<PAGE>
As filed with the Securities and Exchange Commission on April 24, 2000
Registration No. 333 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
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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
(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:
JOHN A. GOOD, ESQ. EDWARD D. HERLIHY, ESQ. ROBERT A. SINGER, ESQ.
Bass, Berry & Sims PLC Wachtell, Lipton, Rosen & Katz Brooks, Pierce, McLendon,
100 Peabody Place, Suite 950 51 West 52nd Street Humphrey & Leonard, L.L.P.
Memphis, Tennessee 38103 New York, New York 10019 2000 Renaissance Plaza,
Telephone: (901) 543-5900 Telephone: (212) 403-1000 230 North Elm Street,
Facsimile: (901) 543-5999 Facsimile: (212) 403-2000 Greensboro, North Carolina 27401
Telephone: (336) 373-8850
Facsimile: (336) 378-1001
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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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Title of Each Class of Securities Proposed Maximum Proposed Maximum
to Amount to be Offering Price per Share Aggregate Offering Amount of
be Registered Registered (1) (2) Price Registration Fee
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Common Stock, $2.00 par value.... 96,654,117 $17.16 $1,658,584,647 $437,887
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(1) Based upon the maximum number of shares of common stock, $2.00 par value
per share of National Commerce Bancorporation which will be issued in
exchange for shares of common stock of CCB Financial Corporation pursuant
to the merger described in the prospectus which is a part of this
registration statement.
(2) Calculated in accordance with Rule 457(f)(1) under the Securities Act by
dividing (A) the product of (i) the average of the high and low prices of
CCB common stock as reported on the New York Stock Exchange on April 17,
2000 ($42.06) and (ii) 39,450,660, the number of shares of CCB common stock
outstanding by (B) 96,654,117, representing the maximum number of shares of
NCBC common stock to be issued in the merger.
----------------
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.
<PAGE>
[NCBC Logo appears here] [CCB Logo appears here]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of National Commerce Bancorporation and CCB
Financial Corporation have agreed on a merger of equals between NCBC and CCB.
This proposed merger of equals will improve the range of business lines through
which we will serve our customers. We bring together two highly complementary
institutions to create a strategically, operationally and financially strong
company that is positioned for further growth. We believe the combined company
will be able to achieve stronger earnings growth and create substantially more
shareholder value than could be achieved by the companies individually.
Our combined company will provide a full line of consumer banking,
commercial banking and trust and investment management services and products.
We will operate in approximately 370 branch locations in Tennessee, North
Carolina, South Carolina, Mississippi, Arkansas, Georgia, Virginia, and West
Virginia. Based on our December 31, 1999 financial data, the combined company
will have assets of approximately $15 billion and deposits of approximately
$11.2 billion.
CCB will merge with and into NCBC with NCBC as the surviving corporation.
Each share of CCB common stock will be converted into 2.45 shares of NCBC
common stock. Each share of NCBC common stock will remain outstanding as a
share of common stock of the combined company.
We cannot complete the merger unless we obtain the necessary governmental
approvals and unless the shareholders of both companies approve the merger.
Each company will hold a special meeting of its shareholders to vote on this
merger. Your vote is very important. Whether or not you plan to attend your
shareholder meeting, please take the time to vote by completing and mailing the
enclosed proxy card to us. If you do not return your card or otherwise vote, or
if you do not instruct your broker how to vote any shares held for you in your
broker's name, the effect will be a vote against the merger.
The places, dates and times of the special meetings are as follows:
For NCBC shareholders: For CCB shareholders:
This document gives you detailed information about our proposed merger, and
it includes our merger agreement as Appendix A. You can also get information
about our companies from publicly available documents we have filed with the
SEC. We encourage you to read this entire document carefully.
The common stock of NCBC is qualified for quotation on the Nasdaq National
Market under the symbol "NCBC." The common stock of CCB is listed on the New
York Stock Exchange under the symbol "CCB."
We enthusiastically support this combination of our two companies and join
with the other members of our Boards of Directors in recommending that you vote
in favor of the merger.
Thomas M. Garrott Ernest C. Roessler
Chairman, President and Chief Chairman, President and Chief
Executive Officer Executive Officer
National Commerce Bancorporation CCB Financial Corporation
Neither the SEC nor any state securities commission has approved or
disapproved of the securities to be issued under this document or determined
if this document is truthful or complete. Any representation to the contrary
is a criminal offense. The securities we are offering through this document
are not savings or deposit accounts or other obligations of any bank or non-
bank subsidiary of either of our companies, and they are not insured by the
Federal Deposit Insurance Corporation, the Bank Insurance Fund, the Savings
Association Insurance Fund or any other governmental agency.
Joint Proxy Statement/Prospectus dated May , 2000
and first mailed to shareholders on or about May , 2000
<PAGE>
[NCBC Logo appears here]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , JUNE , 2000 AT 10:00 A.M.
To the Shareholders of National Commerce Bancorporation:
We will hold a special meeting of shareholders of National Commerce
Bancorporation, a Tennessee corporation, on , June , 2000, at 10:00
a.m., local time, at , for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of March 17, 2000 by and between CCB Financial Corporation,
a North Carolina corporation and NCBC as more fully described in the
enclosed Joint Proxy Statement/Prospectus. Approval of the merger agreement
will also constitute approval of an amendment to the NCBC charter, to become
effective upon completion of the merger to increase the number of authorized
shares of NCBC common stock from 175,000,000 to 400,000,000;
2. To amend NCBC's 1994 Stock Plan, which will be the stock plan of the
combined company following the merger, to increase the limitation on the
number of shares of NCBC common stock for which options may be granted to an
employee in any given year from 60,000 to 200,000, and in the case of NCBC's
Chairman and Chief Executive Officer from 100,000 to 400,000; and
3. To transact any other business as may properly be brought before the special
meeting or any adjournment of the special meeting.
We have fixed the close of business on May 1, 2000 as the record date for
determining those shareholders entitled to vote at the special meeting and any
adjournment of the special meeting. Accordingly, only shareholders of record on
that date are entitled to notice of and to vote at the special meeting and any
adjournment of the special meeting. If you wish to attend the special meeting
and your shares are held in the name of a broker, trust, bank or other nominee,
please bring a proxy or letter from the broker, trustee or nominee with you to
confirm your beneficial ownership of the shares.
By Order of the Board of Directors
/s/ David T. Popwell
______________________________________
David T. Popwell
Secretary
May , 2000
Whether or not you plan to attend the special meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
envelope. The enclosed envelope requires no postage if mailed in the United
States. If you attend the special meeting, you may vote in person if you wish,
even if you have previously returned your proxy card.
The Board of Directors of NCBC unanimously recommends that you vote FOR
approval of the merger agreement and the amendment to NCBC's charter and FOR
approval of the amendment to the 1994 Stock Plan.
<PAGE>
[CCB Logo appears here]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , June , 2000 at 11:00 A.M.
To the Shareholders of CCB Financial Corporation:
We will hold a special meeting of shareholders of CCB Financial Corporation,
a North Carolina corporation, on , June , 2000 at 11:00 a.m., local
time, at , for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of March 17, 2000, by and between National Commerce
Bancorporation, a Tennessee corporation, and CCB as more fully described in
the enclosed Joint Proxy Statement/Prospectus.
2. To transact any other business as may properly be brought before the special
meeting or any adjournment of the special meeting.
We have fixed the close of business on May , 2000 as the record date for
determining those shareholders entitled to vote at the special meeting and any
adjournment of the special meeting. Accordingly, only shareholders of record on
that date are entitled to notice of, and to vote at, the special meeting and
any adjournment of the special meeting. If you wish to attend the special
meeting and your shares are held in the name of a broker, trust, bank or other
nominee, please bring a proxy or letter from the broker, trustee or nominee
with you to confirm your beneficial ownership of the shares.
By Order of the Board of Directors
/s/ Leo P. Pylypec
-------------------------------------
Leo P. Pylypec
Secretary
May , 2000
Whether or not you plan to attend the special meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
envelope. The enclosed envelope requires no postage if mailed in the United
States. If you attend the special meeting, you may vote in person if you wish,
even if you have previously returned your proxy card.
The Board of Directors of CCB unanimously recommends that you vote FOR approval
of the merger agreement.
<PAGE>
To find any one of the principal sections identified below, simply bend the
document slightly to expose the black tabs and open the document to the tab
which corresponds to the title of the section you wish to read. For your
convenience, we have included an index of frequently used terms in this
document in an index of defined terms, which is printed on gold paper towards
the back of this document.
Table of Contents
Summary
Special Meetings
The Merger
Business and Management
Regulation and Supervision
NCBC Capital Stock
Comparison of Shareholders' Rights
Other Matters
Financial Information
Appendices
<PAGE>
TABLE OF CONTENTS
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Page
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SUMMARY
The Merger............................................................... 1
Our Reasons for the Merger............................................... 1
Exchange of Shares....................................................... 1
Our Recommendations to Shareholders...................................... 2
Opinions of Financial Advisors........................................... 2
Material Federal Income Tax Consequences................................. 2
Accounting Treatment..................................................... 3
Management and Operations after the Merger............................... 3
The Companies............................................................ 3
The Shareholders' Meetings............................................... 4
Record Date; Vote Required............................................... 4
Conditions to Completion of the Merger................................... 5
Regulatory Approvals..................................................... 6
Termination of the Merger Agreement, Expansion........................... 6
Waiver and Amendment..................................................... 6
NCBC and CCB Stock Option Agreements..................................... 6
Interests of Directors and Officers in the Merger that Differ from Your
Interests............................................................... 7
CCB Stock Options........................................................ 7
Material Differences in the Rights of Shareholders....................... 8
Dissenters' Rights....................................................... 8
Recent Legislation....................................................... 8
Recent Developments...................................................... 8
Market Price Information................................................. 9
Unaudited Comparative Per Share Data..................................... 9
Unaudited Selected Pro Forma Financial Data of NCBC and CCB.............. 10
Selected Consolidated Financial Data..................................... 11
NCBC SPECIAL MEETING
Matters to be Considered................................................. 15
Proxies.................................................................. 15
Solicitation of Proxies.................................................. 16
Record Date and Voting Rights............................................ 16
Recommendation of NCBC Board............................................. 17
CCB SPECIAL MEETING
Matters to be Considered................................................. 18
Proxies.................................................................. 18
Solicitation of Proxies.................................................. 18
Record Date and Voting Rights............................................ 19
Recommendation of CCB Board.............................................. 20
THE MERGER
Background of the Merger................................................. 21
Recommendation of NCBC Board and NCBC's Reasons for The Merger........... 24
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Recommendation of CCB Board and CCB's Reasons for the Merger.............. 26
Opinion of NCBC's Financial Advisor....................................... 29
Opinion of CCB's Financial Advisor........................................ 34
The Merger................................................................ 40
Conversion of Stock; Treatment of Options................................. 41
Exchange of Certificates; Fractional Shares............................... 42
Effective Time............................................................ 43
Representations and Warranties............................................ 44
Conduct of Business Prior to Merger....................................... 45
Other Agreements.......................................................... 47
Conditions to Completion of the Merger.................................... 49
Regulatory Approvals Required for the Merger.............................. 50
Material Federal Income Tax Consequences.................................. 53
Accounting Treatment...................................................... 54
Termination of the Merger Agreement....................................... 55
Extension, Waiver and Amendment of the Merger Agreement................... 56
Public Trading Markets.................................................... 56
Dividends................................................................. 56
Interests of Certain Persons in the Merger................................ 57
NCBC and CCB Option Agreements............................................ 62
Restrictions on Resales by Affiliates..................................... 68
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................. 70
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.................................. 71
INFORMATION ABOUT NCBC..................................................... 73
Additional Information.................................................... 73
INFORMATION ABOUT CCB...................................................... 74
Additional Information.................................................... 74
REGULATION AND SUPERVISION................................................. 75
Liability for Bank Subsidiaries........................................... 76
Capital Requirements...................................................... 77
Dividend Restrictions..................................................... 79
Deposit Insurance Assessments ............................................ 79
Depositor Preference Statute.............................................. 80
Brokered Deposits......................................................... 80
Interstate Banking and Branching.......................................... 80
Control Acquisitions...................................................... 81
Financial Modernization Legislation....................................... 81
Future Legislation........................................................ 82
NCBC CAPITAL STOCK......................................................... 82
NCBC Common Stock......................................................... 83
NCBC Preferred Stock...................................................... 84
COMPARISON OF SHAREHOLDERS' RIGHTS......................................... 85
Authorized Capital Stock.................................................. 85
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ii
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Size of Board of Directors................................................ 85
Cumulative Voting......................................................... 86
Classes of Directors...................................................... 86
Qualifications of Directors............................................... 86
Filling Vacancies on the Board............................................ 87
Removal of Directors...................................................... 87
Nomination of Directors for Election...................................... 87
Anti-Takeover Provisions--Business Combinations........................... 87
Shareholder Rights Plan................................................... 93
Shareholder Action Without a Meeting...................................... 94
Calling Special Meetings of Shareholders.................................. 94
Notice of Shareholder Meetings............................................ 95
Shareholder Vote Required for Merger...................................... 95
Dividends................................................................. 95
Dissenters' Appraisal Rights.............................................. 96
Shareholders' Preemptive Rights........................................... 96
Indemnification........................................................... 97
Amendment to Articles of Incorporation or Charter......................... 98
Amendment of Bylaws....................................................... 98
APPROVAL OF THE AMENDMENT TO NCBC 1994 STOCK PLAN.......................... 99
Proposed Amendment........................................................ 99
Description of the 1994 Stock Plan........................................ 99
Awards under the Plan..................................................... 100
Terms and Conditions of Options........................................... 100
Surrender of Options...................................................... 101
Restricted Stock Awards................................................... 101
Stock for Meeting Attendance.............................................. 101
Non-transferability....................................................... 101
Adjustment of Shares...................................................... 102
Sale, Merger or Change in Control......................................... 102
Term of the 1994 Stock Plan............................................... 102
Amendment to the 1994 Stock Plan.......................................... 102
Federal Income Tax Consequences Summary................................... 102
LEGAL MATTERS.............................................................. 104
EXPERTS.................................................................... 104
SHAREHOLDER PROPOSALS...................................................... 105
OTHER MATTERS.............................................................. 105
WHERE YOU CAN FIND MORE INFORMATION........................................ 105
INCORPORATION OF DOCUMENTS FILED WITH THE SEC.............................. 106
FORWARD-LOOKING STATEMENTS................................................. 108
GLOSSARY................................................................... 109
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION........................ 110
Appendix A Agreement and Plan of Merger.................................... A-1
Appendix B NCBC Stock Option Agreement..................................... B-1
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iii
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Appendix C CCB Stock Option Agreement..................................... C-1
Appendix D Opinion of Credit Suisse First Boston to the NCBC Board of
Directors.................................................... D-1
Appendix E Opinion of J.P. Morgan Securities, Inc. to the CCB Board of
Directors................................................................ E-1
</TABLE>
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about NCBC and CCB from documents that are not included in or delivered with
this document. This information is available to you without charge upon your
written or oral request. You can obtain information related to NCBC and CCB
that is incorporated by reference in this document by requesting it in writing
or by telephone at the following address and telephone number:
Kathryn L. Shelton W. Harold Parker, Jr.
Assistant Treasurer Senior Vice President and Controller
National Commerce Bancorporation CCB Financial Corporation
One Commerce Square P. O. Box 931
Memphis, Tennessee 38150 (901) 523-3242 Durham, North Carolina 27702
(919) 683-7631
If you would like to request documents, please do so by May , 2000 in
order to receive them before the special meetings.
See "Where You Can Find More Information" on page 105.
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE SPECIAL MEETINGS
Q: What should I do?
A: After you have carefully read this document, mail your signed proxy card
in the enclosed envelope. The instructions on the accompanying proxy card
will give you more information on how to vote by mail. This will enable
your shares to be represented at the NCBC special meeting or the CCB
special meeting, as applicable.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares following the
directions your broker provides. Your failure to instruct your broker to
vote your shares will result in your shares not being voted. If you fail
to return a proxy card or abstain from voting, the effect will be a vote
against the merger.
Q: Can I change my vote after I have submitted my proxy with voting
instructions?
A: Yes. There are three ways you can change your vote. First, you may send a
written notice to the person to whom you submitted your proxy stating that
you would like to revoke your proxy. Second, you may complete and submit a
later dated proxy with new voting instructions. The latest vote actually
received by CCB or NCBC prior to the shareholders' meetings will be your
vote. Any earlier votes will be revoked. Third, you may attend the NCBC
special meeting or the CCB special meeting, as applicable, and vote in
person. Any earlier votes will be revoked. Simply attending the meeting
without voting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions you
will receive from your broker to change or revoke your proxy.
Q: Should I send in my stock certificates?
A: No. You should not send in your stock certificates at this time.
NCBC shareholders will not exchange their certificates in the merger. The
certificates currently representing the shares of NCBC common stock will
represent an equal number of shares of NCBC common stock after the merger.
CCB shareholders will exchange their CCB common stock certificates for NCBC
common stock certificates after we complete the merger. Instructions for
exchanging CCB common stock certificates will be sent to you promptly after
the merger is completed.
Q: Whom should shareholders call with questions?
A: NCBC shareholders should call Jekka Ashman, Director of the NCBC Investors
Relations Department, at (901) 523-3525 with any questions about the
merger and the related transactions.
CCB shareholders should call Sheldon M. Fox, Chief Financial Officer for
CCB, at (919) 683-7645.
<PAGE>
SUMMARY
This brief summary highlights selected information from this document. It
does not contain all of the information that is important to you. We urge you
to carefully read the entire document and the other documents to which this
document refers to fully understand the merger. Please refer to "Where You Can
Find More Information" located on page 105. Each item in this summary includes
a page reference directing you to a more complete description of that item.
The Merger (page 21)
We have attached the merger agreement to this document as Appendix A. Please
read the merger agreement. It is the legal document that governs the merger.
We propose a merger of equals between NCBC and CCB. CCB will merge into NCBC.
NCBC will be the surviving corporation. The combined company will retain the
charter and bylaws of NCBC, except that the number of shares of common stock
authorized for issuance in NCBC's charter will be increased from 175,000,000 to
400,000,000. We expect the merger to be completed in the third quarter of 2000.
The combined company will:
. continue to be incorporated in Tennessee;
. have its corporate offices in Memphis, Tennessee;
. have its operations offices in Durham, North Carolina;
. operate under the CCB trade names in North and South Carolina; and
. operate under the NCBC trade names in all areas outside North and South
Carolina.
Our Reasons for the Merger
We are proposing to merge our two companies because we believe that:
. we will be better positioned to grow and compete successfully in a
consolidating financial services industry;
. we should be able to achieve better financial performance than what our
two companies could achieve separately;
. we should be able to combine our two operations successfully and manage
them in a disciplined manner after the merger with a deeper senior
management team than either company has on its own; and
. the combination will substantially enhance our presence in our primary
markets and in our core businesses, including those that generate
regular fee income.
See "Recommendation of the NCBC Board and NCBC's Reasons for the Merger"
beginning on page 24 and "Recommendation of the CCB Board and CCB's Reasons for
the Merger" beginning on page 26.
Exchange of Shares (page 41)
CCB shareholders. Each share of CCB common stock will automatically be
converted into 2.45 shares of common stock of NCBC. The total number of shares
of NCBC common stock you will be entitled
1
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to receive will therefore be a whole number of shares equal to the number of
shares of CCB common stock you own multiplied by 2.45. You will not receive any
fractional shares, but will receive cash instead of fractional shares.
You will have to surrender your CCB common stock certificates to receive new
certificates representing NCBC common stock. After we have completed the
merger, you will receive further instructions about how to exchange your stock
certificates.
NCBC shareholders. Each of your shares of NCBC common stock will remain
issued and outstanding as one share of common stock of the combined company.
You do not need to surrender or exchange your stock certificates.
Our Recommendations to Shareholders (pages 17 and 20)
NCBC shareholders. The NCBC Board of Directors believes that the merger is
fair to you and in your best interests, and unanimously recommends that you
vote FOR the proposal to approve the merger agreement and the related amendment
to NCBC's charter to increase its authorized shares of common stock. The NCBC
Board also recommends that you vote FOR approval of the amendment to NCBC's
1994 Stock Plan increasing the limit on the number of options that may be
granted to individual employees of NCBC in a particular year.
CCB shareholders. The CCB Board of Directors believes that the merger is
fair to you and in your best interests, and unanimously recommends that you
vote FOR the proposal to approve the merger agreement.
Opinions of Financial Advisors (pages 29 and 34)
NCBC shareholders. Credit Suisse First Boston Corporation has delivered a
written opinion to the NCBC Board of Directors that the exchange ratio is fair
to NCBC from a financial point of view. This opinion is attached to this
document as Appendix D. You should read it completely to understand the
assumptions made, matters considered and limitations of the review undertaken
by Credit Suisse First Boston in providing its opinion.
CCB shareholders. J.P. Morgan Securities, Inc. has delivered a written
opinion to the CCB Board of Directors that the exchange ratio is fair to the
holders of CCB common stock from a financial point of view. This opinion is
attached to this document as Appendix E. You should read this opinion
completely to understand the assumptions made, matters considered and
limitations of the review undertaken by J.P. Morgan in providing its opinion.
Material Federal Income Tax Consequences (page 53)
CCB shareholders. We expect that, for U.S. federal income tax purposes, the
exchange of your shares of CCB common stock for shares of NCBC common stock in
the merger generally will not cause you to recognize any gain or loss. You
will, however, have to recognize income or gain in connection with any cash
received instead of fractional shares.
This tax treatment may not apply to every CCB shareholder. Determining the
actual tax consequences of the merger to you can be complicated, depending on
your specific situation and on variables not
2
<PAGE>
within our control. You should consult your own tax advisor for a full
understanding of the merger's tax consequences to you.
NCBC shareholders. The merger will not cause you to recognize any gain or
loss for U.S. federal income tax purposes.
Accounting Treatment (page 54)
We expect the merger to qualify for pooling-of-interests accounting
treatment. This means that for accounting and financial reporting purposes we
will treat our companies as if they had always been one.
Management and Operations after the Merger (page 70)
The present management teams of our companies will share the responsibility
of managing the combined company. The Board of Directors of the combined
company will be comprised of 20 directors. Ten directors will come from the
current NCBC Board of Directors and 10 directors will come from the current CCB
Board of Directors. For a period of two years after the merger:
. if a current NCBC director ceases to serve on the Board of Directors,
his successor will be nominated by the continuing NCBC directors; and
. if a current CCB director ceases to serve on the Board of Directors, his
successor will be nominated by the continuing CCB directors.
Thomas M. Garrott, currently NCBC's Chairman, Chief Executive Officer and
President, will serve as Chairman of the Board of Directors of the combined
company and Chairman of the Board's Executive Committee. Ernest C. Roessler,
currently CCB's Chairman, President and Chief Executive Officer, will serve as
President and Chief Executive Officer of the combined company.
The Companies (pages 73 and 74)
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Telephone: (901) 523-3242
NCBC is a Tennessee corporation and a bank holding company that provides
diverse financial services through a regional network of banking affiliates and
a national network of non-banking affiliates. NCBC operates 166 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, and
consolidated shareholders' equity of approximately $557 million. NCBC had
consolidated net income of approximately $107 million, or $0.99 per diluted
share, for the year ended December 31, 1999.
CCB Financial Corporation
111 Corcoran Street, P. O. Box 931
Durham, North Carolina 27702
Telephone: (919) 683-7777
CCB is a North Carolina corporation and bank holding company headquartered
in Durham, North Carolina. Its principal banking subsidiary, Central Carolina
Bank and Trust Company, operates 168 branches and has 179 ATMs in North
Carolina. CCB Bank's branches and ATMs are located
3
<PAGE>
predominantly along I-85 and I-40 corridors from Raleigh to Charlotte. Through
American Federal Bank, FSB, a federal savings bank subsidiary headquartered in
Greenville, South Carolina, CCB operates 39 branches and 49 ATMs in the
northwestern and central regions of South Carolina. We expect that American
Federal will be merged into CCB Bank late in the second quarter of this year.
CCB offers a full line of financial products including banking, investment,
insurance and trust services.
As of December 31, 1999, CCB had total consolidated assets of approximately
$8.2 billion, total consolidated deposits of approximately $6.7 billion, and
consolidated shareholders' equity of approximately $720 million. CCB had
consolidated net income of approximately $151 million, or $3.74 per diluted
share, for the year ended December 31, 1999. CCB's 1999 net income included a
non-recurring gain from the sale of credit card receivables which totaled $19.9
million after tax, or $.49 per diluted share.
The Shareholders' Meetings
(pages 15 and 18)
NCBC shareholders. The NCBC special meeting will be held on , June
at 10:00 a.m., local time, at . At the NCBC special meeting, you will
be asked:
. to approve the merger agreement providing for the merger of CCB into
NCBC and the amendment related to NCBC's charter to increase the
authorized shares of NCBC common stock from 175,000,000 to 400,000,000;
. to approve an amendment to NCBC's 1994 Stock Plan to increase the
limitations on the number of options that may be granted to an
individual employee of NCBC in any particular year; and
. to act on other matters that may properly be submitted to a vote at the
NCBC special meeting.
CCB shareholders. The CCB special meeting will be held on , at
11:00 a.m., local time, at . At the CCB special meeting, you will
be asked:
. to approve the merger agreement; and
. to act on other matters that may properly be submitted to a vote at the
CCB special meeting.
Record Date; Vote Required (pages 16 and 19)
NCBC shareholders. You may vote at the NCBC special meeting if you owned
NCBC common stock at the close of business on May 1, 2000. On that date, there
were shares of NCBC common stock outstanding. You may cast one vote for
each share of NCBC common stock that you owned on that date. In order to
approve the merger agreement and the related charter amendment, the holders of
a majority of the outstanding shares of NCBC common stock must vote in favor of
doing so. In order to approve the amendment to NCBC's 1994 Stock Plan, the
holders of a majority of the shares of NCBC common stock voting at the NCBC
special meeting must vote in favor of the amendment.
NCBC directors and executive officers hold approximately % of the
outstanding shares of NCBC common stock
4
<PAGE>
entitled to vote at the NCBC special meeting, and CCB directors and executive
officers hold less than one percent of the outstanding shares of NCBC common
stock entitled to vote at the NCBC special meeting. We expect the NCBC and CCB
directors and executive officers to vote their NCBC shares for approval of the
merger.
CCB shareholders. You may vote at the CCB special meeting if you owned CCB
common stock at the close of business on May , 2000. On that date, there
were shares of CCB common stock outstanding. You may cast one vote for each
share of CCB common stock you owned on that date. In order to approve the
merger agreement, the holders of a majority of CCB's outstanding shares must
vote in favor of doing so.
CCB directors and executive officers hold approximately % of the
outstanding shares of CCB common stock entitled to vote at the CCB special
meeting, and NCBC directors and executive officers hold less than one percent
of the outstanding shares of CCB common stock entitled to vote at the CCB
special meeting. We expect the CCB and NCBC directors and executive officers to
vote their CCB shares for approval of the merger.
Conditions to Completion of the Merger (page 49)
Our obligations to complete the merger are conditioned on the following
events occurring:
. approval of the merger agreement by NCBC and CCB shareholders;
. approval by the Nasdaq National Market of NCBC's application to qualify
for quotation the shares of NCBC common stock to be issued in the
merger;
. approval of the merger by the applicable federal and state regulatory
authorities;
. effectiveness of the registration statement of which this document is a
part;
. the absence of any order, injunction, decree, law or regulation that
would prohibit the merger or make it illegal;
. receipt by each of us of legal opinions that, for United States federal
income tax purposes, NCBC, CCB and CCB shareholders will not recognize
any gain or loss as a result of the merger, except in connection with
the payment of cash instead of fractional shares. These opinions will be
subject to various limitations. We recommend that you read the more
detailed description of the merger's tax consequences beginning on
page 53; and
. receipt by each of us of a letter from our independent accountants to
the effect that the merger will qualify for pooling-of-interests
accounting treatment.
Where the law permits, either of us could choose to waive the satisfaction
of a condition to our obligation to complete the merger. We cannot be certain
when, or if, the conditions to the merger will be satisfied or waived, and we
cannot assure you that the merger will be completed.
5
<PAGE>
Regulatory Approvals (page 50)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System and the North Carolina Commissioner of
Banks. Once the Federal Reserve Board approves the merger, we must wait from 15
to 30 days before we can complete it. During that time, the U.S. Department of
Justice may choose to challenge the merger.
The merger is also subject to the approval of, or notice to, various state
and other regulatory authorities. We have filed, or soon will file, all of the
required applications and notices with the Federal Reserve Board and these
other regulatory authorities.
As of the date of this document, we have not yet received all required
approvals. While we do not know of any reason why we would not be able to
obtain these required approvals in a timely manner, we cannot be certain when
or if we will get them.
Termination of the Merger Agreement; Expenses (page 55)
We may mutually agree at any time to terminate the merger agreement without
completing the merger, even if our shareholders have approved it. Also, either
of us may decide, without the consent of the other, to terminate the merger
agreement in a number of other situations, including:
. the final denial of a required regulatory approval or the issuance by
any governmental entity of an injunction prohibiting completion of the
merger;
. an uncorrected breach of the merger agreement by the other party, so
long as the party seeking to terminate the merger agreement has not
itself breached the agreement; and
. the failure to complete the merger by March 17, 2001.
Whether or not the merger is completed, we will each pay our own fees and
expenses, except that we will evenly divide the costs and expenses that we have
incurred in printing and mailing this document. We will also evenly divide the
fees that we will have to pay to the SEC in connection with the merger.
Waiver and Amendment (page 56)
We may jointly amend the merger agreement, and each of us may waive our
right to require the other party to adhere to the terms and conditions of the
merger agreement. However, we may not do so after our shareholders approve the
merger agreement if the amendment or waiver would reduce or change the
consideration that will be received by CCB shareholders, unless those
shareholders approve the amendment or waiver.
NCBC and CCB Stock Option Agreements (page 62 and Appendices B and C)
Each of us, as an inducement to the other to enter into the merger
agreement, granted the other an option to purchase shares of our common stock
under the circumstances described in the stock option agreements. We granted
the options to each other in order to increase the likelihood that we would
complete the merger. The options
6
<PAGE>
could discourage other companies from proposing a competing combination with
either of us before we complete the merger. The most shares of CCB common stock
that NCBC can purchase if it exercises its option is 19.9% of the outstanding
shares of CCB common stock before counting the shares issued pursuant to the
option agreement. The most shares of NCBC common stock that CCB can purchase if
it exercises its option is 19.9% of the outstanding shares of NCBC's common
stock before counting the shares issued pursuant to the option agreement. The
exercise price under the option granted by NCBC is $20.3125 per share and the
exercise price under the option granted by CCB is $39.75 per share, the closing
prices of our shares on March 16, 2000, the last trading day before the date we
signed the merger agreement. In some circumstances, the company holding the
option, or the company holding shares purchased under the option, may require
the company that granted the option to repurchase the option and/or those
shares at a price based on a formula described in the applicable option
agreement. Either of us could instead choose to give up our option to the
granting company and receive a cash payment of $45 million.
Neither of us can exercise our option unless a series of particular events
described in the option agreements occur. These events generally are agreements
to engage in business combinations or acquisition transactions with third
parties and related events, other than the merger we are proposing in this
document, such as a merger or the sale of a substantial amount of assets or
stock. We do not know of any event that has occurred as of the date of this
document that would allow either of us to exercise our option.
