws requiring a shareholder
approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person,"
interested shareholder" or person or entity of similar type.
Without limiting the above, the Company's Board of Directors has
made inapplicable to the Company Merger the higher shareholder
vote requirement set forth in Article XIV of the Company's
Articles of Incorporation.
2.11 Authority. Except as disclosed in Section 2.11 of
---------
Schedule I, the execution, delivery and performance of their
obligations under this Agreement by the Company and Savings and
the Bank Merger by Savings does not violate or conflict with any
of the provisions of, or constitute a breach or default under or
give any person the right to terminate, cancel or accelerate
payment or performance under or result in the creation of any
Encumbrance upon (i) subject to the Charter Amendment, the
articles of incorporation or bylaws of the Company or the
certificate of incorporation, charter or bylaws of any Company
Subsidiary, (ii) any law, rule, ordinance, or regulation or
judgment, decree, order, award or governmental or non-
governmental permit or license to which it or any of the Company
Subsidiaries is subject, (iii) any other material agreement,
material lease, material contract, note, mortgage, indenture,
arrangement or other obligation or instrument ("Contract") to
which the Company or any of the Company Subsidiaries is a party
or is subject or by which any of their properties or assets is
bound or (iv) any property or asset of Company or Savings
pursuant to any note, bond, mortgage, indenture, license
agreement or other instrument or obligation. The parties
acknowledge that the consummation of the Company Merger and the
other transactions
12
contemplated hereby is subject to various regulatory approvals.
Subject to the approval and effectiveness of the Charter
Amendment, the Company and Savings, as applicable, have all
requisite corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder
and thereunder, except, with respect to this Agreement and the
Company Merger, the approval of the Company's shareholders of
this Agreement required under applicable law. Other than the
receipt of Governmental Approvals (as defined in Section
5.1(c)), the approval of shareholders of this Agreement, and the
consents specified in Schedule I with respect to the Contracts,
no consents or approvals are required on behalf of Company in
connection with the consummation of the transactions
contemplated by this Agreement and the Bank Merger. This
Agreement constitutes the valid and binding obligation of the
Company and Savings, as applicable, and each is enforceable in
accordance with its terms, except as enforceability may be
limited by applicable laws relating to bankruptcy, insolvency or
creditors rights generally and general principles of equity.
2.12 Employment Arrangements. Except as disclosed in
-----------------------
Section 2.12 of Schedule I, there are no employment, severance
or other agreements, plans or arrangements with any current or
former directors, officers or employees of Company or any
Company Subsidiary which may not be terminated without penalty
(including any augmentation or acceleration of benefits) on 30
days or less notice to such person. Except as disclosed in
Section 2.12 of Schedule I, no payments to directors, officers
or employees of the Company or the Company Subsidiaries
resulting from the transactions contemplated hereby will cause
the imposition of excise taxes under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or the
disallowance of a deduction to the Company or any Company
Subsidiary pursuant to Sections 162 or 280G of the Code.
2.13 Employee Benefits.
-----------------
(a) Neither the Company nor any of the Company
Subsidiaries maintains any funded deferred compensation plans
(including profit sharing, pension, savings or stock bonus
plans), unfunded deferred compensation arrangements or employee
benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
other than any plans ("Employee Plans") set forth in Section
2.13 of Schedule I (true and correct copies of which have been
delivered to NewSouth). None of Company or any of the Company
Subsidiaries has incurred or reasonably expects to incur any
liability to the Pension Benefit Guaranty Corporation except for
required premium payments which, to the extent due and payable,
have been paid. The Employee Plans intended to be qualified
under Section 401(a) of the Code are so qualified, and Company
is not aware of any fact which would adversely affect the
qualified status of such plans. Except as set forth in Section
2.13 of Schedule I, neither the Company nor any of the Company
Subsidiaries (a) provides health, medical, death or survivor
benefits to any former employee or beneficiary thereof, or (b)
maintains any form of current (exclusive of base salary and base
wages) or deferred compensation, bonus, stock option, stock
appreciation right, benefit, severance pay, retirement,
incentive, group or individual health insurance, welfare or
similar plan or arrangement for the benefit of any single or
class of directors, officers or employees, whether active or
retired (collectively "Benefit Arrangements"). With respect to
each Employee Plan and Benefit
13
Arrangement of the Company or any Company Subsidiary, Section
2.13 of Schedule I sets forth as of the date of this Agreement:
(i) any and all payments more than 30 days past due, (ii) the
actuarial present value, determined and prepared in accordance
with GAAP (based, where applicable, on the same actuarial
assumptions as those previously used for funding purposes, other
than turnover assumptions, and computed on the basis of a
terminated plan), of any accrued benefits or other obligations
not listed elsewhere in this schedule, including without
limitation, premiums and contributions for which the Company or
any Company Subsidiary is or may be directly or indirectly
liable to present or former employees, officers, directors, and
their beneficiaries, (iii) the net fair market value of the
assets held in any fund, policy, or other arrangement, and (iv)
the amount of any contribution or other obligation paid,
accrued, or payable, or reasonably expected to be payable,
between the date of this Agreement and the Closing, including
but not limited to contributions by Savings to its Employee
Stock Ownership Plan (the "Savings ESOP") to repay its
loan in accordance with past practices (pro rated through the
Closing), subject to applicable tax law limitations.
(b) Except as set forth in Section 2.13 of
Schedule I, all Employee Plans and Benefit Arrangements which
presently are in effect were in effect for substantially all of
calendar year 1998 to date and there has been no material
amendment thereof (other than amendments required to comply with
applicable law) or no material increase in the cost thereof or
benefits payable thereunder on or after October 1, 1998.
(c) Each Company and Company Subsidiary Employee
Plan and Benefit Arrangement has been administered to date, and
will be administered until the Closing, in accordance with their
terms and in compliance with the Code, ERISA, and all other
applicable rules and regulations. With respect to each Employee
Plan and Benefit Arrangement, Company and the Company
Subsidiary, as applicable (i) have, in a timely, accurate, and
proper manner, both filed all required government reports and
made all required employee communications, and (ii) between the
date of this Agreement and the Closing, will complete and file
all such required reports. No condition exists that could
constitute grounds for the termination of any Employee Plan
under Section 4042 of ERISA; no "prohibited transaction," as
defined in Section 406 of ERISA and Section 4975 of the Code,
has occurred with respect to any Employee Plan, or any other
employee benefit plan maintained by Company or any Company
Subsidiary which is covered by Title I of ERISA, which could
subject any person to liability under Title I of ERISA or to the
imposition of any tax under Section 4975 of the Code nor has any
Employee Plan subject to Part III of Subtitle B of Title I of
ERISA or Section 412 of the Code, or both, incurred any
"accumulated funding deficiency," as defined in Section 412 of
the Code, whether or not waived; nor has Company or any Company
Subsidiary failed to make any contribution or pay any amount due
and owing as required by the terms of any Employee Plan or
Benefit Arrangement. Neither Company nor any Company Subsidiary
has incurred or expects to incur, directly or indirectly, any
liability under Title IV of ERISA or otherwise arising in
connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title
IV of ERISA which could constitute a liability of NewSouth, or
any of its affiliates at or after the Effective Time.
14
(d) Except as set forth in Section 2.13 of
Schedule I, the assets of Savings' defined benefit pension plan
do not include equity securities.
(e) Awards for 171,925 shares of Company Common
Stock have previously been awarded to employees and directors of
Savings pursuant to Savings Restricted Stock Plan, of which
awards for 68,778 shares of Company Common Stock became earned
and non-forfeitable prior to the date of this Agreement. Awards
for the remaining 103,147 shares of Company Common Stock,
including dividend equivalents payable with respect to such
shares up to the Effective Time pursuant to such Restricted
Stock Plan, will become earned and non-forfeitable in accordance
with the schedule set forth in Section 2.13 of Schedule I.
2.14 Information Furnished. No statement contained in
---------------------
any schedule, certificate or other document furnished (whether
prior to or subsequent to the date of this Agreement) or to be
furnished in writing by or on behalf of Company to NewSouth
pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. No
information material to the Company Merger or the Bank Merger
and which is necessary to make the representations and
warranties not misleading has been withheld from NewSouth.
2.15 Property and Assets. The Company and the Company
-------------------
Subsidiaries have marketable title to all of their real property
reflected in the Company's consolidated financial statements at
September 30, 1998, referred to in Section 2.4 hereof, or
acquired subsequent thereto, free and clear of all Encumbrances,
except for (a) such items shown in such financial statements or
in the notes thereto, (b) liens for current real estate taxes
not yet delinquent, (c) customary title exceptions that have no
material adverse effect upon the value of such property, (d)
property sold or transferred in the ordinary course of business
since the date of such financial statements, and (e) pledges or
liens incurred in the ordinary course of business. Neither the
Company nor any Company Subsidiary leases as either lessor or
lessee any interest in real property except as set forth in
Exhibit 2.15 of Schedule I. No consent of the lessor of any
material personal property lease is required for consummation of
the Company Merger except as set forth in Section 2.15 of
Schedule I. There has been no material physical loss, damage or
destruction, whether or not covered by insurance, affecting the
real properties of Company and the Company Subsidiaries since
September 30, 1998, except such loss, damage or destruction
which does not have a material adverse effect on the Company and
the Company Subsidiaries, taken as a whole. All property and
assets material to their business and currently used by Company
and the Company Subsidiaries are, in all material respects, in
good operating condition and repair, normal wear and tear
excepted.
2.16 Agreements and Instruments. Except as set forth in
--------------------------
Section 2.16 of Schedule I, neither the Company nor any Company
Subsidiary is a party to (a) any material agreement, arrangement
or commitment not made in the ordinary course of business, (b)
any agreement which involves annual payments in excess of
$10,000 or has a remaining term of one year or more, in each
case whether or not in the ordinary course, (c) any agreement,
indenture or other instrument relating to the borrowing of money
by the Company or any Company Subsidiary or the guarantee by the
Company or any Company Subsidiary of any such obligation (other
than Federal Home Loan Bank advances with a maturity of one year
or less from
15
the date hereof), (d) any agreements to make loans or for the
provision, purchase or sale of goods, services or property
between Company or any Company Subsidiary and any director or
officer of Company or Savings, or any member of the immediate
family or affiliate of any of the foregoing, (e) any agreements
with or concerning any labor or employee organization to which
Company or any Company Subsidiary is a party, (f) any agreements
between Company or any Company Subsidiary and any five percent
or more shareholder of Company, and (g) any agreements,
directives, orders, or similar arrangements between or involving
the Company or any Company Subsidiary and any state or federal
savings institution regulatory authority.
