<PAGE>
As filed with the Securities and Exchange Commission on February 18, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
National Commerce Bancorporation
(Exact name of registrant as specified in its charter)
----------------
<TABLE>
<C> <C> <S>
Tennessee 6711 62-0784645
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
One Commerce Square
Memphis, Tennessee 38150
(901) 523-3434
</TABLE>
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
CHARLES A. NEALE, ESQ.
Vice President and General Counsel
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
(901) 523-3371
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
<TABLE>
<S> <C>
JOHN A. GOOD, ESQ. EDWARD C. WINSLOW, ESQ.
Bass, Berry & Sims PLC Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
100 Peabody Place, Suite 950 2000 Renaissance Plaza, 230 North Elm Street,
Memphis, Tennessee 38103 P. O. Box 26000 (27420)
Telephone: (901) 543-5901 Greensboro, North Carolina 27401
Facsimile: (888) 543-4644 Telephone: (336) 373-8850
E-Mail: [email protected] Facsimile: (336) 378-1001
E-Mail: [email protected]
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the effectiveness of this Registration Statement.
If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered(1) per share(2) offering price(2) registration fee(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $2.00 par
value................. 1,514,108 $9.875 $24,714,163 $6,525.00
</TABLE>
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(1) This amount is based upon the maximum number of shares anticipated to be
issued pursuant to an Agreement and Plan of Reorganization dated as of
December 27, 1999 between the Registrant and Piedmont Bancorp, Inc.
(2) Computed in accordance with Rule 457(f) under the Securities Act of 1933,
as amended, based on the average of the high and low sales price on the
American Stock Exchange as of February 16, 2000 of the securities to be
received by the Registrant in exchange for the securities registered
hereby. On the date hereof, there were 2,502,700 shares of Common Stock, no
par value, of Piedmont Bancorp, Inc. outstanding.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on March 31, 2000
----------------
Notice is hereby given that a special meeting of the shareholders of
Piedmont Bancorp, Inc. will be held on March 31, 2000, at , local time,
at , Hillsborough, North Carolina, for the following purposes:
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization dated as of December 27, 1999, between National Commerce
Bancorporation and Piedmont Bancorp, Inc. and the related Plan of
Merger, copies of which are attached as Appendix A to the proxy
statement/prospectus accompanying this notice. The agreement provides
for the merger of Piedmont with and into NCBC. If the merger is
completed each outstanding share of Piedmont common stock will be
converted into the right to receive a number of shares of NCBC common
stock equal to the ratio of $12.52 (based on currently outstanding
shares of common stock and options to purchase Piedmont common stock)
divided by the average closing price of NCBC common stock on the Nasdaq
National Market for the five trading days ending two trading days prior
to the special meeting. However, if the five day average NCBC closing
price is less than $20.70 per share, the exchange ratio will be fixed at
.60499 shares of NCBC common stock for each share of Piedmont common
stock, and if the five day average NCBC closing price is greater than
$25.30 per share, the exchange ratio will be fixed at .49499 shares of
NCBC common stock for each share of Piedmont common stock. The closing
price of NCBC common on the Nasdaq National Market on February , 2000
was $ per share. The calculation of the exchange ratio is
described in more detail in the proxy statement/prospectus. The exchange
ratio is also subject to adjustment under certain circumstances
described in the agreement. It is anticipated that the merger generally
will be tax-free to Piedmont shareholders for U.S. federal income tax
purposes.
2. To transact such other business as may properly be brought before the
special meeting or at any postponement or adjournment thereof.
Piedmont's Board is not aware of any other business to come before the
special meeting.
The merger is conditioned upon approval by the holders of a majority of the
outstanding shares of Piedmont common stock. The Piedmont Board has fixed the
close of business on February 25, 2000 as the record date for the determination
of the shareholders entitled to receive notice of and to vote at the special
meeting and at any postponement or adjournment of the meeting. A list of
shareholders who are entitled to vote at the special meeting will be available
for inspection by any shareholder, his or her agent or attorney at the time and
place of the meeting.
Your vote is important regardless of the number of shares you own. A form of
proxy is enclosed. Please complete, date and sign the proxy card and return it
promptly in the enclosed postage prepaid envelope whether or not you plan to
attend the special meeting. If you attend the special meeting, you may vote in
person if you wish, even if you have previously returned your proxy card, by
revoking your proxy as described in the proxy statement/prospectus.
By Order of the Board of Directors
/s/ Peggy S. Walker
By: _________________________________
Peggy S. Walker, Secretary
Hillsborough, North Carolina
February , 2000
<PAGE>
Piedmont Shareholders:
This document is being furnished to shareholders of Piedmont Bancorp, Inc.
in connection with the solicitation of proxies by Piedmont's board of directors
for use at a special meeting of the Piedmont shareholders to be held March 31,
2000. The purpose of the special meeting is to approve an Agreement and Plan of
Reorganization dated as of December 27, 1999 and related plan of merger
providing for the merger of Piedmont with and into National Commerce
Bancorporation. If the proposed merger occurs, the combined company expects to
be better positioned to compete in the financial services industry in North
Carolina due to expanded operations and market coverage. We expect that the
merger generally will be tax-free to our shareholders for federal income tax
purposes.
If you approve the merger agreement, we will be merged with and into NCBC.
The merger agreement provides that our shareholders will receive, for each
share of Piedmont common stock they own, a number of shares of NCBC common
stock based on a floating exchange ratio equal to $12.52 (based on currently
outstanding shares of Piedmont common stock and options to purchase Piedmont
common stock) divided by the average closing price of NCBC common stock on the
Nasdaq National Market for the five trading days ending two trading days prior
to the special meeting. However, if the five day average NCBC closing price is
less than $20.70 per share, the exchange ratio will be fixed at .60499 shares
of NCBC common stock for each share of Piedmont common stock, and if the five
day average NCBC closing price is greater than $25.30 per share, the exchange
ratio will be fixed at .49499 shares of NCBC common stock for each share of
Piedmont common stock. The closing price of the NCBC common stock on the Nasdaq
National Market on February , 2000 was $ per share. The calculation of
the exchange ratio is described in more detail in this proxy
statement/prospectus.
Your vote is important. We cannot complete the merger unless the holders of
a majority of the outstanding shares of Piedmont common stock approve the
merger agreement.
The special meeting will be held on March 31, 2000, at a.m., local time,
at , Hillsborough, North Carolina. It is important that your shares be
represented at the special meeting either in person or by proxy. Whether or not
you plan to attend the special meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us in the enclosed postage
prepaid envelope.
If you sign, date and mail your proxy card without indicating how you want
to vote, your proxy will be counted as a vote for approval of the merger
agreement. If you do not sign and send in your proxy or you abstain and do not
attend the special meeting and vote in person, the effect will be a vote
against approval of the merger agreement. If your shares are held in "street
name," you must instruct your broker in order to vote. Failure of your broker
to vote your shares will effectively be a vote against approval of the merger
agreement. If you attend the special meeting, you may vote in person if you
wish, even if you have previously returned your proxy card.
This proxy statement/prospectus contains a detailed description of the
entire transaction. Please read it carefully. You can also obtain more
information about NCBC and Piedmont in documents they each file with the
Securities and Exchange Commission.
After careful consideration, Piedmont's Board of Directors has determined
that the merger is in the best interests of its shareholders, and unanimously
recommends voting FOR approval of the merger agreement and the transactions
provided for in the merger agreement.
Sincerely,
/s/ D. Tyson Clayton
By: _________________________________
D. Tyson Clayton
Chairman, President and Chief
Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved the NCBC common stock to be issued under this
prospectus or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense. The shares of NCBC
common stock offered by this prospectus are not savings accounts, deposits
or other obligations of a bank or savings association and are not insured
by the Federal Deposit Insurance Corporation or any other government
agency.
This proxy statement/prospectus is dated February , 2000 and was mailed to
Piedmont shareholders with a proxy card on or about March , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... iii
SUMMARY.................................................................... 1
The Companies............................................................. 1
The Merger................................................................ 1
Our Reasons for the Merger................................................ 2
The Merger Consideration Will Be Shares of NCBC Common Stock, the Number
of Which Will Depend on the NCBC Average Closing Stock Price of the
Nasdaq National Market for the Five Trading Day Period Ending Two Trading
Days Before the Special Meeting.......................................... 2
Share Information and Market Prices....................................... 3
Generally, the Merger Will Be a Tax-Free Transaction for Piedmont
Shareholders............................................................. 3
Piedmont's Board of Directors Unanimously Recommends Shareholder Approval
of the
Merger Agreement......................................................... 3
Trident Securities Says the Merger Consideration is Fair to Piedmont
Shareholders............................................................. 3
Piedmont to Hold Meeting on March 31, 2000................................ 4
No Dissenters' Appraisal Rights........................................... 4
Pooling of Interests Accounting Treatment................................. 4
Interests of Piedmont Management in the Merger............................ 4
The Merger Agreement...................................................... 4
Stock Option Granted to NCBC by Piedmont.................................. 5
Recent NCBC Financial Information......................................... 6
Recent Piedmont Financial Information..................................... 6
Comparative Market Prices and Dividends................................... 7
NCBC and Piedmont Selected Historical Financial Data...................... 8
NCBC and Piedmont Equivalent Pro Forma Per Common Share Data.............. 11
INFORMATION CONCERNING THE SPECIAL MEETING................................. 13
Date, Time and Place; Matters to be Considered............................ 13
Vote Required............................................................. 13
Voting of Proxies......................................................... 13
Revocability of Proxies................................................... 13
Solicitation of Proxies................................................... 14
THE MERGER................................................................. 15
General................................................................... 15
Background of the Merger.................................................. 15
Recommendation of Piedmont Board of Directors............................. 18
Opinion of Financial Advisor to Piedmont.................................. 19
Interests of Certain Persons in the Merger................................ 25
Management and Operations of NCBC After the Merger........................ 25
Public Trading Markets.................................................... 25
Absence of Dissenters' Appraisal Rights................................... 25
Resale of NCBC Common Stock by Piedmont Shareholders and Affiliates....... 26
THE MERGER AGREEMENT....................................................... 26
Conditions to Completion of the Merger.................................... 26
Piedmont Covenants........................................................ 27
Representations and Warranties............................................ 29
Amendment and Termination................................................. 29
Exchange of Certificates Representing Piedmont Common Stock............... 30
Treatment of Piedmont Stock Options....................................... 30
Bank Regulatory and Other Legal Considerations............................ 30
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Accounting Treatment....................................................... 31
Material Federal Income Tax Considerations................................. 32
STOCK OPTION AGREEMENT...................................................... 33
EXPENSES.................................................................... 35
COMPARISON OF RIGHTS OF PIEDMONT AND NCBC SHAREHOLDERS...................... 35
DESCRIPTION OF NCBC COMMON STOCK............................................ 39
WHERE YOU CAN FIND MORE INFORMATION......................................... 40
FORWARD-LOOKING STATEMENTS.................................................. 40
INCORPORATION OF DOCUMENTS FILED WITH THE SEC............................... 41
LEGAL MATTERS............................................................... 42
EXPERTS..................................................................... 42
</TABLE>
<TABLE>
<S> <C>
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION (without
exhibits other than Plan of Merger)................ Appendix A-1
APPENDIX B FAIRNESS OPINION OF TRIDENT SECURITIES............... Appendix B-1
APPENDIX C STOCK OPTION AGREEMENT............................... Appendix C-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS PIEDMONT MERGING WITH NCBC?
A: Our companies are proposing to merge because we believe that the merger will
benefit our shareholders, customers and employees. We believe the merger
will create a more diversified financial services company that will be
better positioned to compete in the financial services industry in North
Carolina through expanded operations and market coverage. If the merger is
completed, you will have a more liquid investment because NCBC common stock
is more actively traded than Piedmont common stock. In addition, the market
value of the NCBC common stock to be issued in the merger in exchange for
the Piedmont common stock represents a premium over the market and book
value of Piedmont common stock. To review the background and reasons for the
merger in greater detail, see pages 14 through 17.
Q: WHAT AM I BEING ASKED TO VOTE ON AND HOW DOES MY BOARD RECOMMEND THAT I
VOTE?
A: You are being asked to vote FOR approval of the agreement and plan of
reorganization providing for the merger of Piedmont with and into NCBC. The
Piedmont Board has unanimously approved and adopted the merger agreement and
recommends that you also vote for approval.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSAL?
A: Approval of the proposal requires the affirmative vote of a majority of the
outstanding shares of Piedmont common stock.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Under the merger agreement, you will receive shares of NCBC common stock in
exchange for shares of Piedmont common stock you own. Each share of Piedmont
common stock you own will be exchanged for NCBC common stock at the exchange
ratio. The exchange ratio is a floating ratio equal to $12.52 (based on
currently outstanding shares of Piedmont common stock and options to
purchase Piedmont common stock) divided by the average closing price of NCBC
common stock on the Nasdaq National Market for the five trading days ending
two trading days prior to the effective date of the merger. However, if the
five day average NCBC closing price is less than $20.70 per share, the
exchange ratio will be fixed at .60499 shares of NCBC common stock for each
share of Piedmont common stock and if the five day average NCBC closing
price is greater than $25.30 per share, the exchange ratio will be fixed at
.49499 shares of NCBC common stock for each share of Piedmont common stock.
The closing price of the NCBC common stock on the Nasdaq National Market on
February , 2000 was $ per share.
NCBC will not issue fractional shares in the merger. Instead, you will
receive a cash payment, without interest, for the value of any fraction of a
share of NCBC common stock that you would otherwise be entitled to receive.
Q: WHAT HAPPENS AS THE MARKET PRICE OF NCBC COMMON STOCK FLUCTUATES?
A: Under the merger agreement the exchange ratio will fluctuate as the market
price of NCBC common stock fluctuates so long as the average closing price
for NCBC common stock on the Nasdaq National Market for the five trading day
period ending two days before the special meeting is between $20.70 and
$25.30 per share. However, if the five day average closing price is less
than $20.70 per share, the exchange ratio will be fixed at .60499 shares of
NCBC common stock for each share of Piedmont common stock and if the five
day average closing price is greater than $25.30, then the exchange ratio
will be fixed at .49499 shares of NCBC common stock for each share of
Piedmont common stock. After the close of business on the last day of the
five day period during which the average NCBC closing price is determined,
Piedmont shareholders may obtain information about the exchange ratio by
calling (800) 737-3426.
iii
<PAGE>
Q: WHAT WILL MY DIVIDENDS BE AFTER THE MERGER?
A: After the merger, you will receive any dividends that are declared by the
NCBC Board with respect to the NCBC common stock. During 1999, NCBC paid
quarterly dividends at the annual rate of $0.375 per share. NCBC has paid
regular dividends on the NCBC common stock without interruption since its
incorporation.
Q: MAY I SELL THE SHARES OF NCBC COMMON STOCK THAT I WILL RECEIVE IN THE
MERGER?
A: Yes. Shares of NCBC common stock that you receive in the merger will be
freely transferable, unless you are an "affiliate" of Piedmont under
applicable federal securities laws. Affiliates include directors, certain
executive officers and holders of 10% or more of Piedmont common stock.
Generally, all shares of NCBC common stock received by affiliates (including
shares they beneficially own for others) may be sold by them only in
compliance with the Securities Act of 1933, as amended, and applicable
accounting rules governing pooling of interests. Shares of NCBC common stock
received by non-affiliates in connection with the merger will be freely
transferable under the Securities Act. For more detail regarding this
subject, see page 25.
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: We expect to complete the merger as soon as practicable after the special
meeting.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: Generally the exchange of your shares of Piedmont common stock for NCBC
common stock will be tax-free to you for U.S. federal income tax purposes.
You will, however, have to pay taxes on cash received for fractional shares.
To review the federal tax consequences to Piedmont shareholders in greater
detail, see pages 32 and 33. Your tax consequences will depend on your
personal situation. You should consult your tax advisor for a full
understanding of the tax consequences of the merger to you. We cannot give
you tax, accounting, legal or investment advice.
Q: WHAT SHOULD I DO NOW?
A: Indicate on your proxy card how you want to vote. Sign and mail the proxy
card in the enclosed postage prepaid envelope as soon as possible, so that
your shares will be represented at the special meeting. If you sign and send
in your proxy and do not indicate how you want to vote, your proxy will be
voted in favor of the proposal to approve and adopt the merger agreement. If
you do not sign and send in your proxy or if you abstain and you do not
attend the special meeting and vote in person, it will have the effect of a
vote against the merger. The special meeting will take place on March 31,
2000, at , local time, at , Hillsborough, North Carolina,
subject to any adjournments or postponements thereof. You may attend the
special meeting and vote your shares in person, rather than voting by proxy.
In addition, you may withdraw your proxy up to and including the day of the
special meeting by following the directions on pages 13 and 14 and either
change your vote or attend the special meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Yes. Your broker will vote your shares of Piedmont common stock if you
provide instructions on how to vote. You should instruct your broker how to
vote your shares, following the directions your broker provides. If you do
not provide instructions to your broker, your shares will not be voted and
this will have the effect of voting against the merger. Please contact your
broker about this transaction.
iv
<PAGE>
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed we will send you written instructions for
exchanging your Piedmont common stock certificates for NCBC common stock
certificates.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you want additional copies of this document, or if you want to ask any
questions about the merger, you should contact:
D. Tyson Clayton, Chairman, President
and Chief Executive Officer
Piedmont Bancorp, Inc.
260 South Churton Street
Hillsborough, North Carolina 27278-2507
Telephone: (919) 732-2143
or
Thomas W. Wayne, Vice President,
Treasurer and Chief Financial Officer
Piedmont Bancorp, Inc.
260 South Churton Street
Hillsborough, North Carolina 27278-2507
Telephone: (919) 732-2143
v
<PAGE>
SUMMARY
This summary contains selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and to obtain a more completed
description of the legal terms of the merger, you should carefully read this
entire document, including the appendices and the documents incorporated by
reference or otherwise referred to. See "Where You Can Find More Information"
on page 40.
The Companies
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Telephone: (901) 523-3242
National Commerce Bancorporation is a bank holding company that provides
diverse financial services. NCBC provides financial services through a regional
network of banking affiliates and a national network of non-banking affiliates.
NCBC operates 162 bank locations in Tennessee, North Carolina, Georgia,
Virginia, West Virginia, Mississippi and Arkansas. NCBC has three principal
lines of business: retail banking, commercial banking and financial services.
Financial services include transaction processing, in-store licensing and
consulting, capital markets, trust and asset management and treasury services.
As of December 31, 1999 NCBC had total consolidated assets of approximately
$6.8 billion, total consolidated deposits of approximately $4.5 billion,
consolidated shareholders' equity of approximately $557 million, and had
consolidated net income of approximately $107 million, or $.99 per diluted
share, for the year ended December 31, 1999.
The Bank of New York, 101 Barclay Street, New York, New York acts as
transfer agent and registrar for NCBC common stock.
Piedmont Bancorp, Inc.
260 South Churton Street
Hillsborough, North Carolina 27278-2507
Telephone: (919) 732-2143
Piedmont Bancorp, Inc. is a bank holding company. Piedmont's wholly owned
banking subsidiary, Hillsborough Savings Bank, Inc., SSB is a North Carolina
savings bank established in 1913. Hillsborough is primarily a home mortgage
lender which conducts a full service banking business centered in Orange
County, North Carolina, with branches in Durham County, North Carolina.
As of December 31, 1999 Piedmont had total consolidated assets of
approximately $148.1 million, total consolidated deposits of approximately
$109.5 million, consolidated shareholders' equity of approximately
$19.0 million. Piedmont's consolidated net income for the year ended June 30,
1999 was approximately $1.2 million, or $.46 per diluted share.
Registrar and Transfer Company, Commerce Drive, Cranford, New Jersey, acts
as transfer agent and registrar for Piedmont common stock.
The Merger (See Page 15)
The merger agreement is attached as Appendix A to this proxy
statement/prospectus. You should read the merger agreement in its entirety
because it is the legal document that governs the merger of Piedmont and NCBC.
<PAGE>
As a result of the merger, Piedmont will be merged with and into NCBC in
accordance with the provisions of the Tennessee Business Corporation Act and
the North Carolina Business Corporation Act. When the merger is completed:
. NCBC will be the surviving corporation;
. the Board of Directors of NCBC will continue as the Board of Directors
of the surviving corporation;
. the separate existence of Piedmont will cease;
. Hillsborough will operate as a wholly owned banking subsidiary of NCBC;
and
. shareholders of Piedmont will become shareholders of NCBC.
Our Reasons for the Merger (See Pages 15 through 18)
We believe that the merger will enable us to be a stronger competitor in the
financial services industry in North Carolina through expanded operations and
market coverage. The merger will allow us to:
. establish additional "hubs" for NCBC's network of in-store supermarket
branches in North Carolina; and
. provide enhanced financial services to Hillsborough customers.
Piedmont shareholders will benefit from:
. enhanced liquidity in their investment because NCBC common stock is more
actively traded than Piedmont common stock; and
. the premium over the book and market value of Piedmont common stock
represented by the NCBC common stock to be issued in the merger.
The Merger Consideration Will Be Shares of NCBC Common Stock, the Number of
Which Will Depend on the NCBC Average Closing Stock Price on the Nasdaq
National Market for the Five Trading Day Period Ending Two Trading Days Before
the Special Meeting.
At the effective time of the merger, shares of Piedmont common stock will be
converted into the right to receive shares of NCBC common stock based on an
exchange ratio determined two trading days prior to the special meeting. The
exchange ratio will be based in part on the average closing price for the NCBC
common stock on the Nasdaq National Market for the five trading day period
ending two trading days before the special meeting. After the close of business
on the last day of the five day period during which the average NCBC closing
price is determined, Piedmont shareholders may obtain information about the
exchange ratio by calling (800) 737-3426.
If the five day average closing price of the NCBC common stock is between
$20.70 and $25.30 per share, the exchange ratio will be a floating exchange
ratio equal to $12.52 (based on currently outstanding shares of Piedmont common
stock and options to purchase Piedmont common stock) divided by the five day
average closing price per share of the NCBC common stock.
If, however, the five day average closing price of the NCBC common stock is
less than $20.70 per share, the exchange ratio will be fixed at .60499 shares
of NCBC common stock for each share of Piedmont common stock. If the five day
average closing price of the NCBC common stock is greater than $25.30 per
share, the exchange ratio will be fixed at .49499 shares of NCBC common stock
for each share of Piedmont common stock. Consequently, fluctuations in the
market price of the NCBC common stock outside the $20.70 to $25.30 per share
collar may result in the value of NCBC common stock received by Piedmont
shareholders in the merger being significantly higher or lower than at the date
the merger was publicly announced.
2
<PAGE>
Cash payments will be made instead of issuing fractional shares. For
example, if you hold 100 shares of Piedmont common stock and the exchange ratio
is .60499 (the fixed exchange ratio at the lower end of the collar), you will
receive 60 shares of NCBC common stock (100 x .60499 = 60.499), plus a cash
payment equal to the value of .499 of a share of NCBC common stock based upon
the average closing price for NCBC common stock for the five trading days
ending two trading days before the special meeting.
Share Information and Market Prices (See Pages 7 and 8)
NCBC common stock is traded on the Nasdaq National Market under the symbol
"NCBC." Piedmont common stock is traded on the American Stock Exchange under
the symbol "PDB." On December 27, 1999, the last trading day before we
announced the merger, NCBC common stock closed at $22.75 per share on the
Nasdaq National Market, and Piedmont common stock closed at $7.375 per share on
the American Stock Exchange. On February , 2000, NCBC common stock closed at
$ per share and Piedmont common stock closed at $ per share.
Generally, the Merger Will Be a Tax-Free Transaction for Piedmont Shareholders
(See Pages 32 and 33)
NCBC and Piedmont have each received a tax opinion from Bass, Berry & Sims
PLC to the effect that, based on certain facts, representations and
assumptions, the merger will be treated as a "reorganization" for federal
income tax purposes. It is a condition to completing the merger that each party
receives an updated legal opinion to that effect at closing.
Therefore, we expect that for United States federal income tax purposes,
Piedmont shareholders generally will not recognize any gain or loss on the
conversion of shares of Piedmont common stock into shares of NCBC common stock,
except in connection with any cash received instead of a fractional share. We
also expect the merger will not cause Piedmont, NCBC or NCBC's shareholders to
recognize any gain or loss for federal income tax purposes.
This federal income tax treatment may not apply to certain Piedmont
shareholders. Determining the actual tax consequences of the merger to you may
be complex, depending on your specific situation and factors outside our
control. You should consult your own tax advisor for a full understanding of
the merger's tax consequences to you.
Piedmont's Board of Directors Unanimously Recommends Shareholder Approval of
the Merger Agreement (See Page 18)
Piedmont's board of directors believes that the merger is in the best
interests of Piedmont and its shareholders and has unanimously approved the
merger agreement. Piedmont's board of directors unanimously recommends that you
vote "FOR" approval of the merger agreement and the related plan of merger.
Trident Securities Says the Merger Consideration is Fair to Piedmont
Shareholders (See Pages 19 through 24 and Appendix B)
Trident Securities, a division of McDonald Investments, Inc., has delivered
to Piedmont's Board of Directors its opinion that, as of the date of this
document, the exchange ratio is fair to the holders of Piedmont common stock
from a financial point of view. A copy of this opinion is attached to this
document as Appendix B. You should read this opinion completely to understand
the assumptions made, matters considered and limitations on the review made by
Trident Securities in providing its opinion.
3
<PAGE>
Piedmont to Hold Meeting on March 31, 2000 (See Page 13)
Piedmont shareholders will hold a special meeting at , local time, on
March 31, 2000, at , Hillsborough, North Carolina. Piedmont shareholders
will be asked to vote to approve the merger agreement and related plan of
merger and the merger of Piedmont with and into NCBC.
You can vote at the special meeting if you owned Piedmont common stock at
the close of business on February 25, 2000. As of February 25, 2000, there were
approximately shares of Piedmont common stock outstanding which were held
by approximately shareholders of record. Approval of the merger
agreement requires a favorable vote by a majority of the outstanding shares of
Piedmont common stock.
No Dissenters' Appraisal Rights (See Page 25)
Piedmont shareholders will not have dissenters' appraisal rights in
connection with the merger.
Pooling of Interests Accounting Treatment (See Page 31)
NCBC will account for the merger as a pooling of interests. This means that,
for accounting and financial reporting purposes, we will treat Piedmont as if
it had always been combined with NCBC.
Interests of Piedmont Management in the Merger (See Page 25)
In addition to their interests as shareholders, D. Tyson Clayton, Ted R.
Laws and Danny C. Lloyd will each enter into a three year employment agreement
with NCBC providing for a base salary, incentive compensation and employee
benefits.
Under certain circumstances, Mr. Clayton has the right to retire and become
a consultant to NCBC and continue receiving full benefits for the remaining
term of his employment agreement. In addition, seven other employees of
Hillsborough will enter into employment agreements which have two-year terms.
All of the existing directors of Piedmont will be appointed to a local
advisory board and, for service on that board, such directors are expected to
receive fees totaling $4,000 per year. Piedmont's existing emeritus directors
will also serve on the advisory board and will receive annual fees of $3,111.
In addition, consistent with Piedmont's past practices, NCBC will provide
certain post retirement health insurance benefits to three members of
Piedmont's Board of Directors who are current or former Hillsborough employees.
The cost of these health insurance benefits will not exceed $2,000 per year for
each recipient.
NCBC has agreed to indemnify present and former directors, officers,
employees and agents of Piedmont and its subsidiaries against liabilities
arising from their services to the Piedmont companies.
The Piedmont Board of Directors was aware of these interests and took them
into account in their decision to approve the merger agreement.
The Merger Agreement
Conditions That Must Be Satisfied for the Merger to Occur (See Pages 26 and
27)
Completion of the merger is subject to various conditions, including:
. approval of the merger agreement by Piedmont shareholders;
. receipt of all necessary regulatory and other consents and approvals;
4
<PAGE>
. execution of an employment agreement by D. Tyson Clayton and execution
of non-competition agreements by each member of the Piedmont Board of
Directors; and
. receipt of legal and tax opinions and a negative assurance letter from
Piedmont's independent auditors (as to Piedmont only).
Conditions to the merger may be waived by NCBC.
Termination of the Merger Agreement (See Pages 29 and 30)
NCBC and Piedmont can mutually agree to abandon the merger (and terminate
the merger agreement) at any time before the merger is completed, even after
obtaining shareholder approval. Also, either NCBC or Piedmont can decide,
without the consent of the other, to abandon the merger (and terminate the
merger agreement) if:
. the other party materially breaches a provision contained in the merger
agreement and does not (or cannot) correct the breach within 30 days;
. any regulatory authority fails to grant an approval we need to complete
the merger or issues an order preventing the merger;
. the merger has not been completed by September 30, 2000; or
. the Piedmont shareholders fail to approve the merger agreement.
In addition, Piedmont may terminate the merger agreement if its Board of
Directors has determined in good faith and as permitted by the merger agreement
to pursue an alternative acquisition proposal.
Merger Expected to Occur as Soon as Practicable After the Special Meeting
The merger will occur as soon as practicable after the approval of the
merger agreement by the Piedmont shareholders at the special meeting.
Regulatory Approvals We Must Obtain for the Merger (See Pages 30 and 31)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System and the Administrator of the Savings
Institutions Division, North Carolina Department of Commerce. NCBC filed an
application with the Federal Reserve Board on January 19, 2000 and the
Administrator on January 20, 2000 seeking their approval. After those approvals
have been obtained and after expiration of a 15 day statutory waiting period
following Federal Reserve approval, the merger may be completed. We are not
aware of any other material governmental or other approvals or actions required
to complete the merger. Should any other approval or action be required, it is
presently contemplated that the approval or action would be sought.
Stock Option Granted to NCBC by Piedmont (See Pages 33 through 35 and Appendix
C)
In connection with the merger agreement, Piedmont granted NCBC an option to
purchase shares of Piedmont common stock. Under this option, NCBC may purchase
up to 19.5% of the outstanding shares of Piedmont common stock at an exercise
price of $7.65 per share. The option limits NCBC's profit from its exercise of
the option in all cases to $1,035,000.
NCBC cannot exercise the option unless certain events occur within a
specified time period. These events can generally be described as business
combinations or acquisition transactions relating to Piedmont and certain
related events (other than the merger we are proposing in this document). We do
not know of any event that has occurred as of the date of this document that
would allow NCBC to exercise the option.
5
<PAGE>
Piedmont agreed to grant the option to NCBC in order to induce NCBC to enter
into the merger agreement. The option could have the effect of discouraging
other companies from trying to acquire Piedmont.
Recent Developments
Recent NCBC Financial Information
On January 13, 2000, NCBC announced its earnings and other financial data as
of and for the year ended December 31, 1999. NCBC had net income for 1999 of
$107.2 million, or $.99 per diluted share, compared to $88 million, or $.83 per
diluted share for 1998. The 1999 results included approximately $.01 per
diluted share of non-recurring merger charges primarily incurred in the fourth
quarter.
NCBC's return on average assets for 1999 was 1.66%, compared to 1.64% for
1998. Return on average equity was 21.51% for 1999, compared to 22.07% for
1998. Excluding the non-recurring merger charges, 1999 returns on average
assets and equity would have been 1.68% and 21.77%, respectively.
Consolidated assets were approximately $6.8 billion at December 31, 1999, an
11.8% increase over consolidated assets of approximately $6.1 billion at
December 31, 1998. Net loans at December 31, 1999 were $4 billion, an increase
of 18.2% over the $3.4 billion net loans at December 31, 1998.
Recent Piedmont Financial Information
On January 24, 2000, Piedmont announced its earnings and other financial
data as of and for the quarter and six month period ended December 31, 1999.
Piedmont had net income of $417,000, or $.17 per diluted share for the six
months ended December 31, 1999 compared to net income of $751,000, or $.28 per
diluted share for the same period in 1998. Piedmont's earnings for the six
months ended December 31, 1999 were lower than during the comparable 1998
period as a result of costs associated with opening two new branch offices.
Piedmont's return on average assets for the six month period ended December
31, 1999 was approximately .58%, compared to 1.16% for the same period in 1998.
Return on average equity was 4.28% for the six month period ended December 31,
1999, compared to 6.99% for the same period in 1998.
Consolidated assets were approximately $148.1 million at December 31, 1999,
a 14.6% increase over consolidated assets of approximately $129.2 million at
December 31, 1998. Net loans at December 31, 1999 were approximately $108.5
million, a 4.6% increase over the approximately $103.7 million of net loans at
December 31, 1998.
6
<PAGE>
Comparative Market Prices and Dividends
NCBC
NCBC common stock is quoted on the Nasdaq National Market under the symbol
"NCBC." The following table sets forth for the periods indicated the high and
low closing sale prices for NCBC common stock as reported at its regular close
on the Nasdaq National Market and the cash dividends declared per share of NCBC
common stock.
NCBC Common Stock
<TABLE>
<CAPTION>
Price Range
of Common
Stock
------------- Dividends
Fiscal Year/Quarter High Low Declared
------------------- ------ ------ ---------
<S> <C> <C> <C>
1998
First Quarter....................................... $21.56 $15.13 $ 0.07
Second Quarter...................................... 23.38 19.69 0.08
Third Quarter....................................... 25.75 16.50 0.08
Fourth Quarter...................................... 19.06 13.94 0.09
1999
First Quarter....................................... $24.38 $17.56 $ 0.09
Second Quarter...................................... 25.69 21.88 0.09
Third Quarter....................................... 23.88 20.50 0.09
Fourth Quarter...................................... 26.44 21.50 0.105
2000
First Quarter (through February 17, 2000)........... $21.94 $18.13 $0.105
</TABLE>
NCBC has paid regular dividends on its common stock without interruption
since its incorporation. NCBC's Board has the discretion to decide whether or
not to pay dividends in the future and the amount of any such dividends. NCBC's
ability to pay dividends to its shareholders may be limited by certain factors
including regulatory capital requirements and broad enforcement powers of the
Board of Governors of the Federal Reserve System.
Piedmont
Piedmont common stock is traded on the American Stock Exchange and is quoted
under the symbol "PDB". The following table sets forth for the periods
indicated the high and low closing sales prices for the Piedmont common stock
as reported on the American Stock Exchange and the cash dividends declared per
share of Piedmont common stock.
7
<PAGE>
Piedmont Common Stock
<TABLE>
<CAPTION>
Price Range
of Common
Stock
------------- Dividends
Fiscal Year/Quarter High Low Declared
------------------- ------ ------ ---------
<S> <C> <C> <C>
1998
First Quarter....................................... $11.13 $10.13 $0.10
Second Quarter...................................... 11.63 10.38 0.10
Third Quarter....................................... 11.38 10.63 0.10
Fourth Quarter...................................... 10.56 9.50 0.10
1999
First Quarter....................................... $10.13 $ 9.25 $0.10
Second Quarter...................................... 9.75 8.88 0.12
Third Quarter....................................... 9.25 8.50 0.12
Fourth Quarter...................................... 9.00 8.07 0.12
2000
First Quarter....................................... $ 8.94 $ 7.63 $0.12
Second Quarter...................................... 11.32 7.25 0.12
Third Quarter (through February 17, 2000)........... 11.00 9.56 --
</TABLE>
On December 27, 1999, the last trading day before the public announcement of
the merger, the high and low sales prices per share reported on the Nasdaq
National Market for the NCBC common stock were $23.47 and $22.13, respectively
(approximately $12.52 on an equivalent share basis for each share of Piedmont
common stock based on the exchange ratio computed as described elsewhere in
this proxy statement/ prospectus), and the high and low sales prices per share
reported on the American Stock Exchange for Piedmont common stock were $7.38
and $7.00, respectively.
On February 17, 2000, the high and low sales prices per share reported on
the Nasdaq National Market for the NCBC common stock were $18.375 and $17.875,
respectively. Piedmont shareholders are urged to obtain current quotations for
the market prices of NCBC common stock. See "The Merger--General."
NCBC and Piedmont Selected Historical Financial Data
NCBC Selected Historical Financial Data. The selected consolidated financial
data of NCBC for and as of the end of each of the periods indicated in the
five-year period ended December 31, 1998 have been derived from the audited
consolidated financial statements of NCBC which have been restated for
subsequent poolings of interests with First Financial Corporation on August 4,
1999 and Southeastern Mortgage of Tennessee, Inc. on August 20, 1999. The
selected consolidated financial data for each of the nine-month periods ended
September 30, 1999 and 1998, and as of September 30, 1999 and 1998, have been
derived from the unaudited consolidated financial statements of NCBC, which
reflect, in the opinion of management of NCBC, all adjustments, which include
only normal recurring adjustments, necessary for the fair presentation of the
financial data for such periods. The results for these interim periods are not
necessarily indicative of the results for the full year. The selected financial
data should be read in conjunction with the consolidated financial statements
of NCBC and the notes thereto which have been incorporated by reference in this
proxy statement/prospectus. All common share data have been restated to reflect
a two-for-one stock split, effective as of May 16, 1997, and a subsequent two-
for-one stock split effective on July 1, 1998. Pro forma data reflecting the
merger are not presented because the merger would not have a material effect on
the data as presented.