Interests of Directors and Officers in the Merger that Differ from Your
Interests (page 57)
Some of our directors and officers have interests in the merger that may
differ from, or are in addition to, their interests as shareholders in our
companies. These interests exist because of employment agreements between these
people and NCBC or CCB and because of awards granted under our respective
stock-based compensation plans. The NCBC employment agreements provide the
officers of NCBC with benefits or payments after a change in control of NCBC.
The CCB employment agreements provide the officers of CCB with payments after a
change in control of CCB if the officers' employment terminates under certain
specified circumstances. In addition, in order to provide for the continued
employment of these officers, NCBC has entered into new employment agreements
which will be effective upon completion of the merger.
Additional interests of some of our directors and executive officers are
described under "The Merger--Interests of Certain Persons in the Merger" and
"Management and Operations After the Merger."
The members of our Boards of Directors knew about these additional interests
and considered them when they approved the merger agreement and the merger.
CCB Stock Options (page 41)
In the merger, each option to buy CCB common stock granted under CCB's stock
option plans that is outstanding and not yet
7
<PAGE>
exercised immediately before the merger will be converted into an option to buy
NCBC common stock. The number of shares of NCBC common stock subject to each
new option, as well as exercise price of that option, will be adjusted to
reflect the exchange ratio.
Material Differences in the Rights of Shareholders (page 85)
The rights of NCBC shareholders are governed by Tennessee law and by NCBC's
charter and bylaws. The rights of CCB shareholders are governed by North
Carolina law and by CCB's articles of incorporation and bylaws. Upon completion
of the merger, CCB shareholders will become shareholders of NCBC, and those
shareholders' rights will be governed by Tennessee law, NCBC's charter and
NCBC's bylaws. The combined company's charter and bylaws will be identical to
NCBC's current charter and bylaws, except that we will increase the number of
shares the combined company may issue.
Dissenters' Rights
Under applicable law, neither NCBC's nor CCB's shareholders have dissenters'
rights in connection with the merger.
Recent Legislation (page 81)
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act that, effective March 11, 2000, permits bank holding companies to
elect to become "financial holding companies" and to affiliate with securities
firms and insurance companies, as well as engage in other activities that are
financial in nature. The Gramm-Leach-Bliley Act defines "financial in nature"
to include:
. securities underwriting, dealing and market making;
. sponsoring mutual funds and investment companies;
. insurance underwriting and agency operations;
. merchant banking activities; and
. activities that the Federal Reserve Board has determined to be closely
related to banking.
As of the date of this document, neither NCBC nor CCB has elected to become
a financial holding company. Under the Gramm-Leach-Bliley Act, securities firms
and insurance companies that elect to become financial holding companies may
acquire banks and other financial institutions. The Act will significantly
change the competitive environments in which NCBC and CCB and their affiliates
operate.
Recent Developments
On April 13, 2000, NCBC announced the following results of operations for
the three months ended March 31, 2000:
<TABLE>
<S> <C>
Net income........................................................ $29.1 million
Earnings per share (basic)........................................ $0.27
Earnings per share (diluted)...................................... $0.27
</TABLE>
On April 13, 2000, CCB announced the following results of operations for the
three months ended March 31, 2000:
<TABLE>
<S> <C>
Net income....................................................... $ 33.2 million
Earnings per share (basic)....................................... $ 0.84
Earnings per share (diluted)..................................... $ 0.84
</TABLE>
8
<PAGE>
Market Price Information
Shares of NCBC common stock are quoted on the Nasdaq National Market under
the symbol "NCBC." Shares of CCB common stock are listed on the New York Stock
Exchange under the symbol "CCB." The market value of the aggregate
consideration that CCB shareholders will receive in the merger is approximately
$1.95 billion based on NCBC's closing stock price on March 17, 2000, the date
preceding public announcement of the transaction. The closing prices of NCBC
and CCB common stock on March 17, 2000 and May , 2000, and the implied value
to be received in the merger by CCB shareholders for each share of CCB common
stock on those dates, were as follows:
<TABLE>
<CAPTION>
Value of Merger
Consideration per share
NCBC Common Stock CCB Common Stock of CCB Common Stock
----------------- ---------------- -----------------------
<S> <C> <C> <C>
March 17, 2000...... $19.6875 $38.25 $48.23
May , 2000.......
</TABLE>
Of course, the market price of NCBC common stock will fluctuate prior to the
merger, while the exchange ratio is fixed. Accordingly, the value of the
consideration per share to be received by CCB shareholders will vary. You
should obtain current stock price quotations for NCBC common stock and CCB
common stock.
Unaudited Comparative Per Common Share Data
The following table shows summary historical financial data for each of our
companies and also shows similar information reflecting the merger of our
companies, which we refer to as "pro forma" information. In presenting the
comparative pro forma information for the time periods shown, we assumed that
the merger had been completed immediately prior to the start of those periods.
The pro forma information assumes that we will treat our companies as if
they had always been combined for accounting and financial reporting purposes--
a method known as pooling-of-interests accounting. We computed the information
listed as "pro forma equivalent" by multiplying the pro forma amounts by the
exchange ratio of 2.45. We present this information to reflect the fact that
CCB shareholders will receive more than one share of common stock of the
combined company for each share of CCB common stock they own before the merger.
We expect that we will incur merger and integration charges as a result of
combining our companies. The unaudited pro forma earnings and dividend per
share data do not reflect any anticipated merger or integration expenses but
the unaudited pro forma book value per share data include the effect of
estimated non-recurring merger-related and restructuring charges of
approximately $110 million before income taxes, which is approximately $89.1
million after the effect of income taxes.
We also anticipate that the merger will provide the combined company with
financial benefits that include reduced operating expenses. NCBC currently
intends to increase its quarterly cash dividend to $0.13 per share after
completing the merger, subject to a determination by the NCBC Board of
Directors in its discretion to do so. This intended
9
<PAGE>
increase is reflected in the pro forma dividend information in the table. The
pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
reflect the anticipated expense reduction benefits and, accordingly, does not
attempt to predict or suggest future results. It also does not necessarily
reflect what the historical results of the combined company would have been had
our companies been combined.
The information in the following table is based on, and you should read it
together with, the historical financial information that we have presented in
our prior filings with the SEC. We are incorporating this material into this
document by reference. See "Where You Can Find More Information" on page 105
for a description of where you can find our prior filings.
Unaudited Comparative Per Common Share Data
of NCBC And CCB
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
NCBC
Basic earnings per common share:
Historical................................................. $ 1.00 $0.85 $0.72
Pro forma combined for the merger.......................... 1.26 1.03 0.83
Diluted earnings per common share:
Historical................................................. $ 0.99 $0.83 $0.69
Pro forma combined for the merger.......................... 1.24 1.01 0.81
Dividends declared on common stock:
Historical................................................. $0.375 $0.32 $0.23
Pro forma combined for the merger.......................... 0.41 0.35 0.29
Book value per common share:
Historical................................................. $ 5.15
Pro forma combined for the merger.......................... 5.79
CCB
Basic earnings per common share:
Historical................................................. $ 3.77 $2.96 $2.31
Pro forma equivalent for the merger........................ 3.09 2.52 2.03
Diluted earnings per common share:
Historical................................................. $ 3.74 $2.93 $2.28
Pro forma equivalent for the merger........................ 3.04 2.47 1.98
Dividends declared on common stock:
Historical................................................. $ 1.10 $0.99 $0.89
Pro forma equivalent for the merger........................ 1.00 0.86 0.71
Book value per common share:
Historical................................................. $18.19
Pro forma equivalent for the merger........................ 14.19
</TABLE>
10
<PAGE>
Selected Consolidated Financial Data
The following tables set forth selected consolidated historical financial
data for NCBC and CCB. The information in the following tables is based on
historical financial information that we have presented in our prior filings
with the SEC. You should read all of the summary financial information we
provide in the following tables together with this historical financial
information and with the more detailed pro forma financial information we
provide in this document, which you can find beginning at page 110. The
historical financial information is also incorporated into this document by
reference. See "Where You Can Find More Information" on page 105 for a
description of where you can find this historical information.
11
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF NCBC
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Results of Operations
Interest income........ $ 468,028 $ 403,108 $ 353,958 $ 301,560 $ 259,120
Interest expense....... 231,490 200,212 182,151 158,025 132,462
---------- ---------- ---------- ---------- ----------
Net interest income... 236,538 202,896 171,807 143,535 126,658
---------- ---------- ---------- ---------- ----------
Provision for loan
losses................ 15,206 10,079 17,363 14,444 10,106
Total other income..... 92,514 87,992 85,929 72,701 56,706
Total other
expenses(1)........... 155,258 148,899 131,581 111,128 98,247
---------- ---------- ---------- ---------- ----------
Income before income
taxes................. 158,588 131,910 108,792 90,664 75,011
Income taxes........... 51,354 43,890 36,338 30,778 24,163
---------- ---------- ---------- ---------- ----------
Net income............. $ 107,234 $ 88,020 $ 72,454 $ 59,886 $ 50,848
========== ========== ========== ========== ==========
Per Common Share
Basic EPS.............. $ 1.00 $ 0.85 $ 0.72 $ 0.59 $ 0.50
Diluted EPS............ 0.99 0.83 0.69 0.58 0.49
Dividends declared..... 0.375 0.32 0.23 0.20 0.18
Period-end book value.. 5.15 4.06 3.62 3.21 2.97
Period-end market
price................. 22.69 18.81 17.63 9.56 6.56
Average Balances
Loans, net of unearned
discounts............. $3,600,337 $3,040,662 $2,650,663 $2,245,901 $1,809,571
Investment securities.. 2,316,550 1,827,818 1,609,197 1,451,951 1,292,473
Trading account
securities............ 42,285 51,163 30,788 29,157 18,718
Federal funds sold and
securities purchased
under agreements to
resell................ 67,923 44,562 23,985 26,507 29,415
Interest-bearing
deposits with banks... 24,016 19,326 18,456 17,199 17,055
---------- ---------- ---------- ---------- ----------
Total interest-earning
assets............... 6,051,111 4,983,531 4,333,089 3,770,715 3,167,232
---------- ---------- ---------- ---------- ----------
Total assets........... 6,454,848 5,357,986 4,610,430 3,988,379 3,361,071
Non-interest bearing
deposits.............. 467,645 443,395 351,882 326,850 302,652
Interest-bearing
deposits.............. 3,796,794 3,232,032 2,783,476 2,481,029 2,166,421
---------- ---------- ---------- ---------- ----------
Total deposits........ 4,264,439 3,675,427 3,135,358 2,807,879 2,469,073
---------- ---------- ---------- ---------- ----------
Short-term borrowings.. 683,304 476,147 445,863 336,727 264,214
Federal Home Loan Bank
advances.............. 832,206 552,176 405,308 417,316 294,833
Other borrowed funds
and long-term debt.... 9,291 103,103 163,010 65,829 11,176
Stockholders' equity... 498,546 398,735 347,383 307,910 282,406
Ratios
Return on average
assets................ 1.66% 1.64% 1.57% 1.50% 1.51%
Return on average
common equity......... 21.51 22.07 20.86 19.45 18.01
Net interest margin--
taxable equivalent
basis................. 4.13 4.20 4.08 3.95 4.19
Efficiency ratio....... 43.70 49.15 49.23 49.18 51.95
Dividend payout ratio.. 37.89 38.55 33.33 34.48 36.73
Tier 1 risk-based
capital............... 12.50 11.62 12.25 10.96 12.13
Total risk-based
capital............... 13.75 12.87 13.51 12.21 13.38
Leverage............... 8.86 7.94 8.57 7.28 7.82
Average equity to
average assets........ 7.72 7.44 7.53 7.72 8.40
</TABLE>
- --------
(1) Other expenses in 1999 includes merger related expenses of $2.1 million
($1.7 million after-tax).
12
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF CCB
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Results of Operations
Interest income........ $ 589,599 $ 577,426 $ 550,463 $ 512,575 $ 492,409
Interest expense....... 257,547 254,562 250,099 237,572 234,880
---------- ---------- ---------- ---------- ----------
Net interest income.. 332,052 322,864 300,364 275,003 257,529
---------- ---------- ---------- ---------- ----------
Provision for loan
losses................ 14,296 15,884 16,376 17,361 11,007
Total other income
(1)................... 158,454 113,081 93,399 82,606 66,185
Total other expenses
(2)................... 244,036 230,217 226,198 209,833 198,207
---------- ---------- ---------- ---------- ----------
Income before income
taxes and
extraordinary item.... 232,174 189,844 151,189 130,415 114,500
Income taxes (4)....... 81,351 68,632 55,765 43,589 37,356
---------- ---------- ---------- ---------- ----------
Income before
extraordinary item.... 150,823 121,212 95,424 86,826 77,144
Extraordinary item
(3)................... -- -- -- -- (1,709)
---------- ---------- ---------- ---------- ----------
Net income............. $ 150,823 $ 121,212 $ 95,424 $ 86,826 $ 75,435
========== ========== ========== ========== ==========
Per Common Share
Income before
extraordinary item:
Basic EPS.............. $ 3.77 $ 2.96 $ 2.31 $ 2.11 $ 1.90
Diluted EPS............ 3.74 2.93 2.28 2.08 1.85
Net Income:
Basic EPS.............. 3.77 2.96 2.31 2.11 1.86
Diluted EPS............ 3.74 2.93 2.28 2.08 1.81
Basic EPS.............. 3.77 2.96 2.31 2.11 1.86
Diluted EPS............ 3.74 2.93 2.28 2.08 1.81
Dividends declared..... 1.10 0.99 0.89 0.80 0.72
Period-end book value.. 18.19 17.05 16.40 14.82 13.66
Period-end market
price................. 43.56 57.00 53.75 34.13 27.75
Average Balances
Loans, net of unearned
discounts............. $5,587,527 $5,276,042 $4,877,187 $4,464,026 $4,113,207
Investment securities.. 1,539,789 1,358,372 1,477,508 1,439,239 1,426,705
Federal funds sold and
securities purchased
under agreements to
resell................ 253,169 294,652 184,653 248,879 260,913
Interest-bearing
deposits with banks... 52,059 48,484 55,356 64,275 50,156
---------- ---------- ---------- ---------- ----------
Total interest-earning
assets................ 7,432,544 6,977,550 6,594,704 6,216,419 5,850,981
---------- ---------- ---------- ---------- ----------
Total assets........... 7,823,864 7,332,506 6,943,989 6,570,573 6,218,290
Non-interest bearing
deposits.............. 843,247 776,819 688,642 636,601 532,701
Interest-bearing
deposits.............. 5,675,782 5,364,255 5,111,486 4,813,311 4,621,251
---------- ---------- ---------- ---------- ----------
Total deposits......... 6,519,029 6,141,074 5,800,128 5,449,912 5,153,952
---------- ---------- ---------- ---------- ----------
Short-term borrowings.. 215,681 195,627 213,130 234,609 161,787
Federal Home Loan Bank
advances.............. 236,950 187,040 137,475 156,192 164,677
Long-term debt......... 33,059 33,083 33,103 38,355 99,808
Stockholders' equity... 704,841 678,264 638,988 574,759 511,031
Ratios
Income before
extraordinary item to:
Average assets......... 1.93% 1.65% 1.37% 1.32% 1.24%
Average stockholders'
equity................ 21.40 17.87 14.93 15.11 15.10
Return on average
assets................ 1.93 1.65 1.37 1.32 1.21
Return on average
common equity......... 21.40 17.87 14.93 15.11 14.76
Net interest margin--
taxable equivalent
basis................. 4.69 4.76 4.70 4.56 4.56
Efficiency ratio....... 51.43 51.73 51.99 53.80 56.46
Dividend payout ratio.. 29.18 33.45 38.53 37.91 38.71
Tier 1 risk-based
capital............... 11.54 11.23 12.14 11.99 10.89
Total risk-based
capital............... 13.11 12.95 14.02 13.93 12.83
Leverage............... 8.75 8.57 9.02 8.47 7.83
Average equity to
average assets........ 9.01 9.25 9.20 8.75 8.22
</TABLE>
- --------
(1) Other income in 1999 includes $32.8 million of gain ($19.9 million after-
tax) on the sale of credit card receivables. Other income in 1997 includes
$2.3 million of gain ($1.4 million after-tax) on the sale of a subsidiary.
(2) Other expenses in 1997 include merger-related expense of $17.9 million
($13.1 million after-tax) related to mergers with American Federal and
Salem Trust Bank. Other expenses also include the levy in 1996 of a $12.9
million ($8 million after-tax) special assessment by the Federal Deposit
Insurance Corporation to capitalize the Savings Association Insurance Fund.
Other expenses in 1995 include merger-related expense of $10.3 million
($7.3 million after-tax) related to the merger with Security Capital
Bancorp.
(3) The 1995 extraordinary item resulted from a prepayment penalty on the early
extinguishment of debt by American Federal.
(4) During 1996, a tax benefit of $1.6 million ($.04 per diluted share) was
recorded for forgiveness of the recapture of tax bad debt reserves of a
former bank subsidiary.
13
<PAGE>
UNAUDITED SELECTED PRO FORMA FINANCIAL DATA
The following unaudited selected pro forma combined financial data combine
NCBC's historical results with CCB's historical results, in each case, as of or
for the fiscal years ended December 31, 1999, 1998 and 1997. Income statement
data gives effect to the merger as if it had occurred on January 1, 1997.
Balance sheet data gives effect to the merger as if it has occurred on the
indicated balance sheet date. The pro forma data reflects the use of the
pooling-of-interests method of accounting for the merger. Other income in 1999
includes $32.8 million of gain ($19.9 million after-tax) on CCB's sale of
credit card receivables. Other expenses in 1999 includes $2.1 million of NCBC
merger related expenses ($1.7 million after tax).
The information in the following table should be read together with the
historical financial information that NCBC and CCB have presented in their
prior filings with the SEC and the Unaudited Pro Forma Condensed Financial
Information beginning at page 110 of this document. See "Where You Can Find
More Information" on page 105.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
(Dollars in thousands, except per
share data)
<S> <C> <C> <C>
Results of Operations
Interest income........................ $ 1,057,627 $ 980,534 $ 904,421
Interest expense....................... 489,037 454,774 432,250
----------- ----------- -----------
Net interest income................. 568,590 525,760 472,171
----------- ----------- -----------
Provision for loan losses.............. 29,502 25,963 33,739
Total other income..................... 250,968 201,073 179,328
Total other expenses................... 399,294 379,116 357,779
----------- ----------- -----------
Income before income taxes.............. 390,762 321,754 259,981
Income taxes........................... 132,705 112,522 92,103
----------- ----------- -----------
Net income............................. $ 258,057 $ 209,232 $ 167,878
=========== =========== ===========
Per Common Share
Basic EPS.............................. $ 1.26 $ 1.03 $ 0.83
Diluted EPS............................ 1.24 1.01 0.81
Dividends declared..................... 0.41 0.35 0.29
Period-end book value.................. 5.79 5.47 5.16
Period-end market price................ 22.69 18.81 17.63
Average Balances
Loans, net of unearned discounts....... $ 9,187,864 $ 8,316,704 $ 7,527,850
Investment securities.................. 3,856,339 3,186,190 3,086,705
Trading account securities............. 42,285 51,163 30,788
Federal funds sold and securities
purchased under agreements to resell.. 321,092 339,214 208,638
Interest-bearing deposits with banks... 76,075 67,810 73,812
----------- ----------- -----------
Total interest-earning assets.......... 13,483,655 11,961,081 10,927,793
----------- ----------- -----------
Total assets........................... 14,278,712 12,690,492 11,554,419
Non-interest bearing deposits.......... 1,310,892 1,220,214 1,040,524
Interest-bearing deposits.............. 9,472,576 8,596,287 7,894,962
----------- ----------- -----------
Total deposits........................ 10,783,468 9,816,501 8,935,486
----------- ----------- -----------
Short-term borrowings.................. 898,985 671,774 658,993
Federal Home Loan Bank advances........ 1,069,156 739,216 542,783
Other borrowed funds and long-term
debt.................................. 42,350 136,186 196,113
Stockholders' equity................... 1,203,387 1,076,999 986,371
Ratios
Return on average assets............... 1.81% 1.65% 1.45%
Return on average common equity........ 21.44 19.43 17.02
Net interest margin--taxable equivalent
basis................................. 4.44 4.53 4.45
Efficiency ratio....................... 47.85 50.37 50.38
Dividend payout ratio.................. 32.98 34.70 35.80
Tier 1 risk-based capital.............. 11.13 11.39 12.19
Total risk-based capital............... 12.57 12.92 13.82
Leverage............................... 8.19 8.29 8.84
Average equity to average assets....... 8.43 8.49 8.54
</TABLE>
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<PAGE>
NCBC SPECIAL MEETING
This section contains information about the special meeting of shareholders
that NCBC has called to consider and approve the merger agreement.
We are mailing this document to you, as a NCBC shareholder, on or about
May , 2000. Together with this document, we are also sending to you a notice
of the NCBC special meeting and a form of proxy that our Board is soliciting
for use at the special meeting. The special meeting will be held on
June , 2000 at 10:00 a.m., local time.
Matters to Be Considered
The purposes of the special meeting are to vote on the approval of the
merger agreement and an amendment to the NCBC charter, increasing the number of
authorized shares of NCBC common stock from 175,000,000 to 400,000,000 and
approval of an amendment to NCBC's 1994 Stock Plan, to increase the limitation
on the number of shares of common stock for which options may be granted to an
individual employee of NCBC in any particular year to 200,000 shares (400,000
in the case of the Chairman and the Chief Executive Officer). See "Approval of
the Amendment to NCBC 1994 Stock Plan" beginning on page 99. You may also be
asked to vote on a proposal to adjourn the special meeting. We could use any
adjournment of the special meeting for the purpose, among others, of allowing
more time to solicit votes to approve the merger agreement and the charter
amendment or the amendment to the 1994 Stock Plan.
Proxies
The accompanying form of proxy is for use at the special meeting if you
cannot or do not wish to attend in person. You can revoke the proxy at any time
before the vote is taken at the special meeting by submitting to our corporate
secretary written notice of revocation, or a properly executed proxy of a later
date, or by attending the special meeting and voting in person. Written notices
of revocation and other communications with respect to the revocation of
proxies to be used at the NCBC special meeting should be addressed to:
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Attention: David T. Popwell
All shares represented by valid proxies we receive through this solicitation
and not revoked before they are exercised will be voted in the manner specified
in those proxies. If you make no specification on your proxy card, your proxy
will be voted FOR approval of the merger agreement and the charter amendment
and FOR approval of the amendment to the 1994 Stock Plan. Our Board is
presently unaware of any other matter that may be presented for action at the
special meeting. If other matters do properly come before the special meeting,
however, we intend that shares represented by valid proxies will be voted by
and at the discretion of the persons named in the proxies. However, proxies
that indicate a vote against approval of the merger agreement and the charter
amendment or against approval of the amendment to the 1994 Stock Plan will not
be voted in favor of any
15
<PAGE>
adjournment of the special meeting the purpose of which is to allow time to
solicit additional proxies to approve the merger agreement and the charter
amendment or the amendment to the 1994 Stock Plan.
Solicitation of Proxies
We will bear the entire cost of soliciting proxies from our shareholders,
except that we and CCB have agreed to each pay one-half of the costs of
printing and mailing this document and all filing and other fees relating to
the merger paid to the SEC. In addition to soliciting proxies by mail, we will
request banks, brokers and other record holders to send proxies and proxy
solicitation materials to the beneficial owners of NCBC common stock and secure
their voting instructions, if necessary. We will reimburse those record holders
for their reasonable expenses in taking those actions. If necessary, we may
also use several of our regular employees, who will not be specially
compensated, to solicit proxies from our shareholders, either personally or by
telephone, telegram, fax, letter or special delivery letter.
Record Date and Voting Rights
In accordance with Tennessee law, the NCBC bylaws and the rules of The
Nasdaq Stock Market, we have fixed May 1, 2000 as the record date for
determining the NCBC shareholders entitled to notice of and to vote at the
special meeting. Accordingly, you are only entitled to notice of and to vote at
the special meeting if you were a record holder of shares of NCBC common stock
at the close of business on the record date. At that time, there were shares
of NCBC common stock held by approximately holders of record. To have a
quorum that permits us to conduct business at the special meeting, we require
the presence, whether in person or by proxy, of holders of NCBC common stock
representing a majority of the shares outstanding and entitled to vote on the
record date. You are entitled to one vote for each outstanding share of NCBC
common stock you held as of the close of business on the record date.
Shares of NCBC common stock present in person at the special meeting but not
voting, and shares of NCBC common stock for which we have received proxies
indicating that their holders have abstained, will be counted as present at the
special meeting for purposes of determining whether we have a quorum for
transacting business. Brokers who hold shares of NCBC common stock in nominee
or "street" name for customers who are the beneficial owners of those shares
may not give a proxy to vote those shares on the merger agreement without
specific instructions from those customers. However, shares represented by
proxies returned by a broker holding these shares in "street" name will be
counted for purposes of determining whether a quorum exists, even if those
shares are not voted by their beneficial owners in matters where the broker
cannot vote the shares in its discretion (so-called "broker non-votes").
Under Tennessee law, approval of the merger agreement and approval of the
charter amendment requires the affirmative vote of the holders of a majority of
the outstanding shares of NCBC common stock entitled to vote at the special
meeting. Approval of the amendment to the 1994 Stock Plan requires the
affirmative vote of the holders of a majority of the shares of NCBC common
stock voting at the NCBC special meeting.
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<PAGE>
Because approval of the merger agreement and approval of the charter
amendment requires the affirmative vote of the holders of a majority of the
outstanding shares of NCBC common stock entitled to vote at the special
meeting, abstentions and broker non-votes will have the same effect as votes
against approval of the merger agreement and approval of the charter amendment.
Accordingly, the NCBC Board urges you to complete, date and sign the
accompanying proxy and return it promptly in the enclosed, postage-paid
envelope.
Because approval of the amendment to the 1994 Stock Plan requires the
affirmative vote of the holders of a majority of the shares of NCBC common
stock voting at the NCBC special meeting, abstentions and broker non-votes will
have no effect.
As of the record date, our directors and executive officers beneficially
owned approximately shares of NCBC common stock, entitling them to
exercise approximately % of the voting power of the NCBC common stock
entitled to vote at the special meeting. We currently expect that each of our
directors and executive officers will vote the shares of NCBC common stock he
or she beneficially owns for approval of the merger agreement. The subsidiaries
of NCBC, as fiduciaries, custodians or agents, held a total of approximately
shares of NCBC common stock, representing approximately % of the shares
entitled to vote at the special meeting, and maintained sole or shared voting
power with respect to of these shares.
You can find additional information about beneficial ownership of NCBC
common stock by persons and entities owning more than 5% of the stock, and more
detailed information about beneficial ownership of NCBC common stock by our
directors and executive officers, in the definitive proxy statement we filed
with the SEC and sent to our shareholders in connection with our 2000 Annual
Meeting of Shareholders. See "Where You Can Find More Information" on page 105
for instructions on how you can obtain this document.
Recommendation of NCBC Board
The NCBC Board has unanimously approved the merger agreement and the charter
amendment to increase NCBC's authorized shares and the amendment to the NCBC
1994 Stock Plan to increase the number of shares of NCBC common stock for which
options may be granted to an individual employee of NCBC in any given year. The
NCBC Board believes that the merger agreement is fair to and in the best
interests of NCBC and its shareholders and recommends that NCBC shareholders
vote FOR approval of the merger agreement and the charter amendment. The NCBC
Board also recommends that NCBC shareholders vote FOR approval of the amendment
to the 1994 Stock Plan.
See "The Merger--Recommendation of the NCBC Board and NCBC's Reasons for the
Merger" for a more detailed discussion of the NCBC Board's recommendation.
17
<PAGE>
CCB SPECIAL MEETING
This section contains information about the special meeting of shareholders
that CCB has called to consider and approve the merger agreement.
We are mailing this document to you, as a CCB shareholder, on or about May
, 2000. Together with this document, we are also sending to you a notice of
the CCB special meeting and a form of proxy that our Board is soliciting for
use at the special meeting. The special meeting will be held on , June ,
2000 at 11:00 a.m., local time.
Matters to Be Considered
The purpose of the special meeting is to vote on the approval of the merger
agreement and any other matters that may properly be submitted to a vote at the
special meeting. You may also be asked to vote upon a proposal to adjourn the
special meeting. We could use any adjournment for the purpose, among others, of
allowing more time to solicit votes to approve the merger agreement.
Proxies
The accompanying form of proxy is for use at the special meeting if you
cannot or do not wish to attend in person. You can revoke the proxy at any time
before the vote is taken at the special meeting by submitting to our corporate
secretary written notice of revocation or a properly executed proxy of a later
date, or by attending the special meeting and electing to vote in person.
Written notices of revocation and other communications with respect to the
revocation of proxies to be used at the CCB special meeting should be addressed
to:
CCB Financial Corporation
P.O. Box 931
Durham, North Carolina 27702
Attn: Leo P. Pylypec, Corporate Secretary
All shares represented by valid proxies we receive through this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified in this paragraph. If you make no specification on your proxy
card, your proxy will be voted FOR the approval of the merger agreement. If
other matters do properly come before the special meeting, however, we intend
that shares represented by proxies in the form accompanying this document will
be voted by and at the discretion of the persons named in the proxies. However,
proxies that indicate a vote against approval of the merger agreement will not
be voted in favor of any adjournment of the special meeting to solicit
additional proxies to approve the merger agreement.
Solicitation of Proxies
We will bear the entire cost of soliciting proxies from you, except that we
and NCBC have agreed to each pay one-half of the costs and expenses of printing
and mailing this
18
<PAGE>
document and all filing and other fees relating to the merger paid to the SEC.
In addition to solicitation of proxies by mail, we will request banks, brokers
and other record holders to send proxies and proxy material to the beneficial
owners of the stock and secure their voting instructions, if necessary. We will
reimburse these record holders for their reasonable expenses in taking those
actions. We have also made arrangements with Georgeson & Company, Inc. to help
us in soliciting proxies from banks, brokers and nominees and have agreed to
pay approximately $10,000 plus expenses for these services. If necessary, we
may also use several of our regular employees, who will not be specially
compensated, to solicit proxies from our shareholders, either personally or by
telephone, telegram, fax, letter or special delivery letter.
Record Date and Voting Rights
In accordance with North Carolina law, the CCB bylaws and the rules of the
New York Stock Exchange, we have fixed May , 2000 as the record date for
determining the CCB shareholders entitled to notice of and to vote at the
special meeting. Accordingly, you are only entitled to notice of and to vote at
the special meeting if you were a record holder of CCB common stock at the
close of business on the record date. At that time, shares of CCB common
stock were outstanding, held by holders of record. To have a quorum that
permits us to conduct business at the special meeting, we require the presence,
whether in person or through proxies, of the holders of CCB common stock
representing a majority of the shares outstanding and entitled to vote on the
record date. You are entitled to one vote for each outstanding share of CCB
common stock you held as of the close of business on the record date.
Shares of CCB common stock present in person at the special meeting but not
voting, and shares of CCB common stock for which we have received proxies
indicating that their holders have abstained, will be counted as present at the
special meeting for purposes of determining whether we have a quorum for
transacting business. Shares held in street name that have been designated by
brokers on proxy cards as not voted will not be counted as votes cast for or
against any proposal. These broker non-votes will, however, be counted for
purposes of determining whether a quorum exists.