2.17 Material Contract Defaults. Neither the Company nor
--------------------------
any Company Subsidiary nor, to the best knowledge of the Company
and Savings, the other party thereto is in default in any
respect under any contract, agreement, commitment, arrangement,
lease, insurance policy, or other instrument to which the
Company or a Company Subsidiary is a party or by which its
respective assets, business, or operations may be bound or
affected or under which it or its respective assets, business,
or operations receives benefits, and which default is reasonably
expected to have either individually or in the aggregate a
material adverse effect on the Company and any Company
Subsidiary, taken as a whole, and there has not occurred any
event that, with the lapse of time or the giving of notice or
both, would constitute such a default.
2.18 Tax Matters.
-----------
(a) The Company and each of the Company
Subsidiaries have duly and properly filed all federal, state,
local and other tax returns required to be filed by them and
have made timely payments of all taxes due and payable, whether
disputed or not; the current status of audits of such returns by
the Internal Revenue Service ("IRS") and other applicable
agencies is as set forth in Section 2.18 of Schedule I; and
there is no agreement by the Company or any Company Subsidiary
for the extension of time or for the assessment or payment of
any taxes payable. Neither the IRS nor any other taxing
authority is now asserting or, to the best knowledge of Company,
threatening to assert any deficiency or claim for additional
taxes (or interest thereon or penalties in connection
therewith), nor is the Company aware of any basis for any such
assertion or claim. The Company and each of the Company
Subsidiaries have complied in all material respects with
applicable IRS backup withholding requirements and have filed
all appropriate information reporting returns for all tax years
for which the statute of limitations has not closed. The
Company and each Company Subsidiary have complied in all
material respects with all applicable state law sales and use
tax collection and reporting requirements.
(b) Adequate provision for any federal, state or
local taxes due or to become due for the Company or any of the
Company Subsidiaries for any period or periods through and
including September 30, 1998, has been made and is reflected on
the September 30, 1998 audited Company consolidated financial
statements and has been or will be made in accordance with
generally accepted accounting principles with respect to periods
ending after September 30, 1998.
16
2.19 Environmental Matters. Except as set forth in
---------------------
Section 2.19 of Schedule I, neither the Company nor any Company
Subsidiary owns or leases any properties affected by toxic
waste, radon gas or other hazardous conditions or constructed in
part with the use of asbestos. Neither the Company nor any
Company Subsidiary has knowledge of, nor has the Company or any
Company Subsidiary received written notice from any governmental
or regulatory body of, any conditions, activities, practices or
incidents which is reasonably likely to interfere with or
prevent compliance or continued compliance with hazardous
substance laws or any regulation, order, decree, judgment or
injunction, issued, entered, promulgated or approved thereunder,
or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding,
hearing or investigation based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant or chemical, or industrial, toxic or hazardous
substance or waste. There is no civil, criminal or
administrative claim, action, suit, proceeding, hearing or
investigation pending or, to Company's knowledge, threatened
against Company or any Company Subsidiary relating in any way to
such hazardous substance laws or any regulation, order, decree,
judgment or injunction issued, entered, promulgated or approved
thereunder.
2.20 Loan Portfolio: Portfolio Management.
-------------------------------------
(a) All evidences of indebtedness reflected as
assets in the consolidated statement of financial condition of
Company as of September 30, 1998, or acquired since such date,
are (except with respect to those assets which are no longer
assets of the Company or any Company Subsidiary) binding
obligations of the respective obligors named therein except as
enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors rights
generally, and except that the availability of equitable
remedies, including specific performance, is subject to the
discretion of the court before which any proceeding may be
brought, and the payment of no material amount thereof (either
individually or in the aggregate with other evidences of
indebtedness) is subject to any defenses which have been
threatened or asserted against the Company or any Company
Subsidiary. All such indebtedness which is secured by an
interest in real property is secured by a valid and perfected
mortgage lien having the priority specified in the loan
documents. All loans originated or purchased by Savings were at
the time entered into and at all times since have been in
compliance in all material respects with all applicable laws
(including, without limitation, all consumer protection laws)
and regulations. Savings administers its loan and investment
portfolios (including, but not limited to, adjustments to
adjustable mortgage loans) in all material respects in
accordance with all applicable laws and regulations and the
terms of applicable instruments. The records of Savings
regarding all loans outstanding on its books are accurate in all
material respects and the risk classification system has been
established in accordance with the requirements of the OTS.
(b) Section 2.20 of Schedule I sets forth a list,
accurate and complete in all material respects, of the aggregate
amounts of loans, extensions of credit and other assets of
Savings and its subsidiaries that have been adversely
designated, criticized or classified by it as
17
of March 31, 1999, separated by category of classification or
criticism (the "Asset Classification"); and no amounts of loans,
extensions of credit or other assets that have been adversely
designated, classified or criticized as of the date hereof by
any representative of any government entity as "Special
Mention," "Substandard," "Doubtful," "Loss" or words of similar
import are excluded from the amounts disclosed in the Asset
Classification, other than amounts of loans, extensions of
credit or other assets that were charged off by it or any of the
Company Subsidiaries before the date hereof.
2.21 Real Estate Loans and Investments. Except for
---------------------------------
properties acquired in settlement of loans, there are no facts,
circumstances or contingencies known to the Company or any
Company Subsidiary which exist which would require a material
reduction under generally accepted accounting principles in the
present carrying value of any of the real estate investments,
joint ventures, construction loans, other investments or other
loans of the Company or any Company Subsidiary (either
individually or in the aggregate with other loans and
investments).
2.22 Derivatives Contracts. Neither the Company nor any
---------------------
of its Subsidiaries is a party to or has agreed to enter into an
exchange-traded or over-the-counter swap, forward, future,
option, cap, floor or collar financial contract or any other
contract not included on its Balance Sheet which is a
derivatives contract (including various combinations thereof)
(each, a "Derivatives Contract") or owns securities that are
identified in Thrift Bulletin No. 65 or otherwise referred to as
structured notes (each, a "Structured Note"), except for those
Derivatives Contracts and Structured Notes set forth in Section
2.22 of Schedule I, including a list, as applicable, of any of
its or any of its Subsidiaries' assets pledged as security for a
Derivatives Contract.
2.23 Insurance. The Company and the Company Subsidiaries
---------
have in effect insurance coverage which, in respect to amounts,
types and risks insured, is reasonably adequate for the business
in which the Company and the Company Subsidiaries are engaged.
A schedule of all insurance policies in effect as to the Company
and the Company Subsidiaries (the "Insurance Policies") is as
set forth on Section 2.23 of Schedule I (other than policies
pertaining to mortgage loans made in the ordinary course of
business). All Insurance Policies are in full force and effect,
all premiums with respect thereto covering all periods up to and
including the date of this Agreement have been paid, such
premiums covering all periods from the date hereof up to and
including the Effective Date shall have been paid on or before
the Effective Date, to the extent then due and payable (other
than retrospective premiums which may be payable with respect to
worker's compensation insurance policies, adequate reserves for
which are reflected in the Company's financial statements). The
Insurance Policies are valid, outstanding and enforceable in
accordance with their respective terms and will not in any way
be affected by, or terminated or lapsed solely by reason of, the
transactions contemplated by this Agreement. Neither the
Company nor any Company Subsidiary has been refused any
insurance with respect to any material properties, assets or
operations, nor has any coverage been limited or terminated by
any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last
three years.
2.24 Year 2000. (a) Company and Savings' computer
---------
hardware and software systems used for the storage and
processing of data (as used in this Section 2.24, "Systems")
18
are or will be, Millennium Compliant as required by all FFIEC
Year 2000 compliance guidelines, specifically including all
FFIEC-mandated interim deadlines for testing and other Year 2000
compliance activities; (b) to the Company's knowledge, none of
Company's or any Company Subsidiary's Systems, operations or
business functions will be materially adversely affected by the
failure of any third party with whom Company or Savings has
consistent dealings to be Millennium Compliant; (c) to the best
of Company's and Savings' knowledge after due inquiry, all of
its suppliers, customers and third party providers are
Millennium Compliant; and (d) Company and Savings' have taken
all necessary and appropriate action to address and remedy any
known deficiencies in Company's and Savings' Systems from
becoming Millennium Compliant. As used herein "Millennium
Compliant" shall mean the ability of Systems to provide the
following functions, without human intervention, individually
and in combination with other products or systems: (i)
consistently handle data information before, during and after
January 1, 2000, including but not limited to accepting data
input, providing data output and performing calculations on
dates or portions of dates; (ii) function accurately and without
interruption before, during and after January 1, 2000 (including
leap year computations), without any change in operations
associated with the advent of a new century; (iii) respond to
two-digit input in a way that resolves any ambiguity as to
century in a disclosed, defined and predetermined manner; and
(iv) store and provide output of date information in ways that
are unambiguous as to century.
2.25 Delays. The Company is not aware of any matter that
------
could cause a delay in receiving the approval required by the
Company Merger, including without limitation, non-compliance
with the Truth in Lending Act, capital compliance, or any
provisions of the Community Reinvestment Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEWSOUTH, THE BANK AND NEW SUB
NewSouth, the Bank and New Sub represent and warrant to
Company and Savings that, except as disclosed in Schedule II
attached hereto and except that the Bank and New Sub do not make
any representation or warranty regarding NewSouth:
3.1 Organization, Good Standing, Authority, Insurance, Etc.
------------------------------------------------------
NewSouth is a corporation duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Virginia.
Each of the subsidiaries of NewSouth within the meaning of
Section 2(d) of the Bank Holding Company Act of 1956, as amended
(the "BHCA") (individually a "NewSouth Subsidiary" and
collectively the "NewSouth Subsidiaries") is duly organized,
validly existing, and in good standing under the laws of the
respective jurisdiction under which it is organized. NewSouth
and each NewSouth Subsidiary has all requisite power and
authority and is duly qualified and licensed to own, lease
and operate its properties and conduct its business as it is now
being conducted. NewSouth and each NewSouth Subsidiary is
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which qualification is
necessary under applicable law, except to the extent that any
failures to so qualify would not, in the aggregate, have a
material adverse effect on the business, financial condition or
results of operations of NewSouth and the NewSouth Subsidiaries,
taken as a whole. The Bank is a member in good standing of the
Federal Home Loan Bank of Xxxxxxx,
00
and all eligible accounts issued by the Bank are insured by the
SAIF to the maximum extent permitted under applicable law.