8
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
For the Year Ended December 31, September 30,
------------------------------------------------ -----------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Total interest income.. $204,187 $259,120 $301,560 $353,958 $403,108 $294,519 $342,714
Total interest
expense............... 89,062 132,462 158,025 182,151 200,212 145,703 169,531
-------- -------- -------- -------- -------- -------- --------
Net interest income.... 115,125 126,658 143,535 171,807 202,896 148,816 173,183
Provision for loan
losses................ 7,402 10,106 14,444 17,363 10,079 6,819 10,902
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses........... 107,723 116,552 129,091 154,444 192,817 141,997 162,281
Total other income..... 53,821 56,706 72,701 85,929 87,992 66,040 69,046
Total other expenses... 94,185 98,247 111,128 131,581 148,899 110,971 115,104
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes................. 67,359 75,011 90,664 108,792 131,910 97,066 116,223
Income taxes........... 21,671 24,163 30,778 36,338 43,890 32,224 37,561
-------- -------- -------- -------- -------- -------- --------
Net income............. $ 45,688 $ 50,848 $ 59,886 $ 72,454 $ 88,020 $ 64,842 $ 78,662
======== ======== ======== ======== ======== ======== ========
Per Common Share Data:
Earnings per share-
basic................. $ 0.45 $ 0.50 $ 0.59 $ 0.72 $ 0.85 $ 0.62 $ 0.74
Earnings per share-
diluted............... $ 0.44 $ 0.49 $ 0.58 $ 0.69 $ 0.83 $ 0.61 $ 0.73
Cash dividends
declared.............. $ 0.16 $ 0.18 $ 0.20 $ 0.23 $ 0.32 $ 0.23 $ 0.27
Performance Ratios:
Return on average
assets................ 1.54% 1.52% 1.50% 1.57% 1.64% 1.66% 1.64%
Return on average
equity................ 18.37% 18.09% 19.45% 20.86% 22.07% 21.87% 21.84%
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
------------------------------------------------------ ---------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total cash and cash
equivalents........... $ 171,972 $ 393,571 $ 205,285 $ 263,137 $ 335,862 $ 242,383 $ 273,403
Available-for-sale
securities............ 887,922 560,286 743,248 448,098 777,615 841,723 500,811
Held-to-maturity
securities............ 302,646 762,023 817,124 1,210,071 1,377,102 1,059,857 1,706,812
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total securities....... 1,190,568 1,322,309 1,560,372 1,658,169 2,154,717 1,901,580 2,207,623
Trading account
securities............ 13,507 20,159 31,812 98,332 62,737 38,362 18,723
Loans, net of unearned
discounts............. 1,672,180 2,032,195 2,472,285 2,753,130 3,372,044 3,224,302 3,859,508
Less allowance for loan
losses................ 27,317 32,331 39,130 47,076 53,018 50,496 58,119
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net loans.............. 1,644,863 1,999,864 2,433,155 2,706,054 3,319,026 3,173,806 3,801,389
Premises and equipment
net.................... 22,038 22,926 27,321 34,259 45,527 41,192 46,637
Broker/dealer customer
receivables........... 1,130 13,444 11,699 7,695 2,505 4,266 13,959
Other assets........... 88,533 85,290 119,209 145,319 169,917 152,671 181,835
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets........... $3,132,611 $3,857,563 $4,388,853 $4,912,965 $6,090,291 $5,554,260 $6,543,569
========== ========== ========== ========== ========== ========== ==========
Total deposits......... $2,267,428 $2,717,692 $3,143,875 $3,444,502 $4,194,986 $3,803,604 $4,396,315
Short-term borrowings
and other liabilities.. 305,681 456,649 369,826 507,993 683,236 553,107 529,280
Federal Home Loan Bank
advances.............. 323,118 372,799 396,109 389,884 731,610 733,324 1,017,982
Long term debt......... 6,783 6,381 156,065 156,252 6,372 6,372 6,372
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabilities...... 2,903,010 3,553,521 4,065,875 4,498,631 5,616,204 5,096,407 5,949,949
Capital trust pass-
through securities.... -- -- -- 49,884 49,896 49,893 49,906
Total shareholders'
equity................ 229,601 304,042 322,978 364,450 424,191 407,960 543,714
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity.. $3,132,611 $3,857,563 $4,388,853 $4,912,965 $6,090,291 $5,554,260 $6,543,569
========== ========== ========== ========== ========== ========== ==========
</TABLE>
9
<PAGE>
Piedmont Selected Historical Financial Data. The selected consolidated
financial data, except for performance ratios, of Piedmont for each of the
periods indicated in the five-year period ended June 30, 1999 have been derived
from the audited consolidated financial statements of Piedmont. The selected
consolidated financial data for each of the six-month periods ended December
31, 1999 and 1998 have been derived from the unaudited consolidated financial
statements of Piedmont, which reflect, in the opinion of management of
Piedmont, all adjustments, which include only normal recurring adjustments,
necessary for the fair presentation of the financial data for such periods. The
results of such interim periods are not necessarily indicative of the results
for the full year. The selected financial data should be read in conjunction
with Piedmont's consolidated financial statements, including the notes thereto,
incorporated by reference into this proxy statement/prospectus.
<TABLE>
<CAPTION>
Six Months Ended
For the Year Ended June 30, December 31,
--------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operating
Results Data:
Net interest income.... $ 4,129 $ 4,834 $ 4,932 $ 5,026 $ 5,088 $ 2,511 $ 2,554
Provision for possible
loan and lease
losses................ 120 96 658 96 33 27 9
Net income (loss)...... 1,243 1,695 (534) 1,643 1,200 751 417
Period End Balance Sheet
Data:
Total assets........... $104,013 $128,711 $122,761 $130,541 $140,089 $129,244 $148,114
Total deposits......... 76,745 73,361 84,860 89,840 99,339 91,900 109,480
Shareholders' equity... 13,646 37,050 20,416 21,606 19,561 20,694 18,997
Per Common Share Data:
Basic earnings per
common share.......... n/a 0.45 (0.20) 0.61 0.48 0.28 0.17
Diluted earnings per
common share.......... n/a 0.45 (0.20) 0.61 0.46 0.28 0.17
Cash dividends
declared.............. n/a 0.22 7.42 (1) 0.42 0.48 0.24 0.24
Book value............. n/a 14.01 7.42 7.85 7.73 7.91 7.59
Performance Ratios:
Return on average
assets................ 1.24% 1.42% (0.43)% 1.27% 0.91% 1.16% 0.58%
Return on average
equity................ 9.70% 6.15% (1.95)% 7.75% 5.77% 6.99% 4.28%
</TABLE>
- --------
(1)Includes special dividend of $7.00 per share.
10
<PAGE>
NCBC and Piedmont Equivalent Pro Forma Per Common Share Data (1)
The following unaudited table presents selected historical per common share
data for NCBC and Piedmont, NCBC pro forma per common share data and Piedmont
equivalent pro forma per common share data. NCBC pro forma per share data and
Piedmont equivalent pro forma per share data are presented assuming (1) an
exchange ratio of .5627 shares of NCBC common stock for each share of Piedmont
common stock assuming an average closing price for NCBC common stock on the
Nasdaq National Market for the five trading day period ending two trading days
prior to the special meeting equal to $22.25, which was the NCBC closing price
on the day prior to public announcement of the merger; (2) an exchange ratio of
.60499 shares of NCBC common stock for each share of Piedmont common stock
assuming a five day average NCBC closing price below $20.70 per share; and (3)
an exchange ratio of .49499 shares of NCBC common stock for each share of
Piedmont common stock assuming a five day average NCBC closing price above
$25.30 per share. All common share data have been restated to reflect stock
splits and stock dividends during the periods presented. This data should be
read in conjunction with the historical financial statements of NCBC and of
Piedmont, both of which have been incorporated by reference in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
Per Share of Common Stock
-----------------------------------------------------------
Net Net
Income (Loss) Income (Loss) Cash Book Value
(Basic)(2) (Diluted)(2) Dividends(3)(4) (End of Period)
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
NCBC--Historical
Year ended December 31,
1996.................. $ 0.59 $ 0.58 $0.20 $3.21
Year ended December 31,
1997.................. $ 0.72 $ 0.69 $0.23 $3.62
Year ended December 31,
1998.................. $ 0.85 $ 0.83 $0.32 $4.06
Nine months ended
September 30, 1999.... $ 0.74 $ 0.73 $0.27 $5.03
Piedmont--Historical (5)
Year ended December 31,
1996.................. $(0.07) $(0.07) $7.44 $7.14
Year ended December 31,
1997.................. $ 0.55 $ 0.55 $0.40 $7.66
Year ended December 31,
1998.................. $ 0.62 $ 0.59 $0.46 $7.91
Nine months ended
September 30, 1999.... $ 0.29 $ 0.28 $0.36 $7.71
NCBC--Pro forma at .5627
exchange ratio (6)
Year ended December 31,
1996.................. $ 0.58 $ 0.57 $0.20 $3.36
Year ended December 31,
1997.................. $ 0.72 $ 0.70 $0.23 $3.77
Year ended December 31,
1998.................. $ 0.85 $ 0.83 $0.32 $4.20
Nine months ended
September 30, 1999.... $ 0.73 $ 0.72 $0.27 $5.14
Piedmont--Equivalent pro
forma at .5627 exchange
ratio (1)
Year ended December 31,
1996.................. $ 0.33 $ 0.32 $0.11 $1.89
Year ended December 31,
1997.................. $ 0.41 $ 0.39 $0.13 $2.12
Year ended December 31,
1998.................. $ 0.48 $ 0.47 $0.18 $2.36
Nine months ended
September 30, 1999.... $ 0.41 $ 0.41 $0.15 $2.89
NCBC--Pro forma at
.60499 exchange ratio
(6)
Year ended December 31,
1996.................. $ 0.58 $ 0.57 $0.20 $3.35
Year ended December 31,
1997.................. $ 0.72 $ 0.70 $0.23 $3.77
Year ended December 31,
1998.................. $ 0.85 $ 0.83 $0.32 $4.20
Nine months ended
September 30, 1999.... $ 0.73 $ 0.72 $0.27 $5.13
Piedmont--Equivalent pro
forma at .60499
exchange ratio (1)
Year ended December 31,
1996.................. $ 0.35 $ 0.34 $0.12 $2.03
Year ended December 31,
1997.................. $ 0.44 $ 0.42 $0.14 $2.28
Year ended December 31,
1998.................. $ 0.51 $ 0.50 $0.19 $2.54
Nine months ended
September 30, 1999.... $ 0.44 $ 0.44 $0.16 $3.10
NCBC--Pro forma at
.49499 exchange ratio
(6)
Year ended December 31,
1996.................. $ 0.58 $ 0.57 $0.20 $3.36
Year ended December 31,
1997.................. $ 0.72 $ 0.70 $0.23 $3.78
Year ended December 31,
1998.................. $ 0.85 $ 0.84 $0.32 $4.21
Nine months ended
September 30, 1999.... $ 0.73 $ 0.72 $0.27 $5.15
Piedmont-Equivalent pro
forma at .49499
exchange ratio (1)
Year ended December 31,
1996.................. $ 0.29 $ 0.28 $0.10 $1.66
Year ended December 31,
1997.................. $ 0.36 $ 0.35 $0.11 $1.87
Year ended December 31,
1998.................. $ 0.42 $ 0.42 $0.16 $2.08
Nine months ended
September 30, 1999.... $ 0.36 $ 0.36 $0.13 $2.55
</TABLE>
- --------
(footnotes on following page)
11
<PAGE>
Footnotes to preceding page
(1) Represents NCBC data equivalent to one share of Piedmont common stock
computed by multiplying NCBC pro forma data by the exchange ratios of
.5627, .60499 and .49499 described in the lead-in paragraph to this table.
(2) Net income per common share (basic) is based on the average number of
common shares outstanding during the periods presented. Diluted net income
per common share includes an adjustment for the assumed conversion of all
potentially dilutive securities.
(3) NCBC declared quarterly dividends per share of $0.07 beginning the fourth
quarter of 1997. In the second quarter of 1998, the dividend was increased
to $0.08 per common share and was increased to $0.09 per common share in
the fourth quarter of 1998.
(4) Piedmont has consistently paid quarterly dividends since 1995. In December
1996, Piedmont's Board of Directors paid a $7.00 per share special
dividend. In December 1998, Piedmont increased its regular quarterly
dividend to $0.12 per share.
(5) Piedmont's fiscal year end is June 30. Piedmont historical data has been
converted to and presented on a calendar year basis consistent with NCBC's
historical data.
(6) NCBC pro forma gives effect to the merger of Piedmont with and into NCBC,
accounted for as a pooling of interests for the periods indicated.
12
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
We are mailing this document to you on or about March , 2000. We are also
sending you a notice of the Piedmont special meeting and a form of proxy for
use at the special meeting.
Date, Time and Place; Matters to be Considered
The special meeting will be held at , Hillsborough, North
Carolina, on March 31, 2000 at , local time. The purpose of the special
meeting is to consider and vote upon the approval and adoption of the merger
agreement and related plan of merger. Only holders of Piedmont common stock of
record at the close of business on February 25, 2000, the record date, will be
entitled to receive notice of and to vote at the special meeting.
Vote Required
Under the North Carolina Business Corporation Act, the affirmative vote of
the holders of a majority of the outstanding shares of Piedmont common stock
entitled to vote is required to approve and adopt the merger agreement. On the
record date, there were approximately holders of record of Piedmont
common stock and shares of Piedmont common stock outstanding and entitled
to vote. Each share is entitled to one vote. On the record date, the directors
and officers of Piedmont beneficially owned, and expressed their intent to vote
in favor of the merger, a total of approximately 9.8% of the outstanding shares
of Piedmont common stock. In addition, Hillsborough's Employee Stock Ownership
Plan and Trust held approximately 8.45% of the outstanding shares of Piedmont
common stock (composed of 167,285 allocated and 44,315 unallocated shares), and
three Piedmont directors are trustees of the Plan, with the discretionary power
to vote unallocated shares and all allocated shares for which voting
instructions are not received from Plan participants. At the date of this proxy
statement/prospectus, neither NCBC nor any of its affiliates owned any shares
of Piedmont common stock.
Voting of Proxies
Shares of Piedmont common stock represented by properly executed proxies
received at or prior to the special meeting will be voted at the special
meeting in the manner specified. If you make no specification on your returned
proxy form, your proxy will be voted FOR approval and adoption of the merger
agreement and related plan of merger. If you abstain from voting your shares at
the special meeting, your shares will be counted solely for purposes of
determining whether a quorum exists. Otherwise failures to vote, abstentions
and broker non-votes have the same effect as a vote AGAINST the proposal.
You are requested to complete, date and sign the accompanying proxy and
return it promptly to Piedmont in the enclosed postage prepaid envelope even if
you plan to attend the special meeting in person.
We have no knowledge of any matters to be presented at the special meeting,
other than the matters described in this proxy statement/prospectus. If other
matters do properly come before the special meeting, we intend that shares
represented by properly submitted proxies will be voted, or not voted, by and
at the discretion of the persons named as proxies in the proxy card.
Revocability of Proxies
The grant of a proxy on the enclosed form of proxy does not preclude you
from voting in person or otherwise revoking a proxy. If your shares are held in
your name and not through a broker or bank, you can change your vote at any
time before your proxy is voted at the special meeting by:
. prior to the exercise of the proxy delivering to Peggy S. Walker,
Secretary of Piedmont, a duly executed revocation or a new proxy card
bearing a later date; or
. voting in person at the special meeting.
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If you instructed a broker to vote your shares, you must follow your
broker's directions for changing your instructions. Attendance at the special
meeting will not in and of itself constitute revocation of a proxy.
Solicitation of Proxies
NCBC and Piedmont will share the cost of printing and mailing this proxy
statement/prospectus based on relative asset sizes of the parties as of
September 30, 1999. Piedmont will bear the cost of the solicitation of proxies
in connection with the special meeting. In addition to solicitation by mail and
by the paid solicitor, the directors, officers and employees of Piedmont may
solicit proxies by telephone or telegram or in person. These people will not be
additionally compensated, but will be reimbursed for reasonable out-of-pocket
expenses incurred in connection with the solicitation. Arrangements may also be
made with brokerage firms, nominees, fiduciaries and other custodians, for the
forwarding of solicitation materials to the beneficial owners of shares held of
record by those persons, and Piedmont will reimburse those persons for their
reasonable out-of-pocket expenses in connection with the solicitation. Piedmont
has engaged Regan & Associates, Inc. to consult with Piedmont and to assist in
the delivery of proxy materials and the solicitation of proxy votes. For these
services, Piedmont will pay Regan $5,750 and will reimburse Regan's expenses if
the merger is approved by Piedmont shareholders. If the merger is not approved
by Piedmont's shareholders, Regan will only receive reimbursement for its
expenses.
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THE MERGER
The descriptions of the terms and conditions of the merger, the merger
agreement, and any related documents in this proxy statement/prospectus are
qualified in their entirety by reference to the copy of the merger agreement
and related plan of merger attached as Appendix A to this proxy
statement/prospectus, to the registration statement of which this proxy
statement/prospectus is a part and to the exhibits to the registration
statement.
General
The merger agreement provides for the merger of Piedmont with and into NCBC.
NCBC will be the surviving corporation of the merger. Hillsborough will become
a wholly owned subsidiary of NCBC as a result of the merger.
Under the merger agreement, you will receive shares of NCBC common stock in
exchange for shares of Piedmont common stock you own. Each share of Piedmont
common stock you own will be exchanged for NCBC common stock at the exchange
ratio. The exchange ratio is a floating ratio equal to $12.52 (based on
currently outstanding shares of Piedmont common stock and options to purchase
Piedmont common stock) divided by the average closing price of NCBC common
stock on the Nasdaq National Market for the five trading days ending two
trading days prior to the special meeting. However, if the five day average
NCBC closing price per share is less than $20.70, the exchange ratio will be
fixed at .60499 shares of NCBC common stock for each share of Piedmont common
stock and if the five day average NCBC closing price per share is more than
$25.30, the exchange ratio will be fixed at .49499 shares of NCBC common stock
for each share of Piedmont common stock.
NCBC will not issue fractional shares in the merger. Instead, you will
receive a cash payment, without interest, for the value of any fraction of a
share of NCBC common stock that you would otherwise be entitled to receive.
If Piedmont or NCBC effects any stock split, reverse stock split, stock
dividend or similar change in its capital accounts prior to the effective time,
the exchange ratio will be appropriately adjusted in order to give effect to
such change. Each of the shares of Piedmont common stock held by Piedmont or
any of its subsidiaries or by NCBC or any of its subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted, will be canceled and retired at the effective time and no exchange
or payment will be made with respect to such shares.
The merger will be effected under the corporate laws of Tennessee and North
Carolina. The merger will become effective when a certificate of merger has
been duly filed by the Secretary of State of North Carolina and articles of
merger have been duly filed by the Secretary of State of Tennessee. We
anticipate this will occur as soon as practicable after the special meeting.
The transaction is intended to qualify as both (1) a "pooling-of-interests"
for accounting and financial reporting purposes and (2) a tax-free
"reorganization" for federal income tax purposes.
Background of the Merger
Initial Contacts Between NCBC and Piedmont. In June 1999, three officers of
NCBC called on D. Tyson Clayton, President of Piedmont, at Piedmont's offices.
The NCBC representatives described NCBC to Mr. Clayton, asked general questions
about Piedmont, and expressed an interest in a combination of the two
companies. Following that meeting, an NCBC representative called Mr. Clayton by
telephone and tentatively proposed that NCBC acquire Piedmont and mentioned a
range of values that NCBC was willing to consider in a share exchange
transaction. After conferring with M. Marion Clark, Chairman of the Board,
Mr. Clayton rejected the proposal, which was regarded as not sufficiently
favorable to justify further discussion.
In the late summer of 1999, an investment banker representing NCBC called on
Mr. Clayton and expressed NCBC's interest in making a proposal to acquire
Piedmont on terms that would be more favorable to Piedmont's shareholders than
what had been discussed earlier. Clayton told NCBC's representative that
15
<PAGE>
Piedmont would consider a proposal in the range of values mentioned, and NCBC
made a tentative, oral proposal. NCBC subsequently submitted a written proposal
in September 1999.
Board Meeting on October 5, 1999 to Consider Proposal. Piedmont then
contacted Trident Securities, a division of McDonald Investments, Inc. Trident
is an experienced business and financial advisor to banks and savings
associations. On October 5, 1999, Piedmont's Board of Directors met with
Trident to discuss NCBC's proposal.
Trident advised the Board that NCBC is a strong company and that its
proposal was attractive from a financial point of view. The Board decided to
pursue discussions with NCBC but with reservations and questions (i) because
Piedmont's earnings in current periods were down due to investments in two new
branch offices and other new business initiatives, which might result in lower
current values that undervalue the company's long term prospects; (ii) because
Trident advised the Board that NCBC should be able to increase the value of its
offer based on Trident's analysis of potential cost savings, contribution
analysis and other factors; and (iii) because the Board wanted more information
about the possibility of higher competing offers from other potential
acquirers. The Board directed Trident to study these issues; to discuss with
NCBC the prospects of increasing its offer; and to report to the Board at a
future meeting.
Board Meeting on October 25, 1999 with Business and Legal Advisors. On
October 25, 1999, the Board met with its legal counsel and Trident. Legal
counsel reviewed with the directors the legal and fiduciary obligations
relevant to the consideration of proposed changes-of-control, mergers and
acquisitions and similar transactions.
Trident reported to the Board that NCBC had agreed to increase its offer in
terms of the number of shares it was willing to exchange for Piedmont's shares,
but that NCBC had stated (i) that its modified offer was its best and final
offer as to the share exchange ratio; and (ii) that its offer was conditioned
on Piedmont negotiating exclusively with NCBC and not soliciting other,
competitive offers. If Piedmont elected to solicit competitive offers, the NCBC
offer would be withdrawn.
Trident reviewed with the Board the possibility that a superior offer might
be obtained from another company. It identified each company which had both the
ability and a likely interest in making an attractive offer to acquire
Piedmont. Trident then discussed with the Board each company's ability to
acquire Piedmont without diluting its own shareholders' interests in their
companies and the likelihood that each one may wish to acquire Piedmont. The
two companies deemed most likely to have an interest were companies that had
approached Piedmont about possible mergers in the past. In both cases,
discussions had been terminated. Trident advised the Board that both of those
companies were unlikely to be able or willing to make offers now that would be
superior to the NCBC proposal from a financial point of view in light of the
factors that had caused discussions to be terminated in the past, and in light
of subsequent developments in the markets for the stocks of those companies.
Trident reviewed the advantages and disadvantages of the NCBC offer with the
Board and advised the Board that, on balance (i) the NCBC offer was an
attractive offer from a financial point of view; (ii) in Trident's view, it was
unlikely that another company would be willing or able to make a more
attractive offer; and (iii) based on Trident's analysis, Piedmont would likely
not be able to create equivalent values for its shareholders within the
foreseeable future, if it continued to operate as an independent company with
its current business plan. After considering these and other issues, the Board
of Directors agreed to meet with representatives of NCBC for further
discussions.
Meeting Between Board of Directors and NCBC Officers. On October 27, 1999,
the Board of Directors met with three senior executives of NCBC. The NCBC
executives discussed with the Board NCBC's operating strategies and
philosophies, its financial performance, its North Carolina operations and its
plans for a possible combination with Piedmont. Those representatives
reiterated and explained NCBC's pending proposal. They emphasized that NCBC's
proposal was subject to a satisfactory examination of Piedmont's books and
records. NCBC asked the Board to enter into a non-binding letter of intent that
would provide terms for acquisition of Piedmont after examination of books and
records and subject to the negotiation of a definitive agreement.
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Following this meeting with NCBC, the Board met separately. The directors
discussed Piedmont's prospects as an independent company and the advantages and
disadvantages of the NCBC proposal. The proposed letter of intent provided for
Piedmont to grant to NCBC an option to acquire Piedmont common stock in the
event that Piedmont terminated discussions with NCBC in order to pursue
discussions with another company. Trident and legal counsel reviewed with the
Board the financial effect of the option and legal counsel explained legal and
fiduciary issues presented by such option agreements.
The Board did not reach a final decision at this meeting.
Agreement to Letter of Intent. The Board met with Trident and legal counsel
on November 1, 1999. It reviewed NCBC's proposed letter of intent closely. It
discussed the merits of the NCBC proposal and concluded based on Trident's
advice that it was unlikely that a superior proposal would be obtained from
another company. The Board also agreed that the long term best interests of
Piedmont's shareholders would be served better if Piedmont combines with NCBC
than if it continues to operate as an independent company. It therefore agreed
to sign the letter of intent and to permit NCBC to perform a due diligence
examination of Piedmont's books and records.
Due Diligence Examination of Both Companies. During November 1999, NCBC
conducted a detailed examination of Piedmont's books and records, and there
were extensive discussions between the parties and their representatives about
questions arising from that process. Ultimately, all issues were resolved
satisfactorily to both parties.
Also during November 1999, Trident representatives acting on Piedmont's
behalf traveled to NCBC's headquarters in Memphis, Tennessee and interviewed
NCBC's chief financial officer and other NCBC senior officers.
Board of Directors Meeting on December 2, 1999. The Board of Directors met
with Trident on December 2, 1999. On that occasion, management reported to the
Board the outcome of NCBC's examination of Piedmont. Trident reported to the
Board the outcome of its interviews and investigation at the NCBC offices in
Tennessee. Trident's report to the Board was favorable. The Board also reviewed
alternative approaches for the share exchange. Different alternatives were
discussed with Trident's advice.
Following the December 2 meeting, Piedmont received drafts of a proposed
merger agreement and other legal documents. Copies were distributed to the
Board of Directors. The Board met again on December 14, 1999. On that occasion,
with the assistance of Trident and legal counsel, the Board (i) reviewed the
proposed merger agreement and related documents; (ii) discussed in detail
granting the stock option to NCBC and (iii) discussed alternative approaches to
an agreed ratio for the exchange of NCBC shares for Piedmont shares.
As for the exchange ratio, the Board recognized that it could not predict
the future course of NCBC stock prices. With Trident's advice, the Board
considered the advantages and disadvantages of a fixed price, a fixed exchange
ratio and a fixed price with collars. It reviewed current general market trends
and the history of the market prices of NCBC's common stock in relevant
periods. After discussing the issues, the Board directed management and Trident
to seek to negotiate a fixed price with collars with NCBC.
At the December 14 meeting, the Board agreed with NCBC to extend the letter
of intent for an additional period so that agreement could be reached on open
terms and final documents could be prepared for review by the Board.
Final Agreement Reached on December 27, 1999. On December 27, the Board met
with Trident and Piedmont's legal counsel. Trident reviewed the proposed
financial terms in detail. It then provided the Board with detailed comparative
data, including:
. comparative financial and pricing ratios for mergers and acquisitions of
savings banks and savings associations during the last twelve months
nationally, regionally, and in North Carolina;
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<PAGE>
. detailed financial and pricing ratios for North Carolina transactions
during the past three years; and
. an analysis of Piedmont's pro forma contributions to NCBC's assets,
loans, deposits, equity and net income.
Trident advised the Board that, in its judgment, it was very unlikely that
any other prospective acquirer could make an offer that would be more favorable
to Piedmont's shareholders than the NCBC offer. This was based on dilution
analyses, Piedmont's past experience with the two most likely acquirers and
recent market trends which Trident reviewed. Trident also advised the Board
that, based on Piedmont's growth rate and other factors reviewed by Trident,
Trident believed that Piedmont would not be able to achieve values for its
shareholders in the intermediate future that would equal what could be achieved
by entering into the proposed merger agreement. Further, Trident provided the
Board of Directors with its opinion that the terms of the proposed transaction
were fair to Piedmont and its shareholders from a financial point of view.
Based on its earlier determinations, reports received from advisors, and its
own review, the Board concluded that the proposed agreement was the result of
arm's-length negotiations and that entering it was in the best interests of the
shareholders. The Board's conclusions were based on the directors'
consideration of the following factors:
. the financial terms of the proposed agreement;
. the Board's conclusion, based on Trident's advice, that it was unlikely
that other prospective acquirers could match or exceed NCBC's proposal
from a financial point of view;
. a comparison of the terms of the agreement with comparable transactions
in North Carolina and elsewhere;
. information concerning the business, financial condition, results of
operations and prospects of NCBC;
. competitive factors and trends in the banking industry and the Board's
assessment of Piedmont's and NCBC's strategic prospects in Piedmont's
market areas;
. the Board's review with its legal and financial advisors of the
provisions of the merger agreement, including the expected treatment of
the merger as a tax-free "reorganization" for federal tax purposes;
. Trident's opinion that the consideration to be received under the
agreement is fair from a financial point of view to the holders of
Piedmont's common stock;
. alternatives to acquisition, including continued operation as an
independent company in light of possible economic conditions and
Piedmont's likely prospects, banking markets, the competitive
environment and the economy generally; and
. the value to be received by holders of Piedmont's shares in relation to
the historical trading prices, book value and earnings per share of
Piedmont's common stock.
The Board also considered provisions made in the agreement for benefits to
employees, management and members of the Board. It concluded that those terms
were fair and reasonable.
While Piedmont's directors considered the foregoing and other factors
individually, the Board did not collectively assign any specific or relative
weights to the factors considered and did not make any determination with
respect to any individual factor. The Board collectively made its determination
with respect to the merger agreement based on the unanimous conclusion reached
by its members, in light of the factors that each of them considered
appropriate, that the agreement is in the best interests of Piedmont's
shareholders.
Recommendation of Piedmont Board of Directors
The Board of Directors of Piedmont believes that the proposed merger is in
the best interests of Piedmont and Piedmont's shareholders and recommends that
Piedmont shareholders vote FOR approval and adoption of the merger agreement
and related plan of merger. The Board of Directors of Piedmont unanimously
approved the merger agreement at its meeting on December 27, 1999, which was
attended by all of the Piedmont directors.
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Opinion of Financial Advisor to Piedmont
Pursuant to an engagement letter dated December 2, 1999 between Piedmont and
Trident, Piedmont retained Trident to act as its financial advisor in
connection with a possible merger and related matters. As part of its
engagement, Trident agreed, if requested by Piedmont, to render an opinion with
respect to the fairness, from a financial point of view, to the holders of
Piedmont common stock, of the exchange ratio as set forth in the agreement.
Trident is a nationally recognized specialist for the financial services
industry, in general, and for thrifts in particular. Trident is regularly
engaged in evaluations of similar businesses and in advising institutions with
regard to mergers and acquisitions, as well as raising debt and equity capital
for such institutions. Piedmont selected Trident as its financial advisor based
upon Trident's qualifications, expertise and reputation in such capacity.
Trident delivered a written opinion dated December 27, 1999 that the
exchange ratio was fair to Piedmont shareholders, from a financial point of
view, as of the date of such opinion. Trident updated its December 27, 1999
opinion as of the date of this proxy statement/prospectus. No limitations were
imposed by Piedmont on Trident with respect to the investigations made or the
procedures followed in rendering its opinion.
The full text of Trident's written opinion to the Piedmont Board, dated as
of the date of this proxy statement/prospectus, which sets forth the
assumptions made, matters considered and extent of review by Trident, is
attached as Appendix B and is incorporated herein by reference. You should read
the opinion carefully and in its entirety in conjunction with this proxy
statement/prospectus. The following summary of Trident's opinion is qualified
in its entirety by reference to the full text of the opinion. Trident's opinion
is addressed to the Piedmont Board and does not constitute a recommendation to
any shareholder of Piedmont as to how such shareholder should vote at the
Piedmont special meeting described in this document.
Trident, in connection with rendering its opinion:
. reviewed Piedmont's Annual Reports to Shareholders and Annual Reports on
Form 10-K for each of the years ended June 30, 1999, June 30, 1998 and
June 30, 1997, including the audited financial statements contained
therein; and Piedmont's Quarterly Report on Form 10-Q for the six month
period ended December 31, 1999;
. reviewed NCBC's Annual Reports to Shareholders and Annual Reports on
Form 10-K for each of the years ended December 31, 1998, December 31,
1997 and December 31, 1996, including the audited financial statements
contained therein, and unaudited financial information from publicly-
available sources for the year ended December 31, 1999;
. reviewed certain other public and non-public information, primarily
financial in nature, relating to the businesses, earnings, assets and
prospects of Piedmont and NCBC provided to Trident or publicly
available;
. participated in meetings and telephone conferences with members of
senior management of Piedmont and NCBC concerning the financial
condition, business, assets, financial forecasts and prospects of the
companies, as well as other matters Trident believed relevant to its
inquiry;
. reviewed certain stock market information for Piedmont common stock and
NCBC common stock and compared it with similar information for certain
companies whose securities are publicly traded;
. compared the results of operations and financial condition of Piedmont
and NCBC with that of certain companies which Trident deemed to be
relevant for purposes of its opinion;
. reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which Trident deemed to be relevant for
purposes of its opinion;
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. reviewed the merger agreement and its schedules and exhibits and certain
related documents; and
. performed such other reviews and analyses as Trident deemed appropriate.
The oral and written opinions provided by Trident to Piedmont were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinion, Trident relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by Piedmont and NCBC to Trident for purposes of
rendering its opinion. Trident did not assume any obligation to independently
verify any of the provided information as being complete and accurate in all
material respects. With regard to the financial forecasts established and
developed by Trident with the input of management of Piedmont and NCBC, as well
as projections of cost savings and operating synergies, Trident assumed that
this information reflects the best available estimates and judgments of
Piedmont and NCBC as to the future performance of the separate and combined
entities and that the projections provided a reasonable basis upon which
Trident could formulate its opinion. Neither Piedmont nor NCBC publicly
discloses such internal management projections of the type utilized by Trident
in connection with Trident's role as financial advisor to Piedmont. Therefore,
such projections cannot be assumed to have been prepared with a view towards
public disclosure. The projections were based upon numerous variables and
assumptions that are inherently uncertain, including, among others, factors
relative to the general economic and competitive conditions facing Piedmont and
NCBC. Accordingly, actual results could vary significantly from those set forth
in the respective projections.
Trident does not claim to be an expert in the evaluation of loan portfolios
or the allowance for loan losses with respect thereto and therefore assumes
that such allowances for Piedmont and NCBC are adequate to cover such losses.
In addition, Trident does not assume responsibility for the review of
individual credit files and did not make an independent evaluation, appraisal
or physical inspection of the assets or individual properties of Piedmont or
NCBC, nor was Trident provided with such appraisals. Furthermore, Trident
assumes that the merger will be consummated in accordance with the terms set
forth in the agreement, without any waiver of any material terms or conditions
by Piedmont, and that obtaining the necessary regulatory approvals for the
merger will not have an adverse effect on either institution separately or the
combined entity. Moreover, in each analysis that involves per share data for
Piedmont, Trident adjusted the data to reflect full dilution, i.e., the effect
of the exercise of all outstanding stock options. In particular, Trident
assumed that the merger will be accounted for as a "pooling-of-interests" in
accordance with generally accepted accounting principles.
In connection with rendering its opinion to the Piedmont Board, Trident
performed a variety of financial and comparative analyses, which are briefly
summarized below. Such summary of analyses does not purport to be a complete
description of the analyses performed by Trident. Moreover, Trident believes
that these analyses must be considered as a whole and that selecting portions
of the analyses and the factors Trident considered, without considering all
such analyses and factors, could create an incomplete understanding of the
scope of the process underlying the analyses and, more importantly, the opinion
derived from them. The preparation of a financial advisor's opinion is a
complex process involving subjective judgments and is not necessarily
susceptible to partial analyses or a summary description of such analyses. In
its full analysis, Trident also included assumptions with respect to general
economic, financial market and other financial conditions. Furthermore, Trident
drew from its past experience in similar transactions, as well as its
experience in the valuation of securities and its general knowledge of the
banking industry as a whole. Any estimates in Trident's analyses were not
necessarily indicative of actual future results or values, which may
significantly diverge more or less favorably from such estimates. Estimates of
company valuations do not purport to be appraisals nor to necessarily reflect
the prices at which companies or their respective securities actually may be
sold. None of the analyses performed by Trident were assigned a greater
significance by Trident than any other in deriving its opinion.
Comparable Transaction Analysis: Trident reviewed and compared financial
performance and pricing information for groups of comparable pending and
completed thrift merger transactions (through December 21, 1999) it deemed
pertinent to an analysis of the merger. The pricing ratios for the merger were
compared to the
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average and median ratios of (i) price to last twelve months earnings, (ii)
price to tangible book value, (iii) price to capital-adjusted tangible book
value, and (iv) tangible book value premium to core deposits for each of the
following comparable transaction groups:
. all recent thrift acquisitions in the United States announced within the
preceding 12 months ("All Recent Median");
. all thrift acquisitions in the United States announced within the
preceding 90 days ("Last 90 Days Median");
. all pending thrift acquisitions in the United States that have been
announced but have yet to close ("All Pending Median");
. all Southeast thrift acquisitions announced within the preceding 12
months ("Southeast Recent Median");
. all North Carolina thrift acquisitions announced within the preceding 12
months ("North Carolina Recent Median");
. all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with assets of $100-$200
Million ("Assets $100mm-$200mm Median")
. all thrift acquisitions in the United States announced within the
preceding 12 months with a total deal size of $20-$50 Million ("Deal
Size $20mm-$50mm Median")
. all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on average
assets of 70bp-90bp ("ROAA 70bp-90bp Median")
. all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on average
equity of 5%-7% ("ROAE 5%-7% Median")
. all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with tangible capital of
12%-16% ("Tangible Capital 12%-16% Median")
. all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with non-performing
assets/assets of 0.5%-1.0% ("NPAs/Assets 0.5%-1.0% Median")
. Guideline thrift acquisitions announced since January 1, 1998 involving
acquired thrifts with asset sizes, capital levels, and returns on
average equity similar to Piedmont ("Guideline Median")
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The following table represents a summary analysis of the comparable
transactions analyzed by Trident based on the announced transaction values:
<TABLE>
<CAPTION>
Price/Capital Tangible Book
Price/Tangible Adjusted Price/LTM Premium/Core
Deals Book Value Tangible Book (2) Earnings (3) Deposits (4)
----- -------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
All Recent Median....... 71 173.4% 208.5% 23.6x 11.2%
Last 90 Days Median..... 15 160.4% 199.6% 25.6x 10.9%
All Pending Median...... 38 171.7% 199.6% 24.5x 10.9%
Southeast Recent
Median................. 14 129.9% 206.1% 23.0x 9.3%
North Carolina Recent
Median................. 6 120.9% 165.0% 22.8x 6.2%
Assets $100mm-$200mm
Median................. 19 155.8% 194.3% 21.5x 10.8%
Deal Size $20mm-$50mm
Median................. 17 140.7% 211.3% 24.0x 11.2%
ROAA 70bp-90bp Median... 12 186.6% 233.7% 23.1x 13.6%
ROAE 5%-7% Median....... 13 160.4% 206.1% 25.3x 10.8%
Tangible Capital 12%-16%
Median................. 14 157.9% 206.1% 24.5x 9.3%
NPAs/Assets 0.5%-1.0%
Median................. 17 140.7% 170.4% 18.3x 7.1%
Guideline Median........ 12 127.7% 168.1% 22.6x 6.2%
Piedmont (1) ........... 158.9% 240.6% 33.2x 14.1%
</TABLE>
- --------
(1) Piedmont pricing data based on per share consideration of $12.52
(2) Price and capital adjusted to eliminate the impact of excess capital
(assumes 7% capital is adequate)
(3) Last 12 months earnings per share
(4) Tangible book value premium as a percentage of core deposits
Based on multiples of tangible book value, the value of this transaction
falls within the range of similar transactions represented by the comparable
groups. The price to capital-adjusted tangible book value, price to twelve
months earnings, and tangible book value premium to core deposits ratios for
the merger all exceed the median ratios for the comparable groups. In addition,
when compared to the Guideline Median comparable group, this transaction is
valued higher by all methods of comparison used.