Under North Carolina law, approval of the merger agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of CCB
common stock entitled to vote at the special meeting.
Because approval of the merger agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of CCB common stock
entitled to vote at the special meeting, abstentions and broker non-votes will
have the same effect as votes against approval of the merger agreement.
Accordingly, the CCB Board urges you to complete, date and sign the
accompanying proxy and return it promptly in the enclosed, postage-paid
envelope.
As of the record date, directors and executive officers of CCB beneficially
owned approximately shares of CCB common stock, entitling them to exercise
approximately
19
<PAGE>
% of the voting power of the CCB common stock entitled to vote at the special
meeting. We currently expect that each of our directors and executive officers
will vote the shares of CCB common stock he or she beneficially owns for
approval of the merger agreement. The subsidiaries of CCB, as fiduciaries,
custodians or agents, held a total of approximately % of the shares
entitled to vote at the special meeting, and maintained sole or shared voting
power with respect to of these shares.
You can find additional information about beneficial ownership of CCB common
stock by persons and entities owning more than 5% of the stock, and more
detailed information about beneficial ownership of CCB common stock by our
directors and executive officers, in the definitive proxy statement we filed
with the SEC and sent to our shareholders in connection with our 2000 Annual
Meeting of Shareholders. See "Where You Can Find More Information" for
instructions on how you can obtain this document.
Recommendation of CCB Board
The CCB Board has unanimously approved the merger agreement. The CCB Board
believes that the merger agreement is fair to and in the best interests of CCB
and its shareholders and recommends that CCB shareholders vote FOR approval of
the merger agreement.
See "The Merger--Recommendation of the CCB Board and CCB's Reasons for the
Merger" for a more detailed discussion of the CCB Board's recommendation.
20
<PAGE>
THE MERGER
This summary of the material terms and provisions of the merger agreement
and the stock option agreements we have entered into in connection with the
merger agreement is qualified in its entirety by reference to the merger
agreement and the stock option agreements. The merger agreement is attached as
Appendix A, and the stock option agreements are attached as Appendices B and C
to this document. We incorporate each of those documents into this summary by
reference.
The NCBC Board and the CCB Board has each unanimously approved the merger
agreement, which provides for combining our companies through a merger of
equals. In the merger, CCB will merge into NCBC at the effective time, with
NCBC as the surviving corporation.
With the limited exceptions described below, each share of CCB common stock
issued and outstanding at the effective time will be converted into the right
to receive 2.45 shares of NCBC common stock. We refer to this ratio as the
"exchange ratio." Each share of NCBC common stock issued and outstanding at the
effective time will remain issued and outstanding.
When we refer to shares of CCB common stock in this document, we are
generally referring to those shares together with the Series A Junior
Participating Preferred Stock Purchase Rights attached to such shares under the
Rights Agreement dated as of October 1, 1998 between CCB and Central Carolina
Bank and Trust Company, as rights agent.
This section describes the material aspects of the merger, including the
principal provisions of the merger agreement and the stock option agreements.
Capitalized terms we use in this document without an express definition have
the meanings given to those terms in those agreements.
Background of the Merger
Senior management of both NCBC and CCB have regularly reviewed with their
respective Boards of Directors the possible benefits of strategic business
combinations with other financial institutions. In each case, these reviews
have been considered in light of each institution's ongoing evaluation of its
available strategies to increase shareholder value and strengthen its franchise
in order to better compete in the rapidly consolidating market for financial
services and products. In addition, both NCBC's and CCB's senior management
have from time to time had informal discussions with the senior management
teams of other financial institutions regarding the potential benefits and
risks of business combination transactions.
In October, 1999, Thomas M. Garrott, NCBC's Chairman and Chief Executive
Officer, contacted Ernest C. Roessler, CCB's Chairman and Chief Executive
Officer, and suggested that they meet to discuss the possibility of a strategic
merger of equals between NCBC and CCB. Shortly thereafter, Mr. Roessler met
informally with Mr. Garrott.
21
<PAGE>
At that meeting Mr. Garrott told Mr. Roessler that he believed NCBC and CCB
strategically fit well together, based on the companies' respective businesses,
managements and employee cultures, and the geographic location and breadth of
their franchises. Based on his discussions with Mr. Garrott, Mr. Roessler
decided it would be worthwhile to continue these discussions. Accordingly,
following this initial meeting, further informal discussions were held between
various members of NCBC and CCB senior management concerning the potential
benefits and advantages of a merger of equals between the two companies.
Mr. Garrott and Mr. Roessler again spoke in January, 2000. From this time
until Mr. Garrott and Mr. Roessler again met in person in early March 2000,
NCBC and CCB conducted informal due diligence investigations of each other in
order to develop, among other things, financial analyses of the proposed
transaction. NCBC's and CCB's senior managements held further discussions and
negotiations with each other concerning the proposed terms and conditions of a
merger of equals, as well as the potential benefits and advantages thereof. In
addition, representatives of Credit Suisse First Boston Corporation, financial
advisor to NCBC, and J.P. Morgan Securities, Inc., financial advisor to CCB,
met on a number of occasions to discuss various issues related to the proposed
merger of equals. The discussions between NCBC's and CCB's senior management,
and those between NCBC's and CCB's respective financial advisors, included
discussions with respect to the key provisions of a potential merger of equals,
including financial terms, transaction structure, location of the headquarters,
management and succession plans and potential integration, transition and
regulatory issues.
After being briefed by their respective senior managements and financial
advisors on the results of the discussions and due diligence investigations
which had taken place since they last met, on March 7, 2000, Mr. Garrott and
Mr. Roessler spoke by telephone. During this conversation, Mr. Garrott and Mr.
Roessler discussed key provisions for a merger of equals that they believed
would be acceptable to their respective Boards, and agreed to have final due
diligence sessions during the week of March 13, 2000. These discussions
addressed, among other things, the exchange ratio, retention of the name
"National Commerce Bancorporation" and the charter and bylaws of NCBC as the
name, charter and bylaws of the combined company, the composition of the
combined company's board of directors by equal numbers of historical NCBC and
CCB directors, and the roles of Mr. Garrott as Chairman of the Board and its
Executive Committee, and of Mr. Roessler as the President and Chief Executive
Officer, of the combined company. Additionally, Mr. Garrott and Mr. Roessler
discussed that in view of the importance of having reasonable assurances of the
completion of any proposed business combination between the two companies, each
company would require the grant to the other of a 19.9% stock option as a
condition to entering into a definitive merger agreement.
In continuing discussions between the companies, NCBC proposed that Mr.
Garrott and Mr. Roessler, as well as William C. Reed, Vice Chairman of NCBC,
Lewis E. Holland, Chief Financial Officer of NCBC, David T. Popwell, Executive
Vice President of NCBC, Richard L. Furr and J. Scott Edwards, Senior Executive
Vice Presidents of CCB and Sheldon M. Fox, Chief Financial Officer of CCB, who
would comprise the senior management team
22
<PAGE>
of the combined company, enter into long-term employment agreements in
connection with the proposed transaction between the two companies that would
become effective at the consummation of the proposed merger.
The proposed terms of the merger of equals discussed by Messrs. Garrott and
Roessler were presented to the NCBC Board at its regular meeting held on
March 9, 2000. At this meeting, the NCBC Board directed its senior management
to move forward to finalize a merger agreement.
On March 13, 2000, Mr. Garrott and Mr. Roessler spoke by telephone primarily
for the purpose of finalizing the exchange ratio. At this time, Mr. Garrott and
Mr. Roessler agreed that the exchange ratio in the merger would be 2.45 shares
of NCBC common stock for each share of CCB common stock.
On March 15, 2000, the Executive Committee of CCB's Board held a special
meeting at which Mr. Roessler presented, and the Executive Committee
considered, the proposed terms of a merger of equals between NCBC and CCB.
Based on the information presented to it and the advice of J.P. Morgan, the
Executive Committee directed CCB's senior management to move forward with the
negotiation of a definitive merger agreement for presentation to CCB's Board.
Each of NCBC and CCB retained Wachtell, Lipton, Rosen & Katz as special
counsel to assist in the preparation of definitive documentation with respect
to the proposed transaction, including an agreement and plan of merger and
stock option agreements.
On March 17, 2000, the NCBC Board held a special meeting at which senior
management of NCBC reviewed its discussions and negotiations with CCB regarding
the proposed merger of equals, as well as the results of its due diligence
investigation of CCB. Credit Suisse First Boston presented to the NCBC Board
detailed financial information with respect to CCB and the potential
transaction, and rendered its written opinion that, as of such date, the
exchange ratio in the merger agreement was fair to NCBC from a financial point
of view. Also at this meeting, Wachtell, Lipton, Rosen & Katz and Bass, Berry &
Sims PLC, counsel to NCBC, reviewed the terms of the merger agreement and the
option agreements and informed the NCBC Board of the legal standards applicable
to its decision to approve such agreements and the transactions contemplated
thereby. Counsel also explained that, taking into account the number of shares
of NCBC common stock that would be issued in the merger, the merger agreement
contemplated an amendment to NCBC's charter to increase the number of
authorized shares of NCBC common stock. After further questions by and
discussion among the members of the NCBC Board, and consideration of the
factors described under "--Recommendation of the NCBC Board and NCBC's Reasons
for the Merger," the NCBC Board voted unanimously to approve the merger
agreement and the transactions contemplated thereby, including the proposed
amendment to NCBC's charter, as well as the option agreements and the
employment agreements with Messrs. Garrott, Roessler, Reed, Holland, Furr, Fox,
Popwell and Edwards.
On March 17, 2000, the CCB Board held a special meeting at which senior
management of CCB, together with CCB's legal and financial advisors, reviewed
the discussions and
23
<PAGE>
negotiations with NCBC regarding the proposed merger of equals and the results
of the company's due diligence investigation of NCBC. J.P. Morgan presented
detailed financial information with respect to the potential transaction to,
and answered questions of, the CCB Board, and rendered its written opinion
that, as of March 17, 2000, the exchange ratio provided in the merger agreement
was fair to the holders of CCB common stock from a financial point of view.
Also at this meeting, Wachtell, Lipton, Rosen & Katz and Brooks, Pierce,
McLendon, Humphrey & Leonard, LLP, counsel to CCB, reviewed the terms of the
merger agreement and of the option agreements, informed the CCB Board of the
legal standards applicable to its decision to approve the merger agreement and
the option agreements and the transactions contemplated thereby, and discussed
the likelihood that the transaction would receive the requisite regulatory
approvals in a timely manner. Senior management of CCB and the CCB Board
reviewed the terms of the proposed merger of equals, and the CCB Board
concluded that, based on a variety of factors, including, among other things,
low execution risk, NCBC's business and financial position and the value per
share based on the proposed financial terms and prevailing stock market
valuations, the proposed transaction with NCBC was in best interests of CCB and
its shareholders. After further questions by and discussion among the members
of the CCB Board, and consideration of the factors described under "--
Recommendation of the CCB Board and CCB's Reasons for the Merger," the CCB
Board voted unanimously to approve the merger agreement and the option
agreements and the transactions contemplated thereby as being in the best
interests of the shareholders of CCB.
Following the completion of the special meetings of the Boards of each of
CCB and NCBC on March 17, 2000, the merger agreement and the option agreements
were entered into by CCB and NCBC.
Recommendation of the NCBC Board and NCBC's Reasons for the Merger
The NCBC Board believes that the merger is fair to, and in the best
interests of, NCBC and its shareholders. Accordingly, the NCBC Board has
unanimously approved the merger agreement and unanimously recommends that the
NCBC shareholders vote FOR approval of the merger agreement and the charter
amendment and FOR approval of the amendment to the 1994 Stock Plan.
In reaching our decision to approve the merger agreement and the option
agreements, we consulted with our management, as well as with our company's
financial and legal advisors, and considered a variety of factors, including
the following:
. Our expectation that the rate of earnings growth of the combined company
would be greater than either NCBC or CCB could achieve separately;
. While there can be no assurances as to future results, our analysis of
the potential financial impact on NCBC of combining with CCB in the
merger, including the pro forma capital ratios and asset quality of the
combined company, our expectation that
24
<PAGE>
the merger would enhance NCBC's earnings per share beginning upon its
consummation, and our expectation that approximately $50 million in
annual pre-tax expense savings could be realized by the end of fiscal
year 2001 and a pre-tax charge for merger-related expenses and
restructuring charges of approximately $110 million would be taken in
connection with the merger;
. Our knowledge of NCBC's business, operations, financial condition,
earnings and prospects;
. Our analysis of the business, operations, financial condition, earnings
and prospects of CCB, including the information obtained in our
company's due diligence review of CCB;
. The consistency of a merger of equals with CCB with our long-term
business strategy;
. The unique strategic opportunity presented by a merger of equals between
NCBC and CCB;
. The complementary nature of the businesses, management and employee
cultures and the geographic locations and breadth of the franchises of
NCBC and CCB;
. Our belief, and that of our senior management, that NCBC and CCB share a
common vision about the importance of delivering financial performance
and shareholder value and that the management and employees of NCBC and
CCB possess complementary skills and expertise;
. Our expectation that the combined company would benefit from
significantly greater economies of scale than either NCBC or CCB could
achieve separately in its consumer banking, commercial banking, asset
management and other businesses;
. Our belief that the risk of successfully combining and integrating NCBC
and CCB would be less than the execution risks of other possible
strategic alternatives that would be expected to provide benefits to our
shareholders comparable to those we expect our shareholders to derive
from a merger of equals with CCB;
. The structure of the merger and the terms of the merger agreement and
the option agreements, including the fixed exchange ratio, which
provides certainty as to the number of shares of NCBC common stock to be
issued in the merger, and the fact that the merger is intended to
qualify as a reorganization under Section 368(a) of the U.S. tax code
and for pooling-of-interests accounting treatment;
. The proposed arrangements with members of management of NCBC and CCB,
including the fact that Mr. Roessler has agreed to serve as NCBC's
President and
25
<PAGE>
Chief Executive Officer; that Mr. Garrott would remain Chairman of the
Board of Directors of NCBC and become Chairman of the Board's Executive
Committee; that other members of NCBC's senior management would become
members of senior management of the combined company; and that the Board
of Directors of the combined company would be comprised of 10 directors
designated by NCBC and 10 directors designated by CCB. See "--Interests
of Certain Persons in the Merger" and "Management and Operations After
the Merger."
. The opinion of Credit Suisse First Boston that, as of March 17, 2000,
the exchange ratio set forth in the merger agreement was fair to NCBC
from a financial point of view. See "--Opinion of NCBC's Financial
Advisor."
. The likelihood that the merger will be approved by the appropriate
regulatory authorities. See "--Regulatory Approvals Required for the
Merger."
This discussion of the information and factors considered by the NCBC Board
is not intended to be exhaustive but includes all material factors the board
considered. In reaching the determination to approve and recommend the merger,
the NCBC Board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights
to different factors. The NCBC Board is unanimous in its recommendation that
NCBC shareholders vote FOR approval of the merger agreement and charter
amendment and FOR approval of the amendment to the NCBC 1994 Stock Plan.
Recommendation of the CCB Board and CCB's Reasons for the Merger
The CCB Board believes that the merger is fair to, and in the best
interests of, CCB's shareholders. Accordingly, the CCB Board has unanimously
approved the merger agreement and unanimously recommends that CCB shareholders
vote FOR the approval of the merger agreement.
In reaching our decision to approve the merger agreement and the option
agreements, we consulted with our company's management, as well as with its
financial and legal advisors, and considered a number of factors, including
the following:
. Our expectation that the rate of earnings growth of the combined company
would be greater than CCB could achieve separately;
. Our knowledge of CCB's business, operations, financial condition,
earnings and prospects;
. Our analysis of the business, operations, financial condition, earnings
and prospects of NCBC, including the information obtained in our
company's due diligence review of NCBC;
. Our belief that NCBC operates with a similar culture to CCB, including a
focus on achieving superior credit quality, assertive asset/liability
management, industry leading efficiency and a strong sales effort;
26
<PAGE>
. The consistency of a merger of equals with NCBC, rated as the top
performing bank among the 100 largest bank holding companies for 1998
performance by U.S.Banker magazine, with our goal of becoming the top
performing bank in America by 2002;
. The complementary strengths of CCB's commercial banking and NCBC's
retail banking activities, and the opportunities the combined company
will have to leverage these complementary strengths;
. The contiguous geographic footprints of CCB and NCBC, with a focus on
high growth Metropolitan Statistical Areas ("MSAs"), and the combined
company's concentration of almost 90% of its total deposits in its eight
largest MSAs;
. The opportunity presented by a merger of equals for enhanced growth of
the combined company's non-banking businesses and the potential impact
of such growth on the combined company's market valuation;
. The opportunity for the combined company to utilize NCBC's in-store
retail banking activities and CCB's branch operations experience to
engage in de novo expansion in larger markets than would be feasible for
either CCB or NCBC standing alone;
. The opportunity for the combined company to utilize a strong capital
base and deeper management talent to pursue future acquisition
opportunities in banking and non-banking businesses;
. NCBC's track record of delivering superior shareholder returns,
emphasized by a 20-year total return, including reinvestment of
dividends, of 30.3% through December 31, 1999;
. While there can be no assurances as to future results, our analysis of
the potential financial impact of the merger on NCBC, as the issuer of
the stock our shareholders would receive in the transaction, including
the pro forma capital ratios and asset quality of the combined company,
our expectation that the merger would enhance NCBC's earnings per share
beginning upon its consummation, and our expectation that approximately
$50 million in annual pre-tax expense savings could be realized by the
end of fiscal year 2001 and that a pre-tax charge for merger-related
expenses and restructuring charges of approximately $110 million would
be taken in connection with the merger;
. The proposed exchange ratio which will result in CCB shareholders owning
47% of the combined company and which we expect will not result in CCB
shareholders experiencing dilution of earnings per share in 2001;
. Our expectation that NCBC will increase its quarterly dividend following
completion of the merger such that CCB shareholders will not suffer
dilution of their dividends;
. Our belief that the risk of successfully combining and integrating NCBC
and CCB will be lessened by our limited geographic overlap, the
commitment to maintain the brand names used in our banking activities
and our common technology platforms;
27
<PAGE>
. Our belief that the risk of successfully combining and integrating NCBC
and CCB would be less than the execution risks of other possible
strategic alternatives that would be expected to provide benefits to our
shareholders comparable to those we expect our shareholders to derive
from a merger of equals with NCBC;
. The unique strategic opportunity presented by a merger of equals between
NCBC and CCB, including possible future combinations with institutions
in markets not accessible by CCB or NCBC independently;
. Our expectation that the combined company would benefit from
significantly greater economies of scale than either NCBC or CCB could
achieve separately in its consumer banking, commercial banking, asset
management and other businesses;
. Our belief, and that of our senior management, that NCBC and CCB share a
common vision about the importance of delivering financial performance
and shareholder value and that the management and employees of NCBC and
CCB possess complementary skills and expertise;
. The structure of the merger and the terms of the merger agreement and
the option agreements, and the fact that the merger is intended to
qualify as a reorganization under Section 368(a) of the U.S. tax code
and for pooling-of-interests accounting treatment;
. The proposed arrangements with members of management of NCBC and CCB,
including the fact that Mr. Roessler has agreed to serve as NCBC's
President and Chief Executive officer; that Mr. Garrott would remain
Chairman of the Board of NCBC and Chairman of the Board's Executive
Committee; that other members of CCB's senior management would become
members of senior management of the combined company; and that the Board
of Directors of the combined company would be comprised of 10 directors
designated by NCBC and 10 directors designated by CCB. See "--Interests
of Certain Persons in the Merger" and "Management and Operations After
the Merger";
. The opinion of J.P. Morgan that, as of March 17, 2000, the exchange
ratio set forth in the merger agreement is fair from a financial point
of view to CCB shareholders. See "--Opinion of CCB's Financial Advisor";
and
. The likelihood that the merger will be approved by the appropriate
regulatory authorities. See "--Regulatory Approvals Required for the
Merger."
This discussion of the information and factors considered by us is not
intended to be exhaustive but includes all material factors the CCB Board
considered. In reaching its determination to approve and recommend the merger,
the CCB Board did not assign any relative or specific weights to the foregoing
factors, and individual directors may have given differing weights to different
factors. The CCB Board is unanimous in its recommendation that CCB shareholders
vote FOR approval of the merger agreement.
28
<PAGE>
Opinion of NCBC's Financial Advisor
Credit Suisse First Boston acted as financial advisor to NCBC in connection
with the merger. NCBC selected Credit Suisse First Boston based on its
experience, expertise and familiarity with NCBC and its business. Credit Suisse
First Boston is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, NCBC asked
Credit Suisse First Boston to evaluate the fairness of the exchange ratio to
NCBC from a financial point of view. At the March 17, 2000 meeting of NCBC's
Board, Credit Suisse First Boston rendered a written opinion that, as of that
date, and based upon and subject to various matters stated in its opinion, the
exchange ratio was fair to NCBC from a financial point of view.
The full text of the Credit Suisse First Boston opinion, which describes the
procedures followed, assumptions made, matters considered and limitations on
the review undertaken in connection with that opinion, is attached to this
document as Appendix D. NCBC shareholders should read the entire Credit Suisse
First Boston opinion.
Credit Suisse First Boston has consented to the inclusion of the Credit
Suisse First Boston opinion as Appendix D and has reviewed and consented to the
inclusion of this disclosure related to the Credit Suisse First Boston opinion.
In giving this consent, Credit Suisse First Boston does not admit that it comes
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the SEC under the Securities
Act, nor does Credit Suisse First Boston admit that it is an expert with
respect to any part of the registration statement of which this document is a
part within the meaning of the term "experts" as used in the Securities Act or
the rules and regulations of the SEC under the Securities Act.
The Credit Suisse First Boston opinion is directed to the NCBC Board. It
relates only to the fairness of the exchange ratio to NCBC from a financial
point of view, does not address any other aspect of the merger or any related
transaction, and does not constitute a recommendation to NCBC shareholders as
to how to vote at the NCBC special meeting. The summary of the Credit Suisse
First Boston opinion in this document is qualified in its entirety by reference
to the full text of that opinion.
In arriving at its opinion, Credit Suisse First Boston:
. reviewed the merger agreement and publicly available business and
financial information relating to CCB and NCBC that it considered
relevant;
. reviewed other information relating to CCB and NCBC, including
management's financial information and forecasts of cost savings to be
achieved in the merger;
. met with the management of CCB and NCBC to discuss the businesses and
prospects of the companies;
29
<PAGE>
. considered financial and stock market information about CCB and NCBC and
compared that information to similar information about other publicly
held banking institutions;
. considered the financial terms of other recent business combinations and
transactions in the banking industry; and
. considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that Credit
Suisse First Boston deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume
responsibility for independent verification of any of the information it was
provided or otherwise reviewed by Credit Suisse First Boston. Credit Suisse
First Boston relied on this information being complete and accurate in all
material respects. As to management's financial information, including the
estimates of future cost savings expected to be achieved as a result of the
merger, Credit Suisse First Boston assumed that these forecasts were reasonably
prepared and reflected the best currently available estimates and judgements of
management as to the future financial performance of CCB and NCBC. In addition,
NCBC did not ask Credit Suisse First Boston to make, and Credit Suisse First
Boston did not make, an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of CCB or NCBC, nor was Credit Suisse
First Boston furnished with any evaluations or appraisals of this kind. NCBC
placed no limits on the scope of analysis performed or opinion expressed by
Credit Suisse First Boston.
Credit Suisse First Boston's opinion was necessarily based upon financial,
economic, market and other conditions as they existed and could be evaluated on
the date of the opinion. Credit Suisse First Boston did not express any opinion
as to the actual value of NCBC common stock when issued to CCB shareholders in
the merger or the prices at which NCBC common stock will trade.
In preparing its opinion, Credit Suisse First Boston performed a variety of
financial and comparative analyses, the material aspects of which are described
below. The summary of Credit Suisse First Boston's analyses described below
should not be taken as a complete description of the analyses underlying the
Credit Suisse First Boston opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances. Therefore, such an opinion is
not readily susceptible to summary description. In arriving at its opinion,
Credit Suisse First Boston made qualitative judgments as to the significance
and relevance of each analysis and factor considered by it. Accordingly, Credit
Suisse First Boston believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors, without considering
all analyses and factors, could create a misleading or incomplete view of the
processes underlying its analyses and the Credit Suisse First Boston opinion.
In its analyses, Credit Suisse First Boston made numerous assumptions with
respect to CCB, NCBC, industry performance, and regulatory, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of CCB and
30
<PAGE>
NCBC. No company, transaction or business used in these analyses as a
comparison is identical to CCB, NCBC or the merger.
Moreover, an evaluation of the results of these analyses is not entirely
mathematical; rather, these analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the transaction, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in these analyses and the ranges resulting from any particular
analysis are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by these analyses. In addition, analyses related to the
value of businesses or securities do not purport to be appraisals or to reflect
the prices at which those businesses or securities actually may be sold.
Accordingly, these analyses and estimates are inherently subject to substantial
uncertainty.
The Credit Suisse First Boston opinion and the financial analyses Credit
Suisse First Boston presented to the NCBC Board were among many factors
considered by the NCBC Board in its evaluation of the merger and should not be
viewed as determinative of the views of the NCBC Board or management with
respect to the exchange ratio or the merger.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with its written opinion rendered to
the NCBC Board on March 17, 2000. Certain of these summaries include
information presented in tabular format. In order to fully understand the
financial analyses used by Credit Suisse First Boston, these tables must be
read together with the accompanying narrative. The tables alone do not
constitute a complete description of the applicable financial analysis.
Unless otherwise noted, all multiples and ratios in the following analyses
were calculated using stock market data as of March 16, 2000 and reported
financial data as of or for the three month period ended December 31, 1999,
annualized where appropriate. All estimates of future earnings were based on
consensus earnings per share estimates published by First Call. First Call is
an industry service provider of global earnings information based on an average
of earnings estimates published by various investment banking firms.
Comparable Companies Analysis. Credit Suisse First Boston compared selected
operating and stock market data for each of NCBC and CCB to corresponding data
for peer companies that Credit Suisse First Boston selected and deemed to be
relevant for this purpose based on their financial, operational and other
characteristics. The NCBC and CCB peer group consisted of:
. BancorpSouth, Inc.
. Centura Banks, Inc.
. Compass Bancshares, Inc.
. The Colonial BancGroup, Inc.
. First Tennessee National Corporation
. Trustmark Corporation
31
<PAGE>
The analysis indicated that CCB generally trades in line with its peer
group, while its profitability statistics were either in line with or superior
to those of its peers.
<TABLE>
<CAPTION>
CCB PEER RANGE PEER AVERAGE
----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Price to 1999 actual EPS............ 12.2x 9.9x - 13.4x 11.4x
Price to 2000 estimated EPS......... 11.1x 9.0x - 12.2x 10.4x
Book value per share................ $2.19 $1.71 - $2.05 $1.92
Tangible book value per share....... $2.24 $1.91 - $2.49 $2.16
Return on assets.................... 1.64% 1.14% - 1.52% 1.31%
Return on equity.................... 18.1% 14.4% - 23.2% 17.5%
</TABLE>
Comparable Transactions. Credit Suisse First Boston compared the terms of
the NCBC and CCB merger to similar proposed or completed merger of equals
transactions. The market premium, ownership split and board composition were
all within the parameters of the comparable transactions.
<TABLE>
<CAPTION>
----------------------------------
MARKET BOARD
PREMIUM OWNERSHIP COMPOSITION
------- --------- -----------
<S> <C> <C> <C>
NCBC/CCB..................................... 21.7%(/1/) 53%/47% 50%/50%
Dime Bancorp/Hudson United................... 0.0 56/44 52/48
Zions/First Security......................... 55.2 49/51 50/50
Fleet/BankBoston............................. 12.9 60/40 55/45
Star Banc/Firstar............................ 27.1 50/50 56/44
Norwest /Wells Fargo......................... 9.0 47/53 50/50
Citizens Bancshares/Mid Am................... 3.7 50/50 50/50
NationsBank/BankAmerica...................... 0.0 55/45 55/45
Banc One/First Chicago NBD................... 6.4 58/42 50/50
Travelers/Citicorp........................... 7.9 50/50 50/50
Chemical/Chase............................... 6.7 57/43 57/43
First Chicago/NBD............................ (3.0) 50/50 50/50
</TABLE>
- --------
(1) Based on NCBC's and CCB's average closing price for the ten trading days
ended March 16, 2000.
In addition, Credit Suisse First Boston reviewed relevant multiples and
premiums for bank acquisitions. The comparable transactions selected for review
were comprised of transactions with deal values between $500 million and $3
billion announced since June of 1999 and include the following:
. BB&T Corporation / One Valley Bancorp, Inc.
. Wells Fargo & Company / National Bancorp of Alaska, Inc.
. Centura Banks, Inc. / Triangle Bancorp, Inc.
. BB&T Corporation / Premier Bancshares, Inc.
. Citizens Financial Group, Inc. / UST Corp.
. Fifth Third Bancorp / CNB Bancshares Inc.
. Peoples Heritage Financial Group, Inc. / Banknorth Group, Inc
The following table compares the implied transaction multiples and premium
for CCB to those of the comparable transactions reviewed. All multiples were
based on public information at the time of announcement of the particular
transaction. The analysis indicates
32
<PAGE>
that the multiples and premium in the merger were lower than the average of
comparable transactions, which is consistent with its structure as a merger of
equals.
<TABLE>
<CAPTION>
-------------------------------------------
PROPOSED COMPARABLE COMPARABLE
MERGER RANGE AVERAGE
-------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Price to Last twelve months
EPS........................... 15.3x 14.7x - 33.0x 22.4x
Price to Current year EPS...... 13.9x 14.0x - 23.0x 18.2x
Price to Forward year EPS...... 12.6x 13.1x - 19.3x 16.1x
Book value per share........... $2.74 $2.04 - $3.56 $2.76
Tangible book value per share.. $2.81 $2.06 - $4.13 $3.07
Premium to market............... 21.7%(/1/) (5.2)% - 44.0% 22.4%
Relative PE multiple (/2/)...... 126.2% 61.3% - 135.0% 94.2%
</TABLE>
--------
(1) Based on NCBC's and CCB's average closing price for the ten trading
days ended March 16, 2000.
(2) Consists of acquiror's price to forward EPS multiple divided by the
merger partner's transaction price to forward EPS multiple.
Discounted Cash Flow Analysis. Credit Suisse First Boston estimated the
present value of the future streams of after-tax free cash flows that CCB could
produce on a stand-alone basis through calendar year 2005. The analysis assumed
an 8.0% required tangible leverage ratio and was based on estimated calendar
years 2000 and 2001 earnings and a long term growth rate supplied by First
Call. The range of estimated terminal values was calculated by applying
multiples ranging from 8.5x to 10.5x to the projected calendar year 2005 net
income of CCB. The free cash flow streams and estimated terminal values were
then discounted to present values using discount rates ranging from 12% to 14%.
This analysis indicated an implied equity reference range of approximately
$35.30 to $44.04 per share of CCB common stock. In addition, Credit Suisse
First Boston estimated the present value of the future streams of after-tax
free cash flows that CCB could produce on a change-of-control basis, taking
into account the cost savings that the merger could generate. Cost savings were
estimated to have a present value of approximately $285 million. Including
these cost savings results in an implied equity reference range of
approximately $41.61 to $52.31 per share of CCB common stock. These reference
ranges compare with an implied value per share of CCB common stock of $49.77
based on the exchange ratio in the merger and the closing price of NCBC common
stock on March 16, 2000.