NewSouth is duly registered as a bank holding company under the
BHCA.
The minute books of NewSouth and the NewSouth Subsidiaries
contain complete and accurate records of all meetings and other
corporate actions held or taken by their respective shareholders
and Boards of Directors (including the committees of such
Boards).
3.2 Capitalization. The authorized capital stock of
--------------
NewSouth consists of 8,000,000 shares of NewSouth common stock,
par value $.01 per share, of which 3,720,501 shares, excluding
643,543 treasury shares, were issued and outstanding as of the
date of this Agreement and 1,000,000 shares of preferred stock,
par value of $.01 per share, of which no shares were outstanding
as of the date of this Agreement. All outstanding shares of
NewSouth common stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights.
3.3 Financial Statements and Reports.
--------------------------------
(a) No registration statement, proxy statement,
schedule or report filed by NewSouth or any NewSouth Subsidiary
with the SEC under the 1933 Act, or the 1934 Act, on the date of
effectiveness in the case of such registration statements, or on
the date of filing in the case of such reports or schedules, or
on the date of mailing in the case of such proxy statements,
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, in light of the circumstances
under which they were made, not misleading. For the past five
years (or such shorter period as they may have been subject to
such filing requirements), NewSouth and the NewSouth
Subsidiaries have timely filed all documents required to be
filed by them with the SEC, the FRB, the Commission, or the FDIC
under various securities and financial institution laws and
regulations, except to the extent that all failures to so file,
in the aggregate, would not have a material adverse effect on
the business, financial condition or results of operations of
NewSouth and the NewSouth Subsidiaries, taken as a whole; and
all such documents, as finally amended, complied in all material
respects with applicable requirements of law and, as of their
respective date or the date as amended, with respect to the SEC
Reports, 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,
with respect to reports and documents filed with banking
regulatory agencies, were accurate in all material respects.
Except to the extent stated therein, all financial statements
and schedules included in the documents referred to in the
preceding sentences (or to be included in similar documents to
be filed after the date hereof) (i) are or will be (with respect
to financial statements in respect of periods ending after March
31, 1999) in accordance with NewSouth's books and records and
those of any of its Subsidiaries, and (ii) present (and in the
case of financial statements in respect of periods ending after
March 31, 1999 will present) fairly the consolidated statement
of financial condition and the consolidated statements of
operations, stockholders' equity and cash flows of NewSouth and
the NewSouth
20
Subsidiaries as of the dates and for the periods indicated in
accordance with generally accepted accounting principles (except
for the omission of notes to unaudited statements, year end
adjustments to interim results and changes in generally accepted
accounting principles). The consolidated financial statements
of NewSouth as of September 30, 1998 and for the three years
then ended and the consolidated financial statements for all
periods thereafter up to the Closing disclose or will disclose,
as the case may be, all liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or due to
become due and regardless of when asserted), as of their
respective dates, of NewSouth and the NewSouth Subsidiaries
required to be reflected in such financial statements according
to generally accepted accounting principles, other than
liabilities which are not, in the aggregate, material to
NewSouth and the NewSouth Subsidiaries, taken as a whole, and
contain or will contain in the opinion of management adequate
reserves for losses on loans and properties acquired in
settlement of loans, taxes and all other material accrued
liabilities and for all reasonably anticipated material
losses, if any as of such date. There exists no set of
circumstances that could reasonably be expected to result in any
liability or obligation material to NewSouth or the NewSouth
Subsidiaries, taken as a whole, except as disclosed in such
consolidated financial statements at September 30, 1998, or for
transactions effected or actions occurring or omitted to be
taken after September 30, 1998, (i) in the ordinary course of
business, or (ii) as permitted by this Agreement.
(b) NewSouth has made available to the Company all
periodic reports filed with the SEC under the 1934 Act for
periods since December 31, 1996 through the date hereof and will
through Closing upon written request promptly deliver copies of
1934 Act reports for future periods.
(c) Except (i) as disclosed in Section 3.4 of
Schedule II, (ii) as reflected, noted or adequately reserved
against in the financial statements referred to in this Section
3.4, or (iii) for deposits incurred in the ordinary course of
business consistent with past practice, NewSouth and the
NewSouth Subsidiaries do not have any material liabilities
(whether accrued, absolute, contingent or otherwise).
3.4 Absence of Changes. Since September 30, 1998, there
------------------
has been no material adverse change in the business, properties,
financial condition, results of operations or assets of NewSouth
and the NewSouth Subsidiaries, taken as a whole. Since
September 30, 1998 and through the date hereof, there is no
occurrence, event or development of any nature existing or, to
the best knowledge of NewSouth, threatened which may reasonably
be expected to have a material adverse effect upon the business,
properties, financial condition, operations or assets of
NewSouth or any NewSouth Subsidiary, taken as a whole.
3.5 Proxy Statement. At the time the Proxy Statement is
---------------
mailed to the shareholders of the Company for the solicitation
of proxies for the approvals referred to in Section 1.8 hereof
and at all times subsequent to such mailings up to and including
the times of such approval, such Proxy Statement (including any
amendments or supplements thereto), with respect to all
information set forth therein provided by NewSouth for inclusion
therein, will not
21
contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading
with respect to any material fact or which omits to state any
material fact necessary in order to make the statements therein
not false or misleading or necessary to correct any statement in
any earlier communication with respect to the solicitation of a
proxy for the Company Shareholders' Meeting which has become
false or misleading.
3.6 No Broker's or Finder's Fees. No agent, broker,
----------------------------
investment banker, person or firm acting on behalf or under
authority of NewSouth or any of the NewSouth Subsidiaries is or
will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly in connection
with the Company Merger or any other transaction contemplated
hereby, except NewSouth has engaged Xxxxxxxx & Company, an
investment banking firm, to provide financial advisory services
to NewSouth.
3.7 Compliance With Law. NewSouth and the NewSouth
-------------------
Subsidiaries are in compliance in all material respects with all
material laws and regulations applicable to their respective
business or operations or with respect to which compliance is a
condition of engaging in the business thereof, and neither
NewSouth nor any NewSouth Subsidiary has received notice from
any federal, state or local government or governmental agency of
any material violation of, and does not know of any material
violations of, any of the above.
3.8 Corporate Actions. The Boards of Directors of
-----------------
NewSouth, the Bank and New Sub have duly authorized their
respective officers to execute and deliver this Agreement and to
take all action necessary to consummate the Company Merger and
the other transactions contemplated hereby. All corporate
authorizations by the Board of Directors of NewSouth, the Bank
and New Sub required for the consummation of the Company Merger
have been obtained. The shareholders of NewSouth are not
required to approve either the Company Merger or the other
transactions contemplated hereby in accordance with Virginia and
North Carolina corporate law. In its capacity as sole
shareholder of New Sub, the Bank has approved the Company
Merger.
3.9 Authority. The execution, delivery and performance
---------
of this Agreement by NewSouth, the Bank and New Sub and the Bank
Merger by Bank does not violate or conflict with any of the
provisions of, or constitute a breach or default under or give
any person the right to terminate, cancel or accelerate payment
or performance under or result in the creation of any
Encumbrance upon (i) the articles of incorporation or bylaws of
NewSouth, the Bank or New Sub or the articles of incorporation
or bylaws of any other NewSouth Subsidiary, (ii) any law, rule,
ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which
NewSouth or any of the NewSouth Subsidiaries is subject, (iii)
any material Contract to which NewSouth or any of the NewSouth
Subsidiaries is a party or is subject to or by which any of
their properties or assets is bound or (iv) any property or
asset of NewSouth or Bank pursuant to any note, bond, mortgage,
indenture, license agreement or other instrument or obligation
which breach, default, termination, cancellation or acceleration
would have a material adverse effect on the financial condition,
business or results of operations of NewSouth and the NewSouth
Subsidiaries, taken as a
22
whole. The parties acknowledge that the consummation of the
Company Merger and the other transactions contemplated hereby is
subject to various regulatory approvals. NewSouth, New Sub and
the Bank have all requisite corporate power and authority to
enter into this Agreement and to perform their obligations
hereunder. Other than the receipt of Governmental Approvals, no
consents or approvals are required on behalf of NewSouth or any
NewSouth Subsidiary in connection with the consummation of the
transactions contemplated by this Agreement or the Company
Merger. This Agreement constitutes the valid and binding
obligation of NewSouth, New Sub and the Bank, as applicable, and
is enforceable in accordance with its terms, except as
enforceability may be limited by applicable laws relating to
bankruptcy, insolvency or creditors' rights generally and
general principles of equity.
3.10 Information Furnished. No statement contained in
---------------------
any schedule, certificate or other document furnished (whether
prior to or subsequent to the date of this Agreement) or to be
furnished in writing by or on behalf of NewSouth to Company
pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. No
information material to the Company Merger and which is
necessary to make the representations and warranties not
misleading, to the best knowledge of NewSouth, has been withheld
from the Company.
3.11 Agreements and Instruments. As of the date of this
--------------------------
Agreement, there are no agreements, directives, orders or
similar arrangements between or involving NewSouth or any
NewSouth Subsidiary and any state or federal savings institution
regulatory authority.
3.12 Year 2000. NewSouth's and the Bank's computer
---------
hardware and software systems used for the storage and
processing of data (as used in this Section 3.12, "Systems") are
or will be Millennium Compliant as required by all FFIEC Year
2000 compliance guidelines, specifically including all FFIEC-
mandated interim deadlines for testing and other Year 2000
compliance activities; (b) to NewSouth's knowledge, none of
NewSouth's or any NewSouth Subsidiary's Systems, operations or
business functions will be materially adversely affected by the
failure of any third party with whom NewSouth or the Bank has
consistent dealings to be Millennium Compliant; (c) to the best
of NewSouth's and the Bank's knowledge, all of its suppliers,
customers and third party providers are Millennium Compliant;
and (d) NewSouth and the Bank have taken all necessary and
appropriate action to address and remedy any known deficiencies
in NewSouth's and the Bank's Systems from becoming Millennium
Compliant. As used herein "Millennium Compliant" shall mean the
ability of NewSouth's and the Bank's Systems to provide the
following functions, without human intervention, individually
and in combination with other products or systems: (i)
consistently handle data information before, during and after
January 1, 2000, including but not limited to accepting data
input, providing data output and performing calculations on
dates or portions of dates; (ii) function accurately and without
interruption before, during and after January 1, 2000 (including
leap year computations), without any change in operations
associated with the advent of a new century; (iii) respond to
two-digit input in a way that resolves any ambiguity as to
century in a disclosed, defined and predetermined manner; and
(iv) store and provide output of date information in ways that
are unambiguous as to century.