Contribution Analysis: Trident compared the contribution of Piedmont to the
pro forma company relative to the approximate ownership of the pro forma
company. The analysis indicated that Piedmont shareholders would hold
approximately 1.2% of the pro forma shares of NCBC. Piedmont's approximate
contributions are listed below by category:
<TABLE>
<CAPTION>
Piedmont
Contribution
------------
<S> <C>
Assets....................................................... 2.1%
Loans........................................................ 2.6%
Deposits..................................................... 2.3%
Equity....................................................... 3.3%
Tangible equity.............................................. 3.4%
Last twelve month reported earnings (1)...................... 1.5%
Pro Forma Ownership.......................................... 1.2%
</TABLE>
--------
(1) Includes estimated cost savings of 20% attributable to the merger
Accretion/Dilution Analysis: On the basis of financial projections developed
with the assistance of management, and estimates of on-going cost savings
accruing to the pro forma company, as well as estimated one-time costs related
to the transaction, Trident compared pro forma equivalent earnings, cash
dividends, book value and tangible book value to the stand-alone projections
for Piedmont and NCBC. No assumptions were made regarding revenue enhancements
and capital management following the completion of the transaction.
22
<PAGE>
The accretion/dilution analysis demonstrated, among other things, the merger
would result in:
. 46% accretion to earnings for Piedmont shareholders in the first year of
combined operations, and increasing over the period of the analysis;
. zero dilution to earnings for NCBC shareholders in the first year of
combined operations;
. 52% lower cash dividends for Piedmont shareholders, assuming the NCBC
Board maintained its current dividend policy;
. no change in cash dividends for NCBC shareholders;
. 65% dilution to book value and tangible book value for Piedmont
shareholders; and
. 2.2% accretion to book value and tangible book value for NCBC
shareholders.
Discounted Cash Flow Analysis: Trident prepared a discounted cash flow
analysis with regard to Piedmont's estimated acquisition value through
September 2004. This analysis utilized a discount rate of 15%; assumed asset
growth rates between 8.9% and 15.1%; assumed return on average assets of 0.70%
to 0.82%; and assumed earnings multiples of between 23x and 28x. The analyses
resulted in a range of present values of between $10.21 and $11.53 for
acquisition values. This analysis was based on estimates by Trident in
determining the earnings multiples used in projecting Piedmont's acquisition
value and is not necessarily indicative of actual values or actual future
results and does not purport to reflect the prices at which any securities may
trade at the present or at any time in the future. Trident noted that the
discounted cash flow analysis was included because it is a widely used
valuation methodology, but noted that the results of such methodology are
highly dependent upon the numerous assumptions that must be made, including
earnings growth rates, dividend pay-out rates and discount rates.
Due Diligence Examination of NCBC: Trident reviewed its on-site due
diligence examination of NCBC. Trident examined NCBC's historical balance
sheets and income statements, along with recent operating results and a variety
of financial ratios through September 30, 1999. Trident discussed NCBC's
business strategy, strengths and weaknesses, profitability, growth, net
interest margin, non-interest income, operating expenses, intangible assets,
borrowed funds, market area, capital, asset quality and reserve coverage,
concentrations of credit and loan portfolio composition, interest-rate risk,
year 2000 preparations, subsidiary activities, culture, use of technology,
stock pricing, recent bank analysts' reports, and other issues.
Comparable Company Analysis: Trident reviewed and compared stock market data
and selected financial information for NCBC with corresponding information for
actively-traded banks possessing similar financial and performance
characteristics as NCBC. The comparison banks ("Comparable Groups") were
grouped according to the parameters listed below:
<TABLE>
<CAPTION>
Companies
Comparable Groups in Group
----------------- ---------
<S> <C>
Median for All U.S. Banks.......................................... 454
Median for Southeast Banks......................................... 104
Median for Tennessee Banks......................................... 5
Median for Banks with Assets--$5-$10 Billion....................... 33
Median for Banks with Market Capitalization--$2-$3 Billion......... 10
Median for Banks with Return on Average Assets--150bp-175bp........ 45
Median for Banks with Return on Average Equity--20%-25%............ 26
Median for Banks with Tangible Capital Median--7%-9%............... 146
Median for Guideline Companies*.................................... 6
</TABLE>
- --------
* consists of actively-traded companies of similar asset size, tangible
capital levels, and return on equity with emphasis placed upon regional
banks
23
<PAGE>
The table below represents a summary analysis of all of the comparable
groups based on market prices as of December 20, 1999 and the latest publicly
available financial data as of or for the last twelve months ended September
30, 1999:
<TABLE>
<CAPTION>
Mean Median NCBC
----- ------ -----
<S> <C> <C> <C>
Price to last twelve months reported earnings.......... 13.7x 13.6x 24.1x
Price to last twelve months adjusted earnings (1)...... 14.8x 14.6x 25.4x
Price to last twelve months core earnings (2).......... 13.1x 12.7x 23.2x
Price to book value.................................... 209.8% 195.4% 455.4%
Price to tangible book value........................... 235.9% 242.1% 467.9%
Dividend yield......................................... 2.9% 2.8% 1.8%
Return on average assets............................... 1.44% 1.53% 1.65%
Return on average equity............................... 16.5% 16.4% 22.2%
</TABLE>
- --------
(1) Adjusted earnings are defined as pre-tax earnings, minus non-recurring
gains, plus non-recurring losses, taxed at a 35% rate.
(2) Core earnings are defined as pre-tax earnings, minus non-recurring gains,
plus non-recurring losses, plus loan loss provisions, taxed at a 35% rate.
The analysis reveals that NCBC trades at a premium to banks included in
comparable groups based on price to earnings for the last twelve months as well
as price to book and price to tangible book value. NCBC's high stock price may
be explained by its superior profitability, in terms of return on average
assets and return on average equity, relative to the comparable groups.
However, due to its high stock price, NCBC has a lower dividend yield.
Based on the foregoing analyses and Trident's experience with numerous
mergers involving thrift institutions, it is Trident's opinion that the
exchange ratio to be received by Piedmont shareholders in the merger is fair
from a financial point of view.
No company used as a comparison in the above analyses is identical to
Piedmont, NCBC or the combined entity and no other transaction is identical to
the merger. Accordingly, an analysis of the results of the foregoing is not
purely mathematical; rather, such analysis involves complex considerations and
judgments concerning differences in financial market and operating
characteristics of the companies and other factors that could affect the public
trading volume of the companies to which Piedmont, NCBC and the combined entity
are being compared.
In connection with delivery of its opinion dated as of the date of this
proxy statement/prospectus, Trident performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which the analyses described above were based and the factors considered in
connection therewith. Trident did not perform any analyses in addition to those
described above in updating the opinion.
For its financial advisory services provided to Piedmont, Trident has been
paid fees of $35,000 to date and will be paid an additional fee that will
amount to 0.70% of the aggregate consideration received by Piedmont
stockholders (less the $35,000 previously paid) at the time the merger is
completed. In addition, Piedmont has agreed to reimburse Trident for all
reasonable out-of-pocket expenses incurred in connection with its engagement,
and to indemnify Trident against certain liabilities, including any which may
arise under the federal securities laws.
Trident/McDonald Investments is a member of all principal securities
exchanges in the United States and in the conduct of its broker-dealer
activities has from time to time purchased securities from, and sold securities
to, Piedmont and/or NCBC. As a market maker, Trident may also have purchased
and sold the securities of Piedmont and/or NCBC for Trident's own account and
for the accounts of its customers. Additionally, Trident served as Piedmont's
sales agent in Hillsborough Savings' mutual-to-stock conversion in 1995, and
received total fees and commissions of $631,985 for that transaction.
24
<PAGE>
Interests of Certain Persons in the Merger
Hillsborough and NCBC, as the corporate successor to Piedmont, will enter
into employment agreements with D. Tyson Clayton, Ted R. Laws and Danny C.
Lloyd, who serve as President, Vice President and Chief Lending Officer and
Vice President of Hillsborough, respectively. The agreement with Mr. Clayton
provides for a beginning salary of $107,000 per year. The agreement with Mr.
Laws provides for a beginning salary of $80,000 per year. The agreement with
Mr. Lloyd provides for a beginning salary of $53,000 per year. Each of the
employment agreements has a three year term which will be automatically renewed
for one additional year at the end of the term and at the end of each calendar
year thereafter unless terminated as provided in the agreement. Each agreement
provides for possible termination for cause and for termination by the employee
upon 90 days written notice. The employment agreements provide that each
employee will receive benefits provided by NCBC to its executives in similar
positions. Each agreement provides that the employee would be entitled to
receive a bonus of up to 30% of his base salary upon the attainment of certain
pre-arranged performance goals. NCBC and Mr. Clayton have agreed that he may
retire and become a consultant of NCBC if he chooses to do so not sooner than
18 months after the consummation of the merger. If Mr. Clayton should choose to
become a consultant, he would receive the same compensation and benefits as
during the period for which he is an employee. In addition, seven other
employees of Hillsborough will enter into employment agreement which have two
year terms.
All of the existing directors of Piedmont will be appointed to a local
advisory board and, for service on that board, such directors are expected to
receive fees totaling $4,000 per year. Piedmont's existing emeritus directors
will also serve on the advisory board and will receive annual fees of $3,111.
In addition, consistent with Piedmont's past practices, NCBC will provide
certain post retirement health insurance benefits to three members of
Piedmont's Board of Directors who are current or former Hillsborough employees.
The cost of these health insurance benefits will not exceed $2,000 per year for
each recipient.
NCBC has agreed to indemnify present and former directors, officers,
employees and agents of Piedmont and its subsidiaries against liabilities
arising from their services to the Piedmont companies.
Management and Operations of NCBC After the Merger
NCBC will be the surviving corporation in the merger. NCBC will continue to
be governed by the laws of the State of Tennessee and will continue to operate
in accordance with its charter and bylaws, neither of which will be amended in
connection with the merger. The board of directors of NCBC will continue as the
board of directors of the surviving corporation. After the merger, Hillsborough
will operate as a wholly owned banking subsidiary of NCBC.
Public Trading Markets
NCBC common stock is listed on the Nasdaq National Market under the symbol
"NCBC." Piedmont common stock is listed on the American Stock Exchange under
the symbol "PDB." Upon completion of the merger, the Piedmont common stock will
be delisted from the American Stock Exchange. It is a condition precedent to
consummation of the merger that NCBC cause the shares of NCBC common stock to
be issued in the merger to be approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
Absence of Dissenters' Appraisal Rights
Appraisal rights are statutory rights that enable shareholders who object to
certain extraordinary transactions, such as the merger, to demand that the
acquiring corporation pay the fair value for their shares, as determined by a
court in a judicial proceeding, instead of receiving the consideration offered
to shareholders in connection with the transaction. Appraisal rights are not
available in all circumstances.
25
<PAGE>
Piedmont shareholders are not entitled to appraisal rights under North
Carolina law in connection with the merger.
Resale of NCBC Common Stock by Piedmont Shareholders and Affiliates
The shares of NCBC common stock to be issued in the merger will be freely
transferable under the Securities Act of 1933, except for shares issued to any
Piedmont shareholder who may be deemed an "affiliate" (generally directors,
certain executive officers, and beneficial owners of 10% or more of any class
of capital stock) of Piedmont, within the meaning of Rule 145 under the
Securities Act as of the date of the special meeting.
Affiliates of Piedmont may not sell their shares of NCBC common stock
acquired in connection with the merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. In general, under Rule 145 for one year
following the effective time of the merger, an affiliate and certain related
persons are entitled to sell shares of NCBC common stock acquired in the merger
only through unsolicited "broker transactions" or in transactions directly with
a "market maker," as those terms are defined in Rule 144 under the Securities
Act. Moreover, the affiliate and related persons, together with persons acting
in concert with them, within any three-month period during the restricted
period may not sell shares of NCBC common stock exceeding the greater of (1)
one percent of the outstanding shares of NCBC common stock or (2) the average
weekly trading volume of NCBC common stock during the four calendar weeks
preceding such sale. Rule 145 is available to affiliates only if NCBC remains
current with its information filings with the SEC under the Securities Exchange
Act of 1934. Following the restricted period, an affiliate may sell NCBC common
stock free of the foregoing manner of sale or volume limitations, provided that
NCBC is current with its Exchange Act information filings and the affiliate is
not then an affiliate of NCBC. Two years after the effective time, an affiliate
may sell shares of NCBC common stock without any restrictions so long as such
affiliate was not and had not been for at least three months prior to sale an
affiliate of NCBC.
Piedmont has agreed in the merger agreement to use its reasonable efforts to
cause each person who may be deemed to be an affiliate of Piedmont to execute
and deliver to NCBC an agreement by that person not to offer to sell, transfer
or otherwise dispose of any of the shares of NCBC common stock distributed to
him or her in the merger until NCBC publishes at least 30 days of the combined
results of operations of NCBC and Piedmont. In addition, the affiliate
agreement will provide that no shares may be sold, transferred or otherwise
disposed of except or unless (1) the shares are covered by an effective
registration statement under the Securities Act, (2) the shares are sold in
compliance with Rules 144 or 145 under the Securities Act, or (3) the shares
are sold in accordance with a legal opinion satisfactory to counsel for NCBC
that such sale or offer is exempt from the registration requirements of the
Securities Act.
THE MERGER AGREEMENT
The following is a description of the material provisions of the merger
agreement. The description does not purport to be complete. You are urged to
read the merger agreement and related plan of merger, which is attached as
Appendix A to this document, in its entirety. The merger agreement attached as
Appendix A is incorporated by reference into this document.
Conditions to Completion of the Merger
The obligations of Piedmont and NCBC to complete the merger are subject to,
among other things, the satisfaction or written waiver prior to the effective
time of the following conditions:
. approval of the merger agreement by the Piedmont shareholders;
. receipt of any required regulatory approvals that are necessary to
permit consummation of the merger, and the expiration of all applicable
waiting periods described below under "--Bank Regulatory and Other Legal
Considerations;"
26
<PAGE>
. receipt of all other material consents to the merger;
. no court or governmental or regulatory authority taking any action
prohibiting, restricting or making illegal the consummation of the
merger;
. the declaration by the SEC of effectiveness of the registration
statement of which this document is a part and no stop order being
issued;
. approval for listing of the shares of NCBC common stock issuable in the
merger on the Nasdaq National Market, subject to official notice of
issuance;
. the continued truth and accuracy of the representations and warranties
of Piedmont and NCBC contained in the merger agreement other than
inaccuracies that would not be reasonably likely, individually or in the
aggregate, to have a material adverse effect on the financial condition,
results of operations or business of the party by whom the
representations and warranties were made and its subsidiaries, taken as
a whole;
. performance and/or compliance with the various covenants of Piedmont and
NCBC contained in the merger agreement; and
. receipt by the parties of certain legal opinions and receipt by NCBC of
a negative assurance letter from Piedmont's independent auditors (as to
Piedmont only) that there are no known factors related to Piedmont that
would cause the merger not to be eligible for pooling of interests
accounting treatment.
In addition to the conditions described above, the obligation of Piedmont to
complete the merger is subject to there occurring no event that would be
reasonably likely to have a material adverse effect on NCBC and to the receipt
from Trident Securities of its fairness opinion which is not withdrawn prior to
the closing date of the merger.
It is anticipated that the foregoing conditions will be complied with, but
Piedmont and NCBC may waive any condition to their obligations to complete the
transaction, except requisite approvals of Piedmont shareholders and regulatory
authorities. The merger agreement may be terminated by either of the parties
if, subject to certain conditions, the merger is not completed on or before
September 30, 2000.
Piedmont Covenants
Pursuant to the merger agreement, during the period from the date of the
merger agreement until the effective time, Piedmont has agreed to operate its
business only in the usual, regular and ordinary course. In addition, Piedmont
has agreed not to take certain actions without the prior written consent of
NCBC, including, among other things:
. Amend the articles of incorporation, bylaws or other governing
instruments of Piedmont or any subsidiary of Piedmont;
. Incur any additional debt obligation or other obligation for borrowed
money in excess of an aggregate of $50,000 (on a consolidated basis)
except in the ordinary course of the business, or impose, or suffer the
imposition on any asset of Piedmont or its subsidiaries of any lien or
permit any such lien to exist except in the ordinary course of business;
. Repurchase, redeem or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans or under
the Piedmont stock option plans), directly or indirectly, any shares, or
any securities convertible into any shares, of the capital stock of
Piedmont or any subsidiary, or declare or pay any dividend (other than
regular quarterly dividends paid consistent with past practice, and,
provided the payment thereof would not prevent the merger from being
accounted for as a "pooling-of-interests," such other quarterly dividend
as is required to prevent the Piedmont shareholders from foregoing a
dividend from both Piedmont and NCBC during any calendar quarter) or
make any other distribution in respect of Piedmont capital stock;
27
<PAGE>
. Except pursuant to merger agreement or under the Piedmont stock option
plans, issue, sell, pledge, encumber, authorize the issuance of, enter
into any contract to issue, sell, pledge, encumber, or authorize the
issuance of or otherwise permit to become outstanding, any additional
shares of Piedmont common stock or any other capital stock of Piedmont
or any subsidiary, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock or any stock equivalent type
rights;
. Except under the Piedmont option plans, adjust, split, combine or
reclassify any capital stock of Piedmont or any subsidiary or issue or
authorize the issuance of any other securities in respect of or in
substitution for shares of Piedmont common stock, or sell, lease,
mortgage or otherwise dispose of or otherwise encumber any shares of
capital stock of any Piedmont subsidiary (unless any such shares of
stock are sold or otherwise transferred to another Piedmont company) or
any asset having a book value in excess of $25,000, other than in the
ordinary course of business for reasonable and adequate consideration
and tangible assets which are obsolete or no longer useful in the
business of Piedmont or any subsidiary;
. Except for purchases of U.S. Treasury securities, U.S. government agency
securities, which in either case have maturities of three years or less,
or securities of the same nature as those held for investment by
Piedmont or any subsidiary as of September 30, 1999 purchase any
securities or make any material investment, either by purchase of stock
or securities, contributions to capital, asset transfers, or purchase of
any assets, in any person or entity other than a wholly owned Piedmont
subsidiary, or otherwise acquire direct or indirect control over any
person or entity, other than in connection with (i) foreclosures in the
ordinary course of business, (ii) acquisitions of control by a
depository institution subsidiary in its fiduciary capacity, or (iii)
the creation of new wholly owned subsidiaries organized to conduct or
continue activities otherwise permitted by the merger agreement;
. Grant any increase in compensation or benefits to the employees or
officers of Piedmont; pay any severance or termination pay or any bonus
(other than Christmas bonuses payable in December 1999 in the ordinary
course of business consistent with past practice) other than pursuant to
written policies or written contracts in effect on the date of the
merger agreement and disclosed to NCBC; or enter into or amend any
severance agreements with officers of Piedmont or any subsidiary; grant
any material increase in fees or other increases in compensation or
other benefits to directors of Piedmont or any subsidiary except in
accordance with past practice disclosed to NCBC; or voluntarily
accelerate the vesting of any stock options or other stock-based
compensation or employee benefits (other than the acceleration of
vesting which occurs under a benefit plan under the terms of such plan
upon a change of control of Piedmont or otherwise pursuant to the
provisions of such benefit plan);
. Enter into or amend any employment contract between Piedmont or any
subsidiary and any employee (unless such amendment is required by law)
that the company does not have the unconditional right to terminate
without liability (other than liability for services already rendered)
at any time on or after the effective time of the merger;
. Except for the contemplated termination of the Hillsborough Employee
Stock Ownership Plan in accordance with the terms of such plan and
except for termination of the 401(k) retirement plan maintained by
Hillsborough for the benefit of its employees, adopt any new employee
benefit plan of any Piedmont company or terminate or withdraw from, or
make any material change in or to, any existing employee benefit plans
of Piedmont or any subsidiary other than any such change that is
required by law or that, in the opinion of counsel is necessary or
advisable to maintain the tax-qualified status of any such plan, or make
any distributions from such employee benefit plans, except as required
by law, the terms of such plans or consistent with past practice;
. Make any significant change in any tax or accounting methods or systems
of internal accounting controls, except as may be appropriate to conform
to changes in tax laws or regulatory accounting requirements or
generally accepted accounting principles;
28
<PAGE>
. Commence any litigation other than in the ordinary course of business or
in accordance with past practice, settle any litigation involving any
liability of Piedmont or any subsidiary for material money damages in
excess of $50,000 or restrictions upon the operations of Piedmont or any
subsidiary;
. Except in the ordinary course of business, enter into, modify, amend or
terminate any material contract (excluding any loan contract) or waive,
release, compromise or assign any material rights or claims.
Piedmont also has agreed not to take certain enumerated actions relating to
the conduct of its business or pertaining to its employees and employee benefit
arrangements.
In the merger agreement, Piedmont has agreed to cooperate in the preparation
and filing by NCBC of a registration statement with respect to the shares of
NCBC common stock to be issued in the merger and the distribution of this proxy
statement/prospectus. The Board of Directors of Piedmont is required to
recommend, subject to compliance with its fiduciary duties as advised by
counsel, to the Piedmont shareholders approval of the matters submitted for
approval in connection with the merger. The Board of Directors and the officers
of Piedmont are obligated, subject to compliance with their fiduciary duties as
advised by counsel, to use their reasonable efforts to obtain the approval of
the Piedmont shareholders of the merger agreement, and to take all appropriate
actions to cause the merger to be completed.
Representations and Warranties
The merger agreement contains a number of representations and warranties by
NCBC and Piedmont. The material accuracy of all those representations and
warranties as of the closing date is a condition to the obligation of each
company to complete the merger. The representations and warranties relate to
matters such as the organization of each company, the authority of each company
to transact its business, to enter into the merger agreement and to complete
the transactions contemplated by the merger agreement, the capitalization of
each company, the filing of certain reports by each company with regulatory
authorities and the presentation of information contained in those reports, the
absence of certain changes in Piedmont's financial condition or business since
September 30, 1999, the payment of taxes and filing of tax returns, Piedmont's
allowance for possible loan losses, the absence of material litigation, the
compliance with laws by each company, Piedmont's employee benefit plans and the
employment contracts of Piedmont. None of the representations and warranties
will survive the closing.
Amendment and Termination
The merger agreement may be amended by agreement between Piedmont and NCBC,
except that no amendment reducing the consideration received by Piedmont
shareholders may be made unless approved by the Piedmont shareholders.
The merger agreement may be terminated by mutual agreement of the parties at
any time prior to consummation of the merger. In addition, either NCBC or
Piedmont may terminate the merger agreement if any of the following occurs:
. the other party materially breaches a provision contained in the merger
agreement and does not (or cannot) correct the breach within 30 days;
. any regulatory authority fails to grant an approval we need to complete
the merger or issues an order preventing the merger;
. the merger has not been completed by September 30, 2000; or
. the Piedmont shareholders fail to approve the merger agreement.
29
<PAGE>
In addition, Piedmont may terminate the merger agreement if its Board of
Directors has determined in good faith and as permitted by the merger agreement
to pursue an alternative acquisition proposal.
Exchange of Certificates Representing Piedmont Common Stock
Promptly after the effective time, NCBC shall cause The Bank of New York,
the exchange agent, to mail to each holder of record of Piedmont common stock
immediately prior to the effective time materials that will contain
instructions with respect to the surrender of certificates representing shares
of Piedmont common stock and the distribution of certificates representing
shares of NCBC common stock. Shares of Piedmont common stock will be
surrendered to the exchange agent.
Upon surrender to the exchange agent of certificates for shares of Piedmont
common stock for cancellation, together with properly completed transmittal
materials, the exchange agent will distribute to each Piedmont shareholder a
certificate representing the shares of NCBC common stock into which the
holder's shares of Piedmont common stock have been converted, together with all
undelivered dividends or distributions in respect of those shares without
interest thereon. Cash will be paid in lieu of the issuance of fractional
shares of NCBC common stock. Piedmont shareholders will not be entitled to
receive interest on any cash to be received in the merger. See "--General."
Beginning 60 days after the effective time, until Piedmont shareholders have
surrendered their Piedmont common stock certificates for exchange, Piedmont
shareholders will not be entitled to receive any dividends or other
distributions that may be declared and payable to holders of record of NCBC
common stock. Upon their surrender of Piedmont common stock certificates,
however, they will receive NCBC common stock certificates, together with all
the withheld dividends or other distributions with respect to the certificates,
without interest, and any withheld cash payment for a fractional share
interest. Neither NCBC nor the exchange agent will be liable to a Piedmont
shareholder for any NCBC common stock or dividends thereon delivered in good
faith to a public official in accordance with any state's abandoned property,
escheat, or other similar law. After the effective time, certificates
representing shares of Piedmont common stock converted in the merger into NCBC
common stock will be deemed for all other corporate purposes to evidence
ownership of the shares of NCBC common stock into which they were converted.
Treatment of Piedmont Stock Options
At the effective time of the merger, each option to purchase shares of
Piedmont common stock outstanding and unexercised immediately prior to the
effective time will become an option to purchase NCBC common stock and will
continue to be governed by the terms of Piedmont's stock option plan and the
stock option agreements evidencing the options. However, from and after the
effective time, each stock option granted and outstanding under the stock
option plan may be exercised solely for shares of NCBC common stock. The number
of shares of NCBC common stock subject to each former Piedmont stock option
will be equal to the number of shares of Piedmont common stock subject to the
option immediately prior to the merger multiplied by the exchange ratio. The
exercise price per share of NCBC common stock subject to each former Piedmont
stock option will be equal to the exercise price per share of Piedmont common
stock subject to the option immediately prior to the merger divided by the
Exchange Ratio, rounded down to the nearest cent. Each stock option which is an
"incentive stock option" shall be adjusted as required by the Internal Revenue
Code in order to continue as an incentive stock option for federal income tax
purposes.
Bank Regulatory and Other Legal Considerations
The merger is subject to approval by the Federal Reserve Board under the
Bank Holding Company Act. The Bank Holding Company Act provides that the
Federal Reserve Board will not approve a transaction (1) which would result in
a monopoly, or which would be in furtherance of any combination or conspiracy
to
30
<PAGE>
monopolize or to attempt to monopolize the business of banking in any part of
the United States or (2) the effect of which in any section of the country may
be substantially to lessen competition, or to tend to create a monopoly, or
which in any other manner would be in restraint of trade, unless the Federal
Reserve Board finds that the anticompetitive effects of the proposed
transaction are clearly outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the community
to be served. In conducting its review of any application for approval, the
Federal Reserve Board is required to consider the financial and managerial
resources and future prospects of the company or companies and the banks
concerned, and the convenience and needs of the community to be served. The
Bank Holding Company Act also requires the Federal Reserve Board to notify the
Attorney General of the United States of the approval of any transaction. Any
action brought under the antitrust laws by the Attorney General (acting through
the Department of Justice) arising out of any transaction must be commenced by
the Department of Justice prior to the earliest date the transaction could be
consummated, which, with certain exceptions, is 30 days after the Federal
Reserve Board approval unless such period is shortened to as little as 15 days.
The Bank Holding Company Act further requires that consummation of approved
acquisitions or mergers be delayed for such period during which time
complaining parties may obtain a review of the Federal Reserve Board's order by
filing a petition requesting that the order be set aside in the United States
Court of Appeals for the District of Columbia Circuit, or in the United States
Court of Appeals for the circuit in which the complaining party has its
principal place of business. If no action based on the antitrust laws is
commenced before the termination of such period, the acquisition or merger may
not be attacked thereafter in any judicial proceeding on the ground that it
alone and of itself constituted a violation of any antitrust laws other than
Section 2 of the Sherman Antitrust Act.
The merger is also subject to approval by the Administrator of the Savings
Institutions Division, North Carolina Department of Commerce. In determining
whether to approve the merger, the Administrator must determine whether NCBC is
qualified by character, experience and financial responsibility to acquire
Piedmont and its subsidiary, Hillsborough, in a legal and responsible manner.
In making this determination, the Administrator will consider NCBC's financial
and managerial resources and the organizational structures and future prospects
and plans for NCBC and Piedmont. The Administrator will also consider whether
the business and activities of NCBC, or its officers, directors or any person
controlling, controlled by or under common control with NCBC, will create a
material deterioration of confidence in the safety, soundness and financial
integrity of Piedmont.
The Bank Holding Company Act provides for the publication of notices and the
administrative hearings relating to the federal or state filings noted above
and permits interested parties to intervene in the proceedings. If interested
parties intervene, administrative and judicial proceedings relating to both
federal and state filings could substantially delay the regulatory approvals
required for consummation of the merger.
The management of NCBC does not believe that the consummation of the merger
will violate any antitrust or applicable federal or state laws, but there can
be no assurance that the Federal Reserve Board, the Administrator, the
Department of Justice or other regulatory authorities will concur in this
assessment.
Accounting Treatment
NCBC intends to account for the merger as a pooling of interests. Under the
pooling of interests method of accounting, the historical basis of the assets
and liabilities of NCBC and Piedmont will be combined at the effective time and
carried forward at their previously recorded amounts, the stockholders' equity
accounts of NCBC and Piedmont will be combined on the consolidated balance
sheet of NCBC and no goodwill or other intangible assets will be created.
Consolidated financial statements of NCBC issued after the merger will be
restated retroactively to reflect the consolidated operations of NCBC and
Piedmont as if the merger had taken place prior to the periods covered by such
consolidated financial statements.
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Material Federal Income Tax Considerations
The following discussion constitutes the opinion of Bass, Berry & Sims PLC,
counsel to NCBC, subject to the qualifications set forth below and contained in
this section and its written opinion, as to the material United States federal
income tax consequences of the merger and is based on the Internal Revenue Code
of 1986, as amended, applicable Treasury regulations, administrative
interpretations and court decisions as in effect as of the date of this proxy
statement/prospectus, all of which may change, possibly with retroactive
effect.
This discussion does not address all aspects of taxation that may be
relevant to a Piedmont shareholder in light of that shareholder's personal
investment or tax circumstances, or to certain types of Piedmont shareholders
(including insurance companies, financial institutions, broker-dealers, foreign
corporations, persons who receive stock through the exercise of stock options
or otherwise as compensation for services rendered and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws, nor does it discuss any state, local or foreign
tax considerations. Each Piedmont shareholder is urged to consult his or her
own tax advisor as to the specific tax consequences of the merger, including
the applicable federal, state, local and foreign tax consequences of the
merger.
Neither NCBC nor Piedmont has requested or will receive an advance ruling
from the Internal Revenue Service as to the federal income tax consequences of
the merger. Instead, the obligations of NCBC and Piedmont to complete the
merger are conditioned on the delivery of the opinion of Bass, Berry & Sims
PLC, to Piedmont and NCBC reissuing the opinion of Bass, Berry & Sims PLC
stated in this discussion. The opinions have been or will be based upon
representations of fact provided by NCBC and Piedmont. These representations of
fact have not and will not have been independently verified by Bass, Berry &
Sims PLC. The reissued opinion will also be based upon the Internal Revenue
Code, regulations thereunder, administrative rulings and practice by the IRS,
and judicial authority, in each case existing at the time the opinion is
delivered. Any change in applicable law or pertinent facts could affect the
continuing validity of the opinion and this discussion. In addition, a tax
opinion is not binding upon the IRS, and there can be no complete assurance,
and none is hereby given, that the IRS will not take a position which is
contrary to one or more positions reflected in the tax opinion, or that the
opinion will be upheld by the courts if challenged by the IRS. However, NCBC
and Piedmont have agreed in the merger agreement not to take any action which
would disqualify the merger as a reorganization which is tax-free to the
Piedmont shareholders pursuant to Section 368(a) of the Code.
Based on the foregoing, it is the opinion of Bass, Berry & Sims PLC that:
. the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code;
. no gain or loss will be recognized by NCBC or Piedmont as a result of
the merger;
. no gain or loss will be recognized by the shareholders of Piedmont upon
the exchange of Piedmont common stock for NCBC common stock pursuant to
the merger, except with respect to cash received in lieu of a fractional
share interest in NCBC common stock, or by the holders of Piedmont
options upon the conversion of such options into options with respect to
NCBC common stock;
. the aggregate tax basis of the NCBC common stock received by a Piedmont
shareholder pursuant to the merger will be the same as the aggregate tax
basis of the Piedmont common stock surrendered in exchange therefor (
reduced by any tax basis allocable to cash received for a fractional
share); and
. the receipt of cash in lieu of fractional shares of NCBC common stock
will be treated as if fractional shares were distributed as part of the
exchange and then were redeemed by NCBC, and the Piedmont shareholder
generally will recognize capital gain or loss in such exchange equal to
the difference between the cash received and the tax basis of such
fractional share.
EACH HOLDER OF SHARES OF PIEDMONT COMMON STOCK IS URGED TO CONSULT THE
HOLDER'S PERSONAL TAX AND FINANCIAL ADVISORS AS TO THE SPECIFIC FEDERAL INCOME
TAX CONSEQUENCES TO THE HOLDER, BASED ON THE HOLDER'S OWN PARTICULAR STATUS AND
CIRCUMSTANCES, AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES ARISING OUT OF THE MERGER.
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STOCK OPTION AGREEMENT
The following is a summary of the provisions of the Stock Option Agreement
between Piedmont and NCBC, the form of which is attached as Appendix C to this
document. The following summary is qualified in its entirety by reference to
the form of the option agreement, which you are encouraged to read.
Concurrently with the execution of the merger agreement, NCBC and Piedmont
entered into a Stock Option Agreement. Pursuant to the option agreement, NCBC
may purchase from Piedmont shares of Piedmont common stock such that
immediately following the exercise of the option, NCBC would own 19.5% of the
then issued and outstanding shares of Piedmont common stock, giving effect to
the exercise by NCBC of the option. The exercise price for the option, payable
in cash, is equal to $7.65 per share. 19.5% equals approximately 583,191
shares, assuming 2,502,700 shares of Piedmont common stock are issued and
outstanding on the date the option is exercised. The option is exercisable only
under the circumstances described below.
Arrangements such as the option agreement are customarily entered into in
connection with mergers of publicly-traded bank holding companies to increase
the likelihood that the transactions will be consummated in accordance with
their terms and to compensate the person granted the option for the efforts
undertaken and the expenses and losses incurred by the person if the
transaction is not completed. The option agreement may have the effect of
discouraging offers by third parties to acquire Piedmont, even if those persons
were prepared to offer to pay consideration to the Piedmont shareholders that
has a higher current market price than the shares of NCBC common stock to be
received by Piedmont shareholders in the merger. The acquisition of Piedmont by
an entity other than NCBC could cause the option to become exercisable. The
existence of the option could significantly increase the cost to a potential
acquiror of acquiring Piedmont compared to its cost had the option agreement
not been entered into. This increased cost might discourage a potential
acquiror from considering or proposing an acquisition or might result in a
potential acquirer proposing to pay a lower per share price to acquire Piedmont
than it might otherwise have proposed to pay.
Subject to applicable law and NCBC's material compliance with the covenants
of the merger agreement, NCBC may exercise the option, in whole or in part, at
any time, in any of the following circumstances:
. Piedmont enters into an agreement or Piedmont's Board of Directors
recommends to Piedmont shareholders (or withdraws its recommendation FOR
approval of the merger after receipt of a proposal for Piedmont to enter
into) an agreement (other than the merger agreement with NCBC) under
which any entity, person or group, within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, would: (1)
merge or consolidate with, acquire 25% or more of the assets or
liabilities of, or enter into any similar transaction with Piedmont, or
(2) purchase or otherwise acquire (including by merger, reorganization,
consolidation, share exchange or any similar transaction) securities
representing 25% or more of Piedmont's common stock;
. any person (other than NCBC or any of its subsidiaries) acquires the
beneficial ownership or the right to acquire beneficial ownership of
securities which, when aggregated with other such securities owned by
such Person, represents 25% or more of the voting shares of Piedmont
(not including acquisitions where the presumption of control has been
rebutted and the shares acquired are voted in favor of the merger with
NCBC);
. failure of the shareholders to approve, prior to the termination of the
merger agreement, the merger by the required affirmative vote at a
meeting of the shareholders, because a third person (other than NCBC or
a subsidiary of NCBC) announces publicly or communicates, in writing, to
Piedmont a proposal to (1) acquire Piedmont (by merger, reorganization,
consolidation, the purchase of 25% or more of its assets or liabilities,
or any other similar transaction), or (2) purchase or otherwise acquire
securities representing 25% or more of the voting shares of Piedmont.