Contribution Analysis. Credit Suisse First Boston analyzed the relative
contribution of NCBC and CCB to the combined company's market capitalization,
estimated earnings (with and without cost savings) and selected balance sheet
accounts. The analysis reflects that NCBC is contributing 49% of 2001 estimated
net income prior to any cost savings, while receiving 53% ownership of the
combined company.
<TABLE>
<CAPTION>
RELATIVE CONTRIBUTION
---------------------
NCBC CCB
----------- ----------
<S> <C> <C>
Ownership based on 2.45 exchange ratio............. 53% 47%
Stand-alone market capitalization.................. 59 41
2000 estimated net income.......................... 47 53
2001 estimated net income.......................... 49 51
2001 estimated net income with synergies(/1/)...... 45 55
Total loans........................................ 41 59
Total assets....................................... 46 54
Total deposits..................................... 41 59
Common equity...................................... 44 56
</TABLE>
33
<PAGE>
- --------
(1) Fully ascribed to CCB.
Merger Consequences Analysis. Credit Suisse First Boston analyzed the pro
forma effect of the merger on the estimated earnings per share of NCBC for
calendar years 2000 and 2001 based on analysts' consensus estimates as reported
by First Call. In performing this analysis, Credit Suisse First Boston
considered the cost savings expected to be achieved in calendar years 2000 and
2001. Based on this analysis, Credit Suisse First Boston calculated that,
including estimated cost savings, the merger would add 12.1% to NCBC's
estimated earnings per share in 2000 and 18.8% in 2001.
Engagement of Credit Suisse First Boston. Under the terms of Credit Suisse
First Boston's engagement, NCBC has agreed to pay Credit Suisse First Boston a
total fee equal to 0.40% of the transaction consideration less $500,000. Upon
execution of the merger agreement NCBC paid $1 million of the total fee. Upon
the mailing of this document. NCBC paid another $1 million of the total fee.
The balance of the fee is payable upon the closing of the merger. NCBC has also
agreed to indemnify Credit Suisse First Boston and related persons and entities
against various liabilities, including liabilities under the federal securities
laws, arising out of Credit Suisse First Boston's engagement, and to reimburse
Credit Suisse First Boston for its reasonable out-of-pocket expenses, including
the reasonable fees and expenses of its legal counsel, incurred by Credit
Suisse First Boston in connection with its engagement.
In the ordinary course of its business, Credit Suisse First Boston and its
affiliates may actively trade the debt and equity securities of both CCB and
NCBC for their own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in these securities.
Opinion of CCB's Financial Advisor
CCB retained J.P. Morgan as its financial advisor and to deliver a fairness
opinion in connection with the proposed merger. At the meeting of the CCB Board
on March 17, 2000, J.P. Morgan gave its written opinion to the CCB Board that,
as of that date and based upon and subject to the various considerations set
forth in the opinion, the exchange ratio pursuant to the merger agreement was
fair from a financial point of view to CCB's shareholders. CCB's Board did not
limit J.P. Morgan in any way in the investigations it made or the procedures it
followed in giving its opinion. We have attached as Appendix E to this document
the full text of J.P. Morgan's opinion. This opinion sets forth the assumptions
made, matters considered and limits on the review undertaken. We incorporate
J.P. Morgan's opinion into this document by reference and urge you to read the
opinion in its entirety.
J.P. Morgan addressed its opinion to the CCB Board. The opinion addresses
only the exchange ratio pursuant to the merger agreement and is not a
recommendation to any CCB shareholder as to how that shareholder should vote
with respect to the merger.
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<PAGE>
In arriving at its opinions, J.P. Morgan reviewed:
. the merger agreement;
. various publicly available information concerning the businesses of CCB
and NCBC and of several other companies engaged in businesses comparable
to those of CCB and NCBC, and the reported market prices of the
securities of other companies' deemed comparable;
. the terms of various transactions involving companies comparable to CCB
and NCBC and the consideration received for such companies;
. current and historical market prices of CCB and NCBC common stock;
. the audited financial statements of CCB and NCBC for the fiscal years
ended December 31, 1998 and 1999;
. certain internal financial analyses and forecasts prepared by CCB and
NCBC and their respective managements; and
. the terms of other business combinations that J.P. Morgan deemed
relevant.
J.P. Morgan also held discussions with several members of the managements of
CCB and NCBC on numerous aspects of the merger, the past and current business
operations of CCB and NCBC, the financial condition and future prospects and
operations of CCB and NCBC, the effects of the merger on the financial
condition and future prospects of CCB and NCBC and other matters that J.P.
Morgan believed necessary or appropriate to its inquiry. In addition, J.P.
Morgan reviewed other financial studies and analyses and considered such other
information that it deemed appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or
that was furnished to it by CCB and NCBC or that it otherwise reviewed. J.P.
Morgan is not responsible or liable for that information or its accuracy. J.P.
Morgan did not conduct any valuations or appraisals of any assets or
liabilities, nor were any valuations or appraisals provided to J.P. Morgan. In
relying on financial analyses and forecasts provided to it, J.P. Morgan has
assumed that they were reasonably prepared based on assumptions reflecting the
best currently available estimates and judgments by management as to the
expected future results of operations and financial conditions of CCB and NCBC
to which those analyses or forecasts relate. J.P. Morgan also assumed that, in
the course of obtaining regulatory and third party consents for the merger and
the other transactions contemplated by the merger agreement and this document,
no restriction will be imposed that will have a material adverse effect on the
future results of operations or financial conditions of CCB or NCBC. J.P.
Morgan also assumed that the merger will be accounted for as a pooling-of-
interests under generally accepted accounting principles and that it will
qualify as a tax-free reorganization for U.S. federal income tax purposes. J.P.
Morgan relied as to all legal matters relevant to rendering its opinion upon
the advice of counsel.
The projections furnished to J.P. Morgan for CCB and NCBC were prepared by
the respective managements of each company. Neither CCB nor NCBC publicly
discloses
35
<PAGE>
internal management projections of the type provided to J.P. Morgan in
connection with J.P. Morgan's analysis of the merger, and the projections were
not prepared with a view toward public disclosure. The projections were based
on numerous variables and assumptions that are inherently uncertain and may be
beyond the control of management, including, without limitation, factors
related to general economic and competitive conditions and prevailing interest
rates. Accordingly, actual results could vary significantly from those set
forth in the projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based its
opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of, the date of its opinion.
Subsequent developments may affect the opinion, and J.P. Morgan does not have
any obligation to update, revise or reaffirm its opinion. J.P. Morgan expressed
no opinion as to the price at which either CCB's or NCBC's common stock will
trade at any future time. In addition, J.P. Morgan did not solicit third party
indications of interest in connection with its engagement.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses that J.P. Morgan
utilized in providing its March 17, 2000 opinion. We have presented some of the
summaries of financial analyses in tabular format. In order to understand the
financial analyses used by J.P. Morgan more fully, you should read the tables
together with the text of each summary. The tables alone do not constitute a
complete description of J.P. Morgan's financial analyses.
Offer Valuation. J.P. Morgan reviewed the terms of the proposed merger,
including the historical relationship between the stock prices of CCB and NCBC
and the aggregate transaction value. J.P. Morgan also reviewed the value of the
consideration offered based upon the $20.31 closing price of NCBC common stock
on March 16, 2000, the last trading day prior to the March 17, 2000 meeting of
CCB's board of directors. This analysis indicated that the implied value of
NCBC's proposal was approximately $49.77 per share of CCB common stock. J.P.
Morgan calculated that, based on this proposal, CCB common stockholders would
receive a premium of 25.2% to the $39.75 closing price of CCB common stock on
March 16, 2000. J.P. Morgan also determined that CCB's shareholders would own
approximately 47% of the combined company immediately following the merger.
Pro Forma Merger Analysis. J.P. Morgan analyzed pro forma earnings per share
forecasts for calendar years 2000 and 2001 based upon estimates provided by
I/B/E/S. I/B/E/S is a data service that monitors and publishes compilations of
earnings estimates by selected research analysts. In performing this analysis,
J.P. Morgan considered the cost savings expected to be achieved in 2000 and
2001. The analysis showed that the merger would be accretive to the GAAP
earnings per share, cash earnings per share and tangible book value per share
of the combined company in calendar years 2000 and in 2001.
Contribution Analysis. J.P. Morgan reviewed and analyzed the relative
contributions to be made by CCB and NCBC to the combined entity. These
contributions were compared to the approximately 47% continuing ownership stake
that CCB's shareholders would have in the combined company following the
merger.
36
<PAGE>
The following table illustrates the relative contribution by CCB to a
combined CCB/NCBC entity, excluding transaction synergies:
<TABLE>
<CAPTION>
CCB
Contribution basis contribution
------------------ ------------
<S> <C>
Historical financial performance (as of December 1999)
Assets....................................................... 54%
Net loans.................................................... 60
Deposits..................................................... 59
Tangible common equity....................................... 56
GAAP earnings................................................ 55
Cash earnings................................................ 54
Projected financial performance (as of March 16, 2000)
2000 GAAP earnings........................................... 53%
2001 GAAP earnings........................................... 51
2000 cash earnings........................................... 53
2001 cash earnings........................................... 51
</TABLE>
J.P. Morgan also determined the market value contributed by CCB and NCBC to
the combined entity. This analysis indicated that as of March 16, 2000, CCB
contributed 41.2% of the combined entity based on its closing price of $39.75
that day, and 47% of the combined entity based on the price of $49.77 per share
implied by the terms of NCBC's proposal.
Public Trading Multiples. Using publicly available information, J.P. Morgan
compared selected financial data of CCB with similar data for selected publicly
traded companies (the "regional bank peers") engaged in businesses which J.P.
Morgan judged to be reasonably comparable to those of CCB. These companies
were:
Old National Bancorp Cullen/Frost Bankers, Inc.
Trustmark Corporation Centura Banks, Inc.
Compass Bancshares, Inc. FirstMerit Corporation
First Tennessee National Corporation First Virginia Banks, Inc.
Hibernia Corporation Mercantile Bankshares Corporation
These companies were selected because of their operating, organizational and
overall business similarities with CCB. The median valuation levels for the
regional peer group was determined, as well as the median of the bottom and top
quartile of the banks based upon 2000 price to earnings valuation. Based upon a
review of such information and closing stock prices on March 16, 2000, J.P.
Morgan determined that CCB generally traded in line with the median level of
its peer group.
<TABLE>
<CAPTION>
Regional bank peers
--------------------------------
BOTTOM TOP
CCB MEDIAN QUARTILE QUARTILE
----- ------ -------- --------
<S> <C> <C> <C> <C>
Price to:
2000 estimated EPS......................... 11.1x 11.8x 8.9x 14.6x
2001 estimated EPS......................... 10.1x 10.8x 8.1x 13.5x
Book value per share....................... $2.20 $1.95 $1.58 $2.65
Tangible book value per share.............. $2.25 $2.25 $1.82 $3.63
</TABLE>
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<PAGE>
J.P. Morgan also calculated a range of imputed values for a share of CCB
common stock based on the ratios for the regional bank peers. This analysis
resulted in a range of imputed values for CCB common stock of between $35 and
$42.
Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined the following proposed or completed bank merger of equals
transactions, each of which had a value greater than $1 billion and was
announced since January 1998. The market premium, ownership split and board
composition were all within the parameters of the comparable transactions.
<TABLE>
<CAPTION>
MARKET BOARD
PREMIUM(/1/) OWNERSHIP REPRESENTATION
------------ --------- --------------
<S> <C> <C> <C>
National Commerce / CCB................ 25.2% 53%/47% 50%/50%
Dime / Hudson United................... (4.2) 56/44 52/48
Zions / First Security................. 52.6 48/52 50/50
Fleet Financial / BankBoston........... 29.1 62/38 55/45
Star Banc / Firstar.................... 43.0 50/50 56/44
Norwest / Wells Fargo.................. 9.4 48/52 50/50
NationsBank / Bank America............. (1.2) 55/45 55/45
Banc One / First Chicago............... 11.2 60/40 50/50
Travelers / Citigroup.................. 10.4 50/50 50/50
</TABLE>
- --------
(1) Premium based upon stock price five days prior to announcement except
for NCBC / CCB which is based on one day prior due to significant
market movements unrelated to the merger
J.P. Morgan calculated the high, median and low premiums represented by the
purchase price paid in such acquisitions to the market price five days prior to
announcement, as well as the transaction multiple implied by the transaction
value over the last twelve months earnings per share, estimates of the next 12
months' projected earnings per share, book value per share and tangible book
value per share. In addition, J.P. Morgan calculated the same transaction
premiums and multiples, as adjusted for the movement in the S&P Bank Index
since the announcement of the transaction. J.P. Morgan then compared these
premiums and multiples to those offered to CCB in the merger and determined
that the transaction premium and multiples were in line with similar merger of
equals.
<TABLE>
<CAPTION>
As announced As adjusted
-------------------------------------- -----------------------------
Proposed Comparable Comparable Comparable Comparable
merger range median range median
-------- ----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 day premium (/1/)..... 25.2% (4.2%) - 52.6% 10.8% (4.2%) - 52.6% 10.8%
Last twelve months EPS.. 15.3x 8.0x - 31.4x 20.7x 7.6x - 24.1x 15.5x
Next twelve months EPS.. 13.8x 7.3x - 24.8x 17.5x 6.9x - 19.0x 12.8x
Book value per share.... $2.76 $1.29 - $4.05 $3.27 $1.20 - $3.00 $2.60
Tangible book value per
share.................. $2.82 $1.65 - $8.60 $3.97 $1.55 - $6.59 $3.03
</TABLE>
- --------
(1) Premium based upon stock price five days prior to announcement except for
the proposed NCBC / CCB merger, which is based on one day prior due to
significant market movements unrelated to the merger
J.P. Morgan also calculated a range of imputed values for a share of CCB common
stock based on the ratios for the comparable transactions, adjusted for
movement in the S&P Bank
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<PAGE>
Index. This analysis resulted in a range of imputed values for CCB common stock
of between $37 and $54.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis, J.P.
Morgan estimated the net present value of distributable capital that CCB could
produce on a stand-alone basis from 2000 through 2009 and distribute to CCB's
shareholders. In this analysis, J.P. Morgan used I/B/E/S earnings estimates for
2000 and 2001 and assumed that CCB's earnings were grown thereafter at an
annual rate ranging from 9% to 12%. For each growth rate, J.P. Morgan
calculated the sum of: (i) the estimated 2000-2009 distributable capital per
share, projected such that CCB's tangible equity to assets ratio would be
maintained at 7.5%, and discounted to present values at an assumed discount
rate of 11%, and (ii) the terminal values per share of CCB common stock based
on assumed multiples of CCB's projected 2010 earnings ranging from 9.0x to
12.0x. This discounted cash flow analysis indicated a reference range of $40 to
$52 per share of CCB common stock.
J.P. Morgan also used a discounted cash flow analysis to estimate the net
present value of transaction synergies assumed to result from the merger
attributable to CCB shareholders. These synergies were assumed to produce
distributable capital resulting from: (i) cost savings, which were assumed to
be achieved in 2000 and 2001 and then grow at 3% annually; and (ii) a
restructuring charge based on fully phased-in cost savings. The transaction
synergy cash flows were discounted to present values at an assumed discount
rate of 11%, and terminal values were based on assumed multiples of projected
2010 transaction synergies ranging from 9.0x to 12.0x. This discounted cash
flow analysis indicated a reference range for transaction synergies of $3.69 to
$4.37 per share of CCB common stock.
In addition, J.P. Morgan tested the sensitivity of the values for CCB on a
stand-alone basis and for transaction synergies by varying certain assumptions.
The reference ranges were not materially changed by reasonable variations of
key assumptions.
J.P. Morgan also performed a discounted cash flow analysis to estimate the
distributable capital from 2000 through 2009 for NCBC on a stand-alone basis.
In this analysis, J.P. Morgan used I/B/E/S earnings estimates for 2000 and 2001
and assumed that NCBC's earnings were grown thereafter at an annual rate
ranging from 10% to 18%. For each growth rate, J.P. Morgan calculated the sum
of: (i) the estimated 2000-2009 distributable capital per share, projected such
that NCBC's tangible equity to assets ratio would be maintained at 7.5%, and
discounted to present values at an assumed discount rate of 11%; and (ii) the
terminal values per share of NCBC common stock based on assumed multiples of
NCBC's projected 2010 earnings ranging from 10.0x to 18.0x. This discounted
cash flow analysis indicated a reasonable reference range of $17 to $36 per
share of NCBC common stock.
This summary does not purport to be a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that one must consider its opinion,
the summary and its analyses as a whole. Selecting portions of this summary and
these analyses, without considering the analyses as a whole, would create an
incomplete view of the processes underlying the analyses and opinion. In
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<PAGE>
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
those concerning general business and economic conditions and industry-specific
factors. This summary sets forth under the description of each analysis the
other principal assumptions upon which J.P. Morgan based that analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that either company or the combined company might achieve, which
values may be higher or lower than those indicated. Analyses based upon
forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their
advisors. Accordingly, these forecasts and analyses are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by those analyses. Therefore, none of CCB, NCBC, J.P.
Morgan or any other person assumes responsibility if future results are
materially different from those forecasted. Moreover, J.P. Morgan's analyses
are not and do not purport to be appraisals or otherwise reflective of the
prices at which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. CCB selected J.P. Morgan to advise it and deliver a
fairness opinion with respect to the merger on the basis of such experience and
its familiarity with CCB.
CCB has agreed to pay J.P. Morgan a total fee equal to 0.40% of the
transaction consideration less $500,000. $1 million of the fee was paid upon
execution of the merger agreement and $1 million was paid upon the mailing of
this document. The balance of the fee is payable upon the closing of the
merger. CCB also agreed to reimburse J.P. Morgan for its reasonable expenses,
including the fees and disbursements of counsel, and to indemnify J.P. Morgan
against various liabilities, including liabilities which may arise under the
federal securities laws.
J.P. Morgan and it affiliates have provided financial advisory, capital
markets and commercial banking services to CCB, for which they receive
customary fees. In the ordinary course of their business, J.P. Morgan and its
affiliates may actively trade the debt and equity securities of CCB or NCBC for
their own accounts or for the accounts of customers, and, accordingly, they may
at any time hold long or short positions in such securities.
The Merger
Subject to the terms and conditions of the merger agreement and in
accordance with Tennessee and North Carolina law, at the effective time CCB
will merge into NCBC. NCBC will be the surviving corporation and will continue
its corporate existence under the laws of Tennessee. When the merger is
effective, the separate corporate existence of CCB will
40
<PAGE>
terminate. The charter of NCBC will be the charter of the combined company, and
the bylaws of NCBC will be the bylaws of the combined company. At the effective
time, NCBC will amend it charter to authorize it to issue up to 400,000,000
shares of NCBC common stock, instead of the 175,000,000 authorized under the
current NCBC charter.
Conversion of Stock; Treatment of Options
CCB Common Stock. At the effective time, each share of CCB common stock
outstanding, together with the attached CCB preferred stock right, will be
converted into and exchanged for the right to receive 2.45 shares of NCBC
common stock and cash instead of fractional shares. The exchange ratio is
subject to customary adjustments to preserve the relative value of the
consideration CCB shareholders are to receive in the event of stock splits,
reverse stock splits or the like before the merger is completed as described
below under "--Antidilution Adjustments." Because the exchange ratio is fixed
and because the market price of NCBC common stock will fluctuate, the value of
the shares of NCBC common stock that CCB shareholders will receive in the
merger may increase or decrease, both before and after the merger.
Some shares of CCB common stock will not be converted in the merger. These
include shares held by NCBC or CCB or any of our wholly-owned subsidiaries,
except for shares held in trust accounts, managed accounts and the like, or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties ("Trust Account Shares") or shares held by NCBC or CCB or any of our
subsidiaries in respect of a debt previously contracted ("DPC Shares"). Each
outstanding share of CCB common stock owned by NCBC, CCB or any of our wholly-
owned subsidiaries, other than Trust Account Shares or DPC Shares, will be
canceled at the effective time and will cease to be outstanding. No NCBC common
stock or other consideration will be delivered in exchange for these shares.
All shares of NCBC common stock that are owned by CCB or any of its wholly-
owned subsidiaries, other than Trust Account Shares and DPC Shares, will become
authorized, but unissued shares, of NCBC's common stock.
CCB Stock Options. Each option to acquire CCB common stock granted under
CCB's stock option and incentive plans outstanding and unexercised immediately
prior to the effective time will be converted automatically at the effective
time into an option to purchase NCBC common stock, with the following
adjustments:
. the number of shares of NCBC common stock subject to the new option will
be equal to the product of the number of shares of CCB common stock
subject to the original option and the exchange ratio, rounded to the
nearest whole share; and
. the exercise price per share of NCBC common stock subject to the new
option will be equal to the exercise price under the original option
divided by the exchange ratio, rounded to the nearest whole cent.
The duration and other terms of each new NCBC option will be substantially
the same as the original CCB option, except that all references to CCB will be
deemed to be
41
<PAGE>
references to NCBC. In any event, options that are incentive stock options
under the U.S. tax code will be adjusted in the manner prescribed by the U.S.
tax code.
Antidilution Adjustments. If before the effective time the outstanding
shares of CCB common stock or NCBC common stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar change in
capitalization, an appropriate and proportionate adjustment will be made to the
exchange ratio.
NCBC Common Stock. All shares of NCBC common stock issued and outstanding
immediately before the effective time will remain issued and outstanding
immediately after completion of the merger as shares of common stock of the
surviving corporation. They will not be affected by the merger.
Exchange of Certificates; Fractional Shares
Exchange Procedures. At or prior to the effective time of the merger, NCBC
will deposit with The Bank of New York, as exchange agent, or another bank or
trust company reasonably acceptable to each of us, for the benefit of CCB
shareholders, certificates representing the shares of NCBC common stock and
cash instead of any fractional shares to be issued under the merger agreement
in exchange for outstanding shares of CCB common stock. We refer to the fund
into which NCBC deposits the certificates and cash, together with any dividends
or distributions on the fund, as the "exchange fund."
Within five business days after the date of the effective time, the exchange
agent will mail a transmittal letter to CCB shareholders. The form of
transmittal letter will contain instructions about the surrender of CCB common
stock certificates for NCBC common stock certificates and any cash instead of
fractional shares.
CCB common stock certificates should not be returned with the enclosed proxy
card. They should not be forwarded to the exchange agent unless and until you
receive a transmittal letter following the effective time.
After the effective time, you will not be paid dividends or other
distributions declared on the NCBC common stock into which your CCB common
stock has been converted until you surrender your CCB common stock certificates
for exchange. When you surrender your CCB certificates, NCBC will pay you any
unpaid dividends or other distributions, without interest. After the effective
time, there will be no transfers on the stock transfer books of CCB of shares
of CCB common stock issued and outstanding immediately prior to the effective
time. If CCB common stock certificates are presented for transfer after the
effective time, they will be canceled and exchanged for certificates
representing the applicable number of shares of NCBC common stock. Any CCB
shareholder that requests that NCBC common stock certificates be issued in a
name other than that in which the certificate being surrendered is registered
will have to pay transfer taxes to the exchange agent in advance.
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<PAGE>
No Fractional Shares Will Be Issued. The exchange agent will not issue
fractional shares of NCBC common stock to you in the merger. Accordingly, there
will be no dividends or voting rights with respect to any fractional shares.
For each fractional share that would otherwise be issued, the exchange agent
will pay cash in an amount equal to the fraction of a whole share that would
otherwise have been issued, multiplied by the average of the closing sale
prices of NCBC common stock on the Nasdaq National Market as reported by the
Wall Street Journal for the five trading days immediately preceding the date of
the effective time. No interest will be paid or accrued on the cash in lieu of
fractional shares.
None of NCBC, CCB or any other person will be liable to any former CCB
shareholder for any amount properly delivered to a public official under
applicable abandoned property, escheat or similar laws.
Lost, Stolen or Destroyed CCB Common Stock Certificates. If you have lost a
certificate representing CCB common stock, or it has been stolen or destroyed,
the exchange agent will issue the consideration properly payable under the
merger agreement on receipt of appropriate evidence of the loss, theft or
destruction and appropriate evidence that you own the certificate. The exchange
agent may also require you to post bond in an amount necessary to protect
against any claim that may be made against NCBC about ownership of the lost
certificate.
No Action By NCBC Shareholders Required. NCBC shareholders will not be
required to exchange certificates representing their shares of NCBC common
stock or otherwise take any action as a result of the completion of the merger.
You do not need to submit share certificates for NCBC common stock to NCBC,
CCB, the exchange agent or to any other person in connection with the merger.
For a description of the NCBC common stock and a description of the
differences between the rights of CCB shareholders and NCBC shareholders, see
"NCBC Capital Stock" and "Comparison of Rights of NCBC Shareholders and CCB
Shareholders."
Effective Time
The "effective time" will be the time set forth in the articles of merger
that we will file with the Secretary of State of Tennessee and with the
Secretary of State of North Carolina. We will close the merger on a date on
which each of us agrees, but in any case no later than five business days after
the satisfaction or waiver, where waiver is legally permissible, of the last
remaining condition to the merger, unless extended by our mutual agreement. See
"--Conditions to Consummation of the Merger."
We anticipate that we will complete the merger during the fiscal quarter
ending September 30, 2000. However, completion could be delayed if there is a
delay in obtaining the necessary regulatory approvals or for a number of other
reasons. There can be no assurances as to if or when these approvals will be
obtained or that the merger will be completed. If we do not complete the merger
by March 17, 2001, either of us may terminate
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<PAGE>
the merger agreement, unless the failure to complete the merger by this date is
due to the failure of the party seeking to terminate the merger agreement to
perform or observe its covenants and agreements in the merger agreement. See
"--Conditions to Consummation of the Merger" and "--Regulatory Approvals
Required for the Merger."
Representations and Warranties
The merger agreement contains representations and warranties of NCBC, on the
one hand, and CCB, on the other, as to, among other things:
. the corporate organization and existence of each party and its
subsidiaries;
. the capitalization of each party and its subsidiaries;
. the corporate power and authority of each party;
. the compliance of the merger agreement with:
- the organizational documents of each party;
- applicable law; and
- material agreements, instruments or obligations;
. governmental approvals and consents;
. the timely filing of required regulatory reports;
. each party's financial statements and filings with the SEC;
. each party's financial advisor's fees;
. the absence of material changes in each party's business since December
31, 1999;
. the absence of material legal proceedings and injunctions;
. the filing and accuracy of each party's tax returns;
. each party's employee benefit plans and related matters;
. the availability and accuracy of each party's reports and filings with
the SEC;
. each party's compliance with applicable law, including the proper
administration of all accounts for which each party is a fiduciary;
. the validity of, and the absence of material defaults under, various
contracts;
. agreements between each party and regulatory agencies;
. the use of derivative instruments such as swaps and options;
. the absence of undisclosed liabilities;
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<PAGE>
. insurance matters;
. the absence of environmental liabilities;
. the inapplicability to the merger of state anti-takeover laws;
. the tax and accounting treatment of the merger; and
. the status of financial holding company eligibility of each party.
Conduct of Business Prior to Merger
Under the merger agreement, prior to the effective time, each of us has
agreed to, and to cause each of our subsidiaries to:
. conduct its business in the ordinary course;
. use reasonable best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and
retain the services of its key officers and key employees; and
. take no action that would adversely affect or delay the ability of
either of us to obtain the necessary approvals of any regulatory agency
or other governmental entity or to perform our covenants and agreements
under the merger agreement or the option agreements, or to consummate
the contemplated transactions.
In addition, except as expressly contemplated by the merger agreement or as
disclosed prior to signing the merger agreement, or as contemplated by the
stock option agreements, each of us has agreed that, without the consent of the
other party, we and our subsidiaries will not, among other things:
. other than in the ordinary course of business, incur any indebtedness
for borrowed money other than short-term indebtedness incurred to
refinance short-term indebtedness, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make any loan or
advance;
. adjust, split, combine or reclassify any of our capital stock;
. make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into
or exchangeable for any shares of its capital stock, except:
- in the case of NCBC, for regular quarterly cash dividends at a rate
not in excess of $.105 per share of NCBC common stock;
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<PAGE>
- in the case of CCB, for regular quarterly cash dividends on CCB
common stock at a rate not in excess of $.31 per share of CCB common
stock; or
- for dividends paid by any of the subsidiaries of each of NCBC and
CCB to NCBC or CCB or any of their subsidiaries, respectively, and
dividends paid in the ordinary course of business consistent with
past practice by any subsidiaries of each of CCB and NCBC;
. grant any stock appreciation rights or grant any right to acquire any
shares of its capital stock other than:
- pursuant to NCBC stock plans or CCB stock plans in the ordinary
course of business; or
- the conversion of employee or director stock options pursuant to the
acquisition of Piedmont Bancorp, Inc. by NCBC;
. issue any additional shares of capital stock except:
- upon the exercise of stock options outstanding as of the date of the
merger agreement;
- under the option agreements; or
- in connection with the acquisition of Piedmont Bancorp, Inc. by NCBC;
. sell, transfer, mortgage, encumber or otherwise dispose of any material
part of its business or any of its properties or assets to any
individual, corporation or other entity other than a subsidiary, or
cancel, release or assign any indebtedness to any such person or any
claims held by any such person, except in the ordinary course of
business or under contracts or agreements in force at the date of the
merger agreement;
. except for transactions in the ordinary course of business or under
contracts or agreements in force at the date of or permitted by the
merger agreement, make any material investment, either by purchase of
stock or securities, contributions to capital, property transfers, or
purchase of any property or assets, in any other individual, corporation
or other entity other than a subsidiary of that corporation or entity;
. except for transactions in the ordinary course of business, terminate or
waive any material provision of any of its material contracts or
agreements, or make any change in any instrument or agreement governing
the terms of any of its securities, or enter into any material lease or
contract other than normal renewals of contracts and leases without
material adverse changes of terms;
. increase in any manner the compensation or fringe benefits of any of its
employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any of its employees or become a party to,
amend or commit itself to
46
<PAGE>
any pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any
employee other than in the ordinary course of business or accelerate the
vesting of, or the lapsing of restrictions with respect to, any stock
options or other stock-based compensation;
. solicit or encourage from any third party or enter into any
negotiations, discussions or agreement in respect of, or authorize any
individual, corporation or other entity to solicit or encourage from any
third party or enter into any negotiations, discussions or agreement in
respect of, or provide or cause to be provided any confidential
information in connection with, any inquiries or proposals relating to
the position of all or substantially all of its business or assets, or
the acquisition of its voting securities, or the merger of it or any of
its subsidiaries with any corporation or other entity other than as
provided by the merger agreement. Each party will promptly notify the
other of all of the relevant details relating to all inquiries and
proposals that it may receive relating to any of these matters;
. settle any material claim, action or proceeding involving monetary
damages, except in the ordinary course of business;
. knowingly take any action that would prevent or impede the merger from
qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the U.S. tax
code;
. amend its organizational documents or its bylaws;
. other than in prior consultation with the other party to the merger,
restructure or materially change its investment securities portfolio or
its gap position, through purchases, sales or otherwise, or the manner
in which the portfolio is classified or reported;
. take any action that is intended or expected to result in any of its
representations, warranties, covenants or agreements being or becoming
untrue in any material respect at any time prior to the effective time,
or in any of the conditions to the merger not being satisfied or in a
violation of any provision of the merger agreement, except, in every
case, as may be required by applicable law;
. implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by U.S. generally accepted
accounting principles or regulatory guidelines; or
. agree to take, make any commitment to take, or adopt any resolutions of
its board of directors in support of, any of the actions listed above.