23
3.13 Funding. The Bank shall have no later than one day
-------
prior to the Effective Time sufficient cash on hand to fund the
aggregate Merger Consideration payable hereunder.
3.14 Delays. NewSouth is not aware of any matter that
------
could cause a delay in receiving the approval required by the
Company Merger, including without limitation, non-compliance
with the Truth in Lending Act, capital compliance, or any
provisions of the Community Reinvestment Act.
ARTICLE IV
COVENANTS
4.1 Investigations; Access and Copies. Between the date
---------------------------------
of this Agreement and the Effective Time, each party agrees to
give to the other party and its respective representatives and
agents full access (to the extent lawful) to all of the
premises, books, records and employees of it and its
subsidiaries at all reasonable times, upon not less than three
days' prior notice to the chief executive officer of the other
party, and to furnish and cause its subsidiaries to furnish to
the other party and its respective agents or representatives
access to and true and complete copies of such financial and
operating data, all documents with respect to matters to which
reference is made in Articles II or III of this Agreement or on
any list, schedule or certificate delivered or to be delivered
in connection herewith, and such other documents, records, or
information with respect to the business and properties of it
and its subsidiaries as the other party or its respective agents
or representative shall from time to time reasonably request;
provided, however, that any such inspection (a) shall be
conducted in such manner as not to interfere unreasonably with
the operation of the business of the entity inspected and (b)
shall not affect any of the representations and warranties
hereunder. Each party will also give prompt written notice to
the other party of any event or development (x) which, had it
existed or been known on the date of this Agreement, would have
been required to be disclosed under this Agreement, (y) which
would cause any of its representations and warranties contained
herein to be inaccurate or otherwise materially misleading, or
(z) which materially relate to the satisfaction of the
conditions set forth in Article V of this Agreement.
4.2 Conduct of Business of the Company and the Company
--------------------------------------------------
Subsidiaries.
-----------
Between the date of this Agreement and the earlier of the
Effective Time or the date this Agreement is terminated in
accordance with its terms, the Company and Savings
agree:
(a) That the Company and the Company Subsidiaries
shall conduct their business only in the ordinary course, and
maintain their books and records in accordance with past
practices and not to take any action that would (i) adversely
affect the ability to obtain the Governmental Approvals or (ii)
adversely affect the Company's ability to perform its
obligations under this Agreement;
(b) That the Company shall not, without the prior
written consent of NewSouth: (i) declare, set aside or pay any
dividend or make any other distribution with
24
respect to Company's capital stock, except for the declaration
and payment of regular quarterly cash dividends in accordance
with past practice and in an amount not to exceed $0.13 per
share of Company Common Stock with respect to any full calender
quarter after the date hereof; (ii) reacquire any of Company's
outstanding shares of capital stock; (iii) issue or sell or buy
any shares of capital stock of the Company or any Company
Subsidiary, except shares of Company Common Stock issued or
bought (in accordance with past practice) as contemplated
pursuant to Savings' Restricted Stock Plan; (iv) effect any
stock split, stock dividend or other reclassification of
Company's Common Stock; or (v) grant any options or issue any
warrants exercisable for or securities convertible or
exchangeable into capital stock of Company or any Company
Subsidiary or grant any stock appreciation or other rights with
respect to shares of capital stock of Company or of any Company
Subsidiary;
(c) That Company and the Company Subsidiaries
shall not, without the prior written consent of NewSouth: (i)
sell or dispose of any significant assets of the Company or of
any Company Subsidiary other than in the ordinary course of
business consistent with past practices; (ii) merge or
consolidate the Company or any Company Subsidiary with or
otherwise acquire any other entity, or file any applications or
make any contract with respect to branching by Savings (whether
de novo, purchase, sale or relocation) or acquire or construct,
or enter into any agreement to acquire or construct, any
interest in real property (other than with respect to security
interests in properties securing loans and properties acquired
in settlement of loans in the ordinary course) or improvements
to real property except as provided in this Agreement; (iii)
change the articles or certificate of incorporation, charter
documents or other governing instruments of the Company or any
Company Subsidiary, except as provided in this Agreement; (iv)
except as set forth in Section 4.2(c) of Schedule I grant to any
executive officer, director or employee of the Company or any
Company Subsidiary any increase in annual compensation, any
award under any Employee Plan or Benefit Arrangement or any
bonus type payment, except that Savings may continue its 1999
bonus plan as set forth in Section 2.13 of Schedule I for the
benefit of its employees and continue to make accruals
thereunder for each month through the month in which the
Effective Time occurs in a manner consistent with such schedule,
and if the Effective Time does not occur before December 10,
1999, Savings may pay the 1999 bonus amounts specified in
Section 2.13 of Schedule I to the specified employees at any
time between December 10, 1999 and December 31, 1999; (v) adopt
any new or amend (except for any amendments required by law) or
terminate any existing Employee Plans or Benefit Arrangements of
any type except as contemplated herein or make any payment or
contribution to any Employee Plans or Benefit Arrangements
except as set forth in Section 2.13 of Schedule I;
(vi) authorize severance pay or other benefits for any officer,
director or employee of Company or any Company Subsidiary; (vii)
incur any material indebtedness or obligation or enter into or
extend or amend any material agreement or lease, which cannot be
canceled upon one month notice or which involves annual payments
in excess of $10,000; (viii) engage in any lending activities
other than in the ordinary course of business consistent with
past practices; (ix) form any new subsidiary or cause or permit
a material change in the activities presently conducted by any
Company Subsidiary or make additional investments in
subsidiaries; (x) purchase any investments or debt securities,
except that Company and the Company Subsidiaries may purchase
federal funds or make overnight
25
deposits with the Federal Home Loan Bank of Atlanta and may
purchase securities pursuant to any contractual obligation in
existence as of the date of this Agreement, all of which
contractual obligations are set forth in Section 2.13 of
Schedule I; (xi) purchase any equity securities other than
Federal Home Loan Bank stock; (xii) make any investment which
would cause Savings not to be a qualified thrift lender under
Section 10(m) of the HOLA, or not to be a "domestic building and
loan association" as defined in Section 7701(a)(19) of the Code;
(xiii) make any loan with a principal balance of $500,000 or
more; (xiv) authorize capital expenditures other than in the
ordinary course of business; (xv) adopt or implement any change
in its accounting principles, practices or methods other than as
may be required by generally accepted accounting principles or
by a regulatory authority or adopt or implement any change in
its methods of accounting for Federal income tax purposes; or
(xvi) make any loan in which participation interests therein are
to be sold to other persons or entities or acquire a
participation interest in a loan originated by another person or
entity. The limitations contained in this Section 4.2(c) shall
also be deemed to constitute limitations as to the making of any
commitment with respect to any of the matters set forth in this
Section 4.2(c). Notwithstanding the foregoing, Savings may
engage in any of the foregoing activities exclusively with the
Bank.
(d) From and after the date of this Agreement, the
Company and Savings, on the one hand, and NewSouth and the Bank,
on the other hand, shall coordinate policies with respect to
their investment securities portfolios.
(e) Prior to the Effective Time, neither Company
nor Savings shall take any action to contact holders of stock
certificates evidencing outstanding shares of Company Common
Stock for the purpose of permitting those stockholders to submit
their stock certificates to the Company for cancellation upon
the Effective Time in exchange for the Merger Consideration.
4.3 No Solicitation. From the date of this Agreement
---------------
until the Effective Time or the termination of this Agreement
pursuant to its terms, whichever occurs earlier, the Company
agrees that it will not authorize, and will not authorize any of
its Subsidiaries, or any of its or their officers, directors,
employees, agents or other representatives ("Representatives")
to, directly or indirectly, (A) initiate, solicit, encourage or
otherwise facilitate (including by way of furnishing
information), any inquiries or the making of any proposal or
offer that constitutes, or may reasonably be expected to lead
to, a Takeover Proposal, or (B) enter into or maintain or
continue discussions or negotiate with any person in furtherance
of such inquiries or to obtain a Takeover Proposal, or (C) agree
to, approve, recommend, or endorse any Takeover Proposal, or
authorize or permit any of its or their Subsidiaries or
Representatives to take any such action; provided, however, that
nothing contained in this Agreement shall prohibit the Company
Board of Directors from (i) furnishing information to, or
engaging in discussions or negotiations with, any person in
response to an unsolicited bona fide written Takeover Proposal,
(ii) recommending such an unsolicited bona fide written Takeover
Proposal to the stockholders of the Company or (iii) entering
into any agreement or letter of intent with any person with
respect to a Takeover Proposal, if and only to the extent in
each case that (a) the Company Board of Directors concludes in
good faith (after consultation with
26
its financial advisors) that such Takeover Proposal would
constitute a Superior Proposal, (b) the Company Board of
Directors determines in good faith (after consultation with
outside legal counsel) that the failure to take such action
would result in a breach by the Company Board of Directors of
its fiduciary duties to the Company's stockholders under
applicable law, and (c) prior to furnishing such information to,
or entering into discussions or negotiations with, such person,
the Company provides prompt written notice to NewSouth to the
effect that it is furnishing information to, or entering into
discussions or negotiations with, such person (which notice
shall identify the nature and material terms of the proposal).
The Company agrees that it will immediately cease and cause to
be terminated any activities, discussions, or negotiations with
any parties regarding any Takeover Proposal existing as of the
date of this Agreement. The Company agrees to keep NewSouth
fully and timely informed of the status of any inquiries,
proposals, discussions, negotiations, furnishing of non-public
information, or other activities relating to a Takeover
Proposal. As used in this Agreement with respect to the
Company, (i) "Takeover Proposal" shall mean any proposal, other
than as contemplated by this Agreement, for a merger or other
business combination involving the Company or any Company
Subsidiary or for the acquisition of a ten percent (10%) or
greater equity interest in Company or any Company Subsidiary, or
for the purchase, lease or other acquisition of a substantial
portion of the assets of Company or any Company Subsidiary
(other than loans or securities sold in the ordinary course),
and (ii) "Superior Proposal" means a bona fide Takeover Proposal
made by a third party that the Company Board of Directors
determines in its good faith judgment to be more favorable to
the Company's stockholders than the Company Merger (following
consultation with the Company's independent financial advisor)
and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Company
Board of Directors (following consultation with the Company's
independent financial advisor), is reasonably capable of being
obtained by such third person.