Piedmont and NCBC acknowledge and agree that the option will become
exercisable immediately upon the occurrence of any of the above-described
circumstances even though the circumstance occurred as a result, in part or in
whole, of Piedmont's Board of Directors complying with its fiduciary duties.
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NCBC's total profit (as defined below) from its rights under the option is
limited and can never exceed $1,035,000. To remain under this limit, NCBC may
(1) reduce the number of shares of Piedmont common stock subject to the option,
(2) deliver to Piedmont for cancellation, without consideration, the shares of
Piedmont common stock previously purchased pursuant to the option, (3) pay cash
to Piedmont so that NCBC will not actually realize total profit in excess of
the foregoing limit, or (4) any combination of the above. In addition, the
option may not be exercised for a number of shares of Piedmont common stock
that would, as of the date of exercise, result in the holder's (taking into
account all other affiliated holders) notional total profit (as defined below)
exceeding $1,035,000.
The term total profit means the aggregate sum (prior to payment of taxes) of
the following:
. the net cash amount received by NCBC pursuant to the sale to an
unaffiliated purchaser of shares of Piedmont common stock received by
NCBC upon exercise of the option, less NCBC's purchase price for those
shares;
. any amount received by NCBC pursuant to Piedmont's repurchase of shares
of Piedmont common stock received by NCBC upon exercise of the option,
less NCBC's purchase price for those shares; and
. any amount received by NCBC pursuant to Piedmont's repurchase of the
option (or any portion thereof).
The term notional total profit with respect to any number of shares of
Piedmont common stock means the total profit determined as of the date of the
proposed exercise of the option, assuming that the option was exercised on that
date for that number of shares and assuming that the shares, together with all
other Piedmont common stock purchased pursuant to the option held by NCBC and
its affiliates as of that date, were sold for cash at the closing sale price
per share of Piedmont common stock on the American Stock Exchange, or, if the
Piedmont common stock is not listed on the American Stock Exchange, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by NCBC. This determination will be made as of the close of business on
the preceding trading day. Notional profit shall be reduced by customary
brokerage commissions.
The purchase of shares of Piedmont common stock pursuant to the Option is
subject to compliance with applicable law, including receipt of any approvals
required under the Bank Holding Company Act and the rules and regulations
promulgated thereunder.
In the event of any change in Piedmont common stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of securities subject to the
option and the exercise price shall be adjusted appropriately. If before the
option terminates or is exercised Piedmont is acquired by another party or
consolidates with or merges into another corporation, NCBC will be entitled to
receive upon exercise of the option the securities or properties to which a
holder of the number of shares of Piedmont common stock then deliverable upon
exercise of the option would have been entitled upon such acquisition,
consolidation, merger or reorganization. Piedmont will take all steps in
connection with any such transaction necessary to assure that the provisions of
the option will continue to apply, as nearly as reasonably may be practicable,
in relation to any securities or property thereafter deliverable upon exercise
of the option.
The option will terminate upon the earliest of (i) the mutual agreement of
NCBC and Piedmont; (ii) the 90th day following the termination of the merger
agreement for any reason; or (iii) December 27, 2000, which is 12 months after
the date the option agreement was executed by NCBC and Piedmont.
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EXPENSES
All expenses incurred by or on behalf of the parties in connection with the
merger agreement and the transactions contemplated by the merger agreement are
to be borne by the party incurring the expense, except that both NCBC and
Piedmont will bear all costs of filing the registration statement with the SEC
and printing and mailing this proxy statement/prospectus based on the relative
asset sizes of the parties at September 30, 1999.
COMPARISON OF RIGHTS OF PIEDMONT AND NCBC SHAREHOLDERS
NCBC is incorporated under the laws of the State of Tennessee. Piedmont is
incorporated under the laws of the State of North Carolina. Piedmont
shareholders, whose rights as shareholders are currently governed by North
Carolina law and the Piedmont articles of incorporation and bylaws, will
become, upon consummation of the merger, shareholders of NCBC. Their rights as
shareholders of NCBC will be governed by Tennessee law and the NCBC charter and
bylaws. Certain differences between the rights of Piedmont shareholders and
NCBC shareholders are summarized below. The summary does not purport to be a
complete statement of the rights of Piedmont shareholders as compared with the
rights of NCBC shareholders. The identification of specific differences is not
meant to indicate that other equally or more significant differences do not
exist. The summary is qualified in its entirety by reference to the North
Carolina Business Corporation Act and the Tennessee Business Corporation Act,
and the respective charter or articles of incorporation and bylaws of the two
corporations.
Changes in Control. Certain provisions of the NCBC charter and bylaws may
have the effect of preventing, discouraging or delaying any change of control
of NCBC. Article Seven of the NCBC charter provides for a board of directors
consisting of at least three and no more than twenty-five directors and divided
into three classes of directors serving staggered three-year terms. The
classification of directors has the effect of making it more difficult for NCBC
shareholders to change the composition of the NCBC Board of Directors in a
short period of time. At least two annual meetings of NCBC shareholders,
instead of one, will generally be required to effect a change in a majority of
the NCBC Board of Directors.
In addition, the NCBC Board of Directors can at any time, under the NCBC
charter and without shareholder approval, issue one or more series of preferred
stock. In some cases, the issuance of preferred stock without shareholder
approval could discourage or make more difficult attempts to take control of
NCBC through a merger, tender offer, proxy contest or otherwise. Preferred
stock with special voting rights or other features issued to persons favoring
NCBC's management could stop a takeover by preventing the person trying to take
control of NCBC from acquiring enough voting shares necessary to take control.
Finally, Article Nine of the NCBC charter includes specific provisions with
respect to mergers and other business combinations. In general, a business
combination requires the affirmative vote of the holders of at least two-thirds
of the outstanding shares of each class of NCBC's capital voting stock, unless
the business combination is not with or does not involve:
(1) any interested shareholders (as defined in the NCBC charter) or an
affiliate (as defined in the NCBC charter) of an interested shareholder if
the following conditions set forth in (2)(a) below are met, in which event
the business combination will require only such affirmative vote as is
required by law and the NCBC charter, or
(2) an interested shareholder or an affiliate of an interested
shareholder if the following conditions set forth in (a), (b) and (c) are
met, in which event the business combination will require only such
affirmative vote as is required by law and the NCBC charter:
(a) if the business combination has been approved by at least two-
thirds of the entire NCBC board at any time prior to the consummation
of the business combination;
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(b) the aggregate amount of the cash and the fair market value as
of the date of the consummation of the business combination of
consideration other than cash to be received per share by holders of
NCBC's outstanding capital voting stock in that business combination
will be at least equal to the minimum price per share (as defined in
the NCBC charter); and
(c) the consideration to be received by holders of a particular
class of outstanding voting stock will be in cash or in the same form
as the interested shareholder has previously paid for shares of such
class of voting stock. If the interested shareholder has paid for
shares of any class of voting stock with varying forms of
consideration, the form of consideration for that class of voting stock
will be either cash or the form used to acquire the largest number of
shares of the class of voting stock previously acquired by it
(collectively, the "Fair Price Provisions").
The Fair Price Provisions are designed to discourage attempts to take over
NCBC by utilizing two-tier pricing tactics or by acquiring less than all of
NCBC's outstanding shares. In recent years there have been increasing numbers
of non-negotiated attempts to take over publicly owned corporations. These
attempts typically involve the accumulation of a substantial block of the
target corporation, followed by a merger or other reorganization of the
acquired company on terms determined entirely by the purchaser. The terms of
these attempts may include two-tier pricing, which is the practice of paying
cash to acquire a controlling interest in a company and acquiring the remaining
equity interest by paying the remaining shareholders a price that is lower than
the price paid to acquire the controlling interest or by utilizing a different
form of consideration for payment to the remaining shareholders than was used
to purchase the controlling interest.
While the terms of such a non-negotiated takeover could be fair to NCBC
shareholders, negotiated transactions may result in more favorable terms to
NCBC shareholders because of factors such as the timing of the transaction, the
tax effects on the shareholders and the fact that the nature and amount of the
consideration paid to all shareholders will be negotiated by the parties at
arms-length rather than dictated by the purchaser.
In addition, due to the difficulties of complying with the requirements of
the Fair Price Provisions, the Fair Price Provisions generally may discourage
attempts to acquire control of NCBC. As a result, holders of NCBC common stock
may be deprived of an opportunity to sell their shares at a premium above the
market price. In addition, the Fair Price Provisions would give veto power to
the holders of a minority of NCBC common stock with respect to certain business
combinations that are opposed by more than one-third of the NCBC Board of
Directors and which do not meet the Fair Price Provisions, but which a majority
of shareholders may believe to be desirable and beneficial. Moreover, in any
such business combination not receiving the requisite approval of NCBC
shareholders or of directors, the minimum price provisions of the Fair Price
Provisions, while providing objective pricing criteria, could be arbitrary and
not indicative of value.
The Piedmont articles of incorporation and bylaws also contain certain
provisions which may have the effect of preventing, discouraging or delaying a
change in control of Piedmont. Like NCBC, the Piedmont Board of Directors has
the authority to issue shares of preferred stock and the board of directors is
divided into three classes serving staggered three-year terms. However, unlike
NCBC, Piedmont's articles of incorporation do not contain Fair Price
Provisions. Piedmont's articles of incorporation require approval of a merger
or combination of Piedmont, the acquisition of more than 10% of Piedmont's
outstanding shares of stock entitled to vote generally in the election of
directors or a purchase or sale of a substantial portion of the assets of
Piedmont or any of its subsidiaries by the affirmative vote of the holders of
75% of the outstanding shares of Piedmont common stock entitled to vote
generally in the election of directors. The 75% shareholder voting requirement
does not apply, however, if (1) the merger, combination, acquisition or
purchase or sale of assets is initiated by Piedmont upon the vote of at least
51% of the "continuing directors" of Piedmont, or (2) the merger, combination,
acquisition or purchase or sale of assets is approved by Piedmont's Board of
Directors by the affirmative vote of at least 75% of the entire Board of
Directors or 75% of the "continuing directors" if the transaction is proposed
by an entity that beneficially owns 10% or more of Piedmont's outstanding
shares. The "continuing directors" are those directors who are not beneficial
owners of 10% or more of the outstanding voting shares of Piedmont and are not
affiliated with anyone beneficially owning 10% or more of Piedmont's
outstanding voting shares.
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Amendment of Charter. The NCBC Charter requires an affirmative vote by at
least two-thirds of the shares entitled to vote (other than shares held by an
interested shareholder) to alter or amend any provisions of the charter unless
the NCBC Board of Directors, by a two-thirds majority, submits the proposed
amendment to a vote of shareholders in which circumstance a majority vote of
shareholders is needed. The Piedmont articles of incorporation may be amended
by an affirmative vote of a majority of the shares entitled to vote, except for
amendments to the supermajority approval requirements for mergers and other
transactions described above, which require approval of 75% of the shares
entitled to vote if they are not recommended by 75% of disinterested directors.
Dividends. A Tennessee corporation may pay dividends, if authorized by its
board of directors, unless, after giving effect to the dividend, (1) the
corporation would not be able to pay its debts as they become due in the usual
course of business or (2) the corporation's total assets would be less than the
sum of its total liabilities plus (unless the corporation's charter permits
otherwise) the amount necessary to satisfy, upon dissolution, the rights of
shareholders whose preferential rights are superior to those receiving the
distribution if the corporation were dissolved at the time of the distribution.
Piedmont, a North Carolina corporation, is subject to similar dividend
limitations.
Boards of Directors. As permitted by the Tennessee Business Corporation Act,
the NCBC bylaws divide the NCBC Board of Directors into three classes serving
staggered three-year terms, with the terms of one class of directors to expire
each year. The classification of the NCBC Board of Directors means that
approximately one-third of the NCBC Board of Directors is elected each year,
with the result that it would take two annual meetings of NCBC shareholders to
change the majority of the members constituting the NCBC Board of Directors.
The classification of directors has the effect of making it more difficult to
change the composition of the board of directors. A classified board of
directors can help promote the continuity and stability of management and
policies because a majority of the directors at any given time will have prior
experience as directors.
In addition, the NCBC bylaws provide that any or all of the NCBC directors
may be removed from office at any time with or without cause, but only by the
affirmative vote of at least two-thirds of the shares entitled to vote.
The Piedmont articles of incorporation also divide the Piedmont Board of
Directors into three classes serving staggered three-year terms, with the term
of one class of directors to expire each year, with the result that it would
take two annual meetings of Piedmont shareholders to change the majority of the
members constituting the Piedmont Board of Directors.
Special Meetings of Shareholders. The Tennessee Business Corporation Act
provides that a corporation's board of directors, any person authorized by the
charter or bylaws, or unless the charter provides otherwise, the holder of at
least 10% of the votes entitled to be cast may call a special meeting of
shareholders. The NCBC bylaws provide that a special meeting of NCBC
shareholders may be called by the Chairman of the Board, the Board of
Directors, or upon the written request of the holders of not less than 10% of
the votes entitled to be cast of NCBC common stock. The Piedmont bylaws provide
that a special meeting of Piedmont shareholders may be called by at any time by
the Chief Executive Officer, the President, the Chairman of the Board of
Directors or the Board of Directors.
Dissenters' Rights. A Tennessee corporation must provide to its shareholders
dissenters' rights under the Tennessee Business Corporation Act, subject to
certain exceptions. Under the Tennessee Business Corporation Act, a corporation
that is being merged into another corporation or that is selling all or
substantially all its assets to another corporation are required to provide
shareholders with the right to dissent from the action and have a Tennessee
court determine the statutory fair value of their shares. The primary exception
to the dissenters' rights provisions under the Tennessee Business Corporation
Act is for corporations whose shares are listed on a national securities
exchange or traded in a national market system. NCBC qualifies for this
exception. Under North Carolina law, which is currently applicable to Piedmont
and its shareholders, shareholders of a corporation in a merger, share exchange
and certain other transactions are not entitled to
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dissenters' rights if the affected shares of stock they own are, as of the
record date, held of record by at least 2,000 shareholders, are listed on a
national securities exchange or designated as national market system securities
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. and are exchanged for cash or for shares of another company which
are held of record by at least 2,000 shareholders or similarly listed or
designated, or a combination of cash and such shares.
Preemptive Rights. Unless the charter of a Tennessee corporation provides
otherwise, the Tennessee Business Corporation Act states that shareholders of a
Tennessee corporation do not have preemptive rights to acquire proportional
amounts of the corporation's unissued shares upon decision of the board of
directors to issue them. The NCBC charter provides that no holder of any class
of NCBC common stock will have preemptive rights. Like Tennessee law, the North
Carolina Business Corporation Act provides that, unless the articles of
incorporation of a North Carolina corporation provide otherwise, the
shareholders of a North Carolina corporation do not have preemptive rights to
acquire proportional amounts of the corporation's unissued shares upon decision
of the board of directors to issue them. Piedmont's articles of incorporation
do not provide for preemptive rights and, therefore, Piedmont shareholders do
not have preemptive rights.
Indemnification/Limitation on Liability. Under the Tennessee Business
Corporation Act, a corporation may indemnify an individual who is a party to a
proceeding against liability incurred in the proceeding because he or she is or
was a director or officer if that individual conducted himself or herself in
good faith and that individual reasonably believed:
. in the case of conduct in his or her official capacity, that the conduct
was in the best interests of the corporation;
. in all other cases, that the conduct was at least not opposed to the
best interests of the corporation; and
. in the case of any criminal proceeding, that the individual had no
reasonable cause to believe the conduct was unlawful.
A corporation may not indemnify a director or officer (1) in connection with
a proceeding by or in the right of the corporation, except for reasonable
expenses incurred in connection with the proceeding if it is determined that
the director or officer has met the relevant standard of conduct under
Tennessee law or (2) in connection with any proceeding with respect to conduct
for which he or she was adjudged liable on the basis that personal benefit was
improperly received by him or her, whether or not involving action in his or
her official capacity. A corporation must indemnify a director or officer who
was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he or she was a party because he or she was a director or
officer of the corporation against reasonable expenses incurred by the director
or officer in connection with the proceeding.
North Carolina law also allows its corporations to indemnify individuals
serving as officers and directors. Both the NCBC and Piedmont bylaws provide
for indemnification for officers and directors of NCBC and Piedmont
respectively.
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DESCRIPTION OF NCBC COMMON STOCK
This section describes the general terms and provisions of the NCBC common
stock. The summary is not complete and is qualified in its entirety by
reference to the description of the NCBC common stock incorporated by reference
in this proxy statement/prospectus. See "Incorporation of Information Filed
with the SEC." NCBC has also incorporated by reference its charter and bylaws
as exhibits to the registration statement.
General. As of February 16, 2000, the number of authorized shares of NCBC
common stock was 175,000,000, of which 108,346,501 shares were issued and
outstanding.
Dividends. Holders of NCBC common stock are entitled to receive pro rata
dividends when, as and if declared by the NCBC Board out of any funds that NCBC
can legally use to pay dividends. NCBC may pay dividends in cash, stock or
other property. In certain cases, holders of NCBC common stock may not receive
dividends until NCBC has satisfied its obligations to any holders of
outstanding preferred stock. In the event NCBC liquidates, dissolves or winds
up its business, the holders of NCBC preferred stock will receive an amount per
share equal to the amount fixed and determined by the Board, plus any amount
equal to all the dividends accrued on the NCBC preferred stock, before any
distribution will be made on the NCBC common stock. NCBC currently has no
shares of preferred stock issued and outstanding.
Voting Rights. Each share of NCBC common stock is entitled to one vote on
each matter submitted to a vote of shareholders unless Tennessee law or the
certificate of amendment for an outstanding series of NCBC preferred stock
gives the holders of that series of preferred stock the right to vote on
certain matters. The holders of the NCBC common stock have noncumulative voting
rights, which means that the holders of more than 50% of the shares of NCBC
common stock voting for the election of directors can elect 100% of the
directors standing for election at any meeting if they choose to do so and, in
such event, the holders of the remaining shares voting for the election of
directors will not be able to elect any person or persons to the NCBC Board.
Other Rights. The NCBC common stock has no conversion rights and is not
redeemable. The holders of the NCBC common stock do not have any preemptive
rights to subscribe for additional shares of common stock or other NCBC
securities except as may be granted by the NCBC Board of Directors. There is no
restriction on the purchase of shares of NCBC common stock by NCBC except for
certain regulatory limits.
Fully Paid. The issued and outstanding shares of NCBC common stock are fully
paid and nonassessable, which means that the full purchase price for the
outstanding shares of NCBC common stock has been paid and the holders of such
shares will not be assessed any additional monies for such shares.
Listing. The NCBC common stock is listed on the Nasdaq National Market under
the symbol "NCBC." The Bank of New York, or an affiliate thereof, is the
transfer agent, registrar and dividend disbursing agent for the common stock.
NCBC is a legal entity separate and distinct from its subsidiaries,
including its subsidiary banks. There are various legal and regulatory
limitations under federal and state law on the extent to which its
subsidiaries, including its bank and bank holding company subsidiaries, can
finance or otherwise supply funds to NCBC.
The principal source of NCBC's cash revenues is dividends from its
subsidiaries. There are certain limitations under federal and Tennessee law on
the payment of dividends by such subsidiaries. The prior approval of the
appropriate federal regulatory body is required if the total of all dividends
declared by any state member bank of the Federal Reserve System or any national
banking association in any calendar year exceeds the bank's net profits for
that year combined with its retained net profits for the preceding two calendar
years, less any required transfers to surplus or a fund for the retirement of
any preferred stock. Those regulatory bodies also have authority to prohibit a
state member bank or bank holding company, such as NCBC, or a national banking
association from engaging in what, in the opinion of such regulatory body,
constitutes an unsafe or unsound practice in conducting its business. The
payment of dividends could, depending upon the financial condition of the
subsidiary, be deemed to constitute such an unsafe or unsound practice.
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Retained earnings of NCBC's banking subsidiaries available for payment of
cash dividends under all applicable regulations would have been approximately
$24.3 million as of December 31, 1998. See Note N to the Financial Statements
of NCBC, incorporated by reference in this proxy statement/prospectus, with
respect to certain contractual limits on dividend payments by NCBC.
NCBC's subsidiaries, subsidiary banks and their respective subsidiaries are
subject to limitations under Section 23A of the Federal Reserve Act with
respect to extensions of credit to, investments in, and certain other
transactions with, NCBC and its other subsidiaries. Furthermore, loans and
extensions of credit are also subject to various collateral requirements.
Provisions of the NCBC charter and bylaws may restrict changes of control of
NCBC. These provisions include the authority to issue preferred stock with such
rights and privileges as the Board of Directors may deem appropriate from time
to time, provisions for the classification of the NCBC Board of Directors and
provisions relating to certain business combinations with certain shareholders.
See "Comparison of Rights of Piedmont and NCBC Shareholders--Changes in
Control" and "--Boards of Directors."
WHERE YOU CAN FIND MORE INFORMATION
Accompanying this proxy statement/prospectus is a copy of Piedmont's most
recent annual report to shareholders and its quarterly report on Form 10-Q for
the quarter ended December 31, 1999. For further information regarding Piedmont
and NCBC, you may obtain a copy of filings they make with the Securities and
Exchange Commission. Both NCBC and Piedmont are subject to the informational
requirements of the Exchange Act and, in accordance therewith, file reports,
proxy statements and other information with the SEC. Their SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document that NCBC or
Piedmont files with the SEC at the SEC's following public reference facilities:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center, Citicorp Center
Room 1024 Suite 1300 500 West Madison Street, Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call 1-800-SEC-0330 for further
information on the operations of the public reference facilities. NCBC's SEC
filings are also available at the offices of the Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006. This proxy statement/prospectus does not
contain all the information set forth in the Registration Statement on Form S-4
and exhibits thereto, of which this proxy statement/prospectus is a part, that
NCBC has filed with the SEC under the Securities Act.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements made by or on behalf of NCBC or Piedmont. All
statements in this proxy statement/prospectus and the documents incorporated by
reference that are not historical facts or that express expectations and
projections with respect to future matters are "forward-looking statements" for
the purpose of the safe harbor provided by the Reform Act. We caution readers
that such "forward-looking statements," including, without limitation, those
relating to future business initiatives and prospects, revenues, working
capital, liquidity, capital needs, interest costs and income, wherever they
occur in this document or in other statements attributable to NCBC, Piedmont or
both NCBC and Piedmont, are necessarily estimates reflecting the best judgment
of NCBC or Piedmont. Such statements involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the "forward-looking statements." "Forward-looking statements"
should, therefore, be considered in light of various important factors,
including those set forth in this proxy statement/prospectus. Important factors
currently known to management of NCBC or Piedmont that could cause
40
<PAGE>
actual results to differ materially from those in "forward-looking statements"
include significant fluctuations in interest rates, inflation, economic
recession, economic conditions in the markets served by NCBC and Piedmont,
significant changes in the federal and state legal and regulatory environment,
significant under-performance in NCBC's or Piedmont's portfolio of outstanding
loans, and competition in NCBC's and Piedmont's markets. Other factors set
forth from time to time in NCBC's and Piedmont's filings with the SEC should
also be considered. NCBC and Piedmont undertake no obligation to update or
revise "forward-looking statements" to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
INCORPORATION OF DOCUMENTS FILED WITH THE SEC
The SEC allows NCBC and Piedmont to "incorporate by reference" in this proxy
statement/prospectus the information each company files with the SEC, which
means:
. incorporated documents are considered part of this proxy
statement/prospectus;
. NCBC and Piedmont can disclose important information to you by referring
you to those documents; and
. information that NCBC and Piedmont file with the SEC will automatically
update and supersede the information in this proxy statement/prospectus
and information that was previously incorporated.
NCBC incorporates by reference the documents listed below which were filed
with the SEC under the Exchange Act:
(1) NCBC's Annual Report on Form 10-K for the year ended December 31, 1998,
filed on March 26, 1999;
(2) NCBC's Quarterly Reports on Form 10-Q for the quarter ended March 31,
1999, filed on May 7, 1999, for the quarter ended June 30, 1999, filed
on August 13, 1999, and for the quarter ended September 30, 1999, filed
on November 9, 1999; and
(3) The description of NCBC Common Stock contained in the Registration
Statement on Form S-8 (Registration No. 33-38552), filed on January 11,
1991.
Piedmont incorporates by reference the documents listed below which were
filed with the SEC under the Exchange Act:
(1) Piedmont's Annual Report on Form 10-K for the year ended June 30, 1999,
filed on September 28, 1999;
(2) Piedmont's Quarterly Reports on Form 10-Q for the quarter ended
September 30, 1999, filed on November 15, 1999 and for the quarter
ended December 31, 1999, filed on February 14, 2000; and
(3) Piedmont's Current Report on Form 8-K filed on February 11, 2000.
(4) The following sections of Piedmont's 1999 Annual Report to Shareholders
which is enclosed with this proxy statement/prospectus: "Selected
Financial Data" on page 2; "Management's Discussion and Analysis" on
pages 7 through 22 and "Quarterly Financial Data (Unaudited)" on page
44.
NCBC also incorporates by reference each of the following documents that it
will file between the date of this document and the date of the special
meeting:
. Reports filed under Section 13(a) and (c) of the Exchange Act;
. Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent shareholders meeting; and
. Any reports filed under Section 15(d) of the Exchange Act.
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<PAGE>
This proxy statement/prospectus incorporates certain NCBC and Piedmont
documents by reference which are not presented herein or delivered herewith.
Copies of the documents (other than exhibits to the documents, unless the
exhibits are specifically incorporated by reference into such documents) are
available without charge to any person, including any beneficial owner, to whom
this proxy statement/prospectus is delivered, upon written or oral request,
with respect to documents that relate to NCBC, from Lewis E. Holland, Vice
Chairman, Treasurer and Chief Financial Officer, National Commerce
Bancorporation, One Commerce Square, Memphis, Tennessee 38150; Telephone No.
(901) 523-3242, and, with respect to documents that relate to Piedmont, from
Thomas W. Wayne, Treasurer, Vice President and Chief Financial Officer,
Piedmont Bancorp, Inc., 260 South Churton Street, Hillsborough, North Carolina,
27278-2507; Telephone No. (919) 732-2143. In order to ensure timely delivery of
such documents, any request should be made by March 23, 2000.
LEGAL MATTERS
The validity of the shares of NCBC common stock to be issued upon
consummation of the merger has been passed upon for NCBC by Bass, Berry & Sims
PLC, Memphis, Tennessee. In addition, the material tax consequences of the
merger are being passed upon for NCBC and Piedmont by Bass, Berry & Sims PLC.
Attorneys at Bass, Berry & Sims PLC working on the merger and the registration
statement of which this proxy statement/prospectus is a part owned
approximately 300 shares of NCBC common stock as of the date of this proxy
statement/ prospectus. Certain legal matters in connection with the merger will
be passed upon for Piedmont by Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P., Greensboro, North Carolina.
EXPERTS
Ernst & Young LLP, independent auditors, have audited NCBC's consolidated
financial statements included in NCBC's Annual Report on Form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement.
NCBC's financial statements are incorporated by reference in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
The consolidated financial statements of Piedmont Bancorp, Inc. as of June
30, 1999 and 1998 and for each of the years in the three-year period ended June
30, 1999, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated herein by reference, and upon the authority of said
firm as experts in accounting and auditing.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF DECEMBER 27, 1999
BY AND AMONG
NATIONAL COMMERCE BANCORPORATION
AND
PIEDMONT BANCORP, INC.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of this
27th day of December, 1999, by and among NATIONAL COMMERCE BANCORPORATION
("NCBC"), a Tennessee corporation which is registered as a bank holding company
under the Bank Holding Company Act of 1956 and whose principal offices are
located at One Commerce Square, Memphis, Tennessee 38150, and PIEDMONT BANCORP,
INC. ("PBI"), a North Carolina corporation which is registered as a bank
holding company and whose principal offices are located at 260 So. Churton
Street, Hillsborough, North Carolina. NCBC and PBI are sometimes hereinafter
called the "Parties."
Certain other capitalized terms used in this Agreement and in the related
plan of Merger are defined below in Section 10.1.
R E C I T A L S
A. PBI is the beneficial owner and holder of record of one hundred percent
(100%) of the issued and outstanding shares of capital stock of Hillsborough
Savings Bank, Inc., SSB (the "Savings Bank Subsidiary").
B. The Board of Directors of PBI deems it desirable and in the best
interests of PBI, the Savings Bank Subsidiary and the shareholders of PBI that
PBI be merged with and into NCBC, which would survive the merger as the
Surviving Corporation, as defined herein (the "Merger"), on the terms and
subject to the conditions set forth in this Agreement and in the manner
provided in the Plan of Merger annexed hereto as Exhibit 1 (the "Plan of
Merger") and has directed that this Agreement and the Plan of Merger be
submitted to the shareholders of PBI with the recommendation that they be
approved by them.
C. The Board of Directors of NCBC deems it desirable and in the best
interests of NCBC and the shareholders of NCBC that PBI be merged with and into
NCBC on the terms and subject to the conditions set forth in this Agreement and
in the manner provided in the Plan of Merger.
D. The Parties intend that the Merger qualify as a reorganization pursuant
to Section 368 of the Internal Revenue Code of 1986, as amended (the "Code")
and be accounted for as a pooling-of-interests for financial accounting
purposes.
E. The respective Boards of Directors of NCBC and PBI have each adopted
resolutions setting forth and adopting this Agreement and the Plan of Merger,
and have directed that this Agreement and the annexed Plan of Merger and all
resolutions adopted by said Boards of Directors related to this Agreement, be
submitted with appropriate applications to, and filed with all applicable
Regulatory Authority as may be necessary in order to obtain all Consents
required to consummate the proposed Merger and the transactions contemplated in
this Agreement in accordance with this Agreement, the Plan of Merger and
applicable law.
F. The respective boards of Directors of NCBC and PBI have agreed to cause
NCBC and PBI to enter into the stock option agreement annexed hereto as Exhibit
2 (the "Stock Option Agreement") contemporaneously with the signing of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
ARTICLE 1
TERMS OF THE MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement and in the
manner provided in the Plan of Merger, at the Effective Time PBI shall be
merged with and into NCBC in accordance with the provisions of Section 55-11-
01, et seq. of the North Carolina Business Corporation Act ("North Carolina
Code") and Section 48-21-101, et seq. of the Tennessee Business Corporation Act
(the "TBCA") and with the effect provided in Section 48-21-108 of the TBCA (the
"Merger"). NCBC shall be the Surviving Corporation resulting from the Merger
and shall continue to be governed by the laws of the State of Tennessee.
A-1
<PAGE>
1.2 Time and Place of Closing. The Closing will take place at 9:00 a.m. on
the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 a.m.) or at such other time as the
Parties may mutually agree. The Closing shall be held at the offices of Bass,
Berry & Sims PLC, 100 Peabody Place, Suite 950, Memphis, Shelby County,
Tennessee 38103, or at such other place as the Parties may mutually agree.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Articles of
Merger reflecting the Merger shall have been filed with both the Secretary of
State of the State of North Carolina and the Secretary of State of the State of
Tennessee (the "Effective Time").
1.4 Charter. The Charter of NCBC in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation until
otherwise amended or repealed.
1.5 Bylaws. The Bylaws of NCBC in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until otherwise amended
or repealed.
1.6 Name. The name of NCBC shall remain unchanged after the Effective Time,
unless and until otherwise renamed.
1.7 Directors and Officers. The directors and officers of NCBC in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected or appointed, shall serve as the directors and
officers of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation, unless and until their
successors shall have been elected or appointed and shall have qualified or
until they shall have been removed in the manner provided herein.
1.8 NCBC's Right to Revise the Structure of the Transaction. NCBC shall have
the unilateral right to revise the structure of the Merger in order to achieve
tax benefits or for any other reason which NCBC may deem advisable; provided,
however, that NCBC shall not have the right, without the approval of the Board
of Directors of PBI, to make any revision to the structure of the Merger which
(i) changes the amount, form or nature of the Consideration which the PBI
Record Holders are to receive as determined in the manner provided in 2.1(b) of
this Agreement; (ii) changes the intended tax-free effect of the Merger to
NCBC, PBI to any PBI Record Holder or (iii) adversely impacts the rights or
benefits of the officers, directors or employees of PBI. NCBC may exercise this
right of revision by giving written notice to PBI in the manner provided in
Section 10.9 of this Agreement, which notice shall be in the form of an
amendment to this Agreement and the Plan of Merger or in the form of an Amended
and Restated Agreement and Amended and Restated Plan of Merger.
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 Conversion; Cancellation and Exchange of Shares; Exchange Ratio. At the
Effective Time, by virtue of the Merger and without any action on the part of
NCBC, PBI, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) NCBC Capital Stock. Each share of NCBC Capital Stock, including any
attached rights to purchase NCBC capital stock, issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) PBI Common Stock. Each share of PBI Common Stock issued and
outstanding at the Effective Time shall cease to represent any interest
(equity, shareholder or otherwise) in PBI and shall automatically be converted
exclusively into, and constitute only the right of each PBI Record Holder to
receive in exchange for such Holder's shares of PBI Common Stock the
consideration to which the PBI Record Holder is entitled as provided in this
Section 2.1(b):
A-2
<PAGE>
(i) The Exchange Ratio Calculation. Subject to any adjustments which
may be required by an event described in Subsection 2.1(b)(iii) below, at and
as of the Effective Time:
(A) Each share of the PBI Common Stock outstanding at and as of
the Effective Time shall be converted into the right to receive that
number of shares of NCBC Common Stock equal to:
(I) The quotient of the Net Purchase Price (defined below)
divided by the NCBC "Market Price Per Share" as defined hereinbelow,
divided by
(II) The sum of the number of shares of PBI Common Stock
outstanding at and as of the Effective Time and the number of shares
of PBI Common Stock issuable pursuant to options to purchase PBI
Common Stock to the extent that such options are outstanding at and
as of the Effective Time.
Notwithstanding the provisions of subsection (A) above, if the Market Price
Per Share shall be less than $20.70, then each share of PBI Common Stock
outstanding at and as of the Effective Time shall be converted into the right
to receive .60499 shares of NCBC Common Stock, and if the Market Price Per
Share shall exceed $25.30, then each share of PBI Common Stock outstanding at
and as of the Effective Time shall be converted into the right to receive
.49499 shares of NCBC Common Stock.
(B) "Net Purchase Price" shall be $34,500,000.
No share of PBI Common Stock shall be deemed to be
outstanding or have any rights other than those set forth in this
Section 2.1(b) after the Effective Time. No fractional shares of NCBC
Common Stock shall be issued in the Merger and, if after aggregating
all of the whole and fractional shares of NCBC Common Stock to which a
PBI Record Holder shall be entitled based upon this Exchange Ratio
Calculation, there should be a fractional share of NCBC Common Stock
remaining, such fractional share shall be settled by a cash payment
therefor pursuant to Article 3 of this Agreement, which cash settlement
shall be based upon the Market Price Per Share (as defined below) of
one (1) full share of NCBC Common Stock.
(ii) Definition of "Market Price Per Share". The "Market Price Per
Share" shall be the average of the closing price per share of NCBC Common Stock
on the Nasdaq (as reported by The Wall Street Journal) on the five (5) trading
day period ending two (2) trading days prior to the Effective Time, or such
earlier date as may be required by the Securities and Exchange Commission.
(iii) Effect of Stock Splits, Reverse Stock Splits, Stock Dividends
and Similar Changes in the Capital of PBI. Should PBI effect any stock splits,
reverse stock splits, stock dividends or similar changes in its respective
capital accounts subsequent to the date of this Agreement but prior to the
Effective Time, the Exchange Ratio may, in NCBC's sole discretion if such
change in the capital accounts constitutes a breach of any of PBI's
representations, warranties or covenants, be adjusted in such a manner as the
Board of Directors of NCBC shall deem in good faith to be fair and reasonable
in order to give effect to such changes. Notwithstanding the foregoing, nothing
in this subparagraph (iii) shall be deemed to be a waiver of the inaccuracy of
any representation or warranty or breach of any covenant by PBI set forth
herein.
(c) Shares Held by PBI or NCBC. Each of the shares of PBI Common Stock
held by any PBI Company or by any NCBC Company, in each case other than in a
fiduciary capacity or as a result of debts previously contracted, shall be
cancelled and retired at the Effective Time and no Consideration shall be
issued in exchange therefor.
2.2 Conversion of Stock Options.
(a) At the Effective Time, all rights with respect to PBI Common Stock
pursuant to stock options ("PBI Options") granted by PBI under the PBI Option
Plans, which are outstanding at the Effective Time, whether or not exercisable,
shall be converted into and become rights with respect to NCBC Common Stock,
and NCBC shall assume each PBI Option, in accordance with the terms of the PBI
Option Plan and stock
A-3
<PAGE>
option agreement by which it is evidenced. From and after the Effective Time,
(i) each PBI Option assumed by NCBC may be exercised solely for shares of NCBC
Common Stock, (ii) the number of shares of NCBC Common Stock subject to such
PBI Option shall be equal to the number of shares of PBI Common Stock subject
to such PBI Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iii) the per share exercise price under each such PBI
Option shall be adjusted by dividing the per share exercise price under each
such PBI Option by the Exchange Ratio and rounding down to the nearest cent.
PBI agrees to take all necessary steps to effectuate the foregoing provisions
of this Section 2.2. Notwithstanding the foregoing, each stock option which is
an "incentive stock option" under the PBI Option Plan shall be adjusted as
required by Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations promulgated thereunder so as to continue as an
incentive stock option under Section 424 of the Code and so as not to
constitute a modification, extension or renewal of the option within the
meaning of Section 424(h) of the Code.