Other Agreements
In addition to the agreements about the conduct of our businesses we have
described above, we have also agreed in the merger agreement to take several
other actions:
. we have agreed to cooperate with each other and to use our reasonable
best efforts to promptly prepare and file all necessary documentation to
obtain as promptly as
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<PAGE>
practicable all permits, consents, approvals and authorizations of all
third parties and governmental entities necessary or advisable to
consummate the merger;
. we have agreed to give each other access to all of our properties,
books, contracts, commitments and records and to provide information
about our businesses, properties and personnel and to keep each other's
information confidential, subject to the restrictions and for the
purposes set forth in the merger agreement;
. each of us has agreed to call a special meeting of our shareholders as
soon as reasonably practicable for the purpose of voting on the merger
agreement and to use our reasonable best efforts, subject to applicable
law, to hold the special meetings on the dates set;
. we have agreed to use our reasonable best efforts to take all actions
necessary, proper or advisable to comply promptly with all legal
requirements that may be imposed on either of us or our subsidiaries
relating to the merger and to consummate the merger; and
. NCBC has agreed to cause the shares of NCBC common stock to be issued in
the merger to be qualified for quotation on the Nasdaq National Market
as of the effective time.
Also, we have agreed with respect to employee benefit plans:
. that the employee benefit plans in place at the effective time covering
employees of NCBC and CCB will remain in effect for these employees
until the combined company adopts new benefit plans covering employees
of the combined company;
. that we will cooperate with each other in reviewing, evaluating and
analyzing the NCBC employee benefit plans and the CCB employee benefit
plans in order to develop appropriate new benefit plans;
. that we will honor in accordance with their terms all benefits vested as
of March 17, 2000 under CCB's benefit plans, NCBC's benefit plans or
under other contracts, arrangements, commitments or understandings
described in the merger agreement;
. that the merger agreement does not prevent NCBC from amending, modifying
or terminating any CCB benefit plan, NCBC benefit plan or other
contract, arrangement, commitment or understanding in accordance with
its terms and applicable law; and
. that we mutually intend to coordinate our efforts to establish a program
designed to retain and provide incentives to key personnel in a manner
that provides for equitable treatment of similarly situated NCBC and CCB
employees.
In addition, in connection with the approval of the merger, the NCBC Board
and the Benefits Committee of National Bank of Commerce approved an amendment
to the Retirement Plan for Employees of National Bank of Commerce, Memphis,
Tennessee to provide that the execution of the merger agreement and related
documents, any change in the
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composition of the NCBC Board or the Bank's board of directors resulting from
the merger, and any other actions, transactions or consequences contemplated by
or resulting from the merger, will not constitute a "change in control" within
the meaning of that plan.
Conditions to Completion of the Merger
Our obligations to complete the merger are subject to the satisfaction or
waiver, where permissible, of the following conditions at or prior to the
effective time:
. the merger agreement and the transactions it contemplates will have been
duly approved by the requisite vote of shareholders of each company;
. the shares of NCBC common stock that are to be issued upon completion of
the merger will have been qualified for quotation on the Nasdaq National
Market subject to official notice of issuance;
. all regulatory approvals required to consummate the merger will have
been obtained and will remain in full force and effect and all statutory
waiting periods required by law will have expired;
. the registration statement of which this document forms a part will have
become effective, no stop order suspending the effectiveness of the
registration statement will have been issued by the SEC and no
proceedings for that purpose will have been initiated or threatened by
the SEC;
. no order, injunction or decree issued by any court or agency with
jurisdiction, or other legal restraint or prohibition preventing
completion of the merger will be in effect;
. no statute, rule, regulation, order, injunction or decree will have been
enacted, entered, promulgated or enforced by any governmental entity
that materially restricts or makes illegal completion of the merger;
. each of us will have received the opinion of Wachtell, Lipton, Rosen &
Katz, in form and substance reasonably satisfactory to us, dated the
closing date of the merger, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in each of
these opinions that are consistent with the state of facts existing at
the effective time:
- the merger will constitute a reorganization under Section 368(a) of
the U.S. tax code and CCB and NCBC will each be a party to the
reorganization;
- no gain or loss will be recognized by CCB as a result of the merger;
and
- no gain or loss will be recognized by CCB shareholders who exchange
all of their CCB common stock solely for NCBC common stock pursuant
to the merger, except with respect to cash received instead of a
fractional share interest in NCBC common stock;
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. each of us will have received a letter from our independent accountants
to the effect that the merger will qualify for pooling-of-interests
accounting treatment;
. the representations and warranties of the other party to the merger
agreement will be true and correct in all material respects as of the
date of the merger agreement and, except to the extent that the
representations and warranties speak as of an earlier date, as of the
closing date as though made on the closing date, except that for
purposes of this condition, these representations and warranties, except
for each party's representations and warranties as to its
capitalization, as to the absence of any material adverse effect since
December 31, 1999 and the absence of undisclosed liabilities that would
have a material adverse effect, will be deemed to be true and correct
unless the failure of these representations and warranties to be true
and correct, individually or in the aggregate, and without giving effect
to any qualification as to materiality set forth in the representations
and warranties, would have a material adverse effect on the other party;
and
. the other party to the merger agreement will have performed in all
material respects all obligations required to be performed by it under
the merger agreement at or prior to the closing date.
The merger agreement defines "material adverse effect" as a material
adverse effect on:
. the business, operations, results of operations or financial condition
of CCB, NCBC or the surviving corporation, as the case may be, and its
subsidiaries, taken as a whole; or
. the ability of CCB, NCBC or the surviving corporation, as the case may
be, to complete in a timely manner the transactions contemplated by the
merger agreement.
Regulatory Approvals Required for the Merger
We have agreed to use our reasonable best efforts to obtain all regulatory
approvals required to consummate the merger. We refer to these approvals,
along with the expiration of any statutory waiting periods related to these
approvals, as the "requisite regulatory approvals." These include approval
from the Board of Governors of the Federal Reserve System, the North Carolina
Commissioner of Banks and various state and federal regulatory authorities. We
intend to complete the filing of applications and notifications so that we
will obtain the requisite regulatory approvals promptly after the date of this
document. The merger cannot proceed in the absence of the requisite regulatory
approvals. We cannot assure you that the requisite regulatory approvals will
be obtained, and, if obtained, we cannot assure you as to the date of any of
these approvals or the absence of any litigation challenging them. Likewise,
we cannot assure you that the U.S. Department of Justice will not attempt to
challenge the merger on antitrust grounds, or, if such a challenge is made, as
to the result of that challenge.
We are not aware of any other material governmental approvals or actions
that are required prior to the parties' consummation of the merger other than
those described below.
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We presently contemplate that if any additional governmental approvals or
actions are required, these approvals or actions will be sought. However, we
cannot assure you that any of these additional approvals or actions will be
obtained.
Federal Reserve Board. The merger is subject to approval by the Board of
Governors of the Federal Reserve System under Sections 3 and 4 of the federal
Bank Holding Company Act and Section 25(a) of the Federal Reserve Act. NCBC has
filed the required application and notifications with the Federal Reserve Board
for approval of the merger. Assuming Federal Reserve Board approval, the merger
may not be consummated for 30 days after such approval, during which time the
Department of Justice may challenge the merger on antitrust grounds. With the
approval of the Federal Reserve Board and the Department of Justice, the
waiting period may be reduced to no less than 15 days.
The Federal Reserve Board is prohibited from approving any transaction under
the applicable statutes that would result in a monopoly, or that would be in
furtherance of any combination or conspiracy to monopolize, or to attempt to
monopolize, the business of banking in any part of the United States, or that
may have the effect in any section of the United States of substantially
lessening competition or tending to create a monopoly, or resulting in a
restraint of trade, unless the Federal Reserve Board finds that the anti-
competitive effects of the transaction are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served.
In addition, in reviewing a transaction under the Bank Holding Company Act,
the Federal Reserve Board will consider the financial and managerial resources
of our companies and their subsidiary banks and the convenience and needs of
the communities to be served. As part of its consideration of these factors, we
expect that the Federal Reserve Board will consider the regulatory status of
NCBC and CCB, and the overall capital and safety and soundness standards
established by the Federal Deposit Insurance Corporation Improvement Act of
1991 and the regulations issued under that statute.
Under the Community Reinvestment Act of 1977, the Federal Reserve Board will
take into account our records of performance in meeting the credit needs of our
entire communities, including low- and moderate-income neighborhoods, served by
our companies. Each of our banking subsidiaries has received a satisfactory
Community Reinvestment Act rating from its primary federal regulator.
The Federal Reserve Board has furnished notice and a copy of the application
for approval of the merger to the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation and the appropriate state regulatory
authorities. These agencies have 30 days to submit their views and
recommendations to the Federal Reserve Board. The Federal Reserve Board is
required to hold a public hearing in the event it receives a written
recommendation of disapproval of the application from any of these agencies
within this 30-day period. Furthermore, the Bank Holding Company Act and
Federal Reserve Board regulations require published notice of, and the
opportunity for public comment on, the application submitted by NCBC for
approval of the merger, and authorize the Federal Reserve Board to hold a
public
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hearing or meeting if the Federal Reserve Board determines that a hearing or
meeting would be appropriate. Any hearing or meeting or comments provided by
third parties could prolong the period during which the application is under
review by the Federal Reserve Board.
If the Department of Justice were to commence an antitrust action, that
action would stay the effectiveness of Federal Reserve Board approval of the
merger unless a court specifically orders otherwise. In reviewing the merger,
the Department of Justice could analyze the merger's effect on competition
differently than the Federal Reserve Board, and thus it is possible that the
Department of Justice could reach a different conclusion than the Federal
Reserve Board regarding the merger's competitive effects. In particular, the
Department of Justice may focus on the impact of the merger on competition for
loans and other financial services to single and middle market businesses.
Failure of the Department of Justice to object to the merger may not prevent
the filing of antitrust actions by private persons or state attorneys general.
Our rights to exercise our options under the stock option agreements are
also subject to the prior approval of the Federal Reserve Board, to the extent
that the exercise of these options would result in one of us owning more than
5% of the outstanding shares of common stock of the other. Each of us has filed
or intends to file the required application and notifications with the Federal
Reserve Board for approval of the exercise of its option under the relevant
option agreement. In considering whether to approve either company's right to
exercise its option, including its right to purchase more than 5% of the
outstanding shares of the other company's common stock, the Federal Reserve
Board would generally apply the same statutory criteria it would apply to its
consideration of approval of the merger.
North Carolina Commissioner of Banks. North Carolina banking laws require an
out-of-state bank holding company seeking to acquire a North Carolina bank or
bank holding company to file with the Commissioner of Banks a copy of the
application filed with the Federal Reserve Board, to pay various fees, to
include a statement in the filing package describing the conditions,
restrictions, requirements and limitations that would be placed by the host
state of the acquiror upon an acquisition by a North Carolina bank holding
company, and to publish a notice of intent to acquire in a newspaper of general
circulation newspaper in the cities where the relevant companies have their
principal offices. The Commissioner has 90 days to approve or reject the
application. The Commissioner may condition approval upon the transaction being
subject to all conditions, restrictions, requirements and limitations that
would be applied to the transaction by the host state of the acquiror. In
granting or denying approval, the Commissioner may also consider safety and
soundness issues and the character, experience and financial responsibility of
the acquiror's officers and directors.
Other State Regulatory Authorities. Applications or notifications have been
or will be filed with various state financial institution regulatory
authorities in connection with acquisitions or changes in control of CCB or its
subsidiaries that may be deemed to result from the consummation of the merger.
In addition, the merger may be reviewed by the attorneys general in the various
states in which NCBC and CCB own banking subsidiaries.
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These authorities may be empowered under the applicable state laws and
regulations to investigate or disapprove the merger under the circumstances and
based upon the review provided for in applicable state laws and regulations.
Material Federal Income Tax Consequences
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to CCB shareholders who hold CCB common stock as
a capital asset. The summary is based on the U.S. tax code, regulations of the
U.S. Treasury Department under the U.S. tax code, administrative rulings and
court decisions, in each case as in effect as of the date of this document, all
of which are subject to change at any time, possibly with retroactive effect.
This summary is not a complete description of all of the tax consequences of
the merger. In particular, this summary may not address U.S. federal income tax
considerations applicable to you if you are a CCB shareholder subject to
special treatment under U.S. federal income tax law, including, for example:
. foreign persons
. financial institutions
. dealers in securities
. traders in securities who elect to apply a mark-to-market method of
accounting
. insurance companies
. tax-exempt entities
. holders who acquired their shares of CCB common stock through exercise
of an employee stock option or right, or otherwise as compensation
. holders who hold CCB common stock as part of a hedge, straddle,
conversion or constructive sale transaction
In addition, we do not provide any information in this document about the tax
consequences of the merger under applicable foreign, state or local laws or
under any federal laws other than those pertaining to the income tax.
If you are a CCB shareholder, we urge you to consult with your tax advisors
about the particular tax consequences of the merger to you, including the
effects of U.S. federal, state or local, or foreign and other tax laws.
In connection with the filing of the registration statement containing this
document with the SEC, the law firm of Wachtell, Lipton, Rosen & Katz has
delivered an opinion, addressing the U.S. federal income tax consequences of
the merger described below. That opinion has been rendered on the basis of
facts, representations and assumptions set forth or referred to in the opinion.
In rendering this opinion, Wachtell, Lipton, Rosen & Katz
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required and relied upon factual representations contained in certificates of
officers of NCBC and CCB. The opinion is to the effect that, for U.S. federal
income tax purposes:
. the merger will constitute a reorganization within the meaning of
Section 368(a) of the U.S. tax code and CCB and NCBC will each be a
party to the reorganization;
. neither NCBC nor CCB will recognize any gain or loss as a result of the
merger; and
. CCB shareholders who exchange their CCB common stock solely for NCBC
common stock pursuant to the merger will recognize no gain or loss,
except with respect to cash received instead of a fractional share
interest in NCBC common stock.
In addition, our respective obligations to complete the merger are
conditioned upon our receipt of a further opinion of Wachtell, Lipton, Rosen &
Katz, dated the closing date of the merger, on the basis of facts,
representations and assumptions set forth in that opinion that are consistent
with the state of facts existing at the effective time of the merger,
substantially to the foregoing effect.
None of the tax opinions delivered to the parties in connection with the
merger as described in this document are binding on the IRS or the courts, and
we do not intend to request a ruling from the IRS with respect to the merger.
Cash that CCB shareholders receive instead of a fractional share interest in
NCBC common stock will be treated as received in redemption of the fractional
share interest, and in most cases you should recognize capital gain or loss for
U.S. federal income tax purposes measured by the difference between the amount
of cash received and the portion of the tax basis of the share of CCB common
stock allocable to the fractional share interest. This capital gain or loss
would be a long-term capital gain or loss if the holding period for the
fractional share of CCB common stock is greater than one year at the effective
time. The holding period of a share of NCBC common stock received in the
merger, including a fractional share interest deemed received and redeemed as
described above, will include the holding period in the CCB common stock
surrendered in exchange for the NCBC common stock.
Information Reporting and Backup Withholding. Payments related to CCB common
stock may be subject to information reporting to the IRS and to a 31% backup
withholding tax. Backup withholding will not apply, however, to a payment to
you or another payee if you or the payee completes and signs the substitute
Form W-9 that we will include as part of the transmittal letter, or otherwise
prove to NCBC and the exchange agent that you or the payee is exempt from
backup withholding.
Accounting Treatment
We expect the merger to qualify for treatment as a pooling-of-interests
under generally accepted accounting principles. Under this method of
accounting, CCB shareholders and NCBC shareholders will be deemed to have
combined existing voting common stock interests by virtue of the exchange of
shares of CCB common stock for
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shares of NCBC common stock. Accordingly, the book value of the assets,
liabilities and shareholders' equity of each of NCBC and CCB, as reported on
our consolidated balance sheets, will be carried over to the consolidated
balance sheet of the combined company. No goodwill will be created. The
combined company will be able to include in its consolidated income the
consolidated income of both our companies for the entire fiscal year in which
the merger occurs and prior periods will be restated to reflect the combined
consolidated assets, liabilities and operations of both companies for such
periods.
It is a condition to each of our obligations to consummate the merger that
we each receive an opinion from our independent accountants to the effect that
the merger will qualify to be treated as a pooling-of-interests. See "--
Conditions to Consummation of the Merger."
We have prepared the unaudited pro forma financial information contained in
this document using the pooling-of-interests accounting method to account for
the merger. See "Summary--Unaudited Comparative Per Share Data" and "Unaudited
Pro Forma Condensed Financial Information."
Termination of the Merger Agreement
The merger agreement may be terminated at any time before the effective
time, whether before or after approval by NCBC shareholders and CCB
shareholders:
. Mutual Consent--by our mutual consent, if each of our Boards of
Directors so determines by a vote of a majority of the members of the
entire Board;
. Legal Impediment--by either of our Boards of Directors if:
- any governmental entity that must grant a requisite regulatory
approval has denied approval of the merger and this denial has
become final and non-appealable; or
- any governmental entity with jurisdiction has issued a final non-
appealable order enjoining or otherwise prohibiting the consummation
of the transactions contemplated by the merger agreement;
. Delay--by either of our Boards if the merger is not completed on or
before March 17, 2001, unless the delay is caused by the failure of the
party seeking to terminate the merger agreement to perform its
obligations in the merger agreement; or
. Breach--by either of our Boards, if the terminating party is not in
material breach of the merger agreement, if there has been a material
breach of the merger agreement on the part of the other party which,
individually or in the aggregate, would constitute, if occurring or
continuing on the closing date, the failure of the conditions described
in either of the last two paragraphs under "--Conditions to Consummation
of the Merger," and that is not cured within 45 days following written
notice to the party committing the breach or that, by its nature, cannot
be cured prior to the closing date.
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Whether or not we complete the merger, all fees and expenses we incur in
connection with the merger will be paid by the party incurring the expenses.
However, the costs and expenses of printing and mailing this document, and all
filing and other fees paid to the SEC in connection with the merger, will be
borne equally by each of us.
Extension, Waiver and Amendment of the Merger Agreement
Extension and Waiver. At any time before the effective time, either of us,
by action taken or authorized by our Board, may, to the extent legally allowed:
. extend the time for the other to perform any of its obligations or other
acts;
. waive any inaccuracies in the representations and warranties of the
other contained in the merger agreement or in any document delivered
under the merger agreement; and
. waive compliance by the other with any of the agreements or conditions
contained in the merger agreement.
However, after NCBC or CCB shareholders approve the merger agreement, there
may not be, without further approval of those shareholders, any extension or
waiver of the merger agreement that reduces the amount or changes the form of
the consideration to be delivered to the CCB shareholders, other than as
described in the merger agreement.
Amendment. Subject to compliance with applicable law, we may amend the
merger agreement by action taken or authorized by both of our Boards at any
time before or after NCBC shareholders or CCB shareholders approve the merger
agreement, except that after the NCBC shareholders or CCB shareholders have
given their approval, there may not be, without further approval of these
shareholders, any amendment of the merger agreement that changes the amount or
the form of the consideration to be delivered to the CCB shareholders, other
than as described in by the merger agreement.
Public Trading Markets
NCBC common stock is qualified for quotation on the Nasdaq National Market
under the symbol "NCBC." CCB common stock is listed on the New York Stock
Exchange under the symbol "CCB." Upon completion of the merger, the CCB common
stock will be delisted from the New York Stock Exchange. It is a condition to
the closing of the merger that NCBC cause the shares of NCBC common stock to be
issued in the merger to be qualified for quotation on the Nasdaq National
Market, subject to official notice of issuance.
Dividends
We will coordinate the declaration and payment of regular quarterly cash
dividends on NCBC common stock and CCB common stock with the intent that CCB
shareholders will not receive two dividends for a single quarter, nor fail to
receive one dividend that you would otherwise receive in the absence of the
merger. All dividends on NCBC common stock, whether before or after the merger,
are subject to determination by the NCBC Board in its discretion.
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Interests of Certain Persons in the Merger
Some members of NCBC's and CCB's management have interests in the merger
that are in addition to the interests as NCBC or CCB shareholders they share
with you. The NCBC and CCB Boards were aware of these different interests and
considered them, among other matters, in approving the merger agreement and the
transactions it contemplates.
New Employment Agreements with NCBC Executives. In connection with the
execution of the merger agreement, NCBC entered into employment agreements with
each of Thomas M. Garrott, William R. Reed, Lewis E. Holland, David T. Popwell
and Tom W. Scott. Each employment agreement is for an initial term of three
years commencing at the closing of the merger, subject to automatic renewals on
each anniversary of the effective time until the executive attains age 65
(other than Mr. Garrott's agreement, which does not automatically renew).
During the employment period, Mr. Garrott will serve as the Chairman of the
NCBC Board of Directors and as Chairman of the Executive Committee of such
Board, Mr. Reed will serve as Chief Operating Officer of NCBC, Mr. Holland will
serve as President of the non-banking businesses of NCBC, Mr. Popwell will
serve as Executive Vice President of NCBC in charge of mergers and acquisitions
and Mr. Scott will serve as Executive Vice President of the non-banking
businesses of NCBC. During the employment period, Mr. Garrott's annual base
salary will be at least $650,000, Mr. Reed's will be $340,000, Mr. Holland's
will be $325,000, Mr. Popwell's will be $225,000 and Mr. Scott's will be
$175,000. Each employment agreement provides that the executive will be
eligible to receive an annual bonus on the same basis as peer executives of
NCBC, although Mr. Popwell's agreement provides for a minimum annual bonus of
$75,000. On the closing of the merger, Mr. Garrott will be granted 100,000
restricted shares of NCBC common stock and an option to acquire 300,000 shares
of NCBC common stock, each of Messrs. Reed and Holland will be granted 30,000
restricted shares of NCBC common stock and an option to acquire 100,000 shares
of NCBC common stock and each of Messrs. Popwell and Scott will be granted
20,000 restricted shares of NCBC common stock and an option to acquire 60,000
shares of NCBC common stock. The stock options shall have an exercise price
equal to the fair market value of the NCBC common stock on the date of grant.
Each award of restricted stock and each stock option will vest in three equal
installments on each of the first, second and third anniversaries of the date
of grant (subject to accelerated vesting upon a change of control of NCBC and
upon certain terminations of employment as described below). Pursuant to the
employment agreements, each of the executives will be entitled to participate
in the employee benefit plans, practices and policies provided to peer
executives of NCBC, including change of control protection in the form of a new
change of control agreement that will be effective following the closing of the
merger.
Mr. Garrott's employment agreement provides that, upon the occurrence of
specific events, including a breach of the agreement by NCBC, Mr. Garrott may
elect to be employed on part-time status until he attains age 65. NCBC also has
the right to elect to place Mr. Garrott on part-time status. While on part-time
status, Mr. Garrott will be entitled to receive the following payments and
benefits through his attainment of age 65: (1) 75% of the average compensation
paid to him for the two highest of the three compensation years
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preceding the year of part-time status election; (2) continued participation in
NCBC's retirement, compensation and welfare benefit plans; (3) an office and
support services on the same basis as executive officers of NCBC; and (4) the
shares of restricted stock and stock options will vest immediately. In
addition, the agreement provides Mr. Garrott and his spouse with lifetime
medical and dental insurance coverage. The agreement also provides Mr. Garrott
with change in control protection in the event of a change of control of NCBC
following the closing of the merger on the same basis as his existing
employment agreement. See "--Effect of the Merger on Existing NCBC Employment
Agreements."
The employment agreements for Messrs. Reed, Holland, Popwell and Scott
provide that, upon the termination of an executive's employment with NCBC other
than for "cause" or by reason of death or disability, or upon the executive's
termination of employment for "good reason," other than in connection with a
change of control, each executive is entitled to a lump-sum cash payment equal
to the sum of (1) any unpaid base salary; (2) a pro rata annual bonus, based on
the annual bonus payable to the executive in the year prior to the date of
termination (the "recent annual bonus") and (3) the product of (x) the number
of months from the date of termination until the end of the employment period
divided by 12 and (y) the sum of an executive's base salary and the recent
annual bonus. Upon such terminations, the restricted stock and stock options
will vest immediately and medical and dental benefits will continue through the
end of the employment period.
If any amounts payable to an executive would subject such executive to the
excise tax under section 4999 of the U.S. tax code, NCBC will make a payment
such that after the payment of all income and excise taxes, the executive will
be in the same after-tax position as if no excise tax under section 4999 had
been imposed. Each employment agreement also contains restrictive covenants
that prohibit the executive from disclosing confidential information during the
employment period and thereafter and from competing with NCBC while employed
and for two years following termination of employment. After the closing of the
merger, the employment agreements will supersede any pre-existing employment or
change of control agreements between each of the executives and NCBC. See "--
Effect of the Merger on Existing NCBC Employment Agreements."
Effect of the Merger on Existing NCBC Employment Agreements. Prior to the
execution of the merger agreement, NCBC had entered into employment agreements
with Messrs. Garrott, Holland, Reed and Popwell and with Gary L. Lazarini and
Mackie H. Gober, both NCBC executive vice presidents, that provide that the
executives can give notice and elect to receive certain payments in the event
of a "change in control." Under these employment agreements, each officer can
choose to receive a payment equal to three times the officer's average annual
compensation as reported for federal income tax purposes for the most recent
five year period preceding the change of control, plus amounts of deferred
compensation, minus a dollar. In addition, after a change in control and notice
to NCBC, the executives can receive a bonus equal to the highest annual bonus
paid during the three preceding years prorated to the date of the notice.
Furthermore, the executives can receive a payment equal to the amount he would
have received under NCBC's restoration pension plan had his employment
continued for three additional years and also assuming that his annual
compensation during that period was equal to his highest annual base salary
during
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the three years preceding the notice. In addition, each executive will be
entitled to continued welfare benefit coverage for three years after the date
of the notice. If any amounts payable to an executive under the employment
agreements or otherwise would subject such executive to the excise tax under
section 4999 of the U.S. tax code, a payment will be made to the executive such
that after the payment of all income and excise taxes, the executive will be in
the same after-tax position as if no excise tax under section 4999 had been
imposed.
The transactions contemplated by the merger agreement will constitute a
change in control for purposes of these employment agreements. For purposes of
the employment agreements with Messrs. Garrott, Holland, Reed and Popwell, each
executive will be deemed to have given notice upon completion of the merger,
and the new employment agreement with NCBC will then supersede his prior
employment agreement. See "--New Employment Arrangements with NCBC Executives."
Assuming the merger is completed in 2000, the aggregate amount of the cash
payments payable to the six covered NCBC executives under the existing NCBC
agreements (net of $10.5 million of previously funded reserves under NCBC's
restoration pension plan) would be approximately $26 million.
NCBC Stock-Based Rights. Under NCBC's 1994 Stock Plan, unvested stock
options, except those granted in March 2000, will become fully vested and
exercisable, and all restrictions on restricted stock awards will lapse, on a
change of control of NCBC. The transactions provided for by the merger
agreement will constitute a change of control under the 1994 Stock Plan.
. The numbers of unvested NCBC stock options held by Messrs. Garrott,
Reed, Holland, Lazarini and Gober that will vest in connection with the
merger are 345,000, 305,000, 277,000, 209,200, and 182,000,
respectively; and
. The number of shares of NCBC common stock underlying awards of
restricted stock held by Mr. Garrott that will become freely
transferable in connection with the merger is 57,000.
New Employment Agreements with CCB Executives. In connection with the
execution of the merger agreement, NCBC entered into employment agreements with
each of Ernest C. Roessler, Sheldon M. Fox, Richard L. Furr and J. Scott
Edwards. Each employment agreement is for an initial term of three years (five
years in the case of Mr. Roessler) commencing at the closing of the merger,
subject to automatic renewals on each anniversary of the effective time until
the executive attains age 65. During the employment period, Mr. Roessler will
serve as the Chief Executive Officer and President of NCBC and as a member of
the Board of Directors of NCBC, Mr. Fox will serve as Chief Financial Officer
of NCBC, Mr. Furr will serve as President of the Carolina and Virginia banks of
NCBC and Mr. Edwards will serve as Chief Administrative Officer of NCBC. During
the employment period, Mr. Roessler's annual base salary will be at least
$650,000, Mr. Fox's will be $325,000, Mr. Furr's will be $340,000 and
Mr. Edwards' will be $325,700. Each employment agreement provides that the
executive will be eligible to receive an annual bonus on the same basis as peer
executives of NCBC. On the closing of the merger, Mr. Roessler will be granted
100,000 restricted shares of NCBC common stock and an option to acquire 300,000
shares of NCBC common stock, each of Messrs. Fox, Edwards
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and Furr will be granted 30,000 restricted shares of NCBC common stock and an
option to acquire 100,000 shares of NCBC common stock. The stock options shall
have an exercise price equal to the fair market value of the NCBC common stock
on the date of grant. Each award of restricted stock and each stock option will
vest in three equal installments on each of the first, second and third
anniversaries of the date of grant (subject to accelerated vesting upon a
change of control of NCBC and upon certain terminations of employment as
described below). Pursuant to the employment agreements, each of the executives
will be entitled to participate in the employee benefit plans, practices and
policies provided to peer executives of NCBC, including change of control
protection in the form of a new change of control agreement that will be
effective following the closing of the merger.
The employment agreements for each of the executives provide that, upon the
termination of an executive's employment with NCBC other than for "cause" or by
reason of death or disability, or upon the executive's termination of
employment for "good reason," other than in connection with a change of
control, each executive is entitled to a lump-sum cash payment equal to the sum
of (1) any unpaid base salary; (2) a pro rata annual bonus, based on the annual
bonus payable to the executive in the year prior to the date of termination
(the "recent annual bonus") and (3) the product of (x) the number of months
from the date of termination until the end of the employment period divided by
12 (in the case of Mr. Roessler such quotient is deemed to be five) and (y) the
sum of an executive's base salary and the recent annual bonus. Upon such
terminations, the restricted stock and stock options will vest immediately and
medical and dental benefits will continue through the end of the employment
period.
If any amounts payable to an executive would subject such executive to the
excise tax under section 4999 of the U.S. tax code, NCBC will make a payment
such that after the payment of all income and excise taxes, the executive will
be in the same after-tax position as if no excise tax under section 4999 had
been imposed. Each employment agreement also contains restrictive covenants
that prohibit the executive from disclosing confidential information during the
employment period and thereafter and from competing with NCBC while employed
and for two years following termination. After the closing of the merger, the
employment agreements will supersede any pre-existing employment or change of
control agreements between each of the executives and CCB. See "--Effect of the
Merger on Existing CCB Employment Agreements."
Effect of the Merger on Existing CCB Employment Agreements. Prior to the
execution of the merger agreement, CCB had entered into employment agreements
with Messrs. Roessler, Edwards, Furr and Fox that provide for certain payments
and benefits upon a termination of the executive's employment by CCB other than
for cause or disability or by the executive for good reason, in each case
within a one-year period following a "change in control." Upon a covered
termination, each executive is entitled to receive a payment equal to 2.99
times the total of the executive's base salary plus the executive's target
Executive Management Incentive Plan award for the then current fiscal year. Mr.