4.4 Shareholder Approvals. Subject to Sections 1.8 and
---------------------
4.3 herein and the fiduciary duties of the Company's Board of
Directors (including consideration, among other things, of
whether or not an updated fairness opinion has been received by
the Company from its financial advisor), the Company shall call
the meeting of its shareholders to be held for the purpose of
voting upon the Company Merger and related matters, as referred
to in Section 1.8 hereof, as soon as practicable, but in no
event later than sixty (60) days after the SEC has completed its
review of the Company's proxy soliciting materials; provided,
that Company shall receive an opinion dated within five (5) days
of mailing the Proxy Statement that the Company Merger is fair
to Company shareholders from a financial point of view. The
Company agrees that it will file such proxy soliciting materials
with the SEC within 60 days from the date hereof. In connection
with such meeting, the Company Board of Directors shall
recommend approval of the Company Merger, except as the
fiduciary duties of the Company's Board of Directors may
otherwise require. The Company shall use its best efforts to
solicit from its shareholders proxies in favor of approval and
to take all other action necessary or helpful to secure a vote
of the holders of the shares of Company Common Stock in favor of
the Company Merger, except as the fiduciary duties of the Boards
of Directors may otherwise require.
27
4.5 Filing of Applications for the Governmental
-------------------------------------------
Approvals. NewSouth shall use its best efforts to promptly
prepare, submit and file within 45 days after the date hereof
all applications necessary to receive the Governmental Approvals
in connection with the transactions contemplated by this
Agreement.
4.6 Consents. Company and Savings will use their best
--------
efforts to obtain the consent or approval of each person whose
consent or approval shall be required in order to permit Company
or Savings, as the case may be, to consummate the Company Merger
and the Bank Merger.
4.7 Publicity. Between the date of this Agreement and
---------
the Effective Time, neither NewSouth, Company or any of their
subsidiaries shall, without the prior approval of the other,
issue or make, or authorize any of its directors, employees,
officers or agents to issue or make, any press release,
disclosure or statement to the press or any third party with
respect to the Company Merger or the transactions contemplated
hereto, except as required by law. The parties shall cooperate
when issuing or making any press release, disclosure or
statement with respect to Company Merger or the transactions
contemplated hereby, except as required by law.
4.8 Cooperation Generally. Between the date of this
---------------------
Agreement and the Effective Time, NewSouth, Company and their
subsidiaries shall use their best efforts, and take all actions
necessary or appropriate, to consummate the Company Merger and
the other transactions contemplated by this Agreement at the
earliest practicable date. NewSouth, the Bank and New Sub, on
one hand, and the Company and Savings, on the other hand, agree
not to knowingly take any action that would (i) adversely effect
their respective ability to obtain the Governmental Approvals or
(ii) adversely affect their respective ability to perform their
obligations under this Agreement. Each of the parties will
promptly furnish each other with copies of written
communications received by them or any of their respective
subsidiaries from, or delivered by any of the foregoing to any
governmental entity in respect of the transactions contemplated
hereby.
4.9 Additional Financial Statements and Reports. As
-------------------------------------------
soon as reasonably practicable after they become publicly
available, each party shall furnish to the other its statement
of financial condition and related statements of operations,
cash flows and stockholders' equity for all periods prior to the
Closing. Such financial statements will be prepared in
conformity with generally accepted accounting principles applied
on a consistent basis and fairly present the financial
condition, results of operations and cash flows of the party
(subject, in the case of unaudited financial statements, to (a)
normal year-end audit adjustments, (b) any other adjustments
described therein and (c) the absence of notes which, if
presented, would not differ materially from those included in
its most recent audited consolidated balance sheet), and all of
such financial statements will be prepared in conformity with
the requirements of Form 10-Q or Form 10-K, as the case may be,
under the 1934 Act. Each party shall also furnish to the other
within two days after the meeting at which they are distributed
to that party's directors,
28
such internal monthly financial statements as are furnished to
the directors and executive officers of that party.
4.10 Allowance for Loan and Real Estate Owned Losses. At
-----------------------------------------------
the request of NewSouth, immediately prior to the Effective
Time, the Company and Savings shall in an amount specified by
NewSouth, establish such additional provisions for loan and real
estate owned losses as may be necessary in the sole
determination of NewSouth to conform the Company's and Savings'
loan and real estate owned allowance practices and methods to
those of NewSouth and the Bank (as such practices and methods
are to be applied to Company and Savings from and after the
Effective Time); provided, however, that Company and Savings
shall not be required to take such action until: (i) Company and
Savings provide to NewSouth a written statement certified by the
Chairman of the Board, the President and the Chief Financial
Officer of the Company and Savings, that the conditions in
Sections 5.1 and 5.2 to be satisfied by the Company or Savings
or both of them have been satisfied by either or both of them
or, alternatively, setting forth in detail the circumstances
that have prevented such conditions from being satisfied (the
"Reliance Certificate") and NewSouth and the Bank provide to the
Company and Savings a Reliance Certificate relating to
satisfaction of the conditions in Section 5.1 and 5.3; (ii)
NewSouth, the Bank and New Sub, after reviewing the Reliance
Certificate, provide the Company and Savings a written waiver of
any right any entity may have to terminate the Agreement, which
waiver shall contain an express condition precedent that Company
and Savings have established such additional provisions for loan
and real estate losses as requested by NewSouth pursuant to this
Section 4.10; and (iii) in no event until the day prior to the
date of the Closing. No additional provision for loan and real
estate owned losses taken by Savings pursuant to this Section
4.10 shall be deemed in and of itself to be a breach or
violation of any representation, warranty, covenant, condition
or other provision of this Agreement.
4.11 D&O Indemnification and Insurance. For a period of
---------------------------------
five (5) years following the Effective Time NewSouth and Bank
shall indemnify, and advance expenses in matters that may be
subject to indemnification to, persons who served as directors
or officers of Company or Savings or any Company Subsidiaries on
or before the Effective Time ("Indemnities") with respect to
liabilities and claims (and related expenses, including fees and
disbursements of counsel) made against them resulting from their
service as such prior to the Effective Time in accordance with
and subject to the requirements and other provisions of the
Articles of Incorporation and Bylaws of NewSouth and Bank in
effect on the date of this Agreement and applicable provisions
of law to the same extent as NewSouth is obligated thereunder to
indemnify and advance expenses to its own directors and officers
with respect to liabilities and claims made against them
resulting from their service for NewSouth and Bank. NewSouth
shall cause the persons serving as officers or directors of the
Company immediately prior to the Effective Time to be covered
for a period of five (5) years from the Effective Time by the
directors' and officers' liability insurance policy maintained
by the Company (provided that NewSouth may substitute therefor
policies of at least the same coverage and amounts containing
terms and conditions which are not materially less advantageous
than such policy) with respect to acts or omissions occurring
prior to the Effective Time which were committed
29
by such officers and directors in their capacity as such;
provided, however, that in no event shall NewSouth be required
to expend more than $35,000 to maintain or procure insurance
coverage for such five years period pursuant hereto. This
Section 4.11 shall be construed as an agreement as to which the
directors and officers of Company and Savings referred to herein
are intended to be third party beneficiaries and shall be
enforceable by such persons and their heirs and representatives.
4.12 Update Disclosure. From and after the date hereof
-----------------
until the Effective Time, the Company shall promptly, but not
less frequently than monthly, update Schedule I hereto by notice
to NewSouth to reflect any matters which have occurred from and
after the date hereof which, if existing on the date hereof,
would have been required to be described therein and which, in
the case of all such updates other than the last such update
prior to the Effective Time, reflect a material change from the
information provided in Schedule I as of the date hereof;
provided, however, that no such update shall affect the
conditions to the obligation of Company and Savings to
consummate the transactions contemplated hereby, and any and all
changes reflected in any such update shall be considered in
determining whether such conditions have been satisfied.
4.13 Company's Employee Plans and Benefit Arrangements.
-------------------------------------------------
(a) Between the date of this Agreement and the
Effective Time, neither the Company nor any Company Subsidiary
will make any contribution, or undertake any obligation to
contribute any amount to any Employee Plan or Benefit
Arrangement other than as set forth in Section 2.13 of Schedule
I to this Agreement.
(b) On or before 15 days after execution hereof,
the Company will provide NewSouth with true and complete copies
of the following documents where applicable to any Employee Plan
or Benefit Arrangement: (i) each plan document or agreement, and
any amendments thereto, and related trust agreements, insurance
contracts and policies, annuity contracts, and any other funding
arrangement; (ii) the most recent summary plan description and
summary of material modifications, along with disclosure of the
date of their distribution to participants and filing with the
Department of Labor; (iii) for the three most recent plan years,
Form 5500 Annual Return/Report and all actuarial and financial
reports and appraisals; (iv) the most recent determination
letter received from the Internal Revenue Service, plus any open
requests and all other rulings received from any governmental
agency; and (v) with respect to any action taken within the
current and three preceding plan years, a certified copy of all
Board of Directors resolutions. Within 75 days of the date
hereof, the Company or Savings shall provide NewSouth with
documentation, reasonably satisfactory to NewSouth,
demonstrating that for the last three completed Plan years the
requirements of Sections 404, 410, 412, 415, and 416 of the Code
have been satisfied by each Employee Plan that is intended to
qualify under Section 401 of the Code.
(c) Except as otherwise provided in this Section,
if NewSouth so requests, the Company and any Company Subsidiary
shall develop a plan and timetable for terminating
30
each Employee Plan and Benefit Arrangement as of the date of
Closing or the immediately preceding day and, with the advance
written consent of NewSouth, which consent shall not be
unreasonably withheld, shall proceed with the implementation of
said termination plan and timetable. The Company shall be
solely responsible for all costs, expenses, and other
obligations whatsoever arising out of or resulting from
termination of any Employee Plan or Benefit Arrangement.
Neither the Company nor any Company Subsidiary nor any trust in
their direct or indirect control will establish any new benefit
plan or arrangement for directors, officers, or employees, or
amend or commit to distribute any assets from any Employee Plan
or Benefit Arrangement without NewSouth's prior written
approval, except that the Company or a Company Subsidiary may
make such distribution as may be required under the terms of any
existing Employee Plan or Benefit Arrangement in connection with
the retirement or other termination of an employee.
(d) With respect to any benefit plan that provides
for vesting of benefits, there shall be no discretionary
acceleration of vesting, provided that vesting shall accelerate
as of the Effective Time in accordance with the terms of any
Employee Plan or Benefit Arrangement that provides for an
automatic acceleration of vesting upon a change in control
transaction such as the one contemplated hereby.