2.3 Restricted Stock. At the Effective Time, each share of PBI Common Stock
held by the trustees under the Hillsborough Savings Bank, Inc., SSB Management
Recognition Plan (the "MRP"), including unvested shares subject to Awards as
defined in the MRP heretofore granted to participants under the MRP, shall be
converted into and exchanged for NCBC Common Stock and cash in lieu of
fractional shares pursuant to the provisions of Section 3.1 below, and such
shares and cash shall thereafter be held to be delivered to the respective
participants pursuant to the MRP. At the Effective Time, the MRP and each stock
grant agreement pursuant to which Awards were granted shall remain in effect,
except that from and after the Effective Time the MRP and each such stock grant
agreement shall be amended as necessary to provide that: (i) NCBC shall be
substituted for the Savings Bank Subsidiary; (ii) the NCBC Board of Directors
or its Compensation Committee shall be substituted for the Committee of the
Savings Bank Subsidiary Board of Directors with respect to administration of
the MRP; (iii) unvested shares of NCBC Common Stock and cash determined in
accordance with the provisions of Section 3.1 below shall be substituted for
unvested shares of PBI Common Stock; (iv) no shares or other assets in addition
to the shares of PBI Common Stock currently awarded under the MRP shall be
purchased by or for the MRP; and (v) shares, cash or other interests in the MRP
forfeited by participants shall be retained by the Trustees and shall be
available for making additional Awards under the MRP.
2.4 ESOP. The parties acknowledge that the Hillsborough Savings Bank, Inc.
Employee Stock Ownership Plan will not be continued by NCBC and that, as a
result, in accordance with the terms of such Plan, such Plan will terminate as
a result of the Merger.
2.5 Anti-Dilution Provisions. In the event NCBC changes the number of
shares of NCBC Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or recapitalization with respect
to such stock and the record date therefor (in the case of a stock dividend) or
the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
ARTICLE 3
EXCHANGE OF SHARES
3.1 Exchange Procedures. Promptly after the Effective Time, NCBC and PBI
shall cause the Exchange Agent to mail to the PBI Record Holders appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
PBI Common Stock shall pass, only upon proper delivery of such certificates to
the Exchange Agent). The Exchange Agent may establish reasonable and customary
rules and procedures in connection with its duties. After the Effective Time,
each PBI Record Holder of PBI Common Stock (other than shares to be cancelled
pursuant to Section 2.1(c) of this Agreement) issued and outstanding at the
Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the Consideration provided in Section 2.1(b) of
this Agreement, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to
A-4
<PAGE>
Section 3.2 of this Agreement. To the extent required by Section 2.1(b) of
this Agreement, each PBI Record Holder also shall receive, upon surrender of
the certificate or certificates representing his or her shares of PBI Common
Stock outstanding immediately prior to the Effective Time, cash in lieu of any
fractional share of NCBC Common Stock to which such holder may be otherwise
entitled (without interest). NCBC shall not be obligated to deliver the
Consideration to which any PBI Record Holder is entitled as a result of the
Merger until such PBI Record Holder surrenders such holder's certificate or
certificates representing the shares of PBI Common Stock for exchange as
provided in this Section 3.1. The certificate or certificates of PBI Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may
reasonably require. Any other provision of this Agreement notwithstanding,
neither NCBC nor the Exchange Agent shall be liable to a PBI Record Holder for
any amounts paid or properly delivered in good faith to a public official
pursuant to any applicable abandoned property Law. Adoption of this Agreement
by the shareholders of PBI shall constitute ratification of the appointment of
the Exchange Agent.
3.2 Rights of Former PBI Record Holders. At the Effective Time, the stock
transfer books of PBI shall be closed as to holders of PBI Common Stock
outstanding immediately prior to the Effective Time, and no transfer of PBI
Common Stock by any PBI Record Holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section
3.1 of this Agreement, each certificate theretofore representing shares of PBI
Common Stock (other than shares to be cancelled pursuant to Section 2.1(c) of
this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the Consideration provided in Section
2.1(b) of this Agreement, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by PBI in
respect of such shares of PBI Common Stock in accordance with the terms of
this Agreement and which remain unpaid at the Effective Time. Whenever a
dividend or other distribution is declared by NCBC on the NCBC Common Stock,
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares of NCBC Common
Stock issuable pursuant to this Agreement, but beginning sixty (60) days after
the Effective Time no dividend or other distribution payable to the holders of
record of NCBC Common Stock as of any time subsequent to the Effective Time
shall be delivered to a PBI Record Holder until such PBI Record Holder
surrenders his or her certificate or certificates evidencing PBI Common Stock
for exchange as provided in Section 3.1 of this Agreement. However, upon
surrender of such PBI Common Stock certificate, both the NCBC Common Stock
certificate and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such certificate.
3.3 Lost Certificates. Any PBI Record Holder whose certificate
representing shares of PBI Common Stock has been lost, destroyed, stolen or
otherwise is missing shall be entitled to receive a certificate representing
the shares of NCBC Common Stock and cash in lieu of fractional shares to which
he or she is entitled in accordance with and upon compliance with conditions
reasonably imposed by the Exchange Agent (including, without limitation, a
requirement that the shareholder provide a lost instruments indemnity bond in
form, substance and amount reasonably satisfactory to the Exchange Agent).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PBI
Except as disclosed in the PBI Disclosure Letter, PBI hereby represents and
warrants to NCBC as follows:
4.1 Organization, Standing and Power. PBI is a corporation duly organized,
validly existing, and in good standing under the laws of the State of North
Carolina and has the corporate power and authority to carry on its business in
all material respects as now conducted and to own, lease and operate its
Assets. PBI is duly qualified or licensed to transact business as a foreign
corporation in good standing in the states of the United States and foreign
jurisdictions where the character of its Assets or the conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PBI.
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4.2 Authority; No Breach of Agreement.
(a) PBI has the corporate power and authority necessary to execute,
deliver and, upon obtaining all necessary approvals from its stockholders and
appropriate Regulatory Authorities, to perform its obligations under this
Agreement and effect the Plan of Merger and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of
this Agreement and the Plan of Merger, as appropriate, and the consummation of
the transactions contemplated herein and therein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of PBI, subject to the approval of this Agreement and the
Plan of Merger by the requisite vote of holders of the outstanding shares of
PBI Common Stock, which is the only shareholder vote required for approval of
this Agreement and the Plan of Merger and consummation of the Merger by PBI.
Subject to the receipt of such requisite shareholder approval, this Agreement
represents a legal, valid and binding obligation of PBI, enforceable against
PBI in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief and other
equitable remedies is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or the Plan of
Merger, as appropriate, by PBI, nor the consummation by PBI of the transactions
contemplated hereby or thereby, nor compliance by PBI with any of the
provisions hereof or thereof will (i) conflict with or result in a breach of
any provision of PBI's Articles of Incorporation or Bylaws, or (ii) except as
disclosed in Section 4.2(b) of the PBI Disclosure Letter, constitute or result
in a Default under, or require any Consent (other than shareholder approval)
pursuant to, or result in the creation of any Lien on any material Asset of any
PBI Company under, any Contract or Permit of any PBI Company except as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBI, or (iii) subject to receipt of the requisite Consents referred
to in Section 7.3 of this Agreement, violate any Law or Order applicable to any
PBI Company or any of its assets except as is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PBI.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws, the rules of the American
Stock Exchange and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any PBI Employee Plans or
under the HSR Act, and other than Consents, filings or notifications which, if
not obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PBI, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
PBI of the Merger and the other transactions contemplated in this Agreement and
the Plan of Merger.
(d) No PBI Company is a party to, or subject to, or bound by, any
agreement or judgment, order, letter of understanding, writ, prohibition,
injunction or decree of any court or other governmental body of competent
jurisdiction, or any law which would prevent the execution and delivery of this
Agreement and the Plan of Merger by PBI, or the consummation of the
transactions contemplated hereby and thereby, and no action or proceeding is
pending against any PBI Company in which the validity of this Agreement, the
transactions contemplated hereby or any action which has been taken by any of
such Parties in connection herewith or in connection with the transaction
contemplated hereby is at issue.
4.3 Capital Stock.
(a) The authorized capital stock of PBI consists of 20,000,000 shares of
PBI Common Stock, no par value per share, of which 2,502,700 shares are issued
and outstanding as of the date of this Agreement and 5,000,000 shares of PBI
preferred stock, no par value, of which no shares are issued and outstanding as
of the date of this Agreement. All of the issued and outstanding shares of
capital stock of PBI are duly and validly issued and outstanding and are fully
paid and nonassessable. None of the outstanding shares of capital stock of PBI
have been issued in violation of any preemptive rights of the current or past
shareholders of PBI.
(b) Except as set forth in Section 4.3(a) of this Agreement or pursuant
to the PBI Option Plans, there are no shares of capital stock or other equity
securities of PBI outstanding and no outstanding Rights
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relating to the capital stock of PBI; provided, however, that 105,800 shares of
PBI Common Stock have been issued, and are being held pursuant to restrictions
set forth in, the Hillsborough Savings Bank, Inc., SSB Management Recognition
Plan.
4.4 PBI Subsidiaries. PBI has disclosed in Section 4.4 of the PBI Disclosure
Letter all of the PBI Subsidiaries(identifying its jurisdiction of
incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed
to transact business except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PBI, and the number of shares owned
and percentage ownership interest represented by such share ownership). PBI or
one of its wholly owned Subsidiaries owns all of the issued and outstanding
shares of capital stock (or other equity interests) of each PBI Subsidiary. No
capital stock (or other equity interest) of any PBI Subsidiary is or may become
required to be issued (other than to another PBI Company) by reason of any
Rights, and there are no Contracts by which any PBI Subsidiary is bound to
issue (other than to another PBI Company) additional shares of its capital
stock (or other equity interests) or Rights or by which any PBI Company is or
may be bound to transfer any shares of the capital stock (or other equity
interest) of any PBI Subsidiary (other than to another PBI Company). There are
no Contracts relating to the rights of any PBI Company to vote or to dispose of
any shares of the capital stock (or other equity interests) of any PBI
Subsidiary. All of the shares of capital stock (or other equity interests) of
each PBI Subsidiary held by a PBI Company are fully paid and nonassessable
under the applicable corporation or similar Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the PBI Company
free and clear of any Lien. Each PBI Subsidiary is either a bank or a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and
authority necessary for it to own, lease and operate its Assets and to carry on
its business in all material respects as now conducted. Each PBI Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the states of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PBI. The
only PBI Subsidiary that is a depository institution is Savings Bank
Subsidiary. Savings Bank Subsidiary is an "insured institution" as defined in
the Federal Deposit Insurance Act and applicable regulations thereunder, and
the Deposits in which are insured by the Savings Association Insurance Fund, to
the extent provided by law. The minute book and other organizational documents
and Records for each PBI Subsidiary have been made available to NCBC for its
review, and are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
4.5 PBI Financial Statements. PBI has delivered or made available to NCBC
(or will deliver when available, with respect to periods ended after the date
of this Agreement but prior to the Effective Time) true, correct and complete
copies of:
(a) Annual reports on Form 10-K, including any amendments thereto, for
the years ended June 30, 1997, 1998 and 1999, and the quarterly report on Form
10-Q for the quarter ended September 30, 1999, all as filed with the SEC (the
"PBI SEC Reports"). All financial statements contained in the PBI SEC Reports
(the "PBI GAAP Financial Statements") were prepared in accordance with GAAP and
fairly present the financial conditions, results of operations, changes in
stockholders' equity and cash flows of PBI as of the dates of such financial
statements and for the periods then ended (subject, in the case of quarterly
reports, to normal recurring year-end adjustments, which were not and were not
expected to be material).
(b) All Call Reports and Federal Reserve FRY-6 Reports and FRY-9C
Reports, including any amendments thereto, filed with any Regulatory
Authorities by PBI and any PBI Subsidiary, respectively, for the years ended
December 31, 1996, 1997, and 1998, and thereafter, together with any
correspondence with any Regulatory Authorities concerning any of the aforesaid
financial statements and Reports (the "PBI Regulatory Financial Statements").
Such PBI Regulatory Financial Statements (i) were (or will be) prepared from
the
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Records of PBI and/or each PBI Subsidiary; (ii) were (or will be) prepared in
accordance with regulatory accounting principles consistently applied except
where otherwise noted; (iii) present (or, when prepared, will present) in all
material respects PBI's and each PBI Subsidiary's financial condition and the
results of its operations, changes in stockholders' equity and cash flows at
the relevant dates thereof and for the periods covered thereby; and (iv)
contain or reflect (or, when prepared, will contain and reflect) all
adjustments and accruals necessary for the accurate presentation (in all
material respects) of PBI's and each PBI Subsidiary's financial condition and
the results of PBI's and each PBI Subsidiary's operations and cash flows for
the periods covered by such financial statements (subject to any exceptions as
to consistency specified therein or as may be indicated in the notes thereto
or, in the case of interim financial statements, to normal recurring year-end
adjustments that are not material).
4.6 Absence of Undisclosed Liabilities. No PBI Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PBI, except Liabilities which are accrued or
reserved against in the PBI GAAP Financial Statements as of September 30, 1999,
or reflected in the notes or schedules, if any, thereto, and delivered with the
PBI Disclosure Letter prior to the date of this Agreement and (ii) Liabilities
incurred in the ordinary course of business since September 30, 1999. No PBI
Company has incurred or paid any Liability since the Balance Sheet Date, except
for such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PBI or in
connection with the transactions contemplated by this Agreement.
4.7 Absence of Certain Changes or Events. Except as described in Section 4.7
of the PBI Disclosure Letter, since the Balance Sheet Date there has not been:
(a) Any material transaction by any PBI Company which was not undertaken
in the ordinary course of business consistent with past practice.
(b) Any loss of a key employee or any damage, destruction or loss,
whether or not covered by insurance, which has had or which may be reasonably
expected to have a Material Adverse Effect on PBI.
(c) Any acquisition or disposition by any PBI Company of any Asset
having a fair market value, singularly or in the aggregate for each PBI
Company, in an amount greater than Fifty Thousand Dollars ($50,000.00), except
in the ordinary course of business consistent with past practice.
(d) Any mortgage, pledge or subjection to Lien, of any kind or nature,
any of the Assets of any PBI Company, except to secure extensions of credit in
the ordinary course of business consistent with past practice.
(e) Any amendment, modification or termination of any Contract relating
to any PBI Company or to which any PBI Company is a party which amendment,
modification or termination would or may be reasonably expected to have a
Material Adverse Effect on PBI.
(f) Any increase in, or commitment to increase, the compensation payable
or to become payable to any officer, director, employee or agent of any PBI
Company, or any bonus payment or similar arrangement made to or with any of
such officers, directors, employees or agents, other than routine increases
made in the ordinary course of business not exceeding the greater of ten
percent (10%) per annum or Five Thousand Dollars ($5,000.00) for any of them
individually.
(g) Any incurring of, assumption of, or taking of, by any PBI Company,
any Asset subject to any Liability, except for Liabilities incurred or assumed
or Assets taken subsequent to the Balance Sheet Date in the ordinary course of
business consistent with past practice.
(h) Except as are applicable to state-chartered, FDIC insured savings
banks and their Affiliates, generally, any material alteration in the manner of
keeping the books, accounts or Records of any PBI Company, or in the accounting
policies or practices therein reflected.
(i) Any release or discharge (or partial release or discharge) of any
obligation or Liability of any Person related to or arising out of any loan
made by any PBI Company, except in the ordinary course of business and in
conformity with past practice, which, individually or in the aggregate, would
or may reasonably be expected to have a Material Adverse Effect on PBI.
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4.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the
PBI Companies have been timely filed or requests for extensions have been
timely filed, granted and have not expired for periods ended on or before June
30, 1999, and will be filed, or requests for an extension of time for filing
will be filed, on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate in all material respects. All Taxes shown on filed Tax
Returns have been paid. There is no audit, examination, deficiency proceeding,
or litigation with respect to any Taxes, except as reflected in the PBI GAAP
Financial Statements or Section 4.8(a) of the PBI Disclosure Letter. All Taxes
and other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no Liens with respect to Taxes
upon any of the Assets of the PBI Companies.
(b) None of the PBI Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
PBI Companies for the period or periods through and including the date of the
respective PBI GAAP Financial Statements has been made and is reflected on such
PBI GAAP Financial Statements.
(d) Reserved.
(e) Each of the PBI Companies is in compliance with, and its Records
contain information and documents (including properly completed IRS Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state and local tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the IRC, except for such instances of non-compliance and
such omissions as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PBI.
(f) There has not been an ownership change, as defined in the IRC
Section 382(g), of any of the PBI Companies that occurred during or after any
Taxable Period in which the PBI Companies incurred a net operating loss that
carries over to any Taxable Period ending after June 30, 1999.
(g) Except as set forth in Section 4.8(g) of the PBI Disclosure Letter,
none of the PBI Companies is a party to any tax allocation or sharing agreement
and none of the PBI Companies has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which was PBI) or has any Liability for taxes of any Person (other than PBI and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law) as a transferee or successor or by
contract or otherwise.
4.9 Allowance for Possible Loan Losses. The allowance for possible loan or
credit losses, including any allowances or reserves for losses on ORE and other
collateral taken in satisfaction, or partial satisfaction of a debt previously
contracted (the "Allowance") shown on the consolidated balance sheets of PBI
included in the most recent PBI Regulatory Financial Statements dated prior to
the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of PBI included in the PBI Regulatory Financial Statements as of
dates subsequent to the execution of this Agreement and as of the Closing Date
will be, as of the dates thereof, in the reasonable opinion of management of
PBI adequate (within the meaning of GAAP and applicable regulatory requirements
or guidelines) to provide for all known and reasonably anticipated losses
relating to or inherent in the loan and lease portfolios (including accrued
interest receivables and ORE reserves) of the PBI Companies and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by the PBI Companies as of the dates thereof, except where
the failure of such Allowance to be adequate is not reasonably likely to have a
Material Adverse Effect on PBI. Except as described in Section 4.9 of the PBI
Disclosure Letter (by loan type, loan number, classification and outstanding
balance), no PBI Company has any Loan or other extension of credit which has
been (or should have been in management's reasonable opinion) classified as
"Other Assets Especially Mentioned," "Substandard," "Doubtful" or "Loss," or
similar classifications, that were not classified in any PBI Company's most
recent
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report of examination. Section 4.9 of the PBI Disclosure Letter also lists all
Loans or extensions of credit which are included on any PBI Company's "watch
list." The net book value of any PBI Company's assets acquired through
foreclosure in satisfaction of problem loans ("ORE") is carried on the balance
sheet of the PBI Financial Statements at fair value at the time of acquisition
less estimated selling costs which approximate the net realizable value of the
ORE in accordance with the American Institute of Certified Public Accountants'
Statement of Position 92-3.
4.10 Assets. Except as reflected in the PBI GAAP Financial Statements or as
set forth in Section 4.10 of the PBI Disclosure Letter, the PBI Companies have
good and marketable title, free and clear of all Liens, to all of their
respective Assets except to the extent that is not reasonably likely to have a
Material Adverse Effect on PBI. All tangible Assets used in the businesses of
the PBI Companies are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary course of business consistent with PBI's past
practices except to the extent that is not reasonably likely to have a Material
Adverse Effect on PBI. All Assets which are material to PBI's business on a
consolidated basis, held under leases or subleases by any of the PBI Companies,
are held under valid Contracts enforceable in all material respects in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief and other equitable remedies is subject to the discretion of the court
before which any proceedings may be brought), and each such Contract is in full
force and effect. The PBI Companies currently maintain insurance similar in
amounts, scope, and coverage that management believes to be adequate in all
material respects. None of the PBI Companies has received notice from any
insurance carrier that (i) such insurance would be cancelled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as set forth
in Section 4.10 of the PBI Disclosure Letter there are presently no claims
pending under any such policies of insurance and no notices have been given by
any PBI Company under such policies.
4.11 Intellectual Property. All of the Intellectual Property rights of the
PBI Companies are in full force and effect and constitute legal, valid and
binding obligations of the respective parties thereto except to the extent that
is not reasonably likely to have a Material Adverse Effect on PBI, and there
have not been, and there currently are not, any defaults thereunder by any PBI
Company except to the extent that is not reasonably likely to have a Material
Adverse Effect on PBI. A PBI Company owns or is the valid licensee of all such
Intellectual Property rights free and clear of all liens or claims of
infringement except to the extent that is not reasonably likely to have a
Material Adverse Effect on PBI. Except to the extent that is not reasonably
likely to have a Material Adverse Effect on PBI, none of the PBI Companies or
their respective predecessors, has misused the Intellectual Property rights of
others and none of the Intellectual Property rights as used in the business
conducted by any such PBI Company infringes upon or otherwise violates the
rights of any Person, nor has any Person asserted a claim of such infringement.
Except as disclosed in Section 4.11 of the PBI Disclosure Memorandum, no PBI
Company is obligated to pay any royalties to any Person with respect to any
such Intellectual Property. Each PBI Company owns or has the valid right to use
all of the Intellectual Property rights material to PBI which it is presently
using, or in connection with performance of any material Contract to which it
is a party. No officer, director, or employee of any PBI Company is party to
any Contract which requires such officer, director or employee to assign any
interest in any Intellectual Property or keep confidential any trade secrets,
proprietary data, customer information, or other business information except as
disclosed in Section 4.11 of the PBI Disclosure Letter, which restricts or
prohibits such officer, director or employee from engaging in activities
competitive with any person, including any PBI Company.
4.12 Environmental Matters. Except as set forth in Section 4.12 of the PBI
Disclosure Letter:
(a) To the Knowledge or PBI, each PBI Company, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws, except for violations which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on PBI.
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(b) To the Knowledge of PBI, there is no litigation pending or
threatened before any court, governmental agency or authority or other forum in
which any PBI Company or any of its Operating Properties or Participation
Facilities (or PBI in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
environmental law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by any
PBI Company or any of its Operating Properties or Participation Facilities,
except for such litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on PBI.
(c) To the Knowledge of PBI, during the period of (i) any PBI Company's
ownership or operation of any of their respective current properties, (ii) any
PBI Company's participation in the management of any Participation Facility, or
(iii) any PBI Company's holding of a security interest in an Operating
Property, there have been no releases of Hazardous Material in, on, under,
adjacent to, or affecting (or potentially affecting) such properties, except
such as are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PBI. To the Knowledge of PBI, prior to the period of
(i) any PBI Company's ownership or operation of any of their respective current
properties, (ii) any PBI Company's participation in the management of any
Participation Facility, or (iii) any PBI Company's holding of a security
interest in an Operating Property, there were no releases of Hazardous Material
in, on, under, or affecting such property, Participation Facility or Operating
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PBI.
4.13 Compliance with Laws. PBI is duly registered as a bank holding company
under the BHC Act. Each PBI Company has in effect all Permits necessary for it
to own, lease or operate its material Assets and to carry on its business as
now conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PBI, and, to the knowledge of PBI, there has occurred no Default under any such
Permit other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PBI. Except as
set forth in Section 4.13 of the PBI Disclosure Letter, none of the PBI
Companies:
(a) Is, to the knowledge of PBI, in violation of any Laws, Orders or
Permits applicable to its business or employees conducting its business, except
for violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PBI; and
(b) Has received any notification or communication from any agency or
department of federal, state or local government or any Regulatory Authority or
the staff thereof (i) asserting that any PBI Company is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PBI, (ii)
threatening to revoke any Permits the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on PBI, or
(iii) requiring any PBI Company to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, or memorandum of
understanding, or to adopt any board resolution or similar undertaking, which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management or the
payment of dividends.
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4.14 Labor Relations. No PBI Company is the subject of any Litigation
asserting that it or any other PBI Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other PBI Company to bargain with any
labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any PBI Company, pending or threatened,
or to the Knowledge of PBI, is there any activity involving any PBI Company's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity, in any case which might, individually or in the
aggregate, have a Material Adverse Effect on PBI.
4.15 Employee Benefit Plans.
(a) PBI has disclosed in Section 4.15(a) of the PBI Disclosure Letter,
and has delivered or made available to NCBC prior to the date of this Agreement
copies in each case of, all pension, retirement, profit sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus or other incentive plan, all other written employee programs, arrangement
or agreements, all medical, vision, dental or other health plans, all life
insurance plans and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any PBI Company or ERISA Affiliate (defined below) thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively the "PBI Benefit
Plans"). Any of the PBI Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "PBI ERISA Plan." Each PBI ERISA Plan which is also a "defined benefit
plan" (as defined in IRC Section 414(j)) is referred to herein as a "PBI
Pension Plan." No PBI Pension Plan is or has been a multi-employer plan within
the meaning of Section 3(37) of ERISA.
(b) Except as set forth in Section 4.15(b) of the PBI Disclosure Letter,
all PBI Benefit Plans are in compliance with the applicable terms of ERISA, the
IRC and any other applicable laws the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBI. Each PBI ERISA Plan which is intended to be qualified under IRC
Section 401(a) has received a favorable determination letter from the Internal
Revenue Service, and PBI is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. Except as set forth in
Section 4.15(b) of the PBI Disclosure Letter, no PBI Company has engaged in a
transaction with respect to any PBI Benefit Plan that, assuming the taxable
period of such plan expired as of the date hereof, would subject any PBI
Company to a tax imposed by either IRC Section 4975 or Section 502(i) of ERISA
in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PBI.
(c) Except as disclosed in Section 4.15(e) of the PBI Disclosure Letter,
no PBI Company has any liability for retiree health and life benefits under any
of the PBI Benefit Plans to former employees and there are no restrictions on
the rights of such PBI Company to amend or terminate any such retiree health or
benefit plan without incurring liability thereunder which is reasonably likely
to have a Material Adverse Effect on PBI.
(d) Except as disclosed in Section 4.15(f) of the PBI Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any PBI Company from any PBI Company
under any PBI Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any PBI Benefit Plan, or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
(e) The present values of all accrued deferred compensation entitlements
(including entitlements under any executive compensation, supplemental
retirement or employment agreement) of employees and former employees of any
PBI Company and their respective beneficiaries, other than entitlements accrued
pursuant to funded retirement plans subject to the provisions of IRC Section
412 or Section 302 of ERISA, have been fully reflected on the PBI GAAP
Financial Statements to the extent required by and in accordance with GAAP.
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4.16 Material Contracts. Except as disclosed in Section 4.16 of the PBI
Disclosure Letter, none of the PBI Companies, nor any of their respective
assets, businesses or operations, is a party to, or is bound or affected by, or
receives benefits under (i) any employment, severance, termination, consulting
or retirement contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000 or total aggregate payments of $50,000 to
all Persons receiving benefits (ii) any contract relating to the borrowing of
money by any PBI Company or the guarantee by any PBI Company of any such
obligation (other than contracts evidencing deposit liabilities, purchases of
federal funds, fully secured repurchase agreements and Federal Home Loan Bank
advances of depository institution subsidiaries, trade payables, and contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any contracts which prohibit or restrict any PBI Company from engaging in
any business activities in any geographic area, line of business or otherwise
in competition with any other person, (iv) any exchange-traded or over-the-
counter swap, forward, future, option, cap, floor or collar financial contract,
or any other interest rate or foreign currency protection contract (not
disclosed in the PBI GAAP Financial Statements delivered prior to the date of
this Agreement) which is a financial derivative contract (including various
combinations thereof), and (v) any other material contract or amendment thereto
that would be required to be filed as an exhibit to a PBI SEC Report (whether
or not PBI is subject to the filing requirements of the SEC) filed (or which
would have been filed if PBI were subject to the SEC reporting requirements) by
PBI with the SEC prior to the date of this Agreement (together with all
contracts referred to in Sections 4.10 and 4.15(a) of this Agreement (the "PBI
Contracts")). With respect to each PBI Contract: (i) no PBI Company is in
Default thereunder, and (ii) no other party to any such contract is, to the
Knowledge of PBI, in Default in any respect or has repudiated or waived any
material provision thereunder, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PBI. Except as set forth in Section 4.16 of the PBI Disclosure Letter, all of
the indebtedness of any PBI Company for money borrowed is prepayable at any
time by such PBI Company without penalty or premium.
4.17 Legal Proceedings. There is no Litigation pending, or, to the Knowledge
of PBI, threatened against any PBI Company, or against any Asset, interest, or
right of any of them that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PBI, nor are there any orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any PBI Company, that are reasonably likely to have,
individually or in the aggregate, a material Adverse Effect on PBI. Section
4.17 of the PBI Disclosure Letter includes a report of all material litigation
as of the date of this Agreement to which any PBI Company is a party and which
names a PBI Company as a defendant or cross-defendant.
4.18 Reports. Since January 1, 1996, each PBI Company has timely filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with (i) the SEC, if applicable,
including Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements, (ii) all
other Regulatory Authorities, and (iii) any applicable state securities or
banking authorities (except failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PBI). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable laws. As of its respective date, each such report
and document did not, in all material respects, 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 made therein, in light of the circumstances
under which they were made, not misleading.
4.19 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any PBI Company to NCBC pursuant
to this Agreement or any other document, agreement, or instrument referred to
herein contains, or will contain, any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied by any PBI Company or any Affiliate
thereof for inclusion in the Registration Statement to be filed by NCBC with
the SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by any PBI Company or any Affiliate
thereof for inclusion in the Proxy Statement to
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be mailed to PBI's shareholders in connection with the shareholders' meeting,
and any other documents to be filed by a PBI Company or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated thereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of PBI, contain any untrue statement of material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the shareholders' meeting, contain any untrue statement of material
fact, or omit to state any material fact necessary to make the statement
therein, in light of the circumstances under which they were made, not
misleading. All documents that any PBI Company or any Affiliate thereof is
responsible for filing with any regulatory authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
4.20 Accounting, Tax and Regulatory Matters. To the Knowledge of PBI, no PBI
Company or any Affiliate thereof has taken any action or is affected by any
fact or circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the IRC, or (ii) materially impede or
delay receipt of any Consents of Regulatory Authorities referred to in Section
8.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such section. PBI
has made stock repurchases as described in Section 4.20 of the PBI Disclosure
Letter, which, depending upon facts related to NCBC, could affect qualification
of the transactions contemplated hereby for pooling-of-interests accounting
treatment.
4.21 State Takeover Laws. Except for provisions in the Articles of
Incorporation of PBI and the Savings Bank Subsidiary, no PBI Company has taken
any action designed or intended to require the transactions contemplated by
this Agreement and the Plan of Merger to comply with any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover laws (collectively "Takeover Laws"), including Articles 9 and 9A
of the North Carolina Business Corporation Act.
4.22 Articles of Incorporation Provisions. Each PBI Company has taken all
action so that the entering into of this Agreement and the Plan of Merger and
the consummation of the Merger and the other transactions contemplated by this
Agreement and the Plan of Merger do not and will not result in the grant of any
rights to any Person under the Articles, Bylaws or other governing instruments
of any PBI Company (other than their rights under this Agreement and the Plan
of Merger and voting, dissenters' appraisal or other similar rights) or
restrict or impair the ability of NCBC or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of
any PBI Company that may be directly or indirectly acquired or controlled by
it.
4.23 Charter Documents. PBI has previously provided, or made available to,
NCBC true and correct copies of the Articles of Incorporation and Bylaws of PBI
and the Articles of Incorporation and Bylaws of each PBI Company, as amended to
date, and each are in full force and effect.
4.24 Year 2000 Matters. The computer software operated by PBI which is
material to the conduct of its business is capable of providing or is being
adapted to provide uninterrupted millennium functionality to record, store,
process and present calendar dates falling on or after January 1, 2000, in
substantially the same manner and with the same functionality as such software
records, stores, processes and presents such calendar dates falling on or
before December 31, 1999, except as would not have a Material Adverse Effect on
PBI. PBI has not received and does not expect to receive a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). PBI has disclosed or made available to NCBC a complete and accurate copy
of PBI's plan for addressing the issues set forth in the statements of the
Federal Financial Institutions Examination Council, dated May 5, 1997, entitled
"Year 2000 Project Management Awareness," and December 1997, entitled "Safety
and Soundness Guidelines Concerning the Year 2000 Business Risk," as such
issues affect PBI. The costs of the adaptions and compliance referred to in
this Section 4.24 are not expected to have a Material Adverse Effect on PBI.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NCBC
Except as disclosed in the NCBC Disclosure Letter, NCBC hereby represents
and warrants to PBI that:
5.1 Organization, Standing and Power. NCBC is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Tennessee, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its material assets. NCBC is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the states of the United States and foreign jurisdictions
where the character of its assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on NCBC.
5.2 Authority; No Breach by Agreement.
(a) NCBC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the Plan of Merger and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
NCBC. This Agreement represents a legal, valid and binding obligation of NCBC,
enforceable against NCBC in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by NCBC, nor
the consummation by NCBC of the transactions contemplated hereby, nor
compliance by NCBC with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of any NCBC Company's Charter (or similar
governing instrument) or Bylaws, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any
Lien on any assets of any NCBC Company under any Contract or Permit of any
NCBC Company, or (iii) subject to receipt of the requisite approvals referred
to in Section 8.1(b) of this Agreement, violate any Law or Order applicable to
any NCBC Company or any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate law and the rules of the NASDAQ,
and other than Consents required from Regulatory Authorities, and other than
notices to or filings with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect to any employee benefit plans, or under the
HSR Act, and other than Consents, filings or notifications which, if not
obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on NCBC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
NCBC of the Merger and the other transactions contemplated in this Agreement
and the Plan of Merger.
(d) No NCBC Company is a party to, or subject to, or bound by, any
agreement or judgment, order, letter of understanding, writ, prohibition,
injunction or decree of any court or other governmental body of competent
jurisdiction, or any law which would prevent the execution and delivery of
this Agreement and the Plan of Merger by NCBC, or the consummation of the
transactions contemplated hereby and thereby, and no action or proceeding is
pending against any NCBC Company in which the validity of this Agreement, the
transactions contemplated hereby or any action which has been taken by any of
such Parties in connection herewith or in connection with the transaction
contemplated hereby is at issue.
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5.3 Capital Stock. The currently authorized capital stock of NCBC consists
of (i) 175,000,000 shares of NCBC Common Stock, of which 108,346,501 shares are
issued and outstanding as of November 30, 1999, and (ii) 5,000,000 shares of
NCBC Preferred Stock, of which no shares are issued and outstanding. All of the
issued and outstanding shares of NCBC Capital Stock are, and all of the shares
of NCBC Common Stock to be issued in exchange for shares of PBI Common Stock
upon consummation of the Merger, when issued in accordance with the terms of
this Agreement, will be, duly and validly issued and outstanding and fully paid
and nonassessable under the TBCA and the NCBC Charter. NCBC has reserved for
issuance a sufficient number of shares of NCBC Common Stock for the purpose of
issuing shares of NCBC Common Stock in accordance with the provisions of
Section 2.1(b) and 2.2 of this Agreement.
5.4 SEC Filings; Financial Statements.
(a) NCBC has filed and made available to PBI all SEC documents required
to be filed by NCBC since December 31, 1997 (the "NCBC SEC Reports"). The NCBC
SEC Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Laws and (ii) did not, at the time
they were filed (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such NCBC SEC Reports or necessary in order to make the statements in such NCBC
SEC Reports, in light of the circumstances under which they were made, not
misleading. Except for NCBC Subsidiaries that are registered as brokers,
dealers or investment advisors, no NCBC Subsidiary is required to file any SEC
Documents.
(b) Each of the NCBC Financial Statements (including, in each case, any
related notes) contained in the NCBC SEC Reports, including any NCBC SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by
Form 10-Q of the SEC), and fairly presented in all material respects the
consolidated financial position of NCBC and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim statements were or
are subject to normal and recurring year-end adjustments which were not or are
not expected to be material in amount or effect.
(c) Nothing has come to the attention of NCBC which would require a
material change to its most recently filed SEC Documents since the date of such
filing.
5.5 Absence of Undisclosed Liabilities. No NCBC Company has any liabilities
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on NCBC, except liabilities which are accrued or
reserved against in the consolidated balance sheets of NCBC as of September 30,
1999, included in the NCBC Financial Statements reflected in the notes thereto.
No NCBC Company has incurred or paid any Liability since the Balance Sheet
Date, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
NCBC or in connection with the transactions contemplated by this Agreement.
5.6 Absence of Certain Changes or Events. Since December 31, 1998, except as
disclosed in the NCBC Financial Statements delivered prior to the date of this
Agreement or contemplated by pending federal legislation applicable to
financial institutions generally, (i) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on NCBC, and (ii) the NCBC
Companies have not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants and agreements of NCBC provided in Article 6 of this
Agreement or would have a Material Adverse Effect on NCBC.
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5.7 Compliance with Laws. NCBC is duly registered as a bank holding company
under the BHC Act and as a savings and loan holding company under the HOLA.
Each NCBC Company has in effect all Permits necessary for it to own, lease or
operate its material assets and to carry on its business as now conducted, and
there has occurred no default under any such permit. No NCBC Company:
(a) Is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business; and
(b) Has received any notification or communication from any agency or
department of federal, state or local government or any Regulatory Authority or
the staff thereof (i) asserting that any NCBC Company is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, (ii) threatening to revoke any Permits, or (iii) requiring
any NCBC Company to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum or understanding,
or to adopt any board resolution or similar undertaking, which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
5.8 Legal Proceedings. There is no Litigation instituted or pending, or, to
the Knowledge of NCBC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any NCBC Company, or against any Asset,
interest or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on NCBC; nor are
there any orders of any regulatory authorities, other governmental authorities,
or arbitrators against any NCBC Company.
5.9 Reports. Since January 1, 1996, NCBC has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements, (ii) other
Regulatory Authorities, and (iii) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on NCBC). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, 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 made therein, in light of the circumstances under which they were
made, not misleading.