Fox's employment agreement provides that the multiplier is 2.0 rather than 2.99
if the termination occurs prior to October 25, 2000. In addition, each
executive is entitled to receive an additional payment having an actuarial
present value equal to the additional pension benefits under CCB's
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qualified and supplemental retirement plans that the executive would have
received had the executive remained employed for the remaining term of the
agreement and welfare benefit plans for the same period. All options previously
granted to each executive that are unvested as of the date of termination of
employment following a change in control will become vested, fully exercisable
and nonforfeitable, except options granted on March 7, 2000, which will vest
according to their original schedule. All benefits under nonqualified benefit
plans, including all performance units under CCB's long-term incentive plan
payable with respect to the 2000 calendar year, will be 100% vested. CCB is
also required to maintain and continue to pay all premiums under split dollar
life insurance policies and other specified insurance policies. If any amounts
payable to an executive under the employment agreements or otherwise would
subject such executive to the excise tax under section 4999 of the U.S. tax
code, a payment will be made to the executive such that after the payment of
all income and excise taxes, the executive will be in the same after-tax
position as if no excise tax under section 4999 had been imposed.
The transactions contemplated by the merger agreement will constitute a
change in control for purposes of these employment agreements. For purposes of
Messrs. Roessler, Edwards, Furr and Fox, each executive's employment will be
deemed to be terminated other than for cause upon completion of the merger, and
the new employment agreement with NCBC will then supersede his CCB employment
agreement. See "--New Employment Agreements with CCB Executives." Assuming the
merger is completed in calendar year 2000, the aggregate amount of the cash
payments payable to the four covered CCB executives under the existing CCB
agreements, including the payments for performance units under the CCB long-
term incentive plan, would be approximately $13.3 million.
CCB Stock-Based Rights. The merger agreement provides that, on completion of
the merger, each outstanding and unexercised stock option to purchase shares of
CCB common stock granted under CCB's stock-based plans will no longer represent
the right to acquire shares of CCB common stock and will become a right to
acquire NCBC common stock.
Unvested stock options previously granted to Messrs. Roessler, Furr, Fox and
Edwards, except those granted on March 7, 2000, will become fully vested and
exercisable, and all restrictions on restricted stock awards will lapse, on a
change of control of CCB. The transactions provided for by the merger agreement
will constitute a change of control under these plans.
. The numbers of unvested CCB stock options held by Messrs. Roessler,
Furr, Fox and Edwards that will vest in connection with the merger are
11,492, 4,860, 12,533 and 4,760, respectively; and
. The number of shares of CCB common stock underlying awards of restricted
stock held by Mr. Fox that will become freely transferable in connection
with the merger is 600.
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Indemnification and Insurance. The merger agreement provides that, after the
merger, NCBC will indemnify any person who is a current or former director,
officer or employee of CCB or its subsidiaries at the completion of the merger.
This indemnity covers any claim or proceeding, whether actual or threatened, to
which such a person has been made, or has been threatened to be made, a party
and that relates to the person's service as a director, officer or employee of
CCB or its subsidiaries or to the merger agreement, the option agreements or
any of the transactions contemplated by those agreements. NCBC has agreed that,
if this type of indemnity is required by the merger agreement, it will
indemnify a covered person to the fullest extent permitted by law against any
liability or expense the person incurs related to a covered claim or
proceeding.
The merger agreement also provides that NCBC will use its reasonable best
effort to cause the persons serving as officers and directors of CCB or its
subsidiaries immediately before completion of the merger to be covered for at
least six years after completion of the merger by CCB's directors' and
officers' liability insurance policy, or any equivalent substitute for that
policy. The policy will cover acts or omissions taking place prior to
completion of the merger committed by these officers and directors.
NCBC and CCB Option Agreements
Immediately after the execution of the merger agreement, NCBC and CCB
entered into a stock option agreement, dated March 17, 2000, (the "NCBC Option
Agreement"), under which NCBC granted CCB an option to purchase NCBC common
stock from NCBC under the conditions we describe below. At the same time, CCB
and NCBC entered into a stock option agreement, dated March 17, 2000 (the "CCB
Option Agreement" and, together with the NCBC Option Agreement, the "Option
Agreements"), under which CCB granted to NCBC an option to purchase CCB common
stock from CCB under the conditions we describe below. NCBC and CCB each
granted these options to induce the other to enter into the merger agreement.
The terms and conditions of the NCBC Option Agreement and the CCB Option
Agreement are identical in all material respects, except that the NCBC Option
Agreement grants CCB an option on 19.9% of NCBC's outstanding common stock,
while the CCB Option Agreement grants NCBC an option on 19.9% of CCB's
outstanding common stock. For purposes of this section, except as otherwise
noted:
. the NCBC Option Agreement or the CCB Option Agreement, as the case may
be, is sometimes referred to as the "Issuer Option Agreement";
. the company obligated to issue stock under an Option Agreement is
sometimes referred to as the "Issuer";
. the company holding the option is sometimes referred to as the
"Optionee";
. the NCBC option or the CCB option, as the case may be, is sometimes
referred to as the "Issuer Option;" and
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. common stock of the company granting the option, as the case may be, is
referred to as "Issuer Common Stock."
The Option Agreements are intended to increase the likelihood that the
merger will be consummated in accordance with the terms of the merger agreement
and to compensate the Optionee if the merger is not consummated. Consequently,
aspects of the Option Agreements may discourage persons who might be interested
in acquiring all of or a significant interest in NCBC or CCB from considering
or proposing an acquisition, even if, in the case of CCB, these persons were
prepared to offer to pay consideration to the CCB shareholders that had a
higher current market price than the shares of NCBC common stock to be received
under the merger agreement. An agreement to acquire NCBC or CCB, or the
accumulation of 20% or more of their common stock, by a third party could cause
the NCBC option or the CCB option, as the case may be, to become exercisable.
The existence of the Issuer Options could significantly increase the cost to a
potential acquiror of acquiring either of our companies. This increased cost
might discourage a potential acquiror from considering or proposing an
acquisition or might result in a potential acquiror proposing to pay a lower
per share price to acquire the Issuer than it might otherwise have proposed to
pay. Moreover, following consultation with our respective independent
accountants, we believe that the exercise or repurchase of either of the Issuer
Options is likely to prohibit another acquiror from accounting for any
acquisition of the Issuer using the pooling-of-interests accounting method for
a period of two years.
The NCBC Option Agreement provides for the purchase by CCB of up to
21,527,748 shares (the "NCBC Option Shares" or the "Issuer Option Shares," as
the case may be) of NCBC common stock at an exercise price of $20.3125 per
share, the closing sales price on the Nasdaq National Market on March 16, 2000,
the day before the merger agreement was entered into. The NCBC Option Shares
will in no event exceed 19.9% of the NCBC common stock issued and outstanding
without giving effect to the exercise of the NCBC Option.
The CCB Option Agreement provides for the purchase by NCBC of up to
7,846,175 shares (the "CCB Option Shares" or the "Issuer Option Shares," as the
case may be) of CCB common stock at an exercise price of $39.75 per share, the
closing price on the New York Stock Exchange composite tape on March 16, 2000.
The CCB Option Shares will in no event exceed 19.9% of the CCB common stock
issued and outstanding without giving effect to the issuance of any CCB common
stock subject to the CCB Option.
The number of shares of Issuer Common Stock subject to the applicable Issuer
Option will be increased or decreased, as appropriate, to the extent that
additional shares of Issuer Common Stock are either:
. issued or otherwise become outstanding, other than under an exercise of
an Issuer Option except in the case of NCBC resulting from NCBC's
acquisition of Piedmont Bancorp, Inc.; or
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. redeemed, repurchased, retired or otherwise cease to be outstanding
after March 17, 2000
such that, thereafter, the number of Issuer Option Shares will continue to
equal 19.9% of the Issuer Common Stock then issued and outstanding before
considering the issuance of any Issuer Common Stock subject to the Issuer
Option.
Also, except in the case of NCBC's acquisition of Piedmont Bancorp, Inc., in
the event of any change in, or distributions in respect of, the number of
shares of Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares,
distribution on or in respect of such Issuer Common Stock or similar
transaction, the type and number of Issuer Option Shares purchasable upon
exercise of the applicable Issuer Option, and the applicable option price, will
be adjusted in such a manner as will fully preserve the economic benefits of
the option.
Each Issuer Option Agreement provides that the Optionee or any other holder
or holders of the Issuer Option (as used in this section, collectively, the
"Holder") may exercise the Issuer Option, in whole or in part, subject to
regulatory approval, if both an "Initial Triggering Event" and a "Subsequent
Triggering Event" has occurred prior to the occurrence of an "Exercise
Termination Event," so long as the Holder has sent to the Issuer written notice
of the exercise within 90 days following the Subsequent Triggering Event
(subject to extension as provided in each Issuer Option Agreement). Any
exercise of the Issuer Option will be deemed to occur on the date this notice
is sent.
The terms Initial Triggering Event and Subsequent Triggering Event generally
relate to attempts by one or more third parties to acquire a significant
interest in the Issuer. For purposes of each Issuer Option Agreement, the term
"Initial Triggering Event" means the occurrence of any of the following events
or transactions after March 17, 2000:
. the Issuer or any subsidiary of the Issuer, without the Optionee's prior
written consent, enters into an agreement to engage in, or the Issuer's
board recommends that shareholders of the Issuer approve or accept, an
Acquisition Transaction with any person or group, other than as
contemplated by the merger agreement;
. the Issuer or any subsidiary of the Issuer, without the Optionee's prior
written consent, authorizes, recommends, proposes or publicly announces
its intention to authorize, recommend or propose to engage in an
Acquisition Transaction, or the Issuer's board publicly withdraws or
modifies, or publicly announces its intention to withdraw or modify, in
any manner adverse to the Optionee, its recommendation that its
shareholders approve the merger agreement in anticipation of engaging in
an Acquisition transaction;
. any person, other than the Optionee, any subsidiary of the Optionee or
any Issuer subsidiary acting in a fiduciary capacity in the ordinary
course of business acquires beneficial ownership, or the right to
acquire beneficial ownership, of 10% or more of the outstanding shares
of Issuer Common Stock;
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. any person other than the Optionee or any subsidiary of the Optionee
makes a bona fide proposal to the Issuer or its shareholders by public
announcement or written communication that becomes the subject of public
disclosure to engage in an Acquisition Transaction;
. the Issuer breaches any covenant or obligation in the merger agreement
after any person, other than the Optionee or any subsidiaries of the
Optionee, has proposed an Acquisition Transaction, and this breach both
would entitle the Optionee to terminate the merger agreement and is not
remedied prior to the date of the Optionee's notice to the Issuer of the
exercise of the Option; or
. any person other than the Optionee or any subsidiary of the Optionee,
other than in connection with a transaction to which the Optionee has
given its prior written consent, files an application or notice with the
Federal Reserve Board, or other federal or state bank regulatory
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
For purposes of each Issuer Option Agreement, the term "Acquisition
Transaction" means:
. a merger or consolidation, or any similar transaction with the Issuer or
any of its Significant Subsidiaries, as defined in Rule 1-02 of
Regulation S-X of the SEC;
. a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of the Issuer or any of
its Significant Subsidiaries;
. a purchase or other acquisition of securities representing 10% or more
of the voting power of the Issuer; or
. any substantially similar transaction, except that in no event will any
merger, consolidation, purchase or similar transaction involving only
the Issuer and one or more of its subsidiaries, or involving only any
two or more of its subsidiaries, and not entered into in violation of
the merger agreement, be an Acquisition Transaction and, with respect to
NCBC, the acquisition of Piedmont Bancorp, Inc. is not an Acquisition
Transaction.
The term "Subsequent Triggering Event" means the occurrence of either of the
following events or transactions after March 17, 2000:
. the acquisition by any person of beneficial ownership of 20% or more of
the then outstanding shares of Issuer Common Stock; or
. the occurrence of the Initial Triggering Event described above in the
first bullet point under the definition of Initial Triggering Event,
except that the percentage referred to in the third bullet point of the
definition of Acquisition Transaction will be 20%.
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Each Issuer Option will expire upon the occurrence of an "Exercise
Termination Event," which includes:
. the effective time;
. termination of the merger agreement prior to the occurrence of an
Initial Triggering Event, except as a result of an uncured and
volitional material breach of the merger agreement by the Issuer; or
. the date that is 12 months after the termination of the merger agreement
if the termination occurs after the occurrence of an Initial Triggering
Event or is a termination by the Optionee as a result of an uncured
material breach of the merger agreement by the Issuer, unless the breach
by the Issuer is non-volitional.
If an Initial Triggering Event continues or occurs beyond the termination of
the merger agreement and prior to the passage of this 12-month period, the
Issuer Option will terminate 12 months from the expiration of the last Initial
Triggering Event to expire, but in no event more than 18 months after the
termination of the merger agreement.
As of the date of this document, to our knowledge, no Initial Triggering
Event or Subsequent Triggering Event has occurred.
Under some circumstances the Issuer of an Issuer Option may be required to
repurchase the Issuer Option, and any shares for which the option was
exercised, for a price specified in the Option Agreement. Immediately prior to
the occurrence of a Repurchase Event,
. following a request of a Holder, delivered prior to an Exercise
Termination Event, the Issuer, or any successor to the Issuer, will
purchase the Issuer Option from the Holder at a price (the "Issuer
Option Repurchase Price") equal to the amount by which the Market/Offer
Price exceeds the exercise price, multiplied by the number of shares for
which the Issuer Option may then be exercised; and
. at the request of the owner of Issuer Option Shares from time to time
(the "Owner"), delivered within 90 days of the occurrence of a
Repurchase Event, or a later period as provided in Section 7 of each of
the Option Agreements, the Issuer will repurchase the number of the
Issuer Option Shares from the Owner as the Owner will designate at a
price (the "Issuer Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so
designated.
The term "Market/Offer Price" means the highest of:
. the price per share of Issuer Common Stock at which a tender offer or
exchange offer for the Issuer Common Stock has been made;
. the price per share of Issuer Common Stock to be paid by any third party
under an agreement with Issuer;
. the highest closing price for shares of Issuer Common Stock within the
six-month period immediately preceding the date the Holder gives notice
of the required
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repurchase of the Issuer Option or the Owner gives notice of the
required repurchase of Issuer Option Shares, as the case may be; and
. in the event of a sale of all or a substantial portion of the Issuer's
assets, the sum of the price paid in the sale for these assets and the
current market value of the remaining assets of the Issuer as determined
by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to
the Issuer, divided by the number of shares of Issuer Common Stock
outstanding at the time of the sale.
A "Repurchase Event" is deemed to have occurred:
. upon the consummation of an Acquisition Transaction; or
. upon the acquisition by any person of the beneficial ownership of 50% or
more of the then outstanding Issuer Common Stock, as long as a
Subsequent Triggering Event has occurred prior to an Exercise
Termination Event.
In some situations, an Issuer Option will convert into an option to
purchase the shares of a successor to the Issuer. In the event that, prior to
an Exercise Termination Event, the Issuer enters into any agreement:
. to consolidate with or merge into any person, other than the Optionee or
one of its subsidiaries, such that Issuer is not the continuing or
surviving corporation of the consolidation or merger;
. to permit any person, other than the Optionee or one of its
subsidiaries, to merge into the Issuer and the Issuer is the continuing
or surviving corporation, but, in connection with the consolidation or
merger, the then-outstanding shares of the Issuer Common Stock are
changed into or exchanged for stock or other securities of any other
person or cash or any other property, or the then-outstanding shares of
Issuer Common Stock after the merger will represent less than 50% of the
outstanding voting shares and voting share equivalents of the merged
corporation; or
. to sell or otherwise transfer all or substantially all of its assets to
any person, other than the Optionee or any of its subsidiaries,
then the agreement governing these transactions must provide that, upon
consummation of the transaction and upon terms and conditions set forth in the
Issuer Option Agreement, the Issuer Option will be converted into, or
exchanged for, an option having substantially the same terms as the option
(the "Substitute Option") to purchase securities, at the election of the
Holder, of either the acquiring person or any person that controls the
acquiring person.
At the request of the Holder of the Substitute Option, the Issuer of the
Substitute Option will repurchase it at a price, and subject to any other
terms and conditions that are set forth in the Issuer Option Agreement.
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Cash Surrender Value. The Optionee may, at any time during which the Issuer
would be required to repurchase the Issuer Option or any Issuer Option Shares
as described above, surrender the Issuer Option, together with any Issuer
Option Shares issued to and then owned by the Holder, to the Issuer in exchange
for a cash payment equal to the Surrender Price, except that the Optionee may
not exercise this right if the Issuer has previously repurchased the Issuer
Option, or any portion of the Issuer Option, or any Issuer Option Shares as
described above. The "Surrender Price" is:
. $45,000,000, plus
. if applicable, the aggregate purchase price previously paid by the
Optionee with respect to any Issuer Option Shares, minus
. if applicable, the excess of:
- the net cash, if any, received by the Optionee in an arm's-length
sale of Issuer Option Shares, or any other securities into which
these Issuer Option Shares were converted or exchanged, to any party
not affiliated with the Optionee, over
- the purchase price paid by the Optionee with respect to these Issuer
Option Shares.
Some rights and obligations of the Optionee and the Issuer under the Option
Agreement are subject to receipt of required regulatory approvals. The approval
of the Federal Reserve Board is required for the acquisition by the Optionee of
more than 5% of the outstanding shares of Issuer Common Stock. Accordingly, the
Optionee has included or will include in its applications with the Federal
Reserve Board a request for approval of the right of the Optionee to exercise
its rights under the Issuer Option Agreement, including its right to purchase
more than 5% of the outstanding shares of Issuer Common Stock. Acquisitions of
5% or less may be subject to the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, which, if it applied, would require the Optionee to
wait for a specified period before completing the acquisition.
Restrictions on Resales by Affiliates
The offering of shares of NCBC common stock to be issued to CCB shareholders
in the merger have been registered under the Securities Act. They may be traded
freely and without restriction by you if you are not deemed to be an affiliate
of CCB under the Securities Act. An "affiliate" of CCB, as defined by the rules
promulgated under the Securities Act, is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, CCB. Any subsequent transfer of these shares by any person
who is an affiliate of CCB at the time the merger is submitted for vote of the
CCB shareholders will, under existing law, require one of the following:
. the further registration under the Securities Act of the proposed
transfer of these shares of NCBC common stock;
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. compliance with Rule 145 under the Securities Act which permits limited
sales in some circumstances; or
. the availability of another exemption from the registration requirements
of the Securities Act.
We expect these restrictions to apply to the directors and executive
officers of CCB, some of their family members and to entities in which they may
have a substantial ownership interest. Stop transfer instructions will be given
by NCBC to its transfer agent with respect to the NCBC common stock to be
received by persons subject to the restrictions described above, and the
certificates for this stock will bear appropriate legends.
SEC guidelines regarding qualifying for the pooling-of-interests method of
accounting also limit sales of shares of NCBC and CCB by affiliates of either
company in a business combination. SEC guidelines indicate further that
pooling-of-interests accounting will generally not be challenged on the basis
of sales by these affiliates if they do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined company have been published.
Each of us has agreed in the merger agreement to use its best efforts to
cause each person who is an affiliate of our company (for purposes of Rule 145
and for purposes of qualifying the merger for pooling-of-interests accounting
treatment) to deliver to the other a written agreement intended to ensure
compliance with the Securities Act and preserve the ability to treat the merger
as a pooling-of-interests.
NCBC has agreed in the merger agreement to use its best efforts to publish,
not later than 90 days after the end of the first month after the completion of
the merger in which there are at least 30 days of post-merger combined
operations, combined revenue and net income figures as contemplated by and in
accordance with the terms of the SEC's Accounting Series Release No. 135.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
Board of Directors. After the merger, the number of directors on NCBC's
Board will be set at 20. NCBC and CCB have agreed that 10 of these directors
will be designated by NCBC, and that the remaining 10 directors will be
designated by CCB. The CCB designees are Mr. Roessler, James B. Brame, Jr.,
Blake P. Garrett, Jr., C. Dan Joyner, Eugene J. McDonald, George J. Morrow,
Eric B. Munson, Dr. David E. Shi, H. Allen Tate, Jr., and Dr. Phail Wynn, Jr.
The NCBC designees have not been determined, but Mr. Garrott will be one NCBC
designee. For a period of two years after the merger:
. if a NCBC director ceases to serve on the Board of Directors, his
successor shall be nominated by the continuing NCBC directors; and
. if a CCB director ceases to serve on the Board of Directors, his
successor shall be nominated by the continuing CCB directors.
Management. NCBC and CCB have agreed that Mr. Garrott will serve as Chairman
of the NCBC Board and Chairman of the Board's Executive Committee, after
completion of the merger. Mr. Roessler will serve as President and Chief
Executive Officer of NCBC after completion of the merger. Senior managers who
will report directly to Mr. Roessler include William R. Reed, Jr., Chief
Operating Officer, Sheldon M. Fox, Chief Financial Officer, J. Scott Edwards,
Chief Administrative Officer, and Lewis E. Holland, President of Financial
Enterprises. Other key members of the combined company's management team
include Richard L. Furr, who will serve as President of the banks in North
Carolina, South Carolina, Virginia and West Virginia, and David T. Popwell, who
will be Executive Vice President for Mergers and Acquisitions.
Operations. Following completion of the merger, NCBC's corporate offices
will be located in Memphis, Tennessee and its operations headquarters will be
located in Durham, North Carolina.
While there can be no assurances, NCBC and CCB presently expect to achieve
approximately $50 million in annual pre-tax expense savings by the end of
fiscal year 2001 as a result of the merger. NCBC and CCB expect that these
expense savings will be derived principally from centralization of corporate
activities, consolidation of data processing and operations, optimization of
commercial banking, retail branch and alternative delivery channels for bank
products and services, improvements in technology and reconfiguration of the
mortgage, credit card and asset management businesses.
NCBC and CCB also expect that the combined company will incur one-time
merger-related and restructuring charges of approximately $110 million (pre-
tax), principally as a result of conversion costs, employee-related expenses,
costs relating to the integration of systems and operations, expenses relating
to occupancy and equipment write downs and various other costs. For additional
information with respect to these charges, see "Unaudited Pro Forma Condensed
Financial Information."
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PRICE RANGE OF COMMON STOCK 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 per share of NCBC common stock on the Nasdaq
National Market and cash dividends declared per share of 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........................................ $21.94 $15.50 $0.105
Second Quarter (through April 18, 2000).............. 18.56 17.19
</TABLE>
NCBC has paid regular dividends on its common stock without interruption
since its incorporation. The timing and amount of future dividends will depend
upon earnings, cash requirements, the financial condition of NCBC and its
subsidiaries, applicable government regulations and other factors deemed
relevant by the NCBC Board. NCBC currently intends to increase its quarterly
cash dividend to $0.13 per share after completing the merger, subject to a
determination by the NCBC Board of Directors in its discretion to do so. As
described under "Regulation and Supervision--Dividend Restrictions," various
state and federal laws limit the ability of affiliate banks to pay dividends to
NCBC. The merger agreement restricts the cash dividends that may be paid on
NCBC common stock pending consummation of the merger.
CCB. CCB common stock is listed on the New York Stock Exchange and traded
under the symbol "CCB." The following table sets forth the high and low closing
sales prices per share of CCB common stock for the periods indicated, as listed
in the New York Stock Exchange composite transaction reporting system, and the
quarterly cash dividends declared per share for the periods indicated.
<TABLE>
<CAPTION>
Price Range of
Common Stock
--------------- Dividends
Fiscal Year/Quarter High Low Declared
- ------------------- ------- ------- ---------
<S> <C> <C> <C>
1998
First Quarter........................................ $57.00 $47.00 $0.235
Second Quarter....................................... 56.06 51.75 0.235
Third Quarter........................................ 58.50 46.25 0.26
Fourth Quarter....................................... 57.38 43.13 0.26
1999
First Quarter........................................ $58.88 $51.50 $ 0.26
Second Quarter....................................... 59.13 50.94 0.26
Third Quarter........................................ 54.38 40.00 0.29
Fourth Quarter....................................... 48.31 40.13 0.29
2000
First Quarter........................................ $44.25 $33.00 $ 0.29
Second Quarter (through April 18, 2000).............. 44.50 41.44
</TABLE>
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The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of CCB and its subsidiaries, applicable
government regulations and other factors deemed relevant by the CCB Board. As
described under "Regulation and Supervision-Dividend Restrictions," various
state and federal laws limit the ability of affiliate banks to pay dividends to
CCB. The merger agreement restricts the cash dividends that may be paid on CCB
common stock pending consummation of the merger. See "The Merger--Conduct of
Business Pending the Merger" and "--Other Agreements."
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INFORMATION ABOUT NCBC
NCBC is a bank holding company that provides diverse financial services
through a regional network of banking affiliates and a national network of non-
banking affiliates. NCBC operates 166 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, and
consolidated shareholders' equity of approximately $557 million, and it had
consolidated net income of approximately $107 million, or $0.99 per diluted
share, for the year ended December 31, 1999.
NCBC is a legal entity separate and distinct from its banking and non-
banking subsidiaries. Accordingly, the right of NCBC, and thus the right of
NCBC's creditors, to participate in any distribution of the assets or earnings
of any subsidiary, other than in its capacity as a creditor of the subsidiary,
is subject to the prior payment of claims of creditors of the subsidiary. The
principal sources of NCBC's revenues are dividends and fees from its
subsidiaries. See "Regulation and Supervision--Dividend Restrictions" for a
discussion of the restrictions on the subsidiary banks' ability to pay
dividends to NCBC.
NCBC's executive offices are located at One Commerce Square, Memphis,
Tennessee 38150, and our telephone number is (901) 523-3371.
Additional Information
NCBC's Annual Report on Form 10-K for the year ended December 31, 1999
incorporates by reference or sets forth information about executive
compensation, various benefit plans including stock option plans, voting
securities and their principal holders, various relationships and related
transactions and other related matters pertaining to our company. We
incorporate this Annual Report on Form 10-K into this document by reference. If
you would like copies of these documents, you may contact us at the address or
telephone number indicated under "Where You Can Find More Information."
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INFORMATION ABOUT CCB
CCB is a registered bank holding company headquartered in Durham, North
Carolina whose principal business is providing banking and other financial
services through its banking subsidiaries. CCB operates 208 bank locations in
North Carolina and South Carolina.
As of December 31, 1999, CCB had total consolidated assets of approximately
$8.2 billion, total consolidated deposits of approximately $6.7 billion,
consolidated shareholders' equity of approximately $720 million, and it had
consolidated net income of approximately $151 million, or $3.74 per diluted
share, for the year ended December 31, 1999.
CCB is a legal entity separate and distinct from its banking and non-banking
subsidiaries. Accordingly, the right of CCB, and thus the right of CCB's
creditors, to participate in any distribution of the assets or earnings of any
subsidiary, other than in its capacity as a creditor of the subsidiary, is
subject to the prior payment of claims of creditors of the subsidiary. The
principal sources of CCB's revenues are dividends and fees from its
subsidiaries. See "Regulation and Supervision--Dividend Restrictions" for a
discussion of the restrictions on the subsidiary banks' ability to pay
dividends to CCB.
CCB's executive offices are located at 111 Corcoran Street, Durham, North
Carolina 27701, and our telephone number is (919) 683-7777.
Additional Information
CCB's Annual Report on Form 10-K for the year ended December 31, 1999
incorporates by reference or sets forth information relating to executive
compensation, various benefit plans including stock option plans, voting
securities and their principal holders, various relationships and related
transactions and other related matters pertaining to our company. We
incorporate this Annual Report on Form 10-K into this document by reference. If
you would like copies of these documents, you may contact CCB at our address or
telephone number indicated under "Where You Can Find More Information."
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REGULATION AND SUPERVISION
The following discussion briefly describes the material elements of the
regulatory framework governing bank holding companies and their subsidiaries,
and provides specific information relevant to our companies. This regulatory
framework is intended primarily for the protection of depositors and the
federal deposit insurance funds and not for the protection of security holders.
To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those provisions. A
change in the statutes, regulations or regulatory policies applicable to our
companies or our subsidiaries may have a material effect on our businesses.
More information is contained in the documents incorporated in this document by
reference. See "Where You Can Find More Information" for information on how you
can obtain these documents.
As bank holding companies, our companies are each subject to regulation
under the Bank Holding Company Act, and to inspection, examination and
supervision by the Federal Reserve Board. Under the Bank Holding Company Act,
bank holding companies generally may not acquire the ownership or control of
more than 5% of the voting shares, or substantially all the assets, of any
company, including a bank or another bank holding company, without the Federal
Reserve Board's prior approval. Also, bank holding companies generally may
engage only in banking and other activities that are determined by the Federal
Reserve Board to be closely related or incidental to banking. In the event a
bank holding company has elected to become a "financial holding company" (an
"FHC"), it would no longer be subject to the general requirements that it
obtain the Federal Reserve Board's approval prior to acquiring more than 5% of
the voting shares, or substantially all of the assets, of a company that is not
a bank or bank holding company. Moreover, as an FHC, it would be permitted to
engage in activities that are jointly determined by the Federal Reserve Board
and the Treasury Department to be "financial in nature or incidental to such
financial activity." FHCs may also engage in activities that are determined by
the Federal Reserve Board to be "complementary to financial activities."
Generally, bank holding companies from any state can now acquire banks and
bank holding companies located in any other state, subject to certain
conditions, including nationwide and state imposed concentration limits.
Effective June 1, 1997, banks also became eligible to branch across state lines
by acquisition, merger or de novo branching (unless state law would permit such
interstate branching at an earlier date), providing certain conditions are met
including that applicable state law must expressly permit de novo interstate
branching.
NCBC's subsidiary national banking association, National Bank of Commerce,
is subject to regulation and examination primarily by the Office of the
Comptroller of the Currency (the "OCC") and, secondarily, by the FDIC and the
Federal Reserve Board. Its federal savings bank subsidiaries, NBC Bank, FSB
(Knoxville), NBC Bank, FSB (Roanoke) and First Market Bank, FSB (Richmond) are
primarily regulated by the Office of Thrift Supervision (the "OTS"). NCBC's
North Carolina state-chartered savings bank subsidiary, Hillsborough Savings
Bank, Inc., SSB is subject to federal regulation and examination by the
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FDIC and, in addition, is regulated and examined by the North Carolina Savings
Institution Administrator. On May 8, 2000, NBC Bank, FSB (Knoxville) will
convert to a national banking association and subsequently merge into National
Bank of Commerce.
NCBC has other subsidiaries that are subject to governmental regulation and
supervision. Commerce Finance Company is a consumer finance company organized
under the laws of the State of Tennessee and is primarily regulated by the
Consumer Finance Division of the Tennessee Department of Financial
Institutions. The Federal Trade Commission has primary federal regulatory
authority over this company. Commerce Capital Management, Inc. is registered
with the SEC and is an investment adviser pursuant to the Investment Advisers
Act of 1940, as amended. NBC Capital Markets Group, Inc, is a registered
securities broker/dealer under the Exchange Act and is a member of the National
Association of Securities Dealers, and is subject to regulation by the SEC and
the NASD. All regulatory agencies require periodic audits and regularly
scheduled reports of financial information.
CCB's banking subsidiaries are Central Carolina Bank and Trust Company ("CCB
Bank") and American Federal Bank, FSB. CCB Bank is a North Carolina commercial
bank and is subject to regulation and examination primarily by the FDIC and, in
addition, is regulated and examined by the North Carolina Banking Commission
and Commissioner of Banks. American Federal is a federal savings bank and is
primarily regulated and examined by the OTS. It is anticipated that American
Federal will merge into CCB Bank on June 17, 2000.