(e) (i) As of the Effective Time, NewSouth and
the Bank agree that the employment of and the Employment
Agreement between Xxxxx X. Xxxxxxxxx and Savings (as disclosed
in Section 2.12 of Schedule I to this Agreement) shall be
terminated by Savings. In connection with such termination, Xx.
Xxxxxxxxx shall be entitled to receive payment as contemplated
in Section 12(a) of such Employment Agreement, subject to the
limitations set forth therein to be paid by Savings.
(ii) Employees of Savings who become employees of
the Bank shall be entitled to carry over to Bank up to three
days of accrued but unused vacation time but no unused sick
leave. The vacation time for any of Savings employees who become
employees of Bank will carry over past December 31, 1999, but
must be taken prior to December 31, 2000. Employees of Savings
who become employees of Bank will not be permitted to take any
vacation during the first 15 days of January 2000.
(f) Savings' ESOP shall be terminated in accordance
with its terms. Savings shall develop a written description and
timetable within 60 days of the date hereof which shall be
provided to and approved by NewSouth and its counsel, which
approval shall not be unreasonably withheld, setting forth all
actions necessary to terminate Savings' ESOP and submit Savings'
ESOP to the IRS for a determination letter that the Savings'
ESOP, as so amended and terminated, continues to be a qualified
retirement plan and employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Code. Upon development and
approval by NewSouth of said written description and timetable,
Savings shall take such actions as described therein as are
approved by NewSouth. Distribution of the shares and any other
asset of the ESOP shall (i) not occur until after the receipt of
the foregoing IRS determi-
31
nation letter and (ii) occur prior to the Effective Time only
with the express written consent of NewSouth not to be
unreasonably denied.
(g) The Company and Savings shall use their best
efforts to cause each participant in Savings' Restricted Stock
Plan to agree in writing to surrender any of their outstanding
awards for shares of Company Common Stock which will not as of
or immediately prior to the Effective Time be earned and non-
forfeitable in exchange for the consideration set forth in
Section 1.3 herein, provided that no payment may be made to any
participant in Savings' Restricted Stock Plan without the prior
written authorization of NewSouth. The Company and Savings
shall use their best efforts to cause each holder of an option
under the Company Option Plan to agree in writing to cancel any
of their outstanding options to acquire shares of Company Common
Stock in exchange for the consideration set forth in Section 1.3
herein, provided that no payment may be made to any option
holder without the prior written authorization of NewSouth.
(h) Between the date of this Agreement and the
Effective Time, the parties shall cooperate to take steps
necessary to permit Savings' pension plan to be merged into
Bank's pension plan at the Effective Time, including making any
necessary or desirable plan amendments and filings with the IRS
as determined by Bank with the approval of Savings, which
approval shall not be unreasonably withheld.
4.14 Amendment of Savings' Federal Stock Charter.
-------------------------------------------
Subject to the Board of Directors' fiduciary duties, Company and
Savings will take all actions necessary to effectuate the
Charter Amendment, provided that Company and Savings may make
such amendment contingent upon consummation of the Company
Merger.
4.15 Payments. No later than thirty (30) days prior to
--------
consummation of the Company Merger, the Company shall furnish
NewSouth for its review (i) a computation of the amounts
expected to be payable under the employment agreements disclosed
in Section 2.12 of Schedule I as a result of the Company Merger,
and (ii) a schedule reasonably satisfactory to NewSouth
demonstrating that no "disqualified individual" within the
meaning of Section 280G of the Code will be receiving payments
in contravention of the representation set forth in the second
sentence to Section 2.12 herein.
4.16 Environmental Reports. The Company shall undertake
---------------------
within 15 days of the date hereof to order, and shall use its
best efforts to receive within 40 days (subject to extension
with the consent of NewSouth) after ordering a Phase I
Environmental Risk Report (as contemplated in OTS Thrift
Bulletin #16) ("Report") on (i) all commercial real estate owned
by, (ii) all offices and premises used as facilities by, and
(iii) all properties which serve as security for any commercial
real estate loan having an original principal balance of $1
million or more of the Company or Savings. In the event that
NewSouth believes in good faith that such Reports indicate a
reasonable likelihood there will be material costs associated
with bringing any such property or properties into material
compliance with applicable environ-
32
mental laws, NewSouth shall, within 15 days of its receipt of
such Reports, provide Company with written notice to that
effect. Failure of NewSouth to provide such written notice with
respect to a property within such 15 days period shall
constitute waiver of its right to terminate this Agreement
pursuant to Section 5.4(h) herein with respect to such property
only. The Company shall thereafter undertake to order a Phase
II Environmental Risk Report (as contemplated in OTS Thrift
Bulletin #16) on any property as directed by NewSouth. NewSouth
and the Bank agree that they shall pay fifty (50) percent of the
expenses incurred with respect to procuring the Phase I Reports
and NewSouth will pay all of the expenses incurred with respect
to procuring the Phase II Reports. NewSouth and the Bank agree
to keep confidential the contents and results of these Phase I
and Phase II Environmental Risk Reports.
ARTICLE V
CONDITIONS TO THE COMPANY MERGER; TERMINATION OF AGREEMENT
5.1 General Conditions. The obligations of NewSouth,
------------------
the Bank and New Sub and the Company and Savings to effect the
Company Merger and the Bank Merger shall be subject to the
following conditions:
(a) Stockholder Approval and Effectiveness of
Charter Amendment. The holders of the outstanding shares of
Company Common Stock shall have approved this Agreement and the
Company Merger as specified in Section 1.8 hereof and as
otherwise required by applicable law and the Charter Amendment
shall be effective under applicable law.
(b) No Proceedings. No order, decree or
injunction shall have been entered and remain in force
restraining or prohibiting the Company Merger, in the
Liquidation or the Bank Merger in any legal, administrative,
arbitration, investigatory or other proceedings (collectively,
"Proceedings").
(c) Government Approvals. To the extent required
by applicable law or regulation, all approvals of or filings
with any governmental authority (collectively, "Governmental
Approvals"), including without limitation those of the OTS, the
FDIC, FRB, the Commission, the Federal Trade Commission, DOJ,
the SEC, and any state securities or Blue Sky authorities, as
applicable, shall have been obtained or made and any waiting
periods shall have expired in connection with the consummation
of the Company Merger, the Liquidation and the Bank Merger. All
other statutory or regulatory requirements for the valid
consummation of the Company Merger, the Liquidation and the Bank
Merger and related transactions shall have been satisfied.
5.2 Conditions to Obligations of NewSouth, Bank and New Sub.
-------------------------------------------------------
The obligations of NewSouth, Bank and New Sub to effect
the Company Merger, the Liquidation, the Bank Merger and the
transactions contemplated herein shall be subject to the
following additional conditions to the extent not waived:
33
(a) Opinion of Counsel for Company. NewSouth
------------------------------
shall have received from Xxxxxxx Spidi & Xxxxx, PC, special
counsel to the Company, an opinion dated as of the Closing
covering the matters set forth in Exhibit 5.2(a).
(b) Required Consents. In addition to
-----------------
Governmental Approvals, Company and Savings shall have obtained
all necessary third party consents or approvals in connection
with the Company Merger, the Liquidation and the Bank Merger,
the absence of which would materially and adversely affect
Company and the Company Subsidiaries, taken as a whole.
(c) No Material Adverse Change. Between the date
--------------------------
of this Agreement and the date of Closing, there shall not have
occurred any material adverse change in the financial condition,
business, results of operations or assets of Company and the
Company Subsidiaries, taken as a whole other than any such
change attributable to or resulting from year 2000 compliance,
changes in economic conditions applicable to depository
institutions generally or in general levels of interest rates
affecting both the Company and NewSouth to a similar extent and
in a similar manner. No payments made or expenses incurred in
accordance with Section 4.13 herein shall be deemed to
constitute a material adverse change under this Section 5.2(c).
(d) Representations and Warranties to be True;
------------------------------------------
Fulfillment of Covenants and Conditions.
---------------------------------------
The representations and warranties of the Company and Savings
shall be true in all material respects at the Effective Time
with the same effect as though made at the Effective Time (or on
the date when made in the case of any representation or warranty
which specifically relates to an earlier date); Company and
Savings shall have performed all obligations and complied with
each covenant, in all material respects, and all conditions
under this Agreement on their parts to be performed or complied
with at or prior to the Effective Time; and Company shall have
delivered to NewSouth a certificate, dated the Effective Time
and signed by its chief executive officer and chief financial
officer, to such effect.
(e) No Litigation. Neither the Company nor any
-------------
Company Subsidiary shall be a party to any pending litigation,
reasonably probable of being determined adversely to the Company
or any Company Subsidiary, which would have a material adverse
effect on the business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as
a whole.
(f) Governmental Approval. All Governmental
---------------------
Approvals required hereunder to consummate the transactions
contemplated hereby shall have been obtained without the
imposition of any conditions which NewSouth, the Bank and New
Sub reasonably and in good faith determine to be unduly
burdensome upon the conduct of the business of NewSouth, the
Bank or New Sub and, in the reasonable judgment of NewSouth,
substantially diminish the benefits expected to be received by
NewSouth from the transactions contemplated hereby.
(g) Stock Options. All of the outstanding Company
-------------
Stock Options shall have been terminated or canceled as
contemplated in Section 1.3(c) herein.
34
(h) Environmental Reports. NewSouth shall have
---------------------
received, to its reasonable satisfaction, any Phase II
Environmental Reports as is contemplated in Section 4.16 herein
subject to Section 5.4(g) herein.
(i) Restricted Stock Agreements. All participants
---------------------------
in Savings Restricted Stock Plan whose awards for shares of
Company Common Stock pursuant thereto which as of immediately
prior to the Effective Time shall not be deemed earned and non-
forfeitable shall have entered into the written surrender
agreement contemplated in Section 4.13(g) hereto.
(j) Dissenting Shares. No greater than 7% of the
-----------------
outstanding shares of Company Common Stock entitled to vote at
the meeting of Company's shareholders as is contemplated in
Section 1.8 herein shall have delivered the written notice of
intent to demand payment pursuant to Article 13 of the NCBCA.
(k) Tax Opinion. NewSouth and the Company shall
-----------
have received an opinion of NewSouth's tax counsel or tax
accountants substantially to the effect that (i) NewSouth, the
Bank and New Sub and the Company and Savings will not recognize
any gain or loss upon the acquisition of the Company Common
Stock in the Company Merger, (ii) the Company will not recognize
any gain or loss upon its distribution of all its assets to, and
the assumption of all its liabilities by, the Bank in the
Liquidation; (iii) NewSouth and the Bank will not recognize any
gain or loss upon receipt of all the assets and assumption of
all the liabilities of the Company in the Liquidation; and (iv)
NewSouth, the Bank, the Company and Savings will not recognize
any gain or loss as a result of the Bank Merger.