5.10 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any NCBC Company or any Affiliate
thereof to PBI pursuant to this Agreement or any other document, agreement or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any NCBC
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by NCBC with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any NCBC
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to PBI Shareholders in connection with the shareholders' meetings, and
any other documents to be filed by any NCBC Company or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of PBI, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the shareholders' meeting, contain any untrue statement of
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents
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that any NCBC Company or any Affiliate thereof is responsible for filing with
any Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law.
5.11 Accounting, Tax and Regulatory Matters. No NCBC Company or any
Affiliate thereof has taken any action or has any knowledge of any fact or
circumstance relating to NCBC that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of IRC Section 368(a), or (ii) materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 8.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
5.12 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the
NCBC Companies have been timely filed or requests for extensions have been
timely filed, granted and have not expired for periods ended on or before
December 31, 1998, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate in all material respects. All Taxes shown on filed Tax
Returns have been paid. There is no audit, examination, deficiency proceeding,
or litigation with respect to any Taxes, except as reflected in the NCBC
Financial Statements or Section 5.12(a) of the NCBC Disclosure Letter. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the NCBC Companies.
(b) None of the NCBC Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
NCBC Companies for the period or periods through and including the date of the
respective NCBC Financial Statements has been made and is reflected on such
NCBC Financial Statements.
(d) Reserved.
(e) Each of the NCBC Companies is in compliance with, and its Records
contain information and documents (including properly completed IRS Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state and local tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the IRC, except for such instances of non-compliance and
such omissions as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on NCBC.
(f) There has not been an ownership change, as defined in the IRC
Section 382(g), of any of the NCBC Companies that occurred during or after any
Taxable Period in which the Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1998.
(g) Except as set forth in Section 5.12(g) of the NCBC Disclosure
Letter, none of the NCBC Companies is a party to any tax allocation or sharing
agreement and none of the NCBC Companies has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was NCBC) or has any Liability for taxes of any Person
(other than NCBC and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by contract or otherwise.
5.13 Environmental Matters. Except as set forth in Section 5.13 of the NCBC
Disclosure Letter:
(a) Each NCBC Company, its Participation Facilities, and its Operating
Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on NCBC.
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(b) To the Knowledge of NCBC, there is no litigation pending or
threatened before any court, governmental agency or authority or other forum in
which any NCBC Company or any of its Operating Properties or Participation
Facilities (or NCBC in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
environmental law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by any
NCBC Company or any of its Operating Properties or Participation Facilities,
except for such litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on NCBC.
(c) To the Knowledge of NCBC, during the period of (i) any NCBC
Company's ownership or operation of any of their respective current properties,
(ii) any NCBC Company's participation in the management of any Participation
Facility, or (iii) any NCBC Company's holding of a security interest in an
Operating Property, there have been no releases of Hazardous Material in, on,
under, adjacent to, or affecting (or potentially affecting) such properties,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on NCBC. To the Knowledge of NCBC, prior
to the period of (i) any NCBC Company's ownership or operation of any of their
respective current properties, (ii) any NCBC Company's participation in the
management of any Participation Facility, or (iii) any NCBC Company's holding
of a security interest in an Operating Property, there were no releases of
Hazardous Material in, on, under, or affecting such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on NCBC.
5.14 Charter Documents. NCBC has previously provided, or made available to,
PBI true and correct copies of the Charter and Bylaws of NCBC, as amended to
date, and each are in full force and effect.
5.15 Year 2000 Matters. The computer software operated by NCBC which is
material to the conduct of its business is capable of providing or is being
adapted to provide uninterrupted millennium functionality to record, store,
process and present calendar dates falling on or after January 1, 2000, in
substantially the same manner and with the same functionality as such software
records, stores, processes and presents such calendar dates falling on or
before December 31, 1999, except as would not have a Material Adverse Effect on
NCBC. NCBC has not received and does not expect to receive a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). The costs of the adaptions and compliance referred to in this Section
5.14 are not expected to have a Material Adverse Effect on NCBC.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 Affirmative Covenants of PBI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of NCBC shall have been obtained, and except as otherwise
expressly contemplated herein, PBI shall, and shall cause each of its
Subsidiaries to: (i) operate its business only in the usual, regular and
ordinary course, (ii) preserve intact its business organization and assets and
maintain its rights and franchises, (iii) take no action which would (a)
materially adversely affect the ability of any party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentence of
Section 8.1(b) of this Agreement or prevent the transactions contemplated
hereby, including the Merger, from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of
Section 368(a) of the IRC or (b) adversely affect in any material respect the
ability of any Party to perform its covenants and agreements under this
Agreement, and (iv) provide NCBC with PBI financial statements at the end of
each month by the fifteenth (15th) day following the close of said month.
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6.2 Negative Covenants of PBI. Except as specifically permitted by this
Agreement, from the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, PBI covenants and agrees that it
will not do or agree to commit to do, or permit any of its Subsidiaries to do
or agree or commit to do, any of the following without the prior written
consent of the chief executive officer, president, chief financial officer or
executive vice president of NCBC, which consent shall not be unreasonably
withheld:
(a) Amend the Articles, Bylaws or other governing instruments of any PBI
Company; or
(b) Incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a PBI Company to another PBI
Company) in excess of an aggregate of $50,000 (for the PBI Companies on a
consolidated basis) except in the ordinary course of the business of PBI
Subsidiaries consistent with past practices (which shall include, for PBI
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition on any
Asset of any PBI Company of any lien or permit any such lien to exist (other
than in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of
business, advances from the Federal Home Loan Bank, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the
date hereof that are disclosed in the PBI Disclosure Letter); or
(c) Repurchase, redeem or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans or under the PBI
Option Plans), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of any PBI Company, or
declare or pay any dividend (other than regular quarterly dividends paid
consistent with past practice, and, provided the payment thereof would not
prevent the Merger from being accounted for as a "pooling-of-interests," such
other quarterly dividend as is required to prevent the PBI Record Holders from
foregoing a dividend from both PBI and NCBC during any calendar quarter) or
make any other distribution in respect of PBI capital stock; or
(d) Except pursuant to this Agreement or under the PBI Options Plans,
issue, sell, pledge, encumber, authorize the issuance of, enter into any
contract to issue, sell, pledge, encumber, or authorize the issuance of or
otherwise permit to become outstanding, any additional shares of PBI Common
Stock or any other capital stock of any PBI Company, or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any such
stock, or any security convertible into any such stock or any stock equivalent
type rights; or
(e) Except under the PBI Option Plans, adjust, split, combine or
reclassify any capital stock of any PBI Company or issue or authorize the
issuance of any other securities in respect of or in substitution for shares of
PBI Common Stock, or sell, lease, mortgage or otherwise dispose of or otherwise
encumber any shares of capital stock of any PBI Subsidiary (unless any such
shares of stock are sold or otherwise transferred to another PBI Company) or
any Asset having a book value in excess of $25,000, other than in the ordinary
course of business for reasonable and adequate consideration and tangible
Assets which are obsolete or no longer useful in the business of any PBI
Company; or
(f) Except for purchases of U.S. Treasury securities, U.S. government
agency securities, which in either case have maturities of three (3) years or
less, or securities of the same nature as those held for investment by any PBI
Company as of September 30, 1999 purchase any securities or make any material
investment, either by purchase of stock or securities, contributions to
capital, asset transfers, or purchase of any assets, in any Person other than a
wholly owned PBI Subsidiary, or otherwise acquire direct or indirect control
over any Person, other than in connection with (i) foreclosures in the ordinary
course of business, (ii) acquisitions of control by a depository institution
Subsidiary in its fiduciary capacity, or (iii) the creation of new wholly owned
Subsidiaries organized to conduct or continue activities otherwise permitted by
this Agreement; or
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(g) Grant any increase in compensation or benefits to the employees or
officers of any PBI Company, except in accordance with past practice disclosed
in Section 6.2(g) of the PBI Disclosure Letter or as required by law; pay any
severance or termination pay or any bonus (other than Christmas bonuses payable
in December 1999 in the ordinary course of business consistent with past
practice) other than pursuant to written policies or written contracts in
effect on the date of this Agreement and disclosed in Section 6.2(g) of the PBI
Disclosure Letter; and enter into or amend any severance agreements with
officers of any PBI Company; grant any material increase in fees or other
increases in compensation or other benefits to directors of any PBI Company
except in accordance with past practice disclosed in Section 6.2(g) of the PBI
Disclosure Letter; or voluntarily accelerate the vesting of any stock options
or other stock-based compensation or employee benefits (other than the
acceleration of vesting which occurs under a benefit plan under the terms of
such plan upon a change of control of PBI or otherwise pursuant to the
provisions of such benefit plan); or
(h) Except as otherwise provided for herein, enter into or amend any
employment contract between any PBI Company and any Person (unless such
amendment is required by law) that the PBI Company does not have the
unconditional right to terminate without liability (other than liability for
services already rendered) at any time on or after the Effective Time; or
(i) Except for the contemplated termination of the Hillsborough Savings
Bank, Inc., SSB Employee Stock Ownership Plan in accordance with the terms of
such plan and except for termination of the 401(k) Plan maintained by the
Savings Bank Subsidiary for the benefit of its employees, adopt any new
employee benefit plan of any PBI Company or terminate or withdraw from, or make
any material change in or to, any existing employee benefit plans of any PBI
Company other than any such change that is required by law or that, in the
opinion of counsel is necessary or advisable to maintain the tax-qualified
status of any such plan, or make any distributions from such employee benefit
plans, except as required by law, the terms of such plans or consistent with
past practice; or
(j) Make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws or regulatory accounting requirements or GAAP;
or
(k) Commence any litigation other than in the ordinary course of
business or in accordance with past practice, settle any litigation involving
any liability of any PBI Company for material money damages in excess of
$50,000 or restrictions upon the operations of any PBI Company; or
(l) Except in the ordinary course of business, enter into, modify, amend
or terminate any material contract (excluding any loan contract) or waive,
release, compromise or assign any material rights or claims.
6.3 Covenants of NCBC. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, NCBC covenants and
agrees that it shall (i) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment to enhance the
long-term value of the NCBC Common Stock and the business prospects of the NCBC
Companies, and (ii) take no action which would (a) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the
type referred to in the last sentence of Section 8.1(b) of this Agreement or
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of IRC Section 368(a), or (b) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
agreement, provided, that the foregoing shall not prevent any NCBC Company from
acquiring any other assets or businesses or from discontinuing or disposing of
any of its assets or business if such action is, in the judgment of NCBC,
desirable in the conduct of the business of NCBC and its Subsidiaries and would
not, in the judgment of NCBC, likely delay the Effective Time to a date
subsequent to the date set forth in Section 9.1(e) of this Agreement.
Notwithstanding the foregoing or any other provision in this Agreement to the
contrary, nothing herein shall be deemed to restrict NCBC from exercising its
option pursuant to the Stock Option Agreement at any time such option shall be
exercisable.
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6.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
6.5 Reports. Each Party and its Subsidiaries shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with any Regulatory Authority pursuant to
the Securities Laws, such financial statements will fairly present the
consolidated financial position of the entity filing such statements as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP or regulatory accounting (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with any Regulatory Authorities
pursuant to the Securities Laws will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
laws applicable to such reports.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Registration Statement; Proxy Statement; Shareholder Approvals. NCBC
shall file the Registration Statement with the SEC, and shall use its
reasonable effort to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable
state Blue Sky or Securities Laws in connection with the issuance of the shares
of NCBC Common Stock upon consummation of the Merger. PBI shall furnish all
information concerning it and the holders of its capital stock as NCBC may
reasonably request in connection with such action. PBI shall call a
shareholders' meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and the Plan of Merger and such other
related matters as its deems appropriate. In connection with the shareholders'
meeting, (i) NCBC and PBI shall prepare a Proxy Statement (which shall be
included in the Registration Statement with the SEC) and mail such Proxy
Statement to the shareholders of PBI, (ii) the Parties shall furnish to each
other all information concerning them that they may reasonably request in
connection with such Proxy Statement, (iii) the Board of Directors of PBI shall
recommend to their shareholders the approval of the matters submitted for
approval, and (iv) the Board of Directors and officers of PBI shall use their
reasonable efforts to obtain such shareholders' approvals; provided, however,
that any such action by the Board of Directors of PBI shall be subject to the
exercise of its good faith judgment as to its fiduciary duties to its
shareholders imposed by law.
7.2 Exchange Listing. NCBC shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq, subject to official notice of issuance,
the shares of NCBC Common Stock to be issued to the holders of PBI Common Stock
or PBI Stock Options pursuant to the Merger, and NCBC shall pay all costs, give
all notices, make all filings, with the Nasdaq and take all other actions
required in connection with the transactions contemplated herein.
7.3 Applications. NCBC shall prepare and file, and PBI shall cooperate in
the preparation and, where applicable, filing of applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated
by this Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from, all
Regulatory Authorities in connection with the transactions contemplated hereby
as soon as practicable upon their becoming available.
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7.4 NCBC Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, NCBC and PBI shall execute and file the Articles
of Merger with the Secretary of State of the State of North Carolina and the
Secretary of State of the State of Tennessee in connection with the Closing.
7.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 8 of this Agreement; provided, however, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its
reasonable efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement; provided,
however, that nothing in this Section 7.5 shall be construed to obligate NCBC
to take any action to meet any condition required for it to obtain any Consent
if such condition would be unreasonable or constitute a significant impediment
upon NCBC's ability to carry on its business or acquisition programs or to
require NCBC to increase its capital ratios to amounts in excess of the Federal
Reserve's minimum capital ratio guidelines which may from time to time be in
effect.
7.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party or its advisors or agents concerning its and its Subsidiaries'
businesses, operations and financial positions (including any information
learned or obtained during any due diligence activities) and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party. This agreement shall remain in
effect and survive termination of this Agreement.
(c) PBI shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with persons which are considering an
Acquisition Proposal with PBI to preserve the confidentiality of the
information relating to PBI provided to such persons and their Affiliates and
representatives.
(d) Each Party shall give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents either a material breach of any representation, warranty, covenant
or agreement of the other Party or which has had or is reasonably likely to
have a Material Adverse Effect on the other Party.
7.7 Acquisition Proposals. PBI shall not, nor shall it authorize or
knowingly permit any of its officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other representative
retained by it to, initiate, solicit, encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes any Acquisition Proposal (as defined
below), or enter into or maintain or continue discussions or negotiate with any
person in furtherance of an Acquisition Proposal, or agree to or endorse any
Acquisition Proposal, and PBI shall (unless it believes such
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notification could violate the PBI Board of Directors' fiduciary duties) notify
NCBC as promptly as practicable, in reasonable detail, as to any inquiries and
proposals which it or any of its representatives or agents may receive;
provided, however, that, notwithstanding anything to the contrary contained in
this Agreement, (i) PBI may furnish or cause to be furnished confidential and
non-public information concerning PBI and its businesses, properties or assets
to a third party, (ii) PBI may engage in discussions or negotiations with a
third party, (iii) following receipt of an Acquisition Proposal, PBI may take
and disclose to its shareholders information about the proposal, including,
without limitation, its position with respect to such Acquisition Proposal,
and/or (iv) following receipt of an Acquisition Proposal, the PBI Board of
Directors may withdraw or modify its recommendation of the Merger or terminate
this Agreement, but in each event only if and to the extent that the PBI Board
of Directors shall determine in good faith based on the written advice of
counsel that such action is required for the Board of Directors to fulfill its
fiduciary duties to the PBI shareholders. As used herein, the term "Acquisition
Proposal" means: (x) any acquisition or purchase of a significant amount of the
assets PBI, or more than 20% of the equity interest in PBI or any take-over bid
or tender offer (including an issuer bid or self tender offer) or exchange
offer, consolidation, plan or arrangement, reorganization, consolidation,
business combination, sale of substantially all of the assets, sale of
securities, recapitalization, liquidation, dissolution or similar transaction
involving PBI (other than the transactions contemplated by this Agreement) or
(y) any proposal, plan or intention to do any of the foregoing either publicly
announced or communicated to PBI or any agreement to engage in any of the
foregoing. The execution of this covenant and the Stock Option Agreement by PBI
constitutes a significant part of the material inducement for NCBC to enter
into this Agreement.
7.8 (RESERVED)
7.9 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify as a "reorganization" within the meaning of IRC
Section 368(a) for federal income tax purposes.
7.10 State Takeover Laws. Each PBI Company shall take any reasonable steps
necessary to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of any applicable, Takeover
Law.
7.11 Articles of Incorporation Provisions. Each PBI Company shall take all
necessary action to ensure that the entering into of this Agreement and the
Plan of Merger and the consummation of the Merger and the other transactions
contemplated hereby and thereby do not and will not result in the grant of any
rights to any Person under the Charter, Bylaws, or other governing instruments
of any PBI Company (other than their rights pursuant to this Agreement and the
Plan of Merger and voting and other similar rights) or restrict or impair the
ability of NCBC or any of its Subsidiaries to vote, or to exercise the rights
of a shareholder with respect to, shares of any PBI Company that may be
directly or indirectly acquired or controlled by it.
7.12 Agreement of Affiliates. PBI has disclosed in Section 7.12 of the PBI
Disclosure Letter all persons whom it reasonably believes is an "affiliate" of
PBI for purposes of Rule 145 under the 1933 Act. PBI shall use its reasonable
efforts to cause each such Person to deliver to NCBC not later than thirty (30)
days prior to the Effective Time, a written agreement, substantially in the
form annexed as Exhibit 3 to this Agreement. NCBC shall be entitled to place
restrictive legends upon certificates for shares of NCBC Common Stock issued to
affiliates of PBI pursuant to this Agreement and to enforce the provisions of
this Section 7.12 and of each such affiliate agreement.
7.13 Employee Benefits and Contracts. Following the Effective Time, NCBC
shall provide to officers and employees of the PBI Companies employee benefits
under employee benefit and welfare plans, on terms and conditions which when
taken as a whole are substantially similar to those currently provided by the
NCBC Companies to their similarly situated officers and employees. For purposes
of determining eligibility to participate in and vesting under such employee
benefit and welfare plans, all such officers and employees shall be given full
credit for all prior service as officers or employees of the PBI Companies, and
no such officer or employee shall be subject to any waiting period or pre-
existing condition limitation pursuant to any NCBC
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health insurance plan. NCBC shall offer employment contracts in the form
annexed as Exhibit 4 hereto to Ted R. Laws and Danny C. Lloyd, and shall offer
employment contracts in the form annexed as Exhibit 5 to Ken R. Sturdivant,
Keith A. Epstein, Rolanne D. Myers, Arthur F. Krueger, Jr., Barbara J. Roberts,
Robert B.Ward and Cindy K. Jordan. Any employee of PBI or its Subsidiaries who
remains employed through the Effective Date but whose employment is terminated
by NCBC or any of its Subsidiaries within 90 days after the Effective Date
shall, in addition to any benefits to which such employee may be entitled under
the existing Severance Plan of the Savings Bank Subsidiary, be paid a retention
bonus equal to four (4) weeks salary. Any employee of PBI or any of its
Subsidiaries who remains employed through the Effective Date and who remains
employed by PBI, any of its Subsidiaries or any of their successors for at
least ninety (90) days after the Effective Date shall be paid a retention bonus
equal to two (2) weeks salary at the time of his or her next salary payment
after the expiration of such 90 day period.
7.14 Advisory Board; Emeritus Directors. For a period of two (2) years from
and after the Effective Time, NCBC shall cause the Savings Bank Subsidiary to
maintain an advisory board of directors consisting of nine (9) persons, each of
whom shall be entitled to attend all regular quarterly meetings of the Board of
Directors of the Savings Bank Subsidiary, but shall nave no right to vote as a
director. Each advisory director shall be paid a retainer of $1,000 every six
months and a director fee of $500 for each regular meeting attended in person.
In addition to the foregoing, existing PBI emeritus directors shall be
appointed to serve on such advisory board for an annual fee of $3,111. In
consideration of the foregoing and the provisions of Section 7.18, PBI shall
use its reasonable best efforts to cause each director of PBI and the Savings
Bank Subsidiary to execute and deliver a Non-Competition Agreement in the form
annexed as Exhibit 6 to this Agreement.
7.15 D&O Coverage. At the Effective Time, NCBC will provide, at its
election, errors and omissions insurance coverage for PBI's directors and
officers either (i) by purchasing continuation coverage under PBI's current
policy for a period not less than six (6) years after the Effective Time, or
(ii) obtain coverage under NCBC's current policy to provide coverage for PBI's
directors and officers on a prior acts basis for a period not less than six (6)
years prior to the Effective Time.
7.16 Indemnification.
(a) With respect to all claims brought during the period of six (6)
years after the Effective Time, NCBC shall indemnify, defend and hold harmless
present and former directors, officers, employees and agents of PBI and PBI
Companies (the "PBI Entities") (each an "Indemnification Party") against all
Liabilities arising out of actions or omissions arising out of the Indemnified
Party's service or services as directors, officers, employees or agents of a
PBI Entity, or at the request of a PBI Entity, of another corporation,
partnership, joint venture, trust or other enterprise occurring at or prior to
the Effective Time (including transactions contemplated by this Agreement) to
the fullest extent permitted under North Carolina Law and the Articles of
Incorporation and Bylaws of PBI as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
Litigation and whether or not any PBI Entity or NCBC is insured against any
such matter. Without limiting the foregoing, in any case in which approval by
the Surviving Corporation is required to effectuate any indemnification, the
Surviving Corporation shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent
counsel mutually agreed upon between NCBC and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 7.16, upon learning of any such Liability or
Litigation, shall promptly notify NCBC thereof. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) the
Surviving Corporation shall have the right to assume the defense thereof and
the Surviving Corporation shall not be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Parties in connection with the defense thereof, except that
if the Surviving Corporation elects not to assume such defense or counsel for
the Indemnified Parties shall advise that there are substantive issues which
raise conflicts of interest between the Surviving Corporation and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and the Surviving Corporation shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties
in any jurisdiction, (ii) the
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Indemnified Parties will cooperate in the defense of any such Litigation, and
(iii) the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent; and provided further that the Surviving
Corporation shall not have any obligation thereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
The indemnification provided herein shall be in addition to any
indemnification rights on indemnitee may have by law, pursuant to the Articles
of Incorporation or by laws of PBI or any of its subsidiaries or pursuant to
the terms of any employee benefit plan for which the indemnitee serves as a
fiduciary.
7.17 PBI Severance Plan. NCBC agrees that the Merger shall constitute a
"Change in Control" for purposes of the existing Hillsborough Savings Bank,
Inc., SSB Severance Plan. The benefits provided by such Plan shall survive the
Closing and no subsequent amendment or termination of such Plan by NCBC or its
Subsidiaries shall affect the rights of employees with respect to the receipt
of benefits under such Plan.
7.18 Director's Deferred Compensation Plan. For a period of two (2) years
after the Effective Time, NCBC shall cause the Savings Bank Subsidiary to
maintain the current Director's Deferred Compensation Plan and to permit
continued deferral of directors' retainers and fees by advisory and emeritus
directors. After the end of such period, no additional contributions shall be
made to such plan, and accrued balances (plus any earnings thereon) shall be
paid in accordance with the terms of such plan.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6 of
this Agreement:
(a) Shareholder Approvals. The shareholders of PBI shall have approved
this Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby, including the Merger, as and to the extent
required by law or by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner, which in the reasonable judgment of the Board of
Directors of either party would so materially adversely impact the financial or
economic benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, either party would not, in its
reasonable judgment, have entered into this Agreement.
(c) Consents. Each Party shall have obtained any and all Consents
required for consummation of the Merger (other than those referred to in
Section 8.1(b) of this Agreement) or for the preventing of any default under
any contract or permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) Legal Proceedings. No court or government or regulatory authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law or order (whether temporary, preliminary or permanent) or taken
any other action which prohibits, restricts or makes illegal consummation of
the transactions contemplated by this Agreement and the Plan of Merger.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approval under state
securities laws or the 1933 Act, or 1934 Act relating to the issuance or
trading of the shares of NCBC Common Stock pursuant to the Merger shall have
been received.
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(f) Exchange Listing. The shares of NCBC Common Stock issuable pursuant
to the Merger (including any shares issued to satisfy options existing under
the PBI Option Plans) shall have been approved for listing on the Nasdaq,
subject to official notice of issuance.
(g) Tax Opinion. NCBC and PBI shall have received an opinion of Bass,
Berry & Sims PLC, counsel to NCBC, dated the Closing Date, to the effect that
(a) the Merger constitutes a reorganization under Section 368(a) of the IRC,
and (b) no gain or loss will be recognized by shareholders of PBI who receive
shares of NCBC Common Stock in exchange for their shares of PBI Common Stock,
except that gain or loss may be recognized as to cash received in lieu of
fractional share interests; in rendering their opinion, such counsel may
require and rely upon representations and agreements, including those contained
in certificates of officers of PBI, NCBC and others.
(h) Pooling of Interests. NCBC shall have received a negative assurance
letter from KPMG LLP, PBI's independent certified public accountant's dated the
Closing Date, to the effect that such firm is aware of no matters relating to
PBI that would prevent PBI from entering into a transaction similar to the
proposed transaction that would qualify for pooling-of-interests accounting
treatment based upon the attributes of PBI only.
8.2 Conditions to Obligations of NCBC. The obligations of NCBC to perform
this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by NCBC pursuant to Section 10.6(a) of this
Agreement:
(a) Representations and Warranties. For purposes of this Section 8.2(a),
the accuracy of the representations and warranties of PBI set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of PBI set
forth in Section 4.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimis in amount). The representations and
warranties of PBI set forth in Sections 4.20, 4.21 and 4.22 of this Agreement
shall be true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of PBI set forth in this
Agreement (including the representations and warranties set forth in Sections
4.3, 4.20, 4.21 and 4.22) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Material Adverse Effect on PBI.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of PBI to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. PBI shall have delivered to NCBC (i) a certificate,
dated as of the Effective Time and signed on its behalf by its president and
the chief financial officer of the Savings Bank Subsidiary, to the effect that
the conditions of its obligations set forth in Sections 8.2(a) and 8.2(b) of
this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by PBI's Board of Directors and shareholders evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement and the Plan of Merger, and the consummation of
the transactions contemplated hereby and thereby, all in such reasonable detail
as NCBC and its counsel shall reasonably request.
(d) Affiliates Agreements. NCBC shall have received from each affiliate
of PBI the affiliates letter referred to in Section 7.12 of this Agreement, to
the extent necessary to assure in the reasonable judgment of NCBC that the
transactions contemplated hereby will qualify for pooling-of-interests
accounting treatment.
(e) Legal Opinion. PBI shall have delivered to NCBC an opinion of
Brooks, Pierce, McLendon, Humphrey Leonard, L.L.P., counsel to PBI, dated as of
the Closing Date, addressed to and in form and substance satisfactory to NCBC,
to the effect that:
(i) PBI is a bank holding company duly organized and validly existing
and in good standing under the laws of the State of North Carolina with
corporate power and authority to conduct its business of which such counsel has
actual knowledge without any independent investigation and to own and use its
Assets of which such counsel has actual knowledge without any independent
investigation.
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(ii) PBI Subsidiary Bank is a financial institution duly organized
and validly existing, and in good standing under the laws of the State of North
Carolina with corporate power and authority to conduct its business of which
such counsel has actual knowledge without any independent investigation and own
and use its Assets of which such counsel has actual knowledge without any
independent investigation.
(iii) The execution and delivery by PBI of the Agreement do not, and
if PBI were now to perform its obligations under the Agreement such performance
would not, violate or contravene any provision of the Articles of Incorporation
or Bylaws of PBI or, to such counsel's actual Knowledge but without any
independent investigation, result in any breach of, or default or acceleration
under any mortgage, agreement, lease, indenture, or other instrument, order,
judgment or decree to which PBI is a party or by which it is bound.
(iv) The Agreement has been duly and validly executed and delivered
by PBI, and assuming the Agreement is a binding obligation of NCBC, constitutes
a valid and binding agreement of PBI enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and
subject to the application of equitable principles and judicial discretion.
Such counsel shall be entitled to rely upon certificates of officers of PBI and
upon certificates of public officials as to all factual matters relevant to
such opinion, which certificate shall be in form and substance reasonably
satisfactory to such counsel. In addition, such opinion shall contain such
assumptions, qualifications and limitations as are customary for transactions
such as those contemplated by this Agreement.
(g) Non-Compete Agreements. Each director of PBI and Savings Bank
Subsidiary shall have entered into Non-Competition Agreements with NCBC
substantially in the form attached hereto as Exhibit 6.
(h) Employment Agreement. D. Tyson Clayton shall have entered into an
Employment and Non-Competition Agreement with NCBC in the form attached hereto
as Exhibit 7.
(i) Material Adverse Change. There shall not have occurred an event that
would be reasonably likely to have a Material Adverse Effect on PBI.
8.3 Conditions to Obligations of PBI. The obligations of PBI to perform this
Agreement and the Plan of Merger and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by PBI pursuant to Section 10.6(b) of this
Agreement.
(a) Representations and Warranties. For purposes of this Section 8.3(a),
the accuracy of the representations and warranties of NCBC set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of NCBC set
forth in Section 5.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimis in amount). The representations and
warranties of NCBC set forth in Section 5.11 of this Agreement shall be true
and correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of NCBC set forth in this Agreement (including
the representations and warranties set forth in Sections 5.3 and 5.11) such
that the aggregate effect of such inaccuracies has, or is reasonably likely to
have, a Material Adverse Effect on NCBC.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of NCBC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. NCBC shall have delivered to PBI (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions of
its obligations set forth in Sections 8.3(a) and 8.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by NCBC's
Board of Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as PBI and its counsel shall reasonably request.
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(d) Legal Opinion. NCBC shall have delivered to PBI an opinion of Bass,
Berry & Sims PLC, counsel to NCBC, dated as of the Closing Date, addressed to
and in form and substance satisfactory to PBI, to the effect that:
(i) NCBC is a Tennessee corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee with corporate
power and authority to conduct its business of which such counsel has actual
knowledge without any independent investigation and to own and use its Assets
of which such counsel has actual knowledge without any independent
investigation;
(ii) This Agreement and the Plan of Merger have been duly and
validly authorized, executed and delivered on behalf of NCBC by duly
authorized officers or representatives thereof, and (assuming this Agreement
is a binding obligation of PBI) constitutes a valid and binding obligation of
NCBC enforceable in accordance with its terms, subject as to enforceability to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and subject to the
application of equitable principles and judicial discretion;
(iii) The execution, delivery and performance of this Agreement and
the Plan of Merger, as appropriate, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate and shareholder action in
respect thereof on the part of NCBC. Such counsel shall be entitled to rely
upon certificates of officers of NCBC and upon certificates of public
officials as to all factual matters relevant to such opinion, which
certificate shall be in form and substance reasonably satisfactory to such
counsel. In addition, such opinion shall contain such assumptions,
qualifications and limitations as are customary for transactions such as those
contemplated by this Agreement.
(iv) The execution and delivery by NCBC of the Agreement do not, and
if NCBC were now to perform its obligations under the Agreement such
performance would not, violate or contravene any provision of the Charter or
Bylaws of NCBC or, to such counsel's actual knowledge but without any
independent investigation, result in any breach of, or default or acceleration
under any mortgage, agreement, lease, indenture, or other instrument, order,
judgment or decree to which NCBC is a party or by which it is bound.
(e) Fairness Opinion. PBI shall have received from Trident Securities,
its independent financial adviser, a "fairness opinion" dated as of the date
of this Agreement and a "bring down fairness opinion" as of the date of the
mailing of proxy materials relative to the Shareholders' Meeting to the effect
that, in the opinion of such adviser, the consideration to be received by the
PBI Record Holders pursuant to the terms and conditions of this Agreement is
fair to the shareholders of PBI from a financial point of view, and such
fairness opinion shall not have been withdrawn prior to the Closing Date.
(f) Material Adverse Change. There shall not have occurred an event that
would be reasonably likely to have a Material Adverse Effect on NCBC.
ARTICLE 9
TERMINATION
9.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the shareholders of NCBC or
PBI, this Agreement and the Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of NCBC and the Board of
Directors of PBI; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of PBI and Section 8.3(a) in the
case of NCBC or in material breach of any covenant or other agreement
contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within thirty (30) days after the giving
of written notice to breaching Party of such inaccuracy and which
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inaccuracy would provide the terminating Party the ability to terminate the
Merger under the applicable standard set forth in Section 8.2(a) of this
Agreement in the case of PBI and Section 8.3(a) of this Agreement in the case
of NCBC; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
8.2(a) of this Agreement in the case of PBI and Section 8.3(a) in the case of
NCBC or in material breach of any covenant or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any covenant
or agreement contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any
consent of any Regulatory Authority required for consummation of the Merger
shall have been denied by final nonappealable action of such Regulatory
Authority or if any such action taken by such Regulatory Authority is not
appealed within the time limit for appeal or (ii) the shareholders of PBI fail
to vote their approval of this Agreement and the transactions contemplated
hereby as required by the North Carolina Code and PBI's Charter and Bylaws; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by September 30, 2000, if the failure to
consummate the transactions contemplated hereby on or before such date is not
caused by any willful breach of this Agreement by the Party electing to
terminate pursuant to this Section 9.1(e) and further, if NCBC shall have filed
all applications necessary to obtain the necessary Consents of banking
Regulatory Authorities within sixty (60) days of the date hereof, and if the
Closing shall not have occurred because of a delay caused by a bank Regulatory
Authority in its review of the application before it, or by the SEC in its
review of the Registration Statement to be filed by NCBC, then PBI shall, upon
NCBC's written request, extend the September 30, 2000, date for a reasonable
time, in no event less than thirty (30) days nor more than sixty (60) days, in
order for NCBC to obtain all Consents of bank Regulatory Authorities required
and/or all Consents of the SEC and any other securities Regulatory Authorities,
and for the expiration of any stipulated waiting periods; or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
8.2(a) of this Agreement in the case of PBI and Section 8.3(a) in the case of
NCBC or in material breach of any covenant or other agreement contained in this
Agreement) in the event that any of the conditions precedent to the obligations
of such Party to consummate the Merger cannot be satisfied or fulfilled by the
date specified in Section 9.1(e) of this Agreement as the same may be extended
pursuant to Section 9.1(e).
9.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1 of this Agreement, this Agreement and
the Plan of Merger shall become void and have no effect, except that (i) the
provisions of this Section 9.1 and Article 10 and Section 7.6(b) of this
Agreement shall survive any such termination and abandonment; (ii) a
termination pursuant to Sections 9.1(b), 9.1(c) or 9.1(f) of this Agreement
shall not relieve the breaching Party from liability for an uncured willful
breach of a representation, warranty, covenant or agreement giving rise to such
termination; and (iii) Section 7.8 of this Agreement shall be governed by its
own terms.
9.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants and agreements of the
Parties shall not survive the Effective Time except this Section 9.3 and
Articles 1, 2, 3 and 10 and Sections 7.1, 7.6, 7.12, 7.13, 7.14, 7.15, 7.16,
7.17 and 7.18 of this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 Definitions Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"Acquisition Proposal" shall have the meaning given to that term in Section
7.7.
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"Affiliate" of a Party means any Person, partnership, corporation,
association, limited liability company, business trust, or other legal entity
directly or indirectly controlling, controlled by or under common Control, with
that Party.
"Agreement" shall mean this Agreement, the Plan of Merger and the Exhibits
delivered pursuant hereto and incorporated herein by reference.
"Allowances" shall mean the allowances for loan, lease and other credit
losses, including losses in connection with ORE, of any Person.
"Articles of Merger" shall mean the Articles of Merger to be executed by
NCBC and PBI and filed with the Secretary of State of the State of North
Carolina pursuant to Section 55-11-05 of the North Carolina Code and with the
Secretary of State of the State of Tennessee pursuant to Section 48-21-107 of
the TBCA, relating to the merger of PBI with and into NCBC as contemplated by
this Agreement and the Plan of Merger.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and
records of such Person, and whether or not owned in the name of such Person or
any Affiliate of such Person and wherever located.
"Balance Sheet Date" shall mean September 30, 1999.
"BHC Act" shall mean the Bank Holding Company Act of 1956, as amended.
"Business Day" shall mean any Monday, Tuesday, Wednesday, Thursday or Friday
that is not a federal or state holiday generally recognized or observed by
banks in the State of Tennessee or North Carolina.
"Closing" shall mean the consummation of the Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or affirmation by any Person pursuant to any Contract, Law,
Order or Permit.
"Consideration" shall mean the shares of NCBC Common Stock and the cash
settlement of any remaining fractional share of NCBC Common Stock deliverable
to the PBI Record Holders pursuant to Section 2.1(b) of this Agreement.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets, or business.
"Control" shall have the meaning assigned to such term in Section 2(a)(2) of
the Bank Holding Company Act of 1956, as amended.
"Default" shall mean (i) any breach or violation of or default under any
Contract, Order or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence or any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of or renegotiate, or to accelerate, increase or impose any Liability
under, any Contract, Order or Permit.
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"Deposits" shall mean all deposits (including, but not limited to,
certificates of deposit, savings accounts, NOW accounts and checking accounts)
of the Savings Bank Subsidiary and other deposit-taking Affiliates.
"Effective Date" shall mean that date on which the Effective Time of the
Merger shall have occurred.
"Effective Time" shall mean the date and time that the Articles of Merger
shall become effective with the Secretaries of State of the States of North
Carolina and Tennessee.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) and which are
administered, interpreted or enforced by the United States Environmental
Protection Agency and any state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 USC (S)9601, et seq. ("CERCLA"), the
Resource Conservation and Recovery Act, as amended, 42 USC (S)6901, et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Agent" shall mean Bank of New York.
"Exchange Ratio" shall mean the number of shares of NCBC Common Stock, and
fractions thereof, to be exchanged for each share of PBI Common Stock pursuant
to Section 2.1(b) of this Agreement, subject to such adjustments as may be
provided in this Agreement and the Plan of Merger.