CCB also has other subsidiaries subject to governmental regulation and
examination. Salem Trust Co. is a Florida trust company that provides
institutional trust services. It is subject to regulation and examination
primarily by the Florida banking regulators. Salem Advisors, Inc. is an
investment advisory company registered with the SEC and subject to the
Investment Advisers Act of 1940, as amended. Recently, CCB formed Sprunt
Insurance Company, Ltd. in the British Virgin Islands to reinsure private
mortgage insurance on mortgage loans originated by CCB Bank and American
Federal. This company is subject to regulations and examinations under the laws
of the British Virgin Islands.
NCBC, CCB and our subsidiaries also are affected by the fiscal and monetary
policies of the federal government and the Federal Reserve Board, and by
various other governmental requirements and regulations.
Liability for Bank Subsidiaries
Under current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and to maintain resources adequate to support each subsidiary
bank. This support may be required at times when the bank holding company may
not have the resources to provide it. In addition, Section 55 of the National
Bank Act permits the OCC to order the pro rata assessment of shareholders, such
as NCBC, of a national bank whose capital has become impaired. If a shareholder
fails, within three months, to pay that assessment, the OCC can order the sale
of the stockholder's stock to cover the deficiency. In the event of a
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bank holding company's bankruptcy, any commitment by the bank holding company
to a U.S. federal bank regulatory agency to maintain the capital of a
subsidiary bank would be assumed by the bankruptcy trustee and entitled to
priority of payment. North Carolina law provides for assessment of
shareholders, such as CCB, of state commercial banks in circumstances and
manners substantially similar to the provisions of the National Bank Act
covering national banks.
All of NCBC's and CCB's subsidiary banks are FDIC-insured depository
institutions. Any depository institution insured by the FDIC, like our bank
subsidiaries, can be held liable for any loss incurred, or reasonably expected
to be incurred, by the FDIC due to the default of an FDIC-insured depository
institution controlled by the same bank holding company, or for any assistance
provided by the FDIC to an FDIC-insured depository institution controlled by
the same bank holding company that is in danger of default.
"Default" generally means the appointment of a conservator or receiver. "In
danger of default" generally means the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance.
Also, if a default occurred with respect to a bank, any capital loans to the
bank from its parent holding company would be subordinate in right of payment
to payment of the bank's depositors and certain of its other obligations.
Capital Requirements
Each of our companies is subject to risk-based capital requirements and
guidelines imposed by the Federal Reserve Board. These are substantially
similar to the capital requirements and guidelines imposed by the Federal
Reserve Board, the OCC, the FDIC and the OTS on the depository institutions
under their jurisdictions. For this purpose, a depository institution's or
holding company's assets, and some of its specified off-balance sheet
commitments and obligations, are assigned to various risk categories. A
depository institution's or holding company's capital, in turn, is classified
in one of three tiers, depending on type:
<TABLE>
<CAPTION>
Supplementary Market Risk
Core ("Tier 1") capital ("Tier 2") capital ("Tier 3") capital
- ------------------ ---------------------------- ----------------------------
<S> <C> <C>
. common equity among other items: among other items:
. retained earnings . perpetual preferred stock . qualifying unsecured
not meeting the Tier 1 subordinated debt
definition
. qualifying noncumulative . qualifying mandatory
perpetual preferred stock convertible securities
. a limited amount of . qualifying subordinated
qualifying cumulative debt
perpetual preferred stock at . allowances for loan and
the holding company level lease losses, subject to
limitations
. minority interests in
equity accounts of
consolidated subsidiaries
. less goodwill and most
intangible assets
</TABLE>
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Each of our companies, like other bank holding companies, currently is
required to maintain Tier 1 capital and "total capital" (the sum of Tier 1,
Tier 2 and Tier 3 capital) equal to at least 4% and 8% respectively, of its
total risk-weighted assets (including various off-balance-sheet items, such as
standby letters of credit). For a holding company to be considered "well
capitalized" for regulatory purposes, its Tier 1 and total capital ratios must
be 6% and 10% on a risk-adjusted basis, respectively. At December 31, 1999,
each of our companies met both requirements, with Tier 1 and total capital
equal to 12.5% and 13.75% (in the case of NCBC), and 11.54% and 13.11% (in the
case of CCB) of its respective total risk-weighted assets.
Federal Reserve Board, FDIC, OCC and OTS rules require NCBC and CCB to
incorporate market and interest rate risk components into their risk-based
capital standards. Under these market risk requirements, capital is allocated
to support the amount of market risk related to a financial institution's
ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3% if the
holding company has the highest regulatory rating and meets other requirements,
or of 3% plus an additional "cushion" of at least 100 to 200 basis points (one
to two percentage points) if the holding company does not meet these
requirements. At December 31, 1999, NCBC's leverage ratio was 8.86% and CCB's
leverage ratio was 8.75%.
The Federal Reserve Board may set capital requirements higher than the
minimums we have described for holding companies whose circumstances warrant
it. For example, holding companies experiencing or anticipating significant
growth may be expected to maintain capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
The Federal Reserve Board has also indicated that it will consider a "tangible
Tier 1 capital leverage ratio" (deducting all intangibles) and other
indications of capital strength in evaluating proposals for expansion or new
activities.
Each of our banking subsidiaries is subject to similar risk-based and
leverage capital requirements adopted by its applicable federal banking agency.
Each was in compliance with the applicable capital requirements as of December
31, 1999.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to restrictions on its business, which are described under "--Federal
Deposit Insurance Corporation Improvement Act of 1991."
Federal Deposit Insurance Corporation Improvement Act of 1991. The FDICIA,
among other things, identifies five capital categories for insured depository
institutions: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. It requires
U.S. federal bank regulatory agencies to implement systems for "prompt
corrective action" for insured depository institutions that do not meet minimum
capital requirements based on these categories. The FDICIA imposes
progressively more restrictive constraints on operations, management and
capital distributions, depending
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on the category in which an institution is classified. Unless a bank or thrift
is well capitalized, it is subject to restrictions on its ability to offer
brokered deposits and on other aspects of its operations. An undercapitalized
bank or thrift must develop a capital restoration plan and its parent holding
company must guarantee the bank's or thrift's compliance with the plan up to
the lesser of 5% of the bank's or thrift's assets at the time it became
undercapitalized and the amount needed to comply with the plan.
As of December 31, 1999, each bank and saving bank subsidiary of NCBC and
CCB was well capitalized, based on the prompt corrective action ratios and
guidelines described above. You should note, however, that a bank's capital
category is determined solely for the purpose of applying the OCC's (or the
FDIC's or OTS's) prompt corrective action regulations and that the capital
category may not constitute an accurate representation of the bank's overall
financial condition or prospects for other purposes.
Dividend Restrictions
Federal and state laws limit the amount of dividends our affiliate banks can
pay to our companies without regulatory approval. Dividend payments by national
banks above certain statutory limits require prior approval by the OCC.
Similarly, NCBC's and CCB's state commercial and savings bank subsidiaries are
restricted in the amount of dividends they may pay without prior approval of
their respective state regulatory authorities. At December 31, 1999, $51.7
million of the total shareholders' equity of NCBC's affiliate banks was
available for payment of dividends to NCBC without approval by the applicable
regulatory authority, and $283.9 million of the total shareholders' equity of
CCB's affiliate banks was available for payment of dividends to CCB without
regulatory approval.
In addition, federal and state bank regulatory authorities have authority to
prohibit our affiliate banks from engaging in unsafe or unsound practices in
conducting their businesses. The payment of dividends, depending upon the
financial condition of the bank in question, could be deemed an unsafe or
unsound practice. The ability of our affiliate banks to pay dividends in the
future is currently, and could be further, influenced by bank regulatory
policies and capital guidelines.
Deposit Insurance Assessments
The deposits of each of our subsidiary banks are insured up to regulatory
limits by the FDIC, and, accordingly, are subject to deposit insurance
assessments to maintain the Bank Insurance Fund ("BIF") and/or the Savings
Association Insurance Fund ("SAIF") administered by the FDIC. The FDIC has
adopted regulations establishing a permanent risk-related deposit insurance
assessment system. Under this system, the FDIC places each insured bank in one
of nine risk categories based on the bank's capitalization and supervisory
evaluations provided to the FDIC by the institution's primary federal
regulator. Each insured bank's insurance assessment rate is then determined by
the risk category in which it is classified by the FDIC.
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The annual insurance premiums on bank deposits insured by the BIF and the
SAIF vary between $0.00 per $100 of deposits for banks classified in the
highest capital and supervisory evaluation categories to $0.27 per $100 of
deposits for banks classified in the lowest capital and supervisory evaluation
categories.
The Deposit Insurance Funds Act of 1996 provides for assessments to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on
depository institutions with respect to BIF and SAIF-insured deposits) to pay
for the cost of Financing Corporation ("FICO") funding. The FDIC established
the FICO assessment rates effective January 1, 1999 at $0.012 per $100 annually
for BIF-assessable deposits and $0.061 per $100 annually for SAIF-assessable
deposits. The FICO assessments do not vary depending upon a depository
institution's capitalization or supervisory evaluations. NCBC's subsidiary
banks held approximately $0.3 billion and CCB's subsidiary banks held
approximately $1.6 billion as SAIF-assessable deposits as of December 31, 1999.
Depositor Preference Statute
In the "liquidation or other resolution" of the institution by any receiver,
federal legislation provides that deposits and certain claims for
administrative expenses and employee compensation against the insured
depository institution would be afforded a priority over other general
unsecured claims against that institution, including federal funds and letters
of credit.
Brokered Deposits
Under FDIC regulations, no FDIC-insured depository institution can accept
brokered deposits unless it is well capitalized or both is adequately
capitalized and receives a waiver from the FDIC. In addition, these regulations
prohibit any depository institution that is not well capitalized from paying an
interest rate on deposits in excess of 75 basis points over certain prevailing
market rates or, unless it provides certain notice to affected depositors,
offering "pass through" deposit insurance on certain employee benefit plan
accounts.
Interstate Banking and Branching
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, subject to certain concentration limits and other requirements:
. bank holding companies such as NCBC and CCB may acquire banks and bank
holding companies located in any state;
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. any subsidiary bank of a bank holding company may receive deposits,
renew time deposits, close loans, service loans and receive loan
payments as an agent for any other bank subsidiary of that bank holding
company; and
. banks may acquire branch offices outside their home states by merging
with out-of-state banks, purchasing branches in other states and
establishing de novo branch offices in other states. The ability of
banks to acquire branch offices through purchase or opening of other
branches is contingent, however, on the host state having adopted
legislation "opting in" to those provisions of Riegle-Neal. In addition,
the ability of a bank to merge with a bank located in another state is
contingent on the host state not having adopted legislation "opting out"
of that provision of Riegle-Neal.
Our combined company might use Riegle-Neal to acquire banks in additional
states and to consolidate its bank subsidiaries under a smaller number of
separate charters.
Control Acquisitions
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act, such as NCBC or
CCB, would, under the circumstances set forth in the presumption, constitute
acquisition of control of the bank holding company.
In addition, a company is required to obtain the approval of the Federal
Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in
the case of an acquiror that is a bank holding company) or more of any class of
outstanding common stock of a bank holding company, or otherwise obtaining
control or a "controlling influence" over that bank holding company.
Financial Modernization Legislation
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act which permits bank holding companies to become financial holding
companies and, by doing so, affiliate with securities firms and insurance
companies and engage in other activities that are financial in nature or
complementary thereto. A bank holding company may become a financial holding
company, if each of its subsidiary banks is well capitalized under the FDICIA
prompt corrective action provisions, well managed and has at least a
satisfactory rating under the Community Reinvestment Act, by filing a
declaration that the bank holding company wishes to become an FHC and meets all
applicable requirements.
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No prior regulatory approval is required for an FHC to acquire a company,
other than a bank or savings association, engaged in activities permitted under
the Gramm-Leach-Bliley Act. Activities cited by the Gramm-Leach-Bliley Act as
being "financial in nature" include:
. securities underwriting, dealing and market making;
. sponsoring mutual funds and investment companies;
. insurance underwriting and agency;
. merchant banking activities; and
. activities that the Federal Reserve Board has determined to be closely
related to banking.
A national bank also may engage, subject to limitations on investment, in
activities that are financial in nature, other than insurance underwriting,
insurance company portfolio investment, real estate development and real estate
investment, through a financial subsidiary of the bank, if the bank is well
capitalized, well managed and has at least a satisfactory Community
Reinvestment Act rating. Subsidiary banks of an FHC or national banks with
financial subsidiaries must continue to be well capitalized and well managed in
order to continue to engage in activities that are financial in nature. In
addition, an FHC or a bank may not acquire a company that is engaged in
activities that are financial in nature unless each of the subsidiary banks of
the FHC or the bank has at least a satisfactory Community Reinvestment Act
rating.
The Gramm-Leach-Bliley Act will change the operating environment of NCBC,
CCB and their subsidiaries in substantial and unpredictable ways. We cannot
accurately predict the ultimate effect that this legislation, or implementing
regulations, will have upon the financial condition or results of operations of
NCBC, CCB or any of their subsidiaries.
Future Legislation
Various legislation, including proposals to substantially change the
financial institution regulatory system, expand the powers of banking
institutions and bank holding companies, and limit the investments that a
depository institution may make with insured funds, is from time to time
introduced in the U.S. Congress. This legislation may change banking statutes
and the operating environment of the combined company and its subsidiaries in
substantial and unpredictable ways. We cannot accurately predict whether this
potential legislation will ultimately be enacted, and, if enacted, the ultimate
effect that it, or implementing regulations, would have upon the financial
condition or results of operations of the combined company or any of its
subsidiaries.
NCBC CAPITAL STOCK
As a result of the conversion of shares of CCB common stock to shares of
NCBC common stock at the effective time, CCB shareholders will become NCBC
shareholders.
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Your rights as NCBC shareholders will be governed by Tennessee law, the NCBC
charter and the NCBC bylaws. This description of NCBC's capital stock,
including the NCBC common stock to be issued in the merger, reflects the
anticipated state of affairs at the effective time. The following summarizes
the material terms of NCBC's capital stock but does not purport to be complete,
and is qualified in its entirety by reference to the applicable provisions of
federal law governing bank holding companies, Tennessee law and the NCBC
charter and bylaws.
NCBC Common Stock
NCBC is authorized to issue 175,000,000 shares of NCBC common stock. In
connection with this merger, NCBC's charter will be amended to increase the
number of authorized shares of common stock from 175,000,000 to 400,000,000.
All of the issued and outstanding shares of NCBC common stock are, and upon the
issuance of NCBC common stock in connection with the merger will be, validly
issued, fully paid and nonassessable. The Bank of New York, 101 Barclay Street,
New York, New York acts as transfer agent and registrar for NCBC common stock.
Voting and Other Rights. The holders of NCBC common stock are entitled to
one vote per share, and in general, a majority of votes cast with respect to a
matter is sufficient to authorize action upon routine matters. Directors are to
be elected by a plurality of the votes cast, and NCBC shareholders do not have
the right to cumulate their votes in the election of directors. For that
reason, holders of a majority of the shares of NCBC common stock entitled to
vote in any election of directors of NCBC may elect all of the directors
standing for election.
No Preemptive or Conversion Rights. NCBC common stock does not entitle its
holders to any preemptive rights, redemption privileges, sinking fund
privileges or conversion rights.
Assets Upon Dissolution. In the event of liquidation, holders of NCBC common
stock would be entitled to receive proportionately any assets legally available
for distribution to shareholders of NCBC with respect to shares held by them,
subject to any prior rights of any NCBC preferred stock then outstanding.
Distributions. NCBC shareholders are entitled to receive the dividends or
distributions that the NCBC Board may declare out of funds legally available
for these payments. The payment of distributions by NCBC is subject to the
restrictions of Tennessee law applicable to the declaration of distributions by
a corporation. A corporation generally may not authorize and make distributions
if, after giving effect to the distribution, it would be unable to meet its
debts as they become due in the usual course of business or if the
corporation's total assets would be less than the sum of its total liabilities
plus, unless the corporation's charter provides otherwise, the amount that
would be needed, if it were to be dissolved at the time of distribution, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to the rights of those receiving the
distribution. In addition, the payment of distributions to shareholders is
subject to any prior rights of outstanding preferred stock. See "--NCBC
Preferred Stock."
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As a bank holding company, the ability of NCBC to pay distributions will be
affected by the ability of its banking and other subsidiaries to pay dividends.
The ability of these banking subsidiaries, as well as of NCBC, to pay dividends
in the future currently is, and could be further, influenced by bank regulatory
requirements and capital guidelines. See "Regulation and Supervision" for a
more detailed description.
Restrictions on Ownership. The Bank Holding Company Act requires any "bank
holding company" (as defined in the Bank Holding Company Act) to obtain the
approval of the Federal Reserve Board prior to the acquisition of 5% or more of
NCBC common stock. Any person, other than a bank holding company, is required
to obtain prior approval of the Federal Reserve Board to acquire 10% or more of
NCBC common stock under the Change in Bank Control Act. Any holder of 25% or
more of NCBC common stock (or a holder of 5% or more if such holder otherwise
exercises a "controlling influence" over NCBC) is subject to regulation as a
bank holding company under the Bank Holding Company Act. See "Regulation and
Supervision--Control Acquisitions" for further description of the effects of
the Change in Bank Control Act.
NCBC Preferred Stock
NCBC has authorized 5,000,000 shares of preferred stock, no par per share.
As of the date of this document, no shares of NCBC preferred stock were
outstanding. The NCBC Board is authorized to issue preferred stock in one or
more series, to fix the number of shares in each such series, and to determine
the designations and preferences, limitation and relative rights, of each
series. The NCBC Board may determine the number of shares constituting such
series and the designation of any such series, dividend rates, terms of
redemption, liquidation preferences, sinking fund requirements, conversion
rights, voting rights, and whether the preferred stock can be issued as a share
dividend with respect to another class or series of shares, all without any
vote or other action on the part of NCBC shareholders.
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COMPARISON OF SHAREHOLDERS' RIGHTS
The charter and bylaws of the combined company at the effective time will be
identical to those of NCBC currently in effect except that the charter of the
combined company will authorize the issuance of 400,000,000 shares of common
stock, rather than the 175,000,000 shares that are currently authorized by the
NCBC charter. The rights of NCBC shareholders are currently governed by the
Tennessee Business Corporation Act, or TBCA, and by the NCBC charter and NCBC
bylaws. The rights of CCB shareholders are currently governed by the North
Carolina Business Corporation Act, or NCBCA, and by the CCB articles of
incorporation and CCB bylaws. The following is a summary of the material
differences between the TBCA, the NCBC charter and the NCBC bylaws, on the one
hand, and the NCBCA, the CCB articles of incorporation, and the CCB bylaws, on
the other hand. This summary does not purport to be a complete discussion of,
and is qualified in its entirety by reference to, the NCBC charter, the NCBC
bylaws, the CCB articles of incorporation, the CCB bylaws, the TBCA and the
NCBCA.
Authorized Capital Stock
CCB
. 100,000,000 shares of common stock
. 10,000,000 shares of serial preferred stock
NCBC
NCBC currently:
. 175,000,000 shares of common stock
. 5,000,000 shares of preferred stock
NCBC after the merger:
. 400,000,000 shares of common stock
. 5,000,000 shares of preferred stock
Size of Board of Directors
CCB
The CCB bylaws provide for the CCB Board to consist of not less than nine nor
more than 23 directors, with the actual number of directors to be determined by
the CCB Board or CCB's shareholders. The number of directors is currently fixed
at 19.
NCBC
The NCBC charter and bylaws provides for the NCBC Board to consist of at least
three and no more than 25 directors. The exact number is fixed by resolution of
the NCBC board. The number of directors is currently fixed at 16.
After the effective time, it is intended that the NCBC Board will consist of 20
directors, with 10 to be designated by the NCBC Board and 10 to be designated
by the CCB Board.
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Cumulative Voting
Cumulative voting entitles each shareholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by the number of
directors to be elected. Each shareholder may cast all of their votes for one
nominee or distribute them among two or more nominees, thus permitting holders
of less than a majority of the outstanding shares of voting stock to achieve
board representation. Where cumulative voting is not permitted, holders of a
majority of the outstanding shares of voting stock of a corporation elect the
entire board of directors of the corporation, thereby precluding the election
of any directors by the holders of less than a majority of the outstanding
shares of voting stock.
CCB
Under the NCBCA, unless otherwise provided in a corporation's articles of
incorporation, shareholders do not have a right to cumulate their votes for
directors. The CCB articles of incorporation grant shareholders the right to
cumulate their votes only if CCB is not a "public corporation."
NCBC
Under the TBCA, unless otherwise provided in a corporation's charter,
shareholders do not have a right to cumulate their votes for directors. The
NCBC charter does not provide for cumulative voting.
Classes of Directors
CCB
The CCB articles of incorporation and CCB bylaws provide that the CCB Board is
divided into three classes of directors as nearly equal in number as possible,
with each class being elected to a staggered three-year term.
NCBC
The NCBC charter and bylaws contain substantially identical provisions.
Qualifications of Directors
CCB
The CCB bylaws provide that the CCB directors need not be residents of the
State of North Carolina or shareholders of CCB. The CCB bylaws require that a
director must retire at the next regularly scheduled meeting of shareholders
following the director's 70th birthday.
NCBC
The NCBC bylaws provide that the NCBC directors need not be residents of the
State of Tennessee or shareholders of NCBC. The NCBC bylaws require that
directors must be between 18 and 72 years of age, however, a director nominated
for re-election may serve until the January Board of Directors meeting in the
year in which that director's 73rd birthday will occur.
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Filling Vacancies on the Board
NCBC
The NCBC bylaws contain substantially identical provisions.
CCB
The CCB bylaws authorize the CCB Board or its shareholders to appoint new
directors to fill vacancies arising by reason of death, resignation or removal
or resulting from an increase by the Board in the maximum number of directors.
Removal of Directors
CCB
Under the CCB articles of incorporation and CCB bylaws, a majority of the
shareholders may remove the entire Board or any individual director only for
"cause." Cause means (1) the criminal prosecution and conviction of the
director of an act of fraud, embezzlement, theft or personal dishonesty, (2)
prosecution and conviction of the director for a criminal offense involving
dishonesty or breach of trust as described by the FDIA, or (3) the occurrence
of an event causing such director to be "unbondable" under any of CCB's
fidelity bonds or insurance policies covering directors.
NCBC
The NCBC charter and 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 entire Board.
Nomination of Directors for Election
CCB
The CCB bylaws contain specific provisions restricting or conditioning
nominations of directors. The Board of Directors, a nominating committee of the
Board of Directors or the shareholders of CCB may nominate individuals to serve
as directors.
NCBC
Neither the NCBC charter nor the NCBC bylaws contain specific provisions
restricting or conditioning nominations of directors.
Anti-Takeover Provisions--Business Combinations
Both the NCBCA and the TBCA law contain business combination statutes that
protect domestic corporations from hostile takeovers, and from actions
following such a takeover, by prohibiting some transactions once an acquiror
has gained a significant holding in the corporation.
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North Carolina Law
Shareholder Protection Act
The North Carolina Shareholder Protection Act generally requires that, unless
defined "fair price" and procedural requirements are satisfied, an affirmative
vote of 95% of a corporation's voting shares is required to approve certain
business combination transactions with another entity that is the beneficial
owner, directly or indirectly, of more than 20% of the corporation's voting
shares or which is an affiliate of the corporation and previously has been a
20% beneficial holder of such shares. The Shareholder Protection Act is
applicable to CCB.
Tennessee Law
Business Combination Act
The Tennessee Business Combination Act generally provides that a Tennessee
corporation may not engage in a business combination with an interested
shareholder for a period of five years after the point in time when a
shareholder becomes an "interested shareholder" unless the transaction: (1) is
approved in advance by the corporation's board of directors, (2) is exempt from
the law, (3) satisfies defined fairness requirements, or (4) is approved by the
affirmative vote of two-thirds of a corporation's voting shares not owned by
the interested shareholder.
A corporation may enact a charter amendment or bylaw to remove itself entirely
from the Tennessee Business Combination Act. NCBC has not adopted such a
provision in the NCBC charter or the NCBC bylaws removing NCBC from coverage
under the Tennessee Business Combination Act.
Control Share Acquisitions
The North Carolina Control Share Acquisition Act generally provides that,
except as stated below, "control shares" will not have any voting rights.
Control shares are shares acquired by a person under certain circumstances
which, when added to other shares owned, would give such person effective
control over one-fifth, one-third or a majority of all voting power in the
election of the corporation's directors. However, voting rights will be
restored to control shares by resolution approved by the affirmative vote of
the holders of a majority of the corporation's voting stock, other than shares
held by the owner of the control shares, officers of the corporation, and
directors of the
Control Share Acquisitions
Tennessee has a Control Share Acquisition Act that is substantially identical
to the North Carolina statute. The Tennessee Control Share Acquisition Act is
not applicable to NCBC because the NCBC charter does not contain a specific
provision "opting in" to the Control Share Acquisition Act.
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corporation. If voting rights are granted to control shares which give the
holder a majority of all voting power in the election of the corporation's
directors, then the corporation's other shareholders may require the
corporation to redeem their shares at their fair value. The Control Share
Acquisition Act is applicable to CCB.
Investor Protection Act
North Carolina does not have an Investor Protection Act.
Investor Protection Act
The Tennessee Investor Protection Act (the "TIPA") provides that unless a
Tennessee corporation's board of directors has recommended a takeover offer to
shareholders, no offeror beneficially owning 5% or more of any class of equity
securities of the offeree company, any of which was purchased within the
preceding year, may make a tender offer for a class of equity security of the
offeree company if after completion the offeror would be a beneficial owner of
more than 10% of any class of outstanding equity securities of the company
unless the offeror, before making such purchase:
. makes a public announcement of his or her intention with respect to changing
or influencing the management or control of the offeree company;
. makes a full, fair and effective disclosure of such intention to the person
from whom he or she intends to acquire such securities; and
. files with the Tennessee Commissioner of Commerce and Insurance and the
offeree company a statement signifying such intentions and containing such
additional information as may be prescribed by the Commissioner.
The offeror must provide that any equity securities of an offeree company
deposited
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or tendered pursuant to a takeover offer may be withdrawn by an offeree at any
time within seven days from the date the offer has become effective following
filing with the Commissioner and the offeree company and public announcement of
the terms or after 60 days from the date the offer has become effective. If the
takeover offer is for less than all the outstanding equity securities of any
class, such an offer also must accept securities pro rata if the number of
securities tendered is greater than the number the offeror has offered to
accept and pay for. If such an offeror varies the terms of the takeover offer
before its expiration date by increasing the consideration offered to offerees,
the offeror must pay the increased consideration for all equity securities
accepted, whether accepted before or after the variation in the terms of the
offer.
In addition, the organizational documents of both of our companies also contain
provisions regulating business combinations with persons who own a specified
portion of our stock.
CCB
CCB's articles of incorporation include specific provisions with respect to
mergers and other business combinations. In essence, a business combination
requires the affirmative vote of the holders of at least 85% of the outstanding
shares of each class of CCB's capital voting stock entitled to vote in the
election of directors and the holders of at least a majority of the issued and
outstanding voting stock held by persons other than the interested shareholder
or its affiliates. However, CCB's 85% vote requirement will not apply in the
case of a business combination that either:
. has been approved by a majority of CCB's directors who are not affiliated
with the interested shareholder and who NCBC
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 or an affiliate of an interested shareholder if
the 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
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became directors before the interested shareholder became such; or
. the business combination satisfies the following "fair price" provisions:
(1)the aggregate consideration to be received per share of CCB stock is not
less than the higher of:
-- the highest price per share paid by the interested shareholder for CCB
common stock within two years preceding the announcement of the business
combination or the date the person became an interested shareholder; and
-- the fair market value per share of the CCB common stock on such
announcement date or the date the person became an interested shareholder;
(2)the aggregate consideration to be received by CCB's shareholders per share
of any other class of CCB's voting stock other than the CCB stock is not less
than the higher of:
-- the highest price per share paid by the interested shareholder for shares
of such other class of voting stock within two years preceding the announcement
of the business combination or the date the person became an interested
shareholder;
-- the highest preferential amount per share to which holders of shares of
such other class are entitled in the event of any liquidation, dissolution or
winding up of CCB; and
-- the fair market value per share of such other class on such announcement
date or on the date the person became an interested shareholder;
(3)the consideration to be received by CCB's shareholders is in cash or in the
same form as the consideration paid by the 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;
(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; 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, which
we call 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
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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 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 interested shareholder in acquiring the shares already
owned;
(4)except as approved by the CCB directors, after the interested shareholder
has become such and prior to the business combination:
-- there has been no failure to pay any regular quarterly dividend in any
preferred stock or reduction in the annual dividend rate on CCB common stock;
and
-- the interested shareholder shall not have acquired beneficial ownership
of any additional shares of CCB voting stock;
(5)after becoming an interested shareholder, such person shall not have
received the benefit of specified financial assistance or tax advantages; and
(6)a proxy statement in conformity with applicable law shall be mailed to all
shareholders.
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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.
Shareholder Rights Plan
CCB
In 1990, CCB implemented a shareholder rights plan that provides for the
attachment to shares of CCB common stock of junior participating preferred
stock rights that we refer to as "CCB Rights." CCB rights are not currently
exercisable, but may become so in the future on a date which is the earlier of
(1) the tenth business day following a public announcement that any person or
group of affiliated persons have acquired beneficial ownership of 15%, or 10%
in certain circumstances, or more of the outstanding CCB common stock, or (2)
the tenth business day following the date of commencement or the announcement
of an intention to commence, a tender or exchange offer which would result in a
person becoming the beneficial owner of 15%, or 10% in certain circumstances,
or more of CCB's outstanding common stock. At the time any person or group
satisfies the criteria in the items above (such person or group is defined as
an "Acquiring Person"), all CCB Rights held by or transferred to such person or
their affiliates become void and of no effect.
If and only if the distribution date should occur, separate certificates
evidencing each CCB Right would be distributed to the record holders of the CCB
common stock to which such CCB Rights are attached. Each such CCB Right could
then be exercised to purchase .01 of a share of Series A Preferred Stock for a
price of $187.50, as adjusted from time to time as described in the CCB rights
plan. In the alternative (and subject to certain
NCBC
NCBC does not have a shareholder rights plan.
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exceptions), after any person or group becomes an Acquiring Person and prior to
the acquisition by such person of 50% or more of CCB's outstanding common
stock, CCB's Board of Directors at its option may exchange the CCB Rights
(other than the Rights of the Acquiring Person), in whole or part, at an
exchange ratio of one share of CCB common stock, or .01 of a share of Series A
Preferred Stock, per Right (subject to adjustment). The CCB Rights will expire
on October 1, 2008 unless extended, and may be redeemed by CCB at any time
prior to the acquisition by a person becoming an Acquiring Person, at a price
of $.01 per CCB Right.
The CCB rights plan is not in effect with respect to any proposed transaction.
At the effective time, the CCB rights plan will terminate.
Shareholder Action Without a Meeting
CCB
Under NCBCA Section 55-7-04, written action of shareholders in lieu of a
meeting is permitted only if the consent is signed by all of the shareholders
entitled to vote with respect to the subject matter.
NCBC
Under TBCA Section 48-17-104, if all shareholders entitled to vote on the
action consent to taking that action without a meeting, the affirmative vote of
the number of shares that would be necessary to authorize or take such action
at a meeting is the act of the shareholders.