(l) Resignation of Directors and Officers. Each
-------------------------------------
of the persons serving as a director or officer of Company and
Savings or any subsidiary of either shall, at the Closing,
submit his/her written resignation, effective as of the
Effective Time.
5.3 Conditions to Obligations of Company and Savings.
------------------------------------------------
The obligations of Company and Savings to effect the Company
Merger and the transactions contemplated herein shall be subject
to the following additional conditions to the extent not waived.
(a) Opinion of Counsel for NewSouth. Company
-------------------------------
shall have received from Housley Kantarian & Xxxxxxxxx, P.C.,
special counsel to NewSouth, an opinion dated as of the Closing
covering the matters set forth in Exhibit 5.3(a).
(b) Representations and Warranties to be True;
------------------------------------------
Fulfillment of Covenants and Conditions.
---------------------------------------
The representations and warranties of NewSouth and the Bank
shall be true in all material respects at the Effective Time
with the same effect as though made at the Effective Time (or on
the date when made in the case of any representation or warranty
which specifically relates to an earlier date); NewSouth, the
Bank and New Sub shall have performed all obligations and
complied with each covenant, in all material respects, and all
conditions under this Agreement on their parts to be performed
or complied with at or prior to the Effective
35
Time; and NewSouth shall have delivered to Company a
certificate, dated the Effective Time and signed by its chief
executive officer and chief financial officer, to such effect.
(c) Receipt of Merger Consideration. The Exchange
-------------------------------
Agent in its fiduciary capacity shall have certified receipt of
the aggregate Merger Consideration for all shares of Company
Common Stock to be acquired hereunder.
(d) Required Consents. In addition to
-----------------
Governmental Approvals, NewSouth, the Bank and New Sub shall
have obtained all necessary third party consents or approvals in
connection with the Company Merger, the absence of which would
materially and adversely affect NewSouth and the NewSouth
Subsidiaries, taken as a whole.
(e) No Restriction on Payment. There shall not be
-------------------------
any restriction with respect to the payments contemplated in
Section 1.3 herein.
5.4 Termination of Agreement and Abandonment of Company
---------------------------------------------------
Merger.
------
This Agreement and the Company Merger and the Bank Merger may be
terminated at any time before the Effective Time, whether before
or after approval thereof by shareholders of the Company, as
provided below:
(a) Mutual Consent. By mutual consent of the
--------------
parties, evidenced by their written agreement.
(b) Closing Delay. At the election of either
-------------
party, evidenced by written notice, if the Closing shall not
have occurred on or before March 31, 2000, or such later date as
shall have been agreed to in writing by the parties; provided,
however, that the right to terminate under this Section 5.4(b)
shall not be available to any party whose failure to perform an
obligation hereunder has been the cause of, or has resulted in,
the failure of the Closing to occur on or before such date.
(c) Conditions to NewSouth Performance Not Met.
------------------------------------------
By NewSouth upon delivery of written notice of termination to
Company if any event occurs which renders impossible the
satisfaction in any material respect one or more of the
conditions to the obligations of NewSouth, the Bank and New Sub
to effect the Company Merger or the Bank Merger set forth in
Sections 5.1 and 5.2 and noncompliance is not waived by
NewSouth, provided, however, that such notice shall include a
statement of the grounds thereof and the Company and Savings
shall have thirty (30) days thereafter to cure the event or
conditions cited in such notice (to the extent curable) and if
the Company or Savings cures the events or conditions giving the
rise to such grounds to the satisfaction of NewSouth, NewSouth
shall not have any right to terminate this Agreement based upon
such specified events or conditions, and provided, however, that
the right to terminate under this Section 5.4(c) shall not be
available to NewSouth where NewSouth's, Bank's or New Sub's
failure to perform an obligation hereunder has been the cause
of, or has resulted in, the failure of the Closing to occur on
or before such date.
36
(d) Conditions to Company Performance Not Met. By
-----------------------------------------
the Company upon delivery of written notice of termination to
NewSouth if any event occurs which renders impossible of
satisfaction in any material respect one or more of the
conditions to the obligations of Company and Savings to effect
the Company Merger set forth in Sections 5.1 and 5.3 and
noncompliance is not waived by Company, provided, however, that
such notice shall include a statement of the grounds thereof and
NewSouth, the Bank, and NewSub shall have thirty (30) days
thereafter to cure the events or conditions cited in such notice
(to the extent curable) and if NewSouth, the Bank, or NewSub
cures the events or conditions giving the rise to such grounds
to the satisfaction of the Company, the Company shall not have
any right to terminate this Agreement based upon such specified
events or conditions, and provided, however, that the right to
terminate under this Section 5.4(d) shall not be available to
the Company where the Company's or Savings' failure to perform
an obligation hereunder has been the cause of, or has resulted
in, the failure of the Closing to occur on or before such date.
(e) Other Agreements. By Company in connection
----------------
with entering into a definitive agreement or letter of intent
with any person with respect to a Takeover Proposal in
accordance with Section 4.3 herein, provided it has complied
with all provisions thereof, in which case NewSouth shall be
entitled to the fee specified in Section 6.2(b) hereof.
(f) NewSouth Board. At any time prior to the
--------------
Effective Time, by NewSouth, if (i) the Company Board of
Directors withdraws or modifies its recommendation of this
Agreement or the Company Merger in a manner materially adverse
to NewSouth or shall have resolved or publicly announced or
disclosed to any third party its intention to do any of the
foregoing or the Company Board of Directors shall have
recommended to the stockholders of the Company any Takeover
Proposal or resolved to do so; (ii) a tender offer or exchange
offer for 25 percent or more of the outstanding shares of
Company Common Stock is commenced or a registration statement
with respect thereto shall have been filed and the Company Board
of Directors, within 10 days after such tender offer or exchange
offer is so commenced, either fails to recommend against
acceptance of such tender or exchange offer by its stockholders
or takes no position with respect to the acceptance of such
tender or exchange offer by its stockholders; or (iii) the
Company enters into a definitive agreement with respect to a
Takeover Proposal.
(g) Environmental Reports. By NewSouth at any
---------------------
time within 10 days of receipt of the last Phase II Report to be
delivered as contemplated in Section 4.16 herein if the costs to
bring the properties (either singularly or together with other
properties) which are the subject of such Phase II Reports into
material compliance with applicable environmental laws is
projected to exceed $350,000.
ARTICLE VI
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
6.1 Termination; Lack of Survival of Representations and
----------------------------------------------------
Warranties.
----------
In the event of the termination and abandonment of this
Agreement pursuant to Section 5.4 of this
37
Agreement, this Agreement shall become void and have no effect,
except that (i) the provisions of Sections 2.7 and 3.6 (Brokers
and Finders), 4.7 (Publicity), 6.2 (Expenses), 4.16
(Environmental) and 8.2 (Confidentiality) of this Agreement
shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 5.4 (c) or (d) of this
Agreement shall not relieve the breaching party from liability
for an uncured intentional and willful breach of a
representation, warranty, covenant, or agreement giving rise to
such termination.
The representations, warranties and agreements of the
parties set forth in this Agreement shall not survive the
Effective Time, and shall be terminated and extinguished at the
Effective Time, and from and after the Effective Time none of
the parties hereto shall have any liability to the other on
account of any breach or failure of any of those
representations, warranties and agreement; provided, however,
that the foregoing clause shall not (i) apply to agreements of
the parties which by their terms are intended to be performed
after the Effective Time, and (ii) shall not relieve any person
for liability for fraud, deception or intentional
misrepresentation.
6.2 Payment of Expenses.
-------------------
(a) Each of the parties hereto shall bear and pay
all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder.
(b) In order to induce NewSouth, the Bank and New
Sub to enter into this Agreement and as a means of compensating
NewSouth, the Bank and New Sub for the substantial direct and
indirect monetary and other costs incurred and to be incurred in
connection with this Agreement and the transactions contemplated
hereby, the Company and Savings agree that if this Agreement is
terminated in accordance with Sections 5.4(b), 5.4(c) (but only
on account of failure of any of the conditions set forth in
Xxxxxxx 0.0(x) xxx xxxxxxxxxx (x), (x), (x), (x), (x) (except
that for the $2,000,000 payment to be owed following failure
solely of the condition set forth in Section 5.2(j) then at
least 20% of the outstanding shares of Company Common stock
entitled to vote shall have delivered notice pursuant to Article
13 of the NCBA) and (l) of Section 5.2 herein), 5.4(e) or 5.4(f)
hereof and prior to such termination a Termination Event, as
defined in paragraph (c) of this Section 6.2, shall have
occurred, the Company or Savings will upon demand pay to
NewSouth or the Bank in immediately available funds $2,000,000,
inclusive of any other amounts that may otherwise be due and
payable in accordance with Section 6.2 hereunder; provided
however, no such payment shall be due or payable hereunder prior
to Company and Savings entering into a written definitive
agreement with a third party with respect to a Takeover Proposal
within 15 months after termination of the Agreement or within
such 15 month period any third-party person or entity acquires
25% or more of the Company's outstanding Common Stock
(c) For purposes of this Agreement, a Termination
Event shall mean either of the following:
38
(i) The Company or any Company Subsidiary,
without having received NewSouth's prior written consent, shall
have entered into a written agreement to engage in a Takeover
Proposal with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections
3(a)((9) and 13(d)(3) of the 1934 Act, and the rules and
regulations thereunder) other than NewSouth or any affiliate of
NewSouth (the term "affiliate" for purposes of this Agreement
having the meaning assigned thereto in Rule 405 under the 0000
Xxx) or the Board of Directors of the Company shall have
recommended that the shareholders of the Company approve or
accept any Takeover Proposal with any person other than NewSouth
or any affiliate of NewSouth; or
(ii) After a bona fide written proposal is
made by any person other than NewSouth or any affiliate of
NewSouth to the Company or its shareholders to engage in a
Takeover Proposal, either (A) the Company shall have breached
any covenant or obligation contained in this Agreement and such
breach would entitle NewSouth to terminate this Agreement, (B)
the holders of Company Common Stock shall not have approved this
Agreement at the meeting of such shareholders held for the
purpose of voting on this Agreement, a proxy statement has not
been mailed to the holders of Company Common Stock as a result
of the Board of Directors' exercise of its fiduciary duties as
set forth in Section 4.4 of this Agreement, such meeting shall
not have been held in a timely manner or shall have been
postponed, delayed or enjoined prior to termination of this
Agreement except as a result of a judicial or administrative
proceeding or the Company's Board of Directors shall have (i)
withdrawn or modified in a manner materially adverse to NewSouth
the recommendation of the Company's Board of Directors with
respect to this Agreement, or announced or disclosed to any
third party its intention to do so or (ii) failed to recommend,
in the case of a tender offer or exchange offer for the Company
Common Stock, against acceptance of such tender offer or
exchange offer to its shareholders or takes no position with
respect to acceptance of such tender offer or exchange offer by
its stockholders or (C) the Company Board of Directors makes the
provisions of Article XIII or Article XIV of the Company's
Articles of Incorporation inapplicable to such Takeover
Proposal.