"Exhibits" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto or thereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve" shall mean the Board of Governors of the Federal Reserve
System and shall include the Federal Reserve Bank of St. Louis or the Federal
Reserve Bank of Richmond when acting under delegated authority.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time, consistently applied.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title III
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks, service
marks, service names, trade names, applications therefor, technology rights
and licenses, computer software (including any source or object codes therefor
or documentation relating thereto), trade secrets, franchises, know-how,
inventions and other intellectual property rights.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
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"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean those facts that are
actually (as opposed to constructively) known by the Chairman, Chief Executive
Officer, President, Chief Administrative Officer, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer or General Counsel of such
Person, or such other officer of such Person, regardless of title, charged with
or responsible for the oversight of a particular area, department or function
to which the subject matter relates.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule or statute applicable to a Person or its Assets,
Liabilities or business, including those promulgated, interpreted or enforced
by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention,
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, and (ii) for depository institution Subsidiaries of a Party,
pledges to secure deposits and other Liens incurred in the ordinary course of
the banking business.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability, but shall not include regular, periodic routine examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement.
"Merger" shall mean the merger of PBI with and into NCBC, as described in
Section 1.1 of this Agreement.
"Nasdaq" shall mean the Nasdaq Stock Market's National Market, or its
successor, upon which shares of NCBC Common Stock are listed for trading.
"NCBC" shall mean National Commerce Bancorporation, a corporation chartered
and existing under the laws of the State of Tennessee which is registered both
as a bank holding company and as a savings and loan holding company and whose
principal offices are located at One Commerce Square, Memphis, Shelby County,
Tennessee 38150.
"NCBC Capital Stock" shall mean, collectively, the NCBC Common Stock, the
NCBC Preferred Stock and any other class or series of capital stock of NCBC.
"NCBC Common Stock" shall mean the $2.00 par value common stock of NCBC.
"NCBC Companies" shall mean, collectively, NCBC and all NCBC Subsidiaries.
"NCBC Disclosure Letter" shall mean a letter signed by an Executive Vice
President and the Chief Financial Officer of NCBC delivered prior to the date
of this Agreement to PBI describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made.
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"NCBC Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of NCBC as of September 30,
1999, and as of December 31. 1998, and December 30, 1997, and December 31,
1996, and the related statements of earnings, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for the nine
(9) months ended September 30, 1999, and for each of the three years ended
December 31, 1998, 1997, and 1996, as filed by NCBC in SEC Documents, (ii) the
consolidated balance sheet of NCBC (including related notes and schedules, if
any) and related statements of earnings, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to September 30,
1999.
"NCBC Preferred Stock" shall mean the no par value preferred stock of NCBC
authorized but none of which is currently outstanding.
"NCBC SEC Reports" has the meaning set forth in Section 5.4(a).
"NCBC Subsidiaries" shall mean the Subsidiaries of NCBC.
"1933 Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"North Carolina Code" shall mean the North Carolina General Statutes, as
amended.
"Operating Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"ORE" shall mean real estate and other property acquired through
foreclosure, deed in lieu of foreclosure, or similar procedures.
"PBI Common Stock" shall mean the common stock of Piedmont Bancorp, Inc.,
no par value per share.
"PBI Company(ies)" shall mean PBI and all of its Subsidiaries, whether
direct or indirect.
"PBI Disclosure Letter" shall mean a letter signed by the Chief Executive
Officer and Chief Financial Officer of PBI delivered prior to the date of this
Agreement to NCBC describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made.
"PBI Employee Plans" shall mean any pension plans, profit sharing plans,
deferred compensation plans, stock option plans, cafeteria plans, and any
other such or related benefit plans or arrangements offered or funded by PBI
or any PBI Subsidiary, to or for the benefit of the officers, directors,
employees, independent contractors or consultants of PBI or any PBI
Subsidiary.
"PBI Option Plans" means those options to acquire PBI Common Stock under
the Piedmont Bancorp, Inc. Stock Option Plan.
"PBI Record Holders" means those Persons who shall be the holders of record
of any of the issued and outstanding shares of PBI Common Stock immediately
prior to the Effective Time.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
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"Party" shall mean NCBC, on the one hand, or PBI on the other hand, and
"Parties" shall mean, NCBC and PBI.
"Pension Plan" shall mean any employee pension benefit plan as such term is
defined in Section 3(2) of ERISA which is maintained by the referenced Party.
"Permit" shall mean any federal, state, local and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets or
business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Plan of Merger" shall mean the plan of merger providing for the Merger, in
substantially the form of Exhibit 1.
"Proxy Statement" shall mean the proxy statement to be used by PBI to
solicit proxies with a view to securing the approval of the PBI shareholders of
this Agreement and the Plan of Merger.
"Records" means all available records, minutes of meetings of the Board of
Directors, committees and shareholders of a Party; original instruments and
other documentation, pertaining to a Party or any of its Subsidiaries or assets
(including plans and specifications relating to any realty), Liabilities,
Deposits, Contracts, capital stock, and loans; and all other business and
financial records which are necessary or customary for use in the conduct of
such Person or any of such Person's Subsidiary businesses on or after the
Effective Time as it was conducted prior to the Effective Time.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by NCBC under the 1933
Act with respect to the resale of the shares of NCBC Common Stock to be issued
to the shareholders of PBI in connection with the transactions contemplated by
this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Federal Reserve, the
Office of Thrift Supervision (including its predecessor, the Federal Home Loan
Bank Board), the Office of the Comptroller of the Currency, the FDIC, all state
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries, Nasdaq, the National Association of Securities Dealers and the
SEC, or any respective successor thereto.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for shares of the capital stock of a
Person, or which derive their value in whole or in part from shares of the
capital stock of a Person, including stock appreciation rights and phantom
stock, or by which a Person is or may be bound to issue additional shares of
its capital stock or other Rights.
"Savings Bank Subsidiary" shall mean Hillsborough Savings Bank, Inc., SSB.
"SEC" shall mean the United States Securities and Exchange Commission, or
any successor thereto.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
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"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder, as well as any similar state
securities laws and any similar rules and regulations promulgated by the
applicable federal or state bank Regulatory Authorities.
"Shareholders' Meeting" shall mean the Special Meeting of the shareholders
of PBI to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or adjournments thereof.
"Subsidiaries" shall mean all of those Persons of which the entity in
question owns or controls 5% or more of the outstanding voting equity
securities or equity interest, either directly or through an unbroken chain of
entities as to each of which 5% or more of the outstanding equity securities or
equity interest is owned directly or indirectly by its parent; provided,
however, that there shall not be included any Person acquired through
foreclosure or in satisfaction of a debt previously contracted in good faith,
any such entity that owns or operates an automatic teller machine interchange
network, or any such Person the equity securities or equity interest of which
are owned or controlled in a fiduciary capacity or through a small business
development corporation.
"Surviving Corporation" shall mean NCBC, as the corporation resulting from
and surviving the consummation of the Merger as set forth in Section 1.1 of
this Agreement.
"Tax" or "Taxes" shall mean any federal, state, county, local or foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy and other taxes, assessments, charges,
fares or impositions, including interest, penalties, and additions imposed
thereon or with respect thereto.
"TBCA" shall mean the Tennessee Business Corporation Act, as amended.
(b)Any singular term in this Agreement shall be deemed to include the
plural and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
10.2 Expenses.
(a)Except as otherwise provided in this Section 10.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the costs contemplated hereunder, including,
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that each of the Parties shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing and mailing costs incurred in connection with the printing and
mailing of the Registration Statement and the Proxy Statement based on the
relative Asset sizes of the Parties at September 30, 1999.
(b)Nothing contained in this Section 10.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the non-breaching
Party.
10.3 Brokers and Finders. Other than the engagement of Trident Securities by
PBI and Baxter, Fentress & Company by NCBC, each of the Parties represents and
warrants that neither it nor any of its officers, directors, employees or
Affiliates has employed any broker or finder or incurred any Liability for any
financial advisory fees, investments bankers fees, brokerage fees, commissions,
or finders fees in connection with this Agreement or the ones contemplated
hereby. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained
by PBI or NCBC, each of PBI and NCBC, as the case may be agrees to indemnify
and hold the other Party harmless of and from any Liability in respect of any
such claim.
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10.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the other documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement, expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
10.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement and the Plan of Merger has been
obtained; provided, that after any such approval by the holders of PBI Common
stock, there shall be made no amendment that modifies in any material respect
the Consideration to be received by the PBI Record Holders. Notwithstanding the
foregoing or any other provision contained in this Agreement, in the event NCBC
shall exercise its rights pursuant to Section 1.8 of this Agreement, PBI shall
execute any amendment reasonably presented in accordance with such section.
10.6 Publicity. The Parties shall mutually agree upon a press release to be
released no later than the next business day following execution of this
Agreement announcing that the Agreement has been executed. The press release
shall be in form and substance mutually agreed upon by the Parties; provided,
however, that such press release shall contain all information that either
Party shall be advised by counsel is necessary to satisfy such Party's
obligations under applicable laws, including, without limitation, the federal
securities laws and the rules of The Nasdaq Stock Market. The Parties shall
consult with each other regarding the form and substance of all subsequent
press releases related to the transactions contemplated by the Agreement;
provided, however, that notwithstanding the foregoing, neither Party shall be
prohibited from making any disclosure of information that such Party shall be
advised by counsel is necessary to satisfy such Party's obligations under
applicable law, including, without limitation, the federal securities laws and
the rules of The Nasdaq Stock Market.
10.7 Waivers.
(a) Prior to or at the Effective Time, NCBC, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
PBI, to waive or extend the time for the compliance or fulfillment by PBI of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of NCBC under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of NCBC.
(b) Prior to or at the Effective Time, PBI, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
NCBC, to waive or extend the time for the compliance or fulfillment by NCBC of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of PBI under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of PBI.
(c) The failure of any Party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.8 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party; provided, however, NCBC may
assign all of their rights hereunder to any other wholly owned Subsidiary
whether now existing or hereafter acquired or organized. 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.
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10.9 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage prepaid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
If to NCBC: National Commerce Bancorporation
One Commerce Square
Memphis, TN 38150
Attention: Charles A. Neale
Vice President and General Counsel
Fax: (901) 523-3303
Telephone: (901) 523-3372
With a copy to: Bass, Berry & Sims PLC
100 Peabody Place, Suite 950
Memphis, TN 38103
Attention: John A. Good, Esq.
Fax: (901)543-5999
Telephone: (901) 543-5901
If to PBI: Piedmont Bancorp, Inc.
260 So. Churton Street
Hillsborough, NC 27278-2507
Attention: D. Tyson Clayton
President and Chief Executive Officer
Fax: (919) 732-2146
Telephone: (919) 732-2143
With a copy to: Brooks, Pierce, McLendon, Humphrey &
Leonard, L.L.P.
2000 Renaissance Plaza
230 North Elm Street
P. O. Box 26000 (27420)
Greensboro, North Carolina 27401
Attention: Edward C. Winslow, III, Esq.
Fax: (336) 378-1001
Telephone: (336) 373-8850
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Tennessee, without regard to any
applicable conflicts of Laws.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
10.12 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
10.13 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether
under any rule of construction or otherwise. No Party to this Agreement shall
be considered the draftsman. The Parties acknowledge and agree that this
Agreement has been reviewed, negotiated and accepted by all Parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of all Parties hereto.
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10.14 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were 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.
10.15 Attorneys' Fees. If any Party hereto shall bring any action at law or
in equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation contained herein), the prevailing Party in such action shall be
entitled to recover from the other Party its reasonable costs and expenses
necessarily incurred in connection with such action (including fees,
disbursements and expenses of attorneys and costs of investigation).
10.16 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.17 Remedies Cumulative. All remedies provided in this Agreement, by Law
or otherwise, shall be cumulative and not alternative.
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IN WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Agreement or has caused this Agreement to be executed and
delivered in its name and on behalf by its representatives thereunto duly
authorized, all as of the date first written above.
PIEDMONT BANCORP, INC.
/s/ D. Tyson Clayton
By: ____________________________________
President and Chief Executive
Officer
ATTEST:
/s/ Peggy S. Walker
________________________________
Secretary
(Corporate Seal)
NATIONAL COMMERCE BANCORPORATION
/s/ William R. Reed, Jr.
By: ____________________________________
William R. Reed, Jr., Vice
Chairman
ATTEST:
/s/ David T. Popwell
________________________________
David T. Popwell, Secretary
(This corporation has no seal)
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EXHIBIT 1
PLAN OF MERGER OF
PIEDMONT BANCORP, INC.
WITH AND INTO
NATIONAL COMMERCE BANCORPORATION.
Pursuant to this Plan of Merger ("Plan of Merger") dated , 2000, PIEDMONT
BANCORP, INC. ("PBI"), a corporation organized and existing under the laws of
the State of North Carolina, shall be merged with and into NATIONAL COMMERCE
BANCORPORATION ("NCBC"), a corporation organized and existing under the laws of
the State of Tennessee.
ARTICLE 1
TERMS OF MERGER
1.1 The Merger. Subject to the terms and conditions of that certain
Agreement and Plan of Reorganization dated as December 27, 1999, between PBI
and NCBC (the "Merger Agreement") and this Plan of Merger, at the Effective
Time (defined below), PBI shall be merged with and into NCBC in accordance with
the provisions of Section 55-11-06 of North Carolina General Statutes and with
the effect provided in Section 48-21-102 of the Tennessee Code Annotated (the
"Merger"). NCBC shall be the surviving corporation resulting from the Merger
(the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Tennessee. The Merger shall be consummated pursuant to the terms
of the Merger Agreement and this Plan of Merger.
1.2 Effective Time. The Merger shall become effective on the date and at the
time the Articles of Merger reflecting the Merger shall have been filed with
both the Secretary of State of the State of North Carolina and the Secretary of
State of the State of Tennessee (the "Effective Time").
1.3 Charter. The Charter of NCBC in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation until
otherwise amended or repealed.
1.4 Bylaws. The Bylaws of NCBC in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until otherwise amended
or repealed.
1.5 Name. The name of NCBC shall remain unchanged after the Effective Time,
unless and until otherwise renamed.
1.6 Directors and Officers. The directors and officers of NCBC in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected or appointed, shall serve as the directors and
officers of the Surviving Corporation from and after the Effective Time in
accordance with the bylaws of the Surviving Corporation, unless and until their
successors shall have been elected or appointed and shall have qualified or
until they shall have been removed in the manner provided therein.
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 Conversion, Cancellation and Exchange of Shares; Exchange Ratio. At the
Effective Time, by virtue of the Merger becoming effective and without any
action on the part of NCBC, PBI, or the shareholders of any of the foregoing,
the shares of the constituent corporations shall be converted as follows:
(a) NCBC Common Stock. Each share of NCBC common stock, par value $2.00
per share (the "NCBC Common Stock") issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding from and after the
Effective Time.
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(b) PBI Common Stock. Each share of PBI common stock, no par value (the
"PBI Common Stock") issued and outstanding at the Effective Time shall cease
to represent any interest (equity, shareholder or otherwise) in PBI and shall
automatically be converted exclusively into, and constitute only the right of
each holder of record of PBI Common Stock immediately before the Effective
Time (a "PBI Record Holder") to receive in exchange for such PBI Record
Holder's shares of PBI Common Stock the consideration to which the PBI Record
Holder is entitled as provided in this Section 2.1(b) (the "Consideration"):
(i) The Exchange Ratio Calculation. Subject to any adjustments which
may be required by an event described in Subsection 2.1(b)(iii) below, at and
as of the Effective Time:
(A) Each share of the PBI Common Stock outstanding at and as of the
Effective Time shall be converted into the right to receive that number of
shares of NCBC Common Stock equal to (the "Exchange Ratio"):
(I) The quotient of the Net Purchase Price (defined below) divided by
the NCBC Market Price Per Share (defined below),
divided by
(II) The sum of the number of shares of PBI Common Stock outstanding
at and as of the Effective Time and the number of shares of PBI Common
Stock issuable pursuant to options to purchase PBI Common Stock to the
extent that such options are outstanding at and as of the Effective
Time.
Notwithstanding the provisions of subsection (A) above, if the Market Price
Per Share shall be less than $20.70, then each share of PBI Common Stock
outstanding at and as of the Effective Time shall be converted into the right
to receive .60499 shares of NCBC Common Stock, and if the Market Price Per
Share shall exceed $25.30, then each share of PBI Common Stock outstanding at
and as of the Effective Time shall be converted into the right to receive
.49499 shares of NCBC Common Stock.
(B) "Net Purchase Price" shall be $34,500,000.
No share of PBI Common Stock shall be deemed to be outstanding or have
any rights other than those set forth in this Section 2.1(b) after the
Effective Time. No fractional shares of NCBC Common Stock shall be issued
in the Merger and, if after aggregating all of the whole and fractional
shares of NCBC Common Stock to which a PBI Record Holder shall be entitled
based upon this Exchange Ratio calculation, there should be a fractional
share of NCBC Common Stock remaining, such fractional share shall be
settled by a cash payment therefor pursuant to Article 3 of this Plan of
Merger, which cash settlement shall be based upon the Market Price Per
Share (as defined below) of one (1) full share of NCBC Common Stock.
(ii) Definition of Market Price Per Share. The "Market Price Per Share"
of NCBC Common Stock shall be the average of the closing price per share of
NCBC Common Stock on the Nasdaq Stock Market's National Market (as reported by
The Wall Street Journal) on the five (5) trading day period ending two (2)
trading days prior to the Effective Time, or such earlier date as may be
required by the Securities and Exchange Commission.
(iii) Effect of Stock Splits, Reverse Stock Splits, Stock Dividends and
Similar Changes in the Capital of PBI. Should PBI effect any stock splits,
reverse stock splits, stock dividends or similar changes in its respective
capital accounts prior to the Effective Time, the Exchange Ratio may, in
NCBC's sole discretion if such change in the capital accounts constitutes a
breach of any of PBI's representations, warranties or covenants, be adjusted
in such a manner as the Board of Directors of NCBC shall deem in good faith to
be fair and reasonable in order to give effect to such changes.
Notwithstanding the foregoing, nothing in this subparagraph (iii) shall be
deemed to be a waiver of the inaccuracy of any representation or warranty or
breach of any covenant by PBI set forth in the Merger Agreement.
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(c) Shares Held by PBI or NCBC. Each of the shares of PBI Common Stock
held by PBI or any subsidiary or affiliate of PBI or by NCBC or any subsidiary
or affiliate of NCBC, in each case other than in a fiduciary capacity or as a
result of debts previously contracted, shall be cancelled and retired at the
Effective Time and no Consideration shall be issued in exchange therefor.
2.2 Conversion of Stock Options
(a) At the Effective Time, all rights with respect to PBI Common Stock
pursuant to stock options ("PBI Options") granted by PBI under all stock option
plans of PBI (each a "PBI Option Plan"), which are outstanding at the Effective
Time, whether or not exercisable, shall be converted into and become rights
with respect to NCBC Common Stock, and NCBC shall assume each PBI Option, in
accordance with the terms of the PBI Option Plan and stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each PBI Option
assumed by NCBC may be exercised solely for shares of NCBC Common Stock, (ii)
the number of shares of NCBC Common Stock subject to such PBI Option shall be
equal to the number of shares of PBI Common Stock subject to such PBI Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such PBI Option shall be adjusted
by dividing the per share exercise price under each such PBI Option by the
Exchange Ratio and rounding down to the nearest cent. PBI agrees to take all
necessary steps to effectuate the foregoing provisions of this Section 2.2.
Notwithstanding the foregoing, each stock option which is an Aincentive stock
option@ under the PBI Option Plan shall be adjusted as required by Section 424
of the Internal Revenue Code of 1986, as amended (the ACode@) and the
regulations promulgated thereunder so as to continue as an incentive stock
option under Section 424 of the Code and so as not to constitute a
modification, extension or renewal of the option within the meaning of Section
424(h) of the Code.
2.3 Restricted Stock. At the Effective Time, each share of PBI Common Stock
held by the trustees under the Hillsborough Savings Bank, Inc., SSB Management
Recognition Plan (the "MRP"), including unvested shares subject to Awards as
defined in the MRP heretofore granted to participants under the MRP, shall be
converted into and exchanged for NCBC Common Stock and cash in lieu of
fractional shares pursuant to the provisions of Section 3.1 below, and such
shares and cash shall thereafter be held to be delivered to the respective
participants pursuant to the MRP. At the Effective Time, the MRP and each stock
grant agreement pursuant to which Awards were granted shall remain in effect,
except that from and after the Effective Time the MRP and each such stock grant
agreement shall be amended as necessary to provide that: (i) NCBC shall be
substituted for the Hillsborough Savings Bank, Inc., SSB; (ii) the Board of
Directors of NCBC or its Compensation Committee shall be substituted for the
Committee of the Savings Bank Subsidiary Board of Directors with respect to
administration of the MRP; (iii) unvested shares of NCBC Common Stock and cash
determined in accordance with the provisions of Section 3.1 below shall be
substituted for unvested shares of PBI Common Stock; (iv) no shares or other
assets in addition to the shares of PBI Common Stock currently awarded under
the MRP shall be purchased by or for the MRP; and (v) shares, cash or other
interests in the MRP forfeited by participants shall be retained by the
trustees of the MRP and shall be available for making additional Awards under
the MRP.
2.4 Anti-Dilution Provisions. In the event NCBC changes the number of shares
of NCBC Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, or recapitalization with respect to
such stock and the record date therefor (in the case of a stock dividend) or
the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
ARTICLE 3
EXCHANGE OF SHARES
3.1 Exchange Procedures. Promptly after the Effective Time, NCBC and PBI
shall cause the Bank of New York (the "Exchange Agent") to mail to the PBI
Record Holders appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing
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shares of PBI Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent). The Exchange Agent may establish
reasonable and customary rules and procedures in connection with its duties.
After the Effective Time, each PBI Record Holder of PBI Common Stock (other
than shares to be cancelled pursuant to Section 2.1(c) of this Plan of Merger)
issued and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the Consideration provided
in Section 2.1(b) of this Plan of Merger, together with all undelivered
dividends or distributions in respect of such shares (without interest thereon)
pursuant to Section 3.2 of this Plan of Merger. To the extent required by
Section 2.1(b) of this Plan of Merger, each PBI Record Holder also shall
receive, upon surrender of the certificate or certificates representing his or
her shares of PBI Common Stock outstanding immediately prior to the Effective
Time, cash in lieu of any fractional share of NCBC Common Stock to which such
holder may be otherwise entitled (without interest). NCBC shall not be
obligated to deliver the Consideration to which any PBI Record Holder is
entitled as a result of the Merger until such PBI Record Holder surrenders such
holder's certificate or certificates representing the shares of PBI Common
Stock for exchange as provided in this Section 3.1. The certificate or
certificates of PBI Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may reasonably require. Any other provision of this Plan of
Merger notwithstanding, neither NCBC nor the Exchange Agent shall be liable to
a PBI Record Holder for any amounts paid or properly delivered in good faith to
a public official pursuant to any applicable abandoned property Law. Adoption
of the Merger Agreement and this Plan of Merger by the shareholders of PBI
shall constitute ratification of the appointment of the Exchange Agent.
3.2 Rights of Former PBI Record Holders. At the Effective Time, the stock
transfer books of PBI shall be closed as to holders of PBI Common Stock
outstanding immediately prior to the Effective Time, and no transfer of PBI
Common Stock by any PBI Record Holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 3.1
of this Plan of Merger, each certificate theretofore representing shares of PBI
Common Stock (other than shares to be cancelled pursuant to Section 2.1(c) of
this Plan of Merger) shall from and after the Effective Time represent for all
purposes only the right to receive the Consideration provided in Section 2.1(b)
of this Plan of Merger, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by PBI in
respect of such shares of PBI Common Stock in accordance with the terms of this
Plan of Merger and which remain unpaid at the Effective Time. Whenever a
dividend or other distribution is declared by NCBC on the NCBC Common Stock,
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares of NCBC Common
Stock issuable pursuant to this Plan of Merger, but beginning sixty (60) days
after the Effective Time no dividend or other distribution payable to the
holders of record of NCBC Common Stock as of any time subsequent to the
Effective Time shall be delivered to a PBI Record Holder until such PBI Record
Holder surrenders his or her certificate or certificates evidencing PBI Common
Stock for exchange as provided in Section 3.1 of this Plan of Merger. However,
upon surrender of such PBI Common Stock certificate, both the NCBC Common Stock
certificate and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such certificate.
3.3 Lost Certificates. Any PBI Record Holder whose certificate representing
shares of PBI Common Stock has been lost, destroyed, stolen or otherwise is
missing shall be entitled to receive a certificate representing the shares of
NCBC Common Stock and cash in lieu of fractional shares to which he or she is
entitled in accordance with and upon compliance with conditions reasonably
imposed by the Exchange Agent (including, without limitation, a requirement
that the shareholder provide a lost instruments indemnity bond in form,
substance and amount reasonably satisfactory to the Exchange Agent).
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ARTICLE 4
MISCELLANEOUS
4.1 Conditions Precedent. Consummation of the Merger by NCBC shall be
conditioned on the satisfaction of or waiver by NCBC of the conditions
precedent to the Merger set forth in Sections 8.1 and 8.2 of the Merger
Agreement. Consummation of the Merger by PBI shall be conditioned on the
satisfaction, or waiver by PBI, of the conditions precedent to the Merger set
forth in Sections 8.1 and 8.3 of the Merger Agreement.
4.2 Amendments. To the extent permitted by Law and the Merger Agreement,
this Plan of Merger may be amended as permitted in the Merger Agreement.
4.3 Captions. The captions contained in this Plan of Merger are for
reference purposes only and are not part of this Plan of Merger.
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APPENDIX B
[Form of Fairness Opinion]
Board of Directors
Piedmont Bancorp, Inc.
260 South Churton Street
Hillsborough, NC 27278
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of common stock (the "PBI Common Stock"), of
Piedmont Bancorp, Inc. ("PBI") of the Exchange Ratio (as defined below) to be
received by such holders in a merger (the "Merger") of PBI with National
Commerce Bancorporation ("NCBC") pursuant to the Agreement and Plan of
Reorganization (the "Agreement") dated as of December 27, 1999. Unless
otherwise noted, all terms used herein shall have the same meaning as defined
in the Agreement.
As more specifically set forth in the Agreement, and subject to a number of
conditions and procedures described in the Agreement, in the Merger, each share
of PBI Common Stock issued and outstanding at the Effective Time shall be
converted into shares of NCBC Common Stock. The "Exchange Ratio" will be
determined by dividing thirty-four million five-hundred thousand dollars
($34,500,000) by the average closing price for NCBC Common Stock during the
five day period ending two trading days prior to the Effective Time (the
"Market Price Per Share"), divided by the sum of the issued and outstanding
shares of PBI Common Stock and the granted and unexercised options to purchase
PBI Common Stock at the Effective Time. However, in the event the Market Price
Per Share is less than $20.70, the Exchange Ratio will be .60499. In the event
the Market Price Per Share is greater than $25.30, the Exchange Ratio will be
.49499. Each option for the purchase of PBI Common Stock will be converted into
options for the purchase of NCBC Common Stock. The number of stock options and
the exercise price for those options will be adjusted in accordance with the
Exchange Ratio.
Trident Securities, a Division of McDonald Investments, Inc., ("Trident") is
a financial consulting and investment banking firm experienced in the valuation
of business enterprises with considerable experience in the valuation of thrift
institutions. In the ordinary course of our business we may actively trade the
securities of PBI and NCBC for our own account and for the accounts of our
customers and, accordingly, may at any one time hold a long or short position
in such securities. Trident is not affiliated with PBI or NCBC.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement, including the exhibits
and schedules thereto; (ii) certain publicly available information concerning
PBI, including PBI's annual reports on Form 10-K for each of the three years
ended June 30, 1999 and its quarterly report on Form 10-Q for the six months
ended December 31, 1999; (iii) certain publicly available information
concerning NCBC, including its annual report on Form 10-K for each of the three
years ended December 31, 1998, and unaudited financial information from
publicly-available sources for the year ended December 31, 1999; (iv) certain
other internal information, primarily financial in nature, concerning the
business and operations of PBI and NCBC furnished to us by PBI and NCBC for
purposes of our analysis; (v) certain publicly available information concerning
the trading of, and trading markets for, PBI and NCBC common stock; (vi)
certain publicly available information with respect to other companies that we
believe to be comparable to PBI and NCBC; and (vi) certain publicly available
information concerning the nature and terms of other transactions that we
consider relevant. We have also spoken with certain officers and employees of
PBI and NCBC, to discuss the foregoing as well as other matters we believe
relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have
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assumed and relied upon the representations and warranties of PBI and NCBC
contained in the Agreement. We have not been engaged to, and have not
independently attempted to, verify any of such information. We have also relied
upon the management of PBI as to the reasonableness and achievability of the
financial and operating projections (and the assumptions and bases therefor)
provided to us and, with your consent, we have assumed that such projections
reflect the best currently available estimates and judgments of management. We
did not perform a review of the loan portfolios of PBI or NCBC, and we did not
assess the adequacy of PBI's or NCBC's loan loss reserves. We have not
conducted a physical inspection of the properties or facilities of PBI or NCBC,
nor have we made or obtained any independent evaluations or appraisals of any
of such properties or facilities. We have also assumed that the conditions to
the Merger as set forth in the Agreement would be satisfied and that the Merger
would be consummated on a timely basis in the manner contemplated by the
Agreement.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial condition and results of operations of PBI
and NCBC, including interest income, interest expense, net interest income, net
interest margin, interest sensitivity, non-interest income and expense,
earnings, dividends, book value, return on assets, return on equity,
capitalization, the amount and type of non-performing assets and the reserve
for loan losses; (ii) the business prospects of PBI and NCBC; (iii) the economy
of PBI's and NCBC's market areas, and (iv) the nature and terms of certain
other merger transactions that we believe to be relevant. We have also taken
into account our assessment of general economic, market, financial and
regulatory conditions and trends, as well as our knowledge of the financial
services industry, our experience in connection with similar transactions, and
our knowledge of securities valuation generally. Our opinion necessarily is
based upon conditions as they exist and can be evaluated on the date hereof.
Our opinion is, in any event, limited to the fairness, from a financial point
of view, of the Exchange Ratio to be received by PBI in the Merger and does not
address PBI's underlying business decision to effect the Merger or any of the
other terms thereof.
We have provided investment banking services to PBI in the past, for which
we have received customary compensation. We have acted as financial advisor to
PBI in connection with the Merger and will receive from PBI a fee for our
services, a significant portion of which is contingent upon the consummation of
the Merger, as well as PBI's agreement to indemnify us under certain
circumstances.
It is understood that this opinion was prepared for the confidential use of
the Board of Directors and senior management of PBI and may not be disclosed,
summarized, excerpted from or otherwise publicly referred to without our prior
written consent. Our opinion does not constitute a recommendation to any
stockholder of PBI as to how such stockholder should vote at the stockholders'
meeting held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Ratio to be received by PBI in the Merger is fair, as of the date
hereof, from a financial point of view, to the shareholders of PBI.
This opinion is being delivered to the Board of Directors of PBI for its use
and is not to be reproduced, disseminated or delivered to any third party
without the express written consent of Trident, except as required by law. Our
opinion is as of the date set forth above, and events or circumstances
occurring after this date may adversely impact the validity of the basis of our
opinion and/or such opinion.
Very truly yours,
TRIDENT SECURITIES
A Division of McDonald Investments
Inc.
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APPENDIX C
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), dated as of December 27, 1999, is
between NATIONAL COMMERCE BANCORPORATION ("NCBC") and PIEDMONT BANCORP, INC.
("PBI").
RECITALS
PBI and NCBC have executed an Agreement and Plan of Reorganization ("Merger
Agreement"), of even date with this Agreement, under which PBI will be merged
with and into NCBC upon completion of the merger ("Merger") contemplated in the
Merger Agreement.
By negotiating and executing the Merger Agreement and by taking actions
necessary or appropriate to effect the transactions contemplated by the Merger
Agreement, NCBC has incurred and will incur substantial direct and indirect
costs (including, without limitation, the costs of management and employee
time) and will forgo the pursuit of certain alternative investments and
transactions.
AGREEMENT
THEREFORE, in consideration of the promises set forth in this Agreement and
in the Merger Agreement, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this
Agreement, PBI irrevocably grants an option ("Option") to NCBC to purchase that
number of authorized but unissued shares of PBI's common stock, no par value
per share ("PBI Common Stock"), such that immediately following such purchase
NCBC would own 19.5% of the then issued and outstanding shares (as adjusted as
set forth herein) of PBI Common Stock after giving effect to the exercise of
the Option at a per share price in cash (or immediately available funds) equal
to $7.65 ("Option Price").
2. Exercise of Option. Subject to the provisions of this Section 2 and of
Section 12(a) of this Agreement, this Option may be exercised by NCBC as set
forth in Section 5 of this Agreement, in whole or in part, at any time, in any
of the following circumstances:
(a) PBI enters into an agreement or PBI's Board of Directors recommends
to PBI shareholders (or withdraws its recommendation FOR approval of the Merger
after receipt of a proposal for PBI to enter into) an agreement (other than the
Merger Agreement) under which any entity, person or group (collectively
"Person"), within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), would: (1) merge or consolidate with,
acquire 25% or more of the assets or liabilities of, or enter into any similar
transaction with PBI, or (2) purchase or otherwise acquire (including by
merger, reorganization, consolidation, share exchange or any similar
transaction) securities representing 25% or more of PBI's voting shares;
(b) any Person (other than NCBC or any of its subsidiaries) acquires the
beneficial ownership or the right to acquire beneficial ownership of securities
which, when aggregated with other such securities owned by such Person,
represents 25% or more of the voting shares of PBI (the term "beneficial
ownership" for purposes of this Agreement has the meaning set forth in Section
13(d) of the Exchange Act, and the regulations promulgated under the Exchange
Act) (not including acquisitions pursuant to which the acquiror or acquiring
group has successfully rebutted the presumption of control pursuant to 12
C.F.R. (S)574(e) and has voted or given to management of PBI an irrevocable
proxy to vote the securities so acquired for the approval of the Merger at any
and all meetings of shareholders of PBI called for that purpose or at which
such matter is considered (a "Rebuttal Acquisition");
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(c) failure of the shareholders to approve, prior to the termination of
the Merger Agreement, the Merger by the required affirmative vote at a meeting
of the shareholders, because a third Person (other than NCBC or a subsidiary
of NCBC) announces publicly or communicates, in writing, to PBI a proposal
to (a) acquire PBI (by merger, reorganization, consolidation, the purchase of
25% or more of its assets or liabilities, or any other similar transaction),
or (b) purchase or otherwise acquire securities representing 25% or more of
the voting shares of PBI.
(d) It is understood and agreed that the Option will become exercisable
immediately upon the occurrence of any of the above-described circumstances
even though the circumstance occurred as a result, in part or in whole, of the
board of PBI complying with its fiduciary duties.
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall:
(i) NCBC's Total Profit (as defined below) exceed $1,035,000 and, if
it otherwise would exceed such amount, NCBC at its sole election, shall
either (A) reduce any remaining shares of PBI Common Stock subject to the
Option, (B) deliver to PBI for cancellation without consideration shares of
PBI Common Stock previously purchased by NCBC pursuant to the exercise of
the Option, (C) pay cash to PBI, or (D) any combination of the foregoing,
so that NCBC's actual realized Total Profit shall not exceed $1,035,000
after taking into account the foregoing actions; or
(ii) the Option be exercised for a number of shares of PBI Common
Stock as would, as of the date of exercise, result in NCBC's Total Notional
Profit (as defined below) exceeding $1,035,000; provided, that nothing in
this clause (ii) shall restrict any exercise of the Option permitted hereby
on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate
sum (prior to the payment of taxes) of the following: (i) any net cash amounts
received by NCBC pursuant to the sale of shares of PBI Common Stock received
pursuant to the exercise of the Option (or any other securities into which
such shares shall be converted or exchanged) to any unaffiliated person less
NCBC's purchase price of such shares; (ii) any amount received by NCBC
pursuant to PBI's repurchase of shares of PBI Common Stock received pursuant
to the exercise of the Option less NCBC's purchase price of such shares, and
(iii) any amount received by NCBC pursuant to PBI's repurchase of the Option
(or any portion thereof).
As used in this Agreement, the term "Total Notional Profit" with respect to
any number of shares of PBI Common Stock as to which NCBC may propose to
exercise the Option shall be the Total Profit determined as of the date of
such proposed exercise, assuming that the Option were exercised on such date
for such number of shares and assuming that such shares, together with all
other such shares held by NCBC or its affiliates as of such date that were
issued pursuant to the exercise of the Option, were sold for cash at the
closing sale price per share of PBI Common Stock as quoted on the American
Stock Exchange ("AMEX") or, if PBI Common Stock in not then quoted on AMEX,
the highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a
recognized source chosen by NCBC as of the close of business on the preceding
trading day (less customary brokerage commissions).
3. Notice, Time and Place of Exercise. When NCBC wishes to exercise the
Option, NCBC will give written notice of its intention to exercise the Option
and the place and date for the closing of the exercise (which date may not be
later than ten business days from the date such notice is mailed). If any law,
regulation or other restriction will not permit such exercise to be
consummated during this ten-day period, the date for the closing of such
exercise will be within five days following the cessation of the restriction
on consummation.
4. Payment and Delivery of Certificate(s). At the closing for the exercise
of the Option or any portion thereof, (a) NCBC and PBI will each deliver to
the other certificates as to the accuracy, as of the closing date, of their
respective representations and warranties under this Agreement, (b) NCBC will
pay the aggregate purchase price for the shares of PBI Common Stock to be
purchased by delivery of a certified or bank cashier's
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check in immediately available funds payable to the order of PBI, and (c) PBI
will deliver to NCBC a certificate or certificates representing the shares so
purchased.