ARTICLE VII
CERTAIN POST-MERGER AGREEMENTS
7.1 Employees. (i) Except as set forth in paragraphs
---------
(vi) and (vii) of this Section 7.1, employees of the Company or
Savings who become employees of NewSouth or the Bank after the
Effective Time (the "Continuing Employees") shall be eligible to
participate in all benefit plans sponsored by NewSouth or the
Bank to the same extent as other similarly situated NewSouth or
Bank employees, recognizing prior service with Savings for
purposes of eligibility, participation and vesting; provided
that NewSouth shall (i) not subject the Continuing Employees to
any uninsured waiting period or exclusion for pre-existing
conditions that was not in effect on the Effective Time under
the medical plan maintained by the Company or Savings, and (ii)
provide for a carry-over during 1999 or 2000 (as may be
applicable) to the replacement NewSouth or Bank medical plan of
all deductibles and annual out of pocket
39
contributions incurred during the period beginning January 1,
1999 or January 1, 2000 (as be may be applicable) through the
Effective Time.
(ii) Salaries for employees of Savings who are to
become employees of the Bank immediately following the Effective
Time are set forth in Exhibit 7.1 hereto. The Bank shall also
honor the existing agreements set forth in Exhibit 7.1 hereto.
(iii) With respect to those employees of Savings
identified in Exhibit 7.1 hereto who continue to be employed by
the Bank for a period of one year from the Effective Time, such
employees will be paid a retention bonus in the amount set forth
in Exhibit 7.1 on the one year anniversary date of the Effective
Time.
(iv) NewSouth shall pay (or cause to be paid) a
severance benefit in accordance with Exhibit 7.1 hereto to any
person who was a full time employee of Savings immediately prior
to the Effective Time and whose employment with NewSouth or the
Bank is involuntarily terminated during the one (1) year period
commencing as of the Effective Time. The severance payment
obligations under this Section 7.1 shall not apply to (a) any
person who has an Employment Agreement with Company or Savings,
or (b) any employee who is terminated for cause.
(v) In the event the Effective Time occurs prior
to December 10, 1999, on or before December 20, 1999 NewSouth
will pay to the Savings employees listed on Exhibit 7.1 who
continue to be employees of NewSouth on December 20, 1999 or who
are terminated by NewSouth without cause after the Effective
Time and prior to December 20, 1999 the 1999 bonus amounts set
forth in Exhibit 7.1.
(vi) The Continuing Employees shall be eligible to
participate in NewSouth's Employee Stock Ownership Plan
("NewSouth ESOP") no later than October 1, 2001. In connection
with their participation in the NewSouth ESOP, such employees
shall receive credit for prior years of service with Savings or
the Company, as well as service with NewSouth or Bank, for
purposes of determining eligibility to participate, and vesting,
if applicable.
(vii) At the Effective Time, Saving's pension plan
shall be merged with and into Bank's pension plan, and
thereafter each Continuing Employee shall be entitled to
participate in Bank's pension plan to the same extent as other
similarly situated NewSouth or Bank employees. Such Continuing
Employees shall receive credit under Bank's pension plan for
their prior periods of service to Company or Savings for
purposes of determining eligibility and vesting, and no
participant's accrued benefit under Savings' pension plan shall
be reduced as a result of the merger of Savings' pension plan
with and into Bank's pension plan. Continuing Employees will
accrue benefits under Bank's pension plan for service with
NewSouth and Bank after the Effective Time.
7.2 Directors. As of the Effective Time, Mr. H.D.
---------
Xxxxxx, Jr. shall become a Director of NewSouth and the Bank.
All of the non-employee directors of Savings as of the Effective
Time shall be invited by the Bank to join a community advisory
board of directors to
40
advise and assist the Bank with respect to the communities
served by Savings. Such appointment shall be for a three year
basis and each person agreeing to serve on such advisory board
of directors shall receive fees of $400 per month if the
advisory board meets monthly or $1,200 per quarter if the
advisory board meets quarterly.
7.3 Employment Agreements. As of the Effective Time,
---------------------
the existing employment agreements between Savings and each of
H.D. Xxxxxx, Jr., Xxxxxxx X. Xxxxxxxxxx and Xxxxx Xxxxx will be
terminated, and in lieu thereof such individuals will enter into
new employment agreements with the Bank in the form attached at
Exhibit 7.3 hereto.
ARTICLE VIII
GENERAL
8.1 Amendments. Subject to applicable law, this
----------
Agreement may be amended, whether before or after any relevant
approval of shareholders, by an agreement in writing executed in
the same manner as this Agreement and authorized or ratified by
the Boards of Directors of the parties hereto, provided that,
after the adoption of the Agreement by the shareholders of the
Company, no such amendment without further shareholder approval
may reduce the amount or change the form of the consideration to
be received by the Company shareholders in the Company Merger.
8.2 Confidentiality. All information disclosed
---------------
hereafter by any party to this Agreement to any other party to
this Agreement, including, without limitation, any information
obtained pursuant to Section 4.1 hereof, shall be kept
confidential by such other party and shall not be used by such
other party otherwise than as herein contemplated except to the
extent that (i) it was known by such other party when received,
(ii) it is or hereafter becomes lawfully obtainable from other
sources, (iii) it is necessary or appropriate to disclose to the
OTS, the FDIC, the FRB, the Commission or any other regulatory
authority having jurisdiction over the parties or their
subsidiaries or as may otherwise be required by law, or (iv) to
the extent such duty as to confidentiality is waived by the
other party. In the event of the termination of this Agreement,
each party shall use all reasonable efforts to return upon
request to the other parties all documents (and reproductions
thereof) received from such other parties (and, in the case of
reproductions, all such reproductions made by the receiving
party) that include information not within the exceptions
contained in the first sentence of this Section 8.2.
8.3 Governing Law. This Agreement and the legal
-------------
relations between the parties shall be governed by and construed
in accordance with the laws of the State of North Carolina
without taking into account a provision regarding choice of law,
except to the extent certain matters may be governed by federal
law by reason of preemption.
41
8.4 Notices. Any notices or other communications
-------
required or permitted hereunder shall be sufficiently given if
sent by registered mail or certified mail, postage prepaid,
addressed, if to NewSouth or Bank, to
NewSouth Bancorp, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, President
with a copy to:
Housley Kantarian & Xxxxxxxxx, P.C.
Suite 700
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esquire
and if to Company or Savings, to
Green Street Financial Corp
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: H.D. Xxxxxx, Jr., President
with a copy to:
Xxxxxxx Spidi & Xxxxx, PC
One Franklin Square
0000 X Xxxxxx, X.X.
Xxxxx 000 Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx, Esquire
or such other address as shall be furnished in writing by any
such party, and any such notice or communication shall be deemed
to have been given two business days after the date of such
mailing (except that the notice of change of address shall not
be deemed to have been given until received by the addressee).
Notices may also be sent by telegram, telex, facsimile
transmission or hand delivery and in such event shall be deemed
to have been given as of the date received.
8.5 No Assignment. This Agreement may not be assigned
-------------
by any of the parties hereto, by operation of law or otherwise,
without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
42
8.6 Headings. The description heading of the several
--------
Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.7 Counterparts. This Agreement may be extended in one
------------
or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties hereto and
delivered to each of the other parties hereto.
8.8 Construction and Interpretation. Except as the
-------------------------------
context otherwise requires, (a) all references herein to any
state or federal regulatory agency shall also be deemed to refer
to any predecessor or successor agency, and (b) all references
to state and federal statutes or regulations shall also be
deemed to refer to any successor statute or regulation.
8.9 Entire Agreement. This Agreement, together with the
----------------
schedules, lists, exhibits and certificates required to be
delivered hereunder, and any amendment hereafter executed and
delivered in accordance with Section 8.1, constitutes the entire
agreement of the parties, and supersedes any prior written or
oral agreement or understanding among any of the parties hereto
pertaining to the Company Merger, except for the Confidentiality
Agreement between the Company and NewSouth dated October 5,
1998, attached at Exhibit 8.9, which shall remain in full force
and effect. This Agreement is not intended to confer upon any
other persons any rights or remedies hereunder except as
expressly set forth herein.
8.10 Severability. Whenever possible, each provision of
------------
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
the Agreement.
8.11 No Third Party Beneficiaries. Nothing in this
----------------------------
Agreement shall entitle any person (other than the Company,
Savings, NewSouth, the Bank or New Sub and their respective
successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind, except as otherwise
expressly provided herein, including the Indemnities described
in Section 4.11 of this Agreement.
8.12 Enforcement of Agreement. The parties hereto agree
------------------------
that irreparable damage would occur in the event that any of the
provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are
entitled at law or in equity; except that no such rights shall
attach in circumstances where the Company and Savings shall have
paid NewSouth, Bank or NewSub the $2,000,000 payment set forth
in Section 6.2(b) herein.
43
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers
thereunder duly authorized, all as of the date set forth above.
NEWSOUTH BANCORP, INC. GREEN STREET FINANCIAL CORP
By: /s/ Xxxxxx X. Xxxx By: /s/ H.D. Xxxxxx, Jr.
------------------------ --------------------------
Name: Xxxxxx X. Xxxx Name: H.D. Xxxxxx, Jr.
Title: President Title: President
NEWSOUTH BANK HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION
By: /s/ Xxxxxx X. Xxxx By: /s/ H.D. Xxxxxx, Jr.
------------------------ --------------------------
Name: Xxxxxx X. Xxxx Name: H.D. Xxxxxx, Jr.
Title: President Title: President
WASHINGTON FINANCIAL, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------
Name: Xxxxxx X. Xxxx
Title: President
44