5. Transferability of the Option. Neither the Option nor any portion of the
Option will be transferable except to a wholly-owned subsidiary of NCBC.
6. Representations, Warranties and Covenants of PBI. PBI represents and
warrants to NCBC as follows:
(a) Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of PBI, has been duly executed by a duly
authorized officer of PBI and constitutes a valid and binding obligation of
PBI. No shareholder approval by PBI shareholders is required by applicable law
or otherwise before the exercise of the Option in whole or in part.
(b) Option Shares. PBI has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue and, at all times
from the date of this Agreement to such time as the obligation to deliver
shares under this Agreement terminates, will have reserved for issuance, at the
closing(s) upon exercise of the Option, the Option Shares (subject to
adjustment, as provided in Section 8 below), all of which, upon issuance under
this Agreement, will be duly and validly issued, fully paid and nonassessable,
and will be delivered free and clear of all claims, liens, encumbrances and
security interests, including any preemptive right of any of the shareholders
of PBI.
(c) No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by it will violate or
result in any violation of or be in conflict with or constitute a default under
any term of the charter or bylaws of PBI or any agreement, instrument,
judgment, decree, law, rule or order applicable to PBI or any subsidiary of PBI
or to which PBI or any such subsidiary is a party.
(d) Notification of Record Date. At any time from and after the date of
this Agreement until the Option is no longer exercisable, PBI will give NCBC at
least 10 days prior written notice before setting the record date for
determining the holders of record of the PBI Common Stock entitled to vote on
any transaction described in Section 2 above.
7. Representations, Warranties and Covenants of NCBC. NCBC represents and
warrants to PBI as follows:
(a) Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of NCBC, has been duly executed by a
duly authorized officer of NCBC and constitutes a valid and binding obligation
of NCBC.
(b) No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by it will violate or
result in any violation of or be in conflict with or constitute a default under
any term of the charter or bylaws of NCBC or any agreement, instrument,
judgment, decree, law, rule or order applicable to NCBC or any subsidiary of
NCBC or to which NCBC or any such subsidiary is a party.
8. Adjustment Upon Changes in Capitalization. In the event of any change in
the PBI Common Stock by reason of stock dividends, split-ups, mergers,
reorganizations, recapitalizations, combinations, exchanges of shares or the
like, the number and kind of shares or securities subject to the Option and the
purchase price per share of Common Stock will be appropriately adjusted. If,
before the Option terminates or is exercised, PBI is acquired by another party,
or consolidates with or merges into another corporation, NCBC will thereafter
receive, upon exercise of the Option, the securities or properties to which a
holder of the number of shares of Common Stock then deliverable upon the
exercise thereof would have been entitled upon such acquisition, consolidation,
merger, or reorganization, and PBI will take all steps in connection with such
acquisition, consolidation, merger, or reorganization, as may be necessary to
assure that the provisions of this Agreement will thereafter be applicable, as
nearly as reasonably may be practicable, in relation to any securities or
property thereafter deliverable upon exercise of the Option.
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9. Binding Effect; Assignment. This Agreement binds and inures to the
benefit of the parties and their successors. Except as set forth in Section 5,
this Agreement is not assignable by either party.
10. Regulatory Restrictions. Upon exercise of this Option, PBI will use its
best efforts to obtain or to cooperate with NCBC in obtaining all necessary
regulatory consents, approvals, waivers or other action (whether regulatory,
corporate or other) to permit the acquisition of any or all Option Shares by
NCBC.
11. No Rights as Shareholder. This Option, before it is exercised, will not
entitle its holder to any rights as a shareholder of PBI at law or in equity.
Specifically, this Option, before it is exercised, will not entitle the holder
to vote on any matter presented to the shareholders of PBI or, except as
provided in this Agreement, to any notice of any meetings of shareholders or
any other proceedings of PBI.
12. Miscellaneous.
(a) Termination. This Agreement and the Option will terminate upon the
earliest of (1) the mutual agreement of the parties to this Agreement; (2) the
90th day following the termination of the Merger Agreement for any reason; or
(3) 12 months after the date hereof; but if the Option has been exercised
before the termination of this Agreement, then the exercise will close under
Section 4 of this Agreement, even though that closing date is after the
termination of this Agreement.
(b) Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties.
(c) Severability of Terms. Any provision of this Agreement that is
invalid, illegal or unenforceable is ineffective only to the extent of the
invalidity, illegality or unenforceability without affecting in any way the
remaining provisions or rendering any other provisions of this Agreement
invalid, illegal or unenforceable. Without limiting the generality of the
foregoing, if the right of NCBC to exercise the Option in full for the total
number of shares of PBI Common Stock or other securities or property issuable
upon the exercise of the Option is limited by applicable law, or otherwise,
NCBC may, nevertheless, exercise the Option to the fullest extent permissible.
(d) Notices. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and must be given (and
will be deemed to have been duly received if so given) by delivery, by cable,
telecopies or telex, or by registered or certified mail, postage prepaid,
return receipt requested, to the respective parties at the addresses below, or
to such other address as either party may furnish to the other in writing.
Change of address notices will be effective upon receipt.
If to PBI to: Piedmont Bancorp, Inc.
260 So. Churton Street
Hillsborough, North Carolina 27278-2507
Attn: D. Tyson Clayton, President
Fax: (919) 732-2146
Phone: (919) 732-2143
with a copy to: Brooks, Pierce, McLendon, Humphrey &
Leonard, L.L.P.
2000 Renaissance Plaza
230 North Elm Street
Greensboro, North Carolina 27401
Attn: Edward C. Winslow, III, Esq.
Fax: (336) 378-1001
Phone: (336) 373-8850
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If to NCBC to: National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Attn: Lewis E. Holland
Fax: (901) 523-3170
Phone: (901) 523-3320
and
Charles A. Neale
Vice President and General Counsel
Fax: (901) 523-3303
Phone: (901) 523-3371
with a copy to: Bass, Berry & Sims PLC
100 Peabody Place, Suite 950
Memphis, Tennessee 38103
Attn: John A. Good, Esq.
Fax: (901) 543-5999
Phone: (901) 543-5901
(e) Governing Law. The parties intend this Agreement and the Option, in
all respects, including all matters of construction, validity and performance,
to be governed by the laws of the State of North Carolina, without giving
effect to conflicts of law principles.
(f) Counterparts. This Agreement may be executed in several
counterparts, including facsimile counterparts, each of which is an original,
and all of which together constitute one and the same agreement.
(g) Effects of Headings. The section headings in this Agreement are for
convenience only and do not affect the meaning of its provisions.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this Stock
Option Agreement as of the day and year first above written.
NATIONAL COMMERCE BANCORPORATION
/s/ William R. Reed, Jr.
By: ______________________________________
William R. Reed, Jr.
Vice Chairman
PIEDMONT BANCORP, INC.
/s/ D. Tyson Clayton
By: ______________________________________
D. Tyson Clayton
President and Chief Executive
Officer
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20: Indemnification of Directors and Officers
The Registrant is a Tennessee corporation. Sections 48-18-501 through 48-18-
509 of the Tennessee Business Corporation Act contain detailed provisions on
indemnification of directors and officers of a Tennessee corporation against
reasonable expenses.
The Registrant's Restated Charter (the "Charter"), provides that no director
of the Registrant shall be personally liable to the Registrant or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except: (i) for any breach of the director's duty of loyalty to the Registrant
or its shareholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; or (iii) for
unlawful distributions under Section 48-18-304 of the Tennessee Business
Corporation Act.
The Registrant's Bylaws (the "Bylaws"), provide that the Registrant, shall
indemnify any person who is made a party to a suit by or in the right of the
Registrant to procure a judgment in its favor by reason of the fact that he,
his testator or intestate is or was a director or officer of the Registrant,
against amounts paid in settlement and reasonable expenses including attorneys'
fees actually and necessarily incurred as a result of such suit or proceeding
or any appeal therein to the extent permitted by and in the manner provided by
the laws of Tennessee. The Registrant shall indemnify any person made or
threatened to be made a party to a suit or proceeding other than by or in the
right of any company of any type or kind, domestic or foreign, which any
director or officer of the Registrant, by reason of the fact that he, his
testator or intestate, was a director or officer of the Registrant or served
such other company in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such suit or proceeding, or any appeal
therein, if such director or officer acted in good faith for a purpose which he
reasonably believed to be in the best interest of the Registrant and, in
criminal actions or proceedings, in addition, had no reasonable cause to
believe that this conduct was unlawful, and to the extent permitted by, and in
the manner provided by, the laws of Tennessee.
The directors and officers of the Registrant are covered by an insurance
policy indemnifying them against certain civil liabilities, including
liabilities under the federal securities laws, which might be incurred by them
in such capacity.
Item 21: Exhibits and Financial Statement Schedules
An index to Exhibits appears at pages II-5 through II-7 hereof.
Item 22: Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of
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the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Memphis, State of
Tennessee, on February 17, 2000.
National Commerce Bancorporation
/s/ Thomas M. Garrott
By: _________________________________
Thomas M. Garrott
Chairman of the Board,
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lewis E. Holland and Charles A. Neale and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitute or substitutes, may lawfully do or cause to be
done be virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas M. Garrott Chairman of the Board, February 17, 2000
______________________________________ President and Chief
Thomas M. Garrott Executive Officer
(Principal Executive
Officer) and Director
/s/ Lewis E. Holland Vice Chairman, Treasurer February 17, 2000
______________________________________ and Chief Financial
Lewis E. Holland Officer (Principal
Financial Officer and
Principal Accounting
Officer) and Director
/s/ Mark A. Wendel Accounting Officer February 17, 2000
______________________________________ (Principal Accounting
Mark A. Wendel Officer)
/s/ Frank G. Barton, Jr. Director February 17, 2000
______________________________________
Frank G. Barton, Jr.
/s/ R. Grattan Brown, Jr. Director February 17, 2000
______________________________________
R. Grattan Brown, Jr.
/s/ Bruce E. Campbell, Jr. Director February 17, 2000
______________________________________
Bruce E. Campbell, Jr.
</TABLE>
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<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John D. Canale, III Director February 17, 2000
______________________________________
John D. Canale, III
/s/ James H. Daughdrill, Jr. Director February 17, 2000
______________________________________
James H. Daughdrill, Jr.
/s/ Thomas C. Farnsworth, Jr. Director February 17, 2000
______________________________________
Thomas C. Farnsworth, Jr.
______________________________________ Director , 2000
R. Lee Jenkins
______________________________________ Director , 2000
W. Neely Mallory, Jr.
/s/ James E. McGehee, Jr. Director February 17, 2000
______________________________________
James E. McGehee, Jr.
/s/ Phillip H. McNeill, Sr. Director February 17, 2000
______________________________________
Phillip H. McNeill, Sr.
/s/ Harry J. Phillips, Sr. Director February 17, 2000
______________________________________
Harry J. Phillips, Sr.
______________________________________ Director , 2000
J. Bradbury Reed
/s/ William R. Reed, Jr. Director February 17, 2000
______________________________________
William R. Reed, Jr.
/s/ G. Mark Thompson Director February 17, 2000
_____________________________________
G. Mark Thompson
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
2.1 Agreement and Plan of Reorganization among National Commerce
Bancorporation and Piedmont Bancorp, Inc. dated as of December 27,
1999 (included as Appendix A to the Proxy Statement/Prospectus in
Part I of this Registration Statement).
2.2 Stock Option Agreement, dated as of December 27, 1999, between
National Commerce Bancorporation and Piedmont Bancorp, Inc.
(included as Appendix C to the Proxy Statement/Prospectus in Part I
of this Registration Statement).
3.1 Charter of National Commerce Bancorporation as amended and restated
(filed as Exhibit 3.1 to the Registrant's Form 10-K for the year
ended December 31, 1996 (File No. 0-6094) and incorporated herein
by reference).
3.2 Bylaws of National Commerce Bancorporation as amended (filed as
Exhibit 3.2 to the Registrant's Form 10-K for the year ended
December 31, 1995 (File No. 0-6094) and incorporated herein by
reference).
4.1 Specimen Stock Certificate filed as Exhibit 4.1 to the Registrant's
Form 10-k for the year ended December 31, 1996 (File No. 0-6094)
and incorporated herein by reference.
5.1 Opinion of Bass, Berry & Sims PLC, counsel to the Registrant, as to
the legality of the shares of the Registrant's Common Stock being
registered.
8.1 Opinion of Bass, Berry & Sims PLC, counsel to the Registrant, as to
certain federal income tax consequences of the Merger.
10.1 Form of Promissory Notes of NBC payable to The Mallory Partners
(filed as Exhibit 10.1 to the Registrant's Form 10-K for the year
ended December 31, 1987 (File No. 0-6094) and incorporated herein
by reference).
10.2 Employment Agreement dated as of October 1, 1991, by and between
National Bank of Commerce and Bruce E. Campbell, Jr. (filed as
Exhibit 10.5 to the Registrant's Form 10-K for the year ended
December 31, 1987 (File No. 0-6094) and incorporated herein by
reference).
10.3 Employment Agreement dated as of January 1, 1992, by and between
National Bank of Commerce and William R. Reed, Jr. (filed as
Exhibit 10.8 to the Registrant's Form 10-K for the year ended
December 31, 1992 (File No. 0-6094) and incorporated herein by
reference).
10.4 Employment Agreement dated as of September 1, 1993, by and between
National Bank of Commerce and Thomas M. Garrott (filed as Exhibit
10.9 to the Registrant's Form 10-K for the year ended December 31,
1994 (File No. 0-6094) and incorporated herein by reference).
10.5 Employment Agreement dated as of September 1, 1993, by and between
National Bank of Commerce and Gary L. Lazarini (filed as Exhibit
10.10 to the Registrant's Form 10-K for the year ended December 31,
1994 (File No. 0-6094) and incorporated herein by reference).
10.6 Employment Agreement dated as of September 1, 1993, by and between
National Bank of Commerce and Mackie H. Gober (filed as Exhibit
10.11 to the Registrant's Form 10-K for the year ended December 31,
1994 (File No. 0-6094) and incorporated herein by reference).
10.7 Deferred Compensation Agreement dated as of December 1, 1983, for
Thomas M. Garrott (filed as Exhibit 10c(2) to the Registrant's Form
10-K for the year ended December 31, 1984 (File No. 0-6094) and
incorporated herein by reference).
10.8
Employment Agreement dated as of July 1, 1994, by and between
National Bank of Commerce and Lewis E. Holland (filed as Exhibit
10.14 to the Registrant's Form 10-K for the year ended December 31,
1994 (File No. 0-6094) and incorporated herein by reference).
II-5
<PAGE>
Exhibit
Number Description of Exhibits
10.9 First Amendment to Agreement Respecting Employment dated July 27,
1998, by and between National Commerce Bancorporation, National
Bank of Commerce, and William R. Reed, Jr. (filed as Exhibit 10.8
to the Registrant's Form 10-K for the year ended December 31, 1998
(File No. 0-6094) and incorporated herein by reference).
10.10 First Amendment to Agreement Respecting Employment dated July 27,
1998, by and between National Commerce Bancorporation, National
Bank of Commerce, and Thomas M. Garrott (filed as Exhibit 10.9 to
the Registrant's Form 10-K for the year ended December 31, 1998
(File No. 0-6094) and incorporated herein by reference).
10.11 First Amendment to Agreement Respecting Employment dated July 27,
1998, by and between National Commerce Bancorporation, National
Bank of Commerce, and Gary L. Lazarini (filed as Exhibit 10.10 to
the Registrant's Form 10-K for the year ended December 31, 1998
(File No. 0-6094) and incorporated herein by reference).
10.12 First Amendment to Agreement Respecting Employment dated July 27,
1998, by and between National Commerce Bancorporation, National
Bank of Commerce, and Mackie H. Gober (filed as Exhibit 10.11 to
the Registrant's Form 10-K for the year ended December 31, 1998
(File No. 0-6094) and incorporated herein by reference).
10.13 First Amendment to Agreement Respecting Employment dated July 27,
1998, by and between National Commerce Bancorporation, National
Bank of Commerce, and Lewis Holland (filed as Exhibit 10.12 to the
Registrant's Form 10-K for the year ended December 31, 1998 (File
No. 0-6094) and incorporated herein by reference).
10.14 Employment Agreement dated as of August 17, 1998 by and between
National Commerce Bancorporation, National Bank of Commerce, and
David T. Popwell (filed as Exhibit 10.13 to the Registrant's Form
10-K for the year ended December 31, 1998 (File No. 0-6094) and
incorporated herein by reference.)
10.15 Split Dollar Insurance Plan (filed as Exhibit 10c(3) to the
Registrant's Form 10-K for the year ended December 31, 1984 (File
No. 0-6094) and incorporated herein by reference).
10.16 Bonus Incentive Plan (filed as Exhibit 10c(1) to the Registrant's
Form 10-K for the year ended December 31, 1980 (File No. 0-6094)
and incorporated herein by reference).
10.17 1982 Incentive Stock Option Plan, as amended (filed as Exhibit 10.8
to the Registrant's Form 10-K for the year ended December 31, 1988
(File No. 0-6094)) and incorporated herein by reference).
10.18 1986 Stock Option Plan (filed as Exhibit A to the Registrant's
Proxy Statement for the 1987 Annual Special Meeting of Shareholders
and incorporated herein by reference).
10.19 1990 Stock Plan (filed as Exhibit A to the Registrant's Proxy
Statement for the 1990 Annual Special Meeting of Shareholders and
incorporated herein by reference).
10.20 Form of Amendment to 1986 Stock Option Plan (filed as Exhibit 10.10
to the Registrant's Form 10-K for the year ended December 31, 1988
(File No. 0-6094) and incorporated herein by reference).
10.21 1994 Stock Plan (filed as Exhibit A to the Registrant's Proxy
Statement for the 1994 Annual Special Meeting of Shareholders and
incorporated herein by reference).
10.22
Resolution authorizing Pension Restoration Plan (filed as Exhibit
10c(7) to the Registrant's Form 10-K for the year ended December
31, 1986 (File No. 0-6094) and incorporated herein by reference).
II-6
<PAGE>
Exhibit
Number Description of Exhibits
10.23 1994 Stock Plan, filed as Exhibit A to the Registrant's Proxy
Statement for the 1994 Annual Meeting of Shareholders and
incorporated herein by reference.
10.24 Amendment No. 1, National Commerce Bancorporation 1994 Stock Plan,
as amended and restated, effective as of November 1, 1996, filed as
Exhibit 10.17 to the Registrant's Form 10-K for the year ended
December 31, 1998 (File No. 0-6094) and incorporated herein by
reference.
10.25 National Commerce Bancorporation Deferred Compensation Plan
effective January 1, 1999, filed as Exhibit 10.19 to the
Registrant's Form 10-K for the year ended December 31, 1998 (File
No. 0-6094) and incorporated herein by reference.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Bass, Berry & Sims PLC (included in the opinions filed
as Exhibits 5.1 and 8.1).
23.4 Consent of Trident Securities.
99.1 Form of Piedmont Proxy.
II-7
<PAGE>
EXHIBIT 5.1
B A S S, B E R R Y & S I M S P L C
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
<TABLE>
<S> <C> <C>
KNOXVILLE OFFICE: NASHVILLE OFFICE:
1700 RIVERVIEW TOWER THE TOWER AT PEABODY PLACE 2700 FIRST AMERICAN CENTER
KNOXVILLE, TN 37901-1509 100 PEABODY PLACE, SUITE 950 NASHVILLE, TN 37238-2700
(423) 521-6200 MEMPHIS, TENNESSEE 38103-2625 (615) 742-6200
(901) 543-5900
www.bassberry.com
</TABLE>
February 18, 2000
National Commerce Bancorporation
One Commerce Square
Memphis, TN 38150
RE: Form S-4 Registration Statement Relating to
1,514,108 Shares of Common Stock, Par Value $2.00
per Share, of National Commerce Bancorporation
----------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for National Commerce Bancorporation, a Tennessee
corporation ("NCBC"), in connection with the preparation and filing of the
Registration Statement on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to 1,514,108 shares of NCBC common stock, par value $2.00 per share, to
be issued in connection with the Agreement and Plan of Reorganization, dated as
of December 27, 1999 (the "Merger Agreement"), by and between NCBC and Piedmont
Bancorp, Inc.
In our capacity as such counsel, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate records
of NCBC, such agreements and instruments, such certificates of public officials,
officers of NCBC and other persons, and such other documents as we have deemed
necessary or appropriate as a basis for the opinions hereinafter expressed. In
such examinations, we have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity and completeness of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed, photostatic or facsimile
copies, and the authenticity of the originals of such copies, and we have
assumed all certificates of public officials to have been properly given and to
be accurate.
As to factual matters relevant to this opinion letter, we have relied upon
the representations and warranties as to factual matters contained in
certificates and statements of officers of NCBC and certain public officials.
Except to the extent expressly set forth herein, we have made no independent
investigations with regard thereto, and, accordingly, we do not express any
opinion as to matters that might have been disclosed by independent
verification.
<PAGE>
On the basis of the foregoing, and subject to the limitations set forth
herein, we are of the opinion that the shares of Common Stock of NCBC, par value
$2.00 per share, issuable in connection with the Merger Agreement have been duly
authorized and, when issued in accordance with the terms of the Merger Agreement
as described in the Registration Statement, will be validly issued, fully paid
and nonassessable by the Company.
We consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to any related registration statement subsequently
filed by NCBC pursuant to Rule 462(b) of the Act and to the use of our name
under the heading "Legal Opinions" in the Prospectus constituting a part
thereof. In giving such consent, we do not thereby admit that we are within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission thereunder.
This opinion letter is being furnished by us to NCBC and the Commission
solely for the benefit of NCBC and the Commission in connection with the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon by any other person, or by NCBC or the Commission for any other
purposes, without our express written consent. The only opinion rendered by us
consists of those matters set forth in the fourth paragraph hereof, and no
opinion may be implied or inferred beyond those expressly stated. This opinion
letter is rendered as of the date hereof, and we have no obligation to update
this opinion letter.
Sincerely,
BASS, BERRY & SIMS PLC
<PAGE>
EXHIBIT 8.1
B A S S, B E R R Y & S I M S P L C
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
<TABLE>
<S> <C> <C>
KNOXVILLE OFFICE: NASHVILLE OFFICE:
1700 RIVERVIEW TOWER THE TOWER AT PEABODY PLACE 2700 FIRST AMERICAN CENTER
KNOXVILLE, TN 37901-1509 100 PEABODY PLACE, SUITE 950 NASHVILLE, TN 37238-2700
(423) 521-6200 MEMPHIS, TENNESSEE 38103-2625 (615) 742-6200
(901) 543-5900
www.bassberry.com
</TABLE>
February 18, 2000
National Commerce Bancorporation
One Commerce Square
Memphis, TN 38150
Piedmont Bancorp, Inc.
260 South Churton Street
Hillsborough, North Carolina 27278-2507
RE: Federal Income Tax Consequences of Merger of Piedmont Bancorp, Inc.
with and into National Commerce Bancorporation
Ladies and Gentlemen:
We have acted as counsel for National Commerce Bancorporation ("NCBC") in
connection with the Merger (the "Merger") of Piedmont Bancorp, Inc. ("Piedmont")
with and into NCBC, pursuant to the Agreement and Plan of Reorganization dated
as of December 27, 1999 (the "Agreement") by and between NCBC and Piedmont. You
have requested our opinion, in our capacity as counsel to NCBC, regarding
certain federal income tax consequences of the Merger.
We understand that our opinion will be referred to in the Proxy
Statement/Prospectus of NCBC and Piedmont that forms part of the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission in
connection with the Merger. We hereby consent to such use of our opinion and to
the filing of this opinion as an exhibit to the Registration Statement.
All capitalized terms used herein without definition have the respective
meanings specified in the Agreement. All references herein to the Code are to
the united States Internal Revenue Code of 1986, as amended.
<PAGE>
National Commerce Bancorporation
Piedmont Bancorp, Inc.
February 18, 2000
Page 2
INFORMATION RELIED ON
---------------------
In rendering the opinion expressed herein, we have examined such documents
as we have deemed appropriate, including the Agreement. In our examination of
such documents, we have assumed, with your consent, that all documents submitted
to us as photocopies or telecopies faithfully reproduce the originals thereof,
that such originals are authentic, that all such documents have been or will be
duly executed to the extent required, and that all statements set forth in such
documents are accurate. We also have obtained such additional information and
representations as we have deemed relevant and necessary. However, we have not
yet obtained written certificates from NCBC and Piedmont to verify certain facts
that we have assumed in rendering this opinion. Before rendering our opinion in
connection with the closing, we intend to obtain appropriate written
certificates to confirm certain material facts that we have assumed herein.
In view of the foregoing, we have assumed that the following statements are
true on the date hereof and will be true at the time of the Merger:
1. The Merger will be consummated in compliance with the material terms
of the Agreement and none of the material terms and conditions therein have been
waived or modified and neither NCBC nor Piedmont has a plan or intention to
waive or modify any such material term or condition.
2. The fair market value of the NCBC Common Stock and other
consideration received by each Piedmont shareholder will be approximately equal
to the fair market value of the Piedmont Common Stock surrendered by such
shareholder in the Merger.
3. Neither Piedmont nor any person related to Piedmont has acquired or
will acquire, in connection with the merger, any Piedmont Common Stock from the
Piedmont shareholders prior to the Effective Time. For purposes of this
assumption, a person is related to Piedmont if it is (i) a corporation as to
which Piedmont owns, actually or constructively, fifty percent or more of the
total voting power or total value of the shares of all classes of stock
outstanding, or (ii) a corporation which owns, actually or constructively, fifty
percent or more of the total voting power or total value of all shares of all
classes of stock of Piedmont. A person will be deemed related to Piedmont for
this purpose if such relationship exists either immediately before or
immediately after such acquisition, and a person that is a partner in a
partnership will be deemed to own or have acquired any stock that such
partnership acquired in accordance with the partners' interest in the
partnership.
4. Neither NCBC nor any person related to NCBC has acquired or will
acquire, in connection with the Merger, any Piedmont Common Stock from the
Piedmont shareholders prior to the Effective time. For purposes of this
assumption, a person is related to NCBC if it is (i) a member of its affiliated
group within the meaning of Section 1504 of the Code, (ii) a corporation as to
which NCBC owns, actually or constructively, fifty percent or more of the total
voting power or
<PAGE>
National Commerce Bancorporation
Piedmont Bancorp, Inc.
February 18, 2000
Page 3
total value of the shares of all classes of stock outstanding, or (iii) a
corporation which owns, actually or constructively, fifty percent or more of the
total voting power or total value of all shares of all classes of stock of NCBC.
A person will be deemed related to NCBC for this purpose if such relationship
exists either immediately before or immediately after such acquisition or arises
in connection with the Merger, and a person that is a partner in a partnership
will be deemed to own or have acquired any stock that such partnership acquired
in accordance with the partner's interest in the partnership.
5. Neither NCBC nor any person related to NCBC has any plan or intention
to reacquire any of the shares of NCBC Common Stock issued in the Merger. For
purposes of this assumption, a person is related to NCBC if it is (i) a member
of its affiliated group within the meaning of Section 1504 of the Code, (ii) a
corporation as to which NCBC owns, actually or constructively, fifty percent or
more of the total voting power or total value of the shares of all classes of
stock outstanding, or (iii) a corporation which owns, actually or
constructively, fifty percent or more of the total voting power or total value
of all shares of all classes of stock of NCBC. A person will be deemed related
to NCBC for this purpose if such relationship exists either immediately before
or immediately after such acquisition or arises in connection with the Merger,
and a person that is a partner in a partnership will be deemed to own or have
acquired any stock that such partnership acquired in accordance with the
partner's interest in the partnership.
6. The liabilities of Piedmont to be assumed by NCBC and the liabilities
to which the transferred assets of Piedmont are subject were incurred by
Piedmont in the ordinary course of its business.
7. NCBC, Piedmont and the shareholders of Piedmont will pay their
respective expenses, if any, incurred in connection with the Merger.
8. There is no intercorporate indebtedness existing between Piedmont and
NCBC that was or will be issued, acquired, or settled at a discount.
9. Neither Piedmont nor NCBC is a regulated investment company, a real
estate investment trust, or a corporation 50 percent or more of the value of
whose total assets (excluding cash, cash items, receivables and U.S. government
securities) are stock or securities and 80 percent or more of the value of whose
total assets are assets held for investment. For purposes of the 50 percent and
80 percent determinations under the preceding sentence, stock and securities in
any subsidiary shall be disregarded, and the parent corporation shall be deemed
to own its ratable share of the subsidiary's assets. A corporation shall be
considered a subsidiary for purposes of this paragraph if the parent owns 50
percent or more of the combined voting power of all classes of such
corporation's stock entitled to vote, or 50 percent or more of the total value
of shares of all classes of such corporation's stock outstanding.
<PAGE>
National Commerce Bancorporation
Piedmont Bancorp, Inc.
February 18, 2000
Page 4
10. Piedmont is not under the jurisdiction of a court in a case under
Title 11 of the United States Code or a receivership, foreclosure, or similar
proceeding in a federal or state court.
11. The fair market value of the assets of Piedmont transferred to NCBC
will equal or exceed the sum of the liabilities assumed by NCBC plus the amount
of liabilities, if any, to which the transferred assets are subject.
12. NCBC has no plan or intention to sell or otherwise dispose of any of
the assets acquired from Piedmont, except for dispositions made in the ordinary
course of business.
13. Following the Merger, NCBC will continue the historic business of
Piedmont or use a significant portion of Piedmont's historic business assets in
a business.
14. None of the compensation received by any shareholder-employees of
Piedmont in contemplation of or as result of the Merger will be separate
consideration for, or allocable to, any of their shares of Piedmont Common
Stock; none of the shares of NCBC Common Stock received by any shareholder-
employees of Piedmont in exchange for Piedmont Common Stock in the Merger will
be separate consideration for, or allocable to, any employment agreement; and
the compensation paid to any shareholder-employees pursuant to the Merger will
be for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
15. The outstanding Piedmont Options have been granted by Piedmont as
compensation in connection with the provision of services to Piedmont and
Hillsborough Savings Bank, Inc., SSB, by the Piedmont Option holders.
16. The payment of cash in lieu of fractional shares of NCBC Common Stock
is solely for the purpose of avoiding the expense and inconvenience to NCBC of
issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Merger to
the Piedmont shareholders instead of issuing fractional shares of NCBC Common
Stock will not exceed one percent of the total consideration that will be issued
in the Merger to the Piedmont shareholders in exchange for their shares of
Piedmont Common Stock. The fractional share interest of each Piedmont
shareholder will be aggregated and no Piedmont shareholder will receive cash in
an amount equal to or greater than the value of one full share of NCBC Common
Stock.
17. At the Effective Time, the aggregate fair market of the NCBC Common
Stock issued to the Piedmont shareholders in the Merger will represent at least
fifty percent (50%) of the total value of the aggregate consideration payable in
the Merger to the Piedmont shareholders (including cash paid in lieu of
fractional shares of NCBC Common Stock).
<PAGE>
National Commerce Bancorporation
Piedmont Bancorp, Inc.
February 18, 2000
Page 5
18. Piedmont has not and will not, prior to the Effective Time, make any
distribution with respect to its stock which is not in the ordinary course of
business.
OPINION
-------
Based upon the foregoing and subject to the limitations below, it is our
opinion that:
1. The Merger will be treated as a "reorganization" within the meaning of
Section 368(a)(1)(A) of the Code;
2. No gain or loss will be recognized by NCBC or Piedmont as a result of
the Merger;
3. No gain or loss will be recognized by the shareholders of Piedmont
upon the exchange of Piedmont Common Stock for NCBC Common Stock pursuant to the
Merger (except with respect to cash received in lieu of fractional share
interests in NCBC Common Stock) or by the holders of Piedmont Options upon the
conversion of such options into rights with respect to NCBC Common Stock;
4. The aggregate tax basis of the NCBC Common Stock received by a
Piedmont shareholder pursuant to the Merger will be the same as the aggregate
tax basis of the Piedmont Common Stock surrendered in exchange therefor
(excluding any basis allocable to a fractional share of NCBC Common Stock for
which cash is received);
5. The receipt of cash in lieu of fractional shares of NCBC Common Stock
will be treated as if fractional shares were distributed as part of the exchange
and then were redeemed by NCBC; and
The opinion expressed herein is based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, our opinion is based solely on the documents that we have
examined, the additional information that we have obtained, and the statements
set out herein that we have assumed to be true on the day hereof and at the tine
of the Merger. Our opinion cannot be relied upon if any of the material facts
contained in such documents or any such additional information is, or later
becomes, inaccurate. Finally, our opinion is limited to the tax matters
specifically covered thereby, and we have not been asked to address herein, nor
have we addressed herein, any other tax consequences of the Merger.
Very truly yours,
BASS, BERRY & SIMS PLC
<PAGE>
EXHIBIT 21.1
Parent and Subsidiaries
National Commerce Bancorporation and Subsidiaries
The following table shows the subsidiaries of NCBC, their jurisdiction of
organization, and the percentage of voting securities owned by each subsidiary's
parent as of February 17, 2000.
<TABLE>
<CAPTION>
% of Voting
Securities Owned
Jurisdiction of by Parent
Name of Subsidiary Organization Parent
<S> <C> <C> <C>
National Bank of Commerce (NBC) United States NCBC 100.00
Commerce General Corporation Tennessee NBC 100.00
NBC Capital Markets Group, Inc. Tennessee NBC 80.00
NBC Bank, FSB (Knoxville) United States NCBC 100.00
Commerce Capital Management, Inc. Tennessee NCBC 100.00
Monroe Properties, Inc. Tennessee NCBC 100.00
National Commerce Bank Services, Inc. Tennessee NBC 100.00
Commerce Finance Company Tennessee NBC 100.00
NBC Bank, FSB (Memphis) United States NCBC 100.00
TransPlatinum Service Corp. Tennessee NCBC 100.00
Kenesaw Leasing, Inc. Tennessee Knoxville 100.00
First Market Bank, FSB United States NCBC 49.00
USI Alliance Corp. Tennessee NCBC 100.00
National Commerce Real Estate Holding Company Tennessee NBC 100.00
(NCREHC)
J&S Leasing, Inc. Tennessee Knoxville 100.00
NBC Insurance Services, Inc. Tennessee NBC 100.00
Commerce Real Estate Holding Company (CREHC) Delaware CREHC 100.00
American Title and Escrow, Inc. Tennessee NBC 100.00
FleetOne, L.L.C. Tennessee TransPlatinum 100.00
Southeastern Mortgage of Tennessee, Inc. Tennessee NBC 100.00
</TABLE>
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Proxy Statement/Prospectus of
National Commerce Bancorporation and to the incorporation by reference therein
of our report dated February 19, 1999, with respect to the consolidated
financial statements of National Commerce Bancorporation incorporated by
reference in its Annual Report (Form 10-K) for the year ended December 31, 1998,
filed with the Securities and Exchange Commission.
Ernst & Young LLP
Memphis, Tennessee
February 16, 2000
<PAGE>
EXHIBIT 23.2
To the Board of Directors
National Commerce Bancorporation
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KMPG LLP
Raleigh, North Carolina
February 17, 2000
<PAGE>
EXHIBIT 23.4
February 18, 2000
Board of Directors
Piedmont Bancorp, Inc.
260 South Churton Street
Hillsborough, NC 27278
Members of the Board:
We hereby consent to the use of our name and to the description of our
opinion letter to the Board of Directors of Piedmont Bancorp, Inc., to be signed
and dated the date of the Proxy Statement/Prospectus that is a part of this
Registration Statement, under the caption "Opinion of Financial Advisor to
Piedmont", and to the inclusion of such opinion letter as Appendix B to the
Proxy Statement/Prospectus that is a part of this Registration Statement.
TRIDENT SECURITIES
A Division of McDonald Investments, Inc.
By /s/ John F. Schramm
--------------------
John F. Schramm
Senior Vice President
<PAGE>
EXHIBIT 99.1
X
Please
mark REVOCABLE PROXY
your PIEDMONT BANCORP, INC.
votes as
in this
example.
Special Meeting of Stockholders
March , 2000 -- .m.
(Solicited on behalf of the Board of Directors)
The undersigned hereby appoints D. Tyson Clayton and Peggy S. Walker, and each
of them, as Proxies, each with power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated below, all of
the shares of common stock of Piedmont Bancorp, Inc., that the undersigned is
entitled to vote at the Special Meeting of Shareholders to be held on March
, 2000, or at any adjournments thereof. The affirmative vote of a majority
of the shares represented at the meeting may authorize the adjournment of the
meeting; provided, however, that no proxy that is voted against the Agreement
and Plan of Reorganization, dated as of December 27, 1999, by and between
National Commerce Bancorporation and Piedmont Bancorp, Inc. (the "Agreement")
will be voted in favor of adjournment to solicit further proxies for such
proposal.
1. Adoption of the Agreement and the related Plan of Merger
For Against Abstain
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1, THE ADOPTION OF THE
AGREEMENT AND RELATED PLAN OF MERGER.
Please sign exactly as your name appears on this proxy. When shares are held by
joint tenants, both may sign, but only one signature is required. When signing
as attorney-in-fact, executor, administrator, personal representative, trustee
or guardian, please give full title as such. If a corporation, partnership or
other entity, please sign in full corporate, partnership or other entity name
by President or other authorized person.
Date
Stockholder sign above
Co-holder (if any) sign above
Detach above card, date, sign and mail in postage-paid envelope provided.
PIEDMONT BANCORP, INC.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE ABOVE SIGNED SHAREHOLDER, BUT IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ITEM 1. THIS PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO ITS EXERCISE.
The above signed acknowledges receipt from Piedmont Bancorp, Inc. prior
to the execution of this proxy of the Notice of Special Meeting and the
related Proxy Statement/Prospectus.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