Calling Special Meetings of Shareholders
CCB
Under NCBCA Section 55-7-02, a special meeting of a corporation's shareholders
may be called by the Board of Directors or another person as may be designated
in a corporation's articles of incorporation or bylaws. The CCB bylaws provide
that special meetings of the shareholders may be called by the Chairman of the
Board, the Vice-Chairman of the Board or the
NCBC
Under TBCA Section 48-17-102, the 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
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President. Accordingly, CCB shareholders do not have the right to demand that a
special meeting be called.
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.
Notice of Shareholder Meetings
CCB
The CCB bylaws require that CCB deliver notice of an annual or special meeting
not less than 10 nor more than 50 days before an annual or special meeting.
NCBC
The NCBC bylaws require that NCBC deliver notice of an annual or special
meeting not less than 10 nor more than 60 days before an annual or special
meeting.
Shareholder Vote Required for Merger
CCB
Generally, the NCBCA requires the approval of majority of all votes entitled to
be cast to approve a merger. The 85% limitation contained in CCB's articles of
incorporation, as described above in this document, imposes more stringent
standards on business combinations subject to its provisions. The 85%
limitation is not applicable to the merger of CCB into NCBC because the merger
was approved unanimously by the entire Board of Directors of CCB.
NCBC
Generally, the TBCA requires the approval of majority of all votes entitled to
be cast to approve a merger. NCBC's charter requires the affirmative vote of at
least two-thirds of the outstanding shares of each class of voting stock to
approve any certain business combination that fits within parameters. The two-
thirds limitation is not applicable to the merger of CCB into NCBC because the
merger was approved unanimously by the entire Board of Directors of NCBC.
Dividends
CCB
Under NCBCA Section 55-6-40, the Board of Directors may authorize and the
corporation may make distributions to its shareholders unless either of the
following is true:
. the corporation would not be able to pay its debts as they become due in the
usual course of business; or
. the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy NCBC
Under TBCA Section 48-16-401, the Board of Directors of a Tennessee corporation
may authorize, and the corporation may pay, dividends or make other
distributions to its shareholders (including the repurchase of its shares)
unless either of following is true:
. after the distribution the corporation would not be able to pay its debts as
they become due in the usual course of business; or
. the corporation's total assets after the distribution would be less than the
sum
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the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
of its total liabilities plus, unless the charter provides otherwise, the
amount that would be needed, if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
The NCBC charter provides that the shareholders have the right to receive
dividends if and when declared by the NCBC Board out of funds legally available
for dividends.
Dissenters' Appraisal Rights
CCB
Under NCBCA Section 55-13-02, a shareholder of a corporation is generally
entitled to receive payment of the fair value of his or her stock if the
shareholder dissents from transactions including a proposed merger, share
exchange, or sale of substantially all of the assets of the corporation.
However, dissenters' rights generally are not available to holders of shares,
that are listed on a national securities exchange, quoted on the Nasdaq
National Market or held of record by at least 2,000 shareholders.
NCBC
Under TBCA Section 48-23-102, a shareholder of a corporation is generally
entitled to receive payment of the fair value of their stock if the shareholder
dissents from transactions including a proposed merger, share exchange or a
sale of substantially all of the assets of the corporation. However,
dissenters' rights generally are not available to holders of shares, such as
shares of NCBC common stock, that are registered on a national securities
exchange or quoted on a national market security system.
Shareholders' Preemptive Rights
CCB
Under NCBCA Section 55-6-30, unless otherwise provided in a corporation's
articles of incorporation, shareholders do not have preemptive rights;
provided, however, that shareholders of a public corporation do not have
preemptive rights in any event. The CCB articles of incorporation do not
provide for preemptive rights.
NCBC
Under TBCA Section 48-16-301, unless otherwise provided in a corporation's
charter, shareholders do not have preemptive rights. The NCBC charter does not
provide for preemptive rights.
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Indemnification
CCB
Under the NCBCA, the CCB articles of incorporation and the CCB bylaws, CCB 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; and
. 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, in which the director or
officer was adjudged liable to the corporation 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.
NCBC
The provisions of the TBCA, NCBC's charter and NCBC's bylaws with respect to
indemnification are substantially identical to those applicable to CCB.
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Amendment to Articles of Incorporation or Charter
CCB
Generally, the CCB articles of incorporation may be amended if the amendment is
approved by the vote of the holders of a majority of the CCB common stock
present at the shareholders' meeting at which such amendment proposal is
considered. However, unless recommended to CCB's shareholders by a vote of
three-fourths of the CCB directors, the affirmative vote of both (1) the
holders of not less than 85% of each class of CCB's outstanding voting stock
and (2) the holders of a majority outstanding CCB voting stock held by persons
other than an interested shareholder or its affiliates is required to amend or
repeal or to adopt provisions inconsistent with the provisions of the CCB 85%
vote requirement or the CCB fair price provisions.
NCBC
The NCBC Charter requires an affirmative vote by at least two-thirds of the
shares entitled to vote to alter or amend any provisions of the charter unless
the NCBC Board of Directors, by at least a two-thirds majority, submits the
proposed amendment to a vote of shareholders in which circumstance a majority
vote of shareholders is needed.
Amendment of Bylaws
CCB
CCB's bylaws may be amended or repealed, and new bylaws may be adopted, by the
affirmative vote of a simple majority of CCB's directors or by the affirmative
vote of the holders of a majority of the shares of CCB common stock represented
at a shareholders' meeting. However, any bylaw approved by CCB's shareholders
may be amended or repealed only by a vote of the shareholders and any bylaw
providing for a higher Board of Directors or shareholder vote requirement for
its amendment or repeal may be amended or repealed by such higher vote.
NCBC
TBCA Section 48-20-201 provides that a corporation's Board of Directors may
amend or repeal the corporation's bylaws unless:
. the charter reserves this power exclusively to the shareholders in whole or
in part; or
. the shareholders in amending or repealing a particular bylaw provide
expressly that the Board of Directors may not amend or repeal that bylaw.
A corporation's shareholders may amend or repeal the corporation's bylaws even
though the bylaws may also be amended or repealed by its Board of Directors.
NCBC's bylaws may be amended or repealed by a vote of a majority of the entire
board.
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APPROVAL OF THE AMENDMENT TO NCBC 1994 STOCK PLAN
Proposed Amendment
NCBC maintains the National Commerce Bancorporation 1994 Stock Plan, as
amended and restated, which will be the stock plan of the combined company
following the merger. On April , 2000, the NCBC Board approved an amendment
to the 1994 Stock Plan, subject to shareholder approval, to increase the
limitation on the number of shares of NCBC common stock for which options may
be granted to an employee in any given year from 60,000 to 200,000, and in the
case of NCBC's Chairman and its Chief Executive Officer from 100,000 to
400,000. The following is a summary of the material terms of the 1994 Stock
Plan as proposed to be amended. This discussion is qualified in its entirety by
reference to the 1994 Stock Plan.
Description of the 1994 Stock Plan
General. The 1994 Stock Plan provides for grants of stock options and
restricted stock awards. Options granted under the 1994 Stock Plan may be
either "incentive stock options" as defined in Section 422 of the U.S. tax
code, or non-qualified stock options. The Committee also may award grants of
restricted stock which become effective upon the satisfaction of one or more
objective employment or other grant conditions. Additionally, the 1994 Stock
Plan provides that NCBC will distribute shares of common stock to directors who
satisfy certain meeting attendance requirements. The 1994 Stock Plan provides
that 4,000,000 shares of common stock are reserved for use under the plan. Any
shares subject to an option which remain unissued after the cancellation,
expiration or exchange of such option and any restricted stock which is
forfeited shall become available for use again under the Plan.
Purpose. The general purpose of the 1994 Stock Plan is to promote the
interests of NCBC through grants to key employees of options to purchase NCBC
common stock and grants to key employees of restricted shares of common stock
and the payment of additional compensation to NCBC directors and the directors
of NCBC's subsidiary banks in order to (1) attract key employees, directors and
bank directors, (2) to provide an additional incentive to each key employee,
director and bank director to work to increase the value of NCBC common stock,
and (3) to provide each key employee, director, and bank director with a stake
in the future of NCBC which corresponds to the state of each of NCBC's
shareholders.
Administration. The Stock Option and Management Compensation Committee of
the NCBC Board currently administers the 1994 Stock Plan. The Committee is
composed of "non-employee directors" under Rule 16b-3 of the Exchange Act who
are also "outside directors" under Section 162(m) of the U.S. tax code.
Eligibility. Awards under the plan may be granted only to full time,
salaried employees of NCBC or any subsidiary or affiliate of NCBC who in the
judgment of the Committee is key, directly or indirectly, to the success of
NCBC. NCBC estimates that approximately 350 people currently participate in the
1994 Stock Plan.
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Awards under the Plan
The Committee may grant options or restricted stock under the 1994 Stock
Plan to such key employees as the Committee may determine; provided that the
options granted to a key employee in any calendar year may not exceed 60,000
shares, except for the Chairman and the Chief Executive Officer, to whom
options for 100,000 shares may be granted each calendar year. If the amendment
to the 1994 Stock Plan is approved by the NCBC shareholders at the NCBC special
meeting, the foregoing limits will be increased to 200,000 shares for all
employees except the Chairman and the Chief Executive Officer; and to 400,000
shares for the Chairman and Chief Executive Officer. However, the foregoing per
share limitations may be exceeded in the discretion of the Committee in
connection with recruiting a new employee. Each grant of an option shall be
evidenced by an option agreement stating whether the option is an incentive
stock option or a non-qualified stock option and such terms and conditions as
the Committee deems consistent with the terms of the Plan. Each grant of
restricted stock shall be evidenced by a restricted stock agreement setting
forth any conditions under which the grant will be effective and the conditions
under which the key employee's interest will become nonforfeitable.
Under the 1994 Stock Plan, the Committee has established a program under
which grants of options may be conditioned on the purchase of common stock by
the employee and on the key employee holding such common stock for a specified
period. All common stock purchases made by a key employee under such program
shall be made in the open market and the Committee shall grant any related
option at an option price equal to the purchase price paid by the employee for
the stock bought on the open market. This program is known as the "Share NCBC
Program."
Terms and Conditions of Options
Exercise Price. The Committee determines the exercise price of options to
purchase shares of common stock at the time the options are granted. However,
excluding options issued to 10% shareholders, the exercise price of an option
must not be less than the fair market value of the common stock on the date the
option is granted. Any optionee who owns more than 10% of the combined voting
power of all classes of outstanding stock of NCBC is not eligible for the grant
of an option unless the exercise price of the option is at least 110% of the
fair market value of the common stock on the date of grant.
Form of Consideration. A grantee may pay the option price (1) in cash; (2)
by delivering shares of common stock having a fair market value equal to the
exercise price which the optionee has owned for six months; or (3) by a
combination of (1) and (2).
Exercise of the Option. Each option granted under the 1994 Stock Plan will
be exercisable in whole or in part as set forth in the option agreement under
which such option is granted, but no option will be exercisable during the six
months after the date such option is granted, and each option will expire after
the earlier of (1) the date such option is exercised in full, (2) the date
which is the fifth anniversary of the date the option is granted,
100
<PAGE>
if the option is an incentive stock option granted to a key employee who is a
10% shareholder, or (3) the date which is the tenth anniversary of the date
such option is granted if the option is a non-qualified stock option or an
incentive stock option granted to a key employee who is not a 10% shareholder.
An option agreement may provide for the exercise of an option after the
employment of the key employee has terminated.
Termination of Employment; Death and Disability. The Committee determines
the terms and conditions relating to the effect of termination of the
participant's employment or the participant's death or disability on an
individual basis.
Surrender of Options
The Committee in an option agreement can grant a key employee the right to
surrender an option on any date that (1) the fair market value of the common
stock subject to the option exceeds the option price, and (2) the option is
otherwise exercisable. In exchange for the surrendered shares, the key employee
shall receive a payment (in cash or common stock, or a combination of cash and
common stock) equal to the excess of the fair market value of such shares over
the option price for such shares on the date of surrender.
Restricted Stock Awards
Restricted stock grants become effective as of the date set by the Committee
or upon the timely satisfaction of all conditions to the grant. The holder of
restricted stock is entitled to receive any cash dividends and to vote the
common stock underlying such grant. A share of common stock ceases to be
restricted stock when the key employee's interest becomes nonforfeitable under
the terms of the 1994 Stock Plan and the related restricted stock agreement.
The Committee may authorize a cash bonus to a key employee to pay any tax
liability attributed to the restricted stock grant becoming nonforfeitable or
to the payment of the cash bonus itself.
Stock for Meeting Attendance
The 1994 Stock Plan provides that each director of NCBC and each director of
NCBC's banking subsidiaries and affiliates shall receive for each calendar
year, 100 shares of common stock if he or she attends all of the regularly
scheduled meetings of each board of directors on which he or she serves. Each
director shall be required to agree upon request to hold such shares for at
least six months and, further, for investment only.
Non-transferability
No option that is an incentive stock option and no related surrender right
shall be transferable by a key employee other than by will or by the laws of
descent and distribution, and any such option and any such surrender right
shall be exercisable during the lifetime of a key employee only by such key
employee. However, an option which is a nonqualified stock option and any
related surrender right and any restricted stock grant may be transferable by a
key employee to the extent provided in the related option or restricted stock
agreement subject to certain terms and conditions set forth in the 1994 Stock
Plan.
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Adjustment of Shares
The 1994 Stock Plan provides for adjustment by the Committee in an equitable
manner of the number, kind or class of shares of common stock (1) reserved
under the 1994 Stock Plan, (2) subject to the individual limitations on grants
of options set forth in the 1994 Stock Plan, (3) subject to options granted
under the 1994 Stock Plan and the exercise prices thereof and (4) underlying
restricted stock grants, to reflect changes in the capitalization of NCBC and
in the event of transactions which provide for the substitution or assumption
of such options or restricted stock grants.
Sale, Merger or Change in Control
Generally, upon a change of control of NCBC, all options vest and become
immediately exercisable and the restrictions on restricted stock lapse.
Term of the 1994 Stock Plan
The 1994 Stock Plan shall terminate either (1) on the tenth anniversary of
the 1994 Stock Plan's original effective date (i.e., September 9, 2003), in
which case the 1994 Stock Plan shall continue in effect until all outstanding
grants have been surrendered, exercised, forfeited, become forfeitable or are
no longer exercisable, or (2) if earlier, on the date on which all of the
common stock reserved under the 1994 Stock Plan has been issued or is no longer
available for use under the 1994 Stock Plan.
Amendment to the 1994 Stock Plan
The 1994 Stock Plan may be amended by the NCBC Board from time to time to
the extent that the NCBC Board deems necessary or appropriate; provided,
however, no such amendment shall be made absent the approval of the
shareholders of NCBC required under Sections 162(m) and 422 of the U.S. tax
code. The NCBC Board may also suspend the granting of options and restricted
stock under the 1994 Stock Plan at any time and may terminate the 1994 Stock
Plan at any time. The NCBC Board, however, may modify, amend or cancel any
options or restricted stock previously granted only under certain
circumstances.
Federal Income Tax Consequences Summary
This is a summary of the current federal income tax consequences of the
grant, exercise, or surrender of an option or surrender right ("stock
appreciation right") and the grant of restricted stock under the 1994 Stock
Plan. The federal income tax laws and regulations are frequently amended, and
such amendments may or may not be retroactive with respect to transactions
described in this summary. Furthermore, employees participating in the 1994
Stock Plan may be subject to taxes other than federal income taxes, such as
state and local income taxes and estate or inheritance taxes. Accordingly,
prior to surrendering or purchasing shares under the 1994 Stock Plan, or
selling or otherwise disposing of such shares, or the lapse of any restrictions
on any restricted stock, each employee should consult his or her own tax
adviser.
Grant of Options. An employee is not subject to federal income tax upon the
grant of an option pursuant to the 1994 Stock Plan nor will the grant of an
option result in an income tax deduction for NCBC.
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Exercise of Incentive Stock Options. As a result of the exercise of an
incentive stock option and the related transfer of common stock to an employee,
the employee normally will not recognize any income for federal income tax
purposes and NCBC normally will not be entitled to any federal income tax
deduction. However, the excess of the fair market value of shares transferred
upon the exercise of an incentive stock option over the option price of such
shares (the "spread") generally will constitute an item of alternative minimum
tax adjustment for the year in which the option is exercised.
If the common stock transferred pursuant to the exercise of an incentive
stock option is disposed of within two years from the date of the grant of the
option or within one year from the date of exercise (the "holding periods"),
the employee generally will recognize ordinary income equal to the lesser of
(1) the gain realized (which would be the excess of the amount realized on the
disposition over the option price) or (2) the spread. The balance, if any, of
the employee's gain over the amount treated as ordinary income on a disposition
generally will be long- or short-term capital gain depending upon whether the
holding period applicable to long-term capital assets is satisfied. NCBC
normally will be entitled to a federal income tax deduction equal to any
ordinary income recognized by the employee.
Following satisfaction of the holding periods, the sale or other taxable
disposition of shares of common stock acquired by the exercise of an incentive
stock option generally will result in long-term capital gain or loss treatment
with respect to the difference between the amount realized on the disposition
and the incentive stock option exercise price. NCBC will not be entitled to any
federal income tax deduction as a result of a disposition of such shares after
the holding periods.
Exercise of Non-Qualified Stock Option. As a result of the exercise of a
non-qualified stock option, the employee generally will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of
the shares transferred to the employee upon exercise over the option price, and
NCBC generally will be entitled to a corresponding federal income tax
deduction. Depending on the period the common stock is held after exercise, the
sale or other taxable disposition of shares of common stock acquired through
the exercise of a non-qualified stock option generally will result in a short-
or long-term capital gain or loss equal to the difference between the amount
realized on such disposition and the fair market value of such shares on the
date of transfer.
Special Rules. Special rules will apply to an employee who exercises an
option by paying the option price, in whole or in part, by the transfer to NCBC
of previously acquired shares of common stock.
Restricted Stock. The fair market value of restricted stock will be taxable
to the employee (absent an election under Section 83(b) of the U.S. tax code)
as ordinary income at the time the common stock transferred to the employee
pursuant to the grant no longer is subject to a substantial risk of forfeiture
or the common stock is transferable. If an election is made under Section 83(b)
of the U.S. tax code, the fair market value of the common stock will be taxable
to the employee at the time the common stock is transferred to the employee
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pursuant to the grant. NCBC generally, will be entitled to a federal income tax
deduction in an amount equal to the ordinary income recognized by the employee
in the taxable year the employee recognizes such income.
Section 162(m). Section 162(m) of the U.S. tax code generally denies a
corporate tax deduction for annual compensation exceeding $1 million paid to
the chief executive officer and the four other most highly compensated officers
of a public corporation. Certain types of compensation, including options and
stock appreciation rights granted with a fair-market-value exercise price, are
generally excluded from this deduction limit. So that options and surrender
rights granted under the 1994 Stock Plan will qualify for the exclusion for
performance-based compensation, the amendments to the 1994 Stock Plan are being
submitted to shareholders for approval. By approving the amendments to the 1994
Stock Plan, the shareholders will be approving limits on options and stock
appreciation rights contained therein for purposes of Section 162(m) of the
U.S. tax code.
Approval of the amendment to the 1994 Stock Plan requires the affirmative vote
of the holders of a majority of the shares of common stock casting votes at the
special meeting. The NCBC Board recommends a vote FOR the approval of the
amendment to the 1994 Stock Plan.
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 CCB by Wachtell, Lipton, Rosen &
Katz, New York, New York.
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, 1999, as set forth in their report, which is incorporated by
reference in this Joint Proxy Statement/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 CCB as of December 31, 1999 and
1998 and for each of the years in the three-year period ended December 31,
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 by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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SHAREHOLDER PROPOSALS
NCBC shareholders may submit proposals to be considered for shareholder
action at the 2001 annual meeting of shareholders if they do so in accordance
with the applicable regulations of the SEC. Any of these proposals must be
received by the Secretary of NCBC no later than , 2000 in order to be
considered for inclusion in NCBC's 2001 annual meeting proxy materials. If a
shareholder desires to bring business before the 2001 annual meeting of
shareholders that is not a proposal submitted for inclusion in NCBC's proxy
statement, notice must be received by the Secretary of NCBC no later than ,
2000.
CCB will hold a 2001 annual meeting of shareholders only if the merger is
not consummated before the time of the meeting. In the event that this meeting
occurs, any proposals of shareholders intended to be presented at the 2001
annual meeting of shareholders must be received by the Secretary of CCB no
later than , 2000 in order to be considered for inclusion in the CCB proxy
materials relating to that meeting.
OTHER MATTERS
As of the date of this document, the CCB Board and the NCBC Board know of no
matters that will be presented for consideration at either of the special
shareholders' meetings other than as described in this document. If any other
matters properly come before the NCBC special meeting, or any adjournments or
postponements thereof, or before the CCB special meeting, or any adjournment
thereof, of these meetings, and be voted upon, the enclosed proxies will be
deemed to confer discretionary authority on the individuals that they name as
proxies to vote the shares represented by these proxies as to any of these
matters. The individuals named as proxies intend to vote or not to vote in
accordance with the recommendation of the respective managements of CCB and
NCBC.
WHERE YOU CAN FIND MORE INFORMATION
NCBC has filed a registration statement with the SEC under the Securities
Act that registers the distribution to CCB shareholders of the shares of NCBC
common stock to be issued in connection with the merger. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about NCBC and NCBC common stock. The rules and
regulations of the SEC allow us to omit some information included in the
registration statement from this document.
105
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Both NCBC and CCB are subject to the informational requirements of the
Exchange Act and, in accordance therewith, file reports, proxy statements and
other information with the SEC. You may read and copy any document that NCBC or
CCB 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 60611-2511
</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.
The SEC also maintains a world wide web site that contains reports, proxy
statements and other information about issuers, like NCBC and CCB, who file
electronically with the SEC. The address of that site is http://www.sec.gov.
You can also inspect NCBC filings at the offices of The Nasdaq Stock Market,
Inc. at 1735 K Street, N.W., Washington, D.C. 20006. You can also inspect CCB
filings at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF DOCUMENTS FILED WITH THE SEC
The SEC allows NCBC and CCB to "incorporate by reference" in this document
the information each company files with the SEC, which means:
. incorporated documents are considered part of this document;
. NCBC and CCB can disclose important information to you by referring you
to those documents; and
. information that NCBC and CCB file with the SEC will automatically
update and supersede the information in this document 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, 1999,
filed on March 27, 2000;
(2) NCBC's Current Reports on Form 8-K filed on March 21, 2000 and March 27,
2000 and NCBC's Amended Current Reports on Form 8-K/A filed on March 24,
2000 and March 27, 2000; and
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(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.
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 NCBC 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.
CCB incorporates by reference the documents listed below which were filed
with the SEC under the Exchange Act:
(1) CCB's Annual Report on Form 10-K for the year ended December 31, 1999,
filed on March 17, 2000; and
(2) CCB's Current Reports on Form 8-K filed on February 8, 2000 and March 22,
2000 and CCB's Amended Current Report on Form 8-K/A filed on March 24,
2000.
CCB also incorporates by reference each of the following documents that it
will file between the date of this document and the date of the CCB special
meeting:
. Reports filed under Section 13(a) and (c) of the Exchange Act;
. Definitive proxy or information statement 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.
This Joint Proxy Statement/Prospectus incorporates certain NCBC and CCB
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 Joint Proxy Statement/Prospectus is delivered, upon written or oral
request, with respect to documents that relate to NCBC, from Kathryn L.
Shelton, Assistant Treasurer, National Commerce Bancorporation, One Commerce
Square, Memphis, Tennessee 38150; Telephone No. (901) 523-3242, and, with
respect to documents that relate to CCB, from W. Harold Parker, Jr., Senior
Vice President and Controller, CCB Financial Corporation, 111 Corcoran Street,
Durham, North Carolina 27701.
In order to ensure timely delivery of such documents, any request should be
made by May , 2000.
107
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FORWARD-LOOKING STATEMENTS
This document, including information included or incorporated by reference
in this document, contains forward-looking statements with respect to the
financial condition, results of operations and business of NCBC and CCB and,
assuming the consummation of the merger, a combined NCBC and CCB, including:
. statements about the synergies (including cost savings), and accretion
to reported earnings expected to be realized from the merger;
. statements about business opportunities and strategies potentially
available to the combined company; the restructuring charges expected to
be incurred in connection with the merger;
. statements about management, operations and policies of the combined
company after the merger; and
. statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends," "estimates," "should"
or similar expressions.
These forward-looking statements involve some risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by these forward-looking statements include, among other things,
the following possibilities:
. expected cost savings from the merger cannot be fully realized or
realized within the expected time;
. revenues following the merger are lower than expected;
. retention of key personnel;
. competitive pressure among depository institutions increases
significantly;
. costs or difficulties related to the integration of the businesses of
NCBC and CCB are greater than expected;
. changes in the interest rate environment reduce interest margins;
. general economic conditions, either nationally or in the states in which
the combined company will be doing business, are less favorable than
expected;
. legislation or regulatory requirements or changes adversely affect the
business in which the combined company will be engaged; and
. changes may occur in the securities market.
All dividends on NCBC common stock are subject to determination by the NCBC
Board in its discretion. See "Where You Can Find More Information" on page 105.
108
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
"Acquisition Transaction"................................................... 65
"BIF"....................................................................... 79
"CCB Option Agreement"...................................................... 62
"CCB Option Shares"......................................................... 63
"Default"................................................................... 77
"DPC Shares"................................................................ 41
"effective time"............................................................ 43
"exchange agent"............................................................ 42
"exchange fund"............................................................. 42
"exchange ratio"............................................................ 21
"Exercise Termination Event"................................................ 66
"FHC"....................................................................... 75
"FICO"...................................................................... 80
"Holder".................................................................... 64
"In danger of default"...................................................... 77
"Initial Triggering Event".................................................. 64
"Issuer".................................................................... 62
"Issuer Common Stock"....................................................... 63
"Issuer Option"............................................................. 62
"Issuer Option Agreement"................................................... 62
</TABLE>
<TABLE>
<S> <C>
"Issuer Option Repurchase Price"............................................ 66
"Issuer Option Shares....................................................... 63
"Issuer Option Share Repurchase Price"...................................... 66
"Market/Offer Price"........................................................ 66
"material adverse effect"................................................... 50
"NCBC Option Agreement"..................................................... 62
"NCBC Option Shares......................................................... 63
"OCC"....................................................................... 75
"OTS"....................................................................... 75
"Option Agreements"......................................................... 62
"Optionee".................................................................. 62
"Owner"..................................................................... 66
"Repurchase Event".......................................................... 67
"requisite regulatory approvals"............................................ 50
"SAIF"...................................................................... 79
"Subsequent Triggering Event"............................................... 65
"Substitute Option"......................................................... 67
"Surrender Price"........................................................... 68
"Trust Account Shares"...................................................... 41
</TABLE>
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UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed balance sheet as of December 31,
1999, combines the historical consolidated balance sheets of NCBC and CCB as if
the merger of CCB into NCBC had been effective on December 31, 1999, after
giving effect to certain estimated adjustments. The unaudited pro forma
condensed statements of income for the years ended December 31, 1999, 1998 and
1997 present the results of operations of NCBC and CCB as if the merger of CCB
into NCBC had been effective at the beginning of the earliest period presented.
The unaudited pro forma combined condensed financial information has been
prepared from, and should be read in conjunction with, the historical
consolidated financial statements of NCBC and CCB.
The unaudited pro forma condensed financial information reflects the
application of the pooling-of-interests method of accounting for the merger.
Under this method of accounting, the recorded assets, liabilities,
stockholders' equity, income and expenses of NCBC and CCB are combined and
reflected at historical amounts. You should not assume that NCBC and CCB would
have achieved the pro forma combined results if they had actually been combined
during the periods presented.
The combined company expects to incur merger and other non-recurring
expenses as a result of the merger and to achieve merger benefits in the form
of operating cost savings. The pro forma earnings, which do not reflect any
direct costs or potential savings which are expected to result from the
consolidation of the operations of NCBC and CCB, are not necessarily indicative
of the results of future operations. No assurances can be given with respect to
the ultimate level of expense savings.
110
<PAGE>
NATIONAL COMMERCE BANCORPORATION
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
(2) (5) (6)
(4) Pro Forma NCBC/CCB
Assets NCBC CCB Adjustments Combined
------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents.... $ 261,296 $ 400,989 -- $ 662,285
Available-for-sale
securities.................. 553,928 1,563,120 -- 2,117,048
Held-to-maturity securities.. 1,759,383 73,370 -- 1,832,753
Trading account securities... 30,294 -- -- 30,294
Net loans.................... 3,926,192 5,876,918 -- 9,803,110
Premises and equipment, net.. 47,830 113,858 -- 161,688
Other assets................. 227,250 158,043 -- 385,293
---------- ---------- ------- -----------
Total assets................ $6,806,173 $8,186,298 -- $14,992,471
========== ========== ======= ===========
<CAPTION>
Liabilities and Stockholders'
Equity
- -----------------------------
<S> <C> <C> <C> <C>
Deposits..................... $4,495,900 $6,717,025 -- $11,212,925
Short-term borrowings........ 883,038 229,670 -- 1,112,708
Federal Home Loan Bank
advances.................... 714,335 395,937 -- 1,110,272
Accounts payable and accrued
liabilities................. 99,241 90,720 89,100 279,061
Long-term debt............... 6,372 32,985 -- 39,357
---------- ---------- ------- -----------
Total liabilities........... 6,198,886 7,466,337 89,100 13,754,323
Capital trust pass-through
securities.................. 49,909 -- -- 49,909
Common stock................. 216,446 197,900 (3,959) 410,387
Additional paid in capital... 90,230 29,690 3,959 123,879
Retained earnings............ 253,940 506,092 (89,100) 670,932
Accumulated other
comprehensive loss.......... (3,238) (13,721) -- (16,959)
---------- ---------- ------- -----------
Total stockholders' equity... 557,378 719,961 (89,100) 1,188,239
---------- ---------- ------- -----------
Total liabilities and
stockholders' equity........ $6,806,173 $8,186,298 -- $14,992,471
========== ========== ======= ===========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial information.
111
<PAGE>
NATIONAL COMMERCE BANCORPORATION
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(2) (3) (6)
(4) Pro Forma NCBC/CCB
NCBC CCB Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Loans............................... $311,293 $478,908 $ -- $ 790,201
Securities:
Taxable............................. 136,424 91,529 227,953
Non-Taxable......................... 12,108 4,360 16,468
-------- -------- ------ ---------
148,532 95,889 -- 244,421
Other............................... 8,203 14,802 23,005
-------- -------- ------ ---------
Total interest income............... 468,028 589,599 1,057,627
Interest Expense:
Deposits............................ 158,477 232,767 391,244
Borrowings.......................... 73,013 24,780 97,793
-------- -------- ------ ---------
Total interest expense.............. 231,490 257,547 -- 489,037
-------- -------- ------ ---------
Net interest income................. 236,538 332,052 -- 568,590
Provision for loan losses........... 15,206 14,296 29,502
-------- -------- ------ ---------
Net interest income after provision
for loan losses.................... 221,332 317,756 -- 539,088
Other income:
Trust service income................ 10,139 12,574 22,713
Service charges on deposits......... 21,705 61,831 83,536
Other service charges and fees...... 20,674 24,672 45,346
Broker/dealer revenue............... 18,092 -- 18,092
Investment securities gains
(losses)........................... (1,789) 1,378 (411)
Other............................... 23,693 57,999 81,692
-------- -------- ------ ---------
Total other income.................. 92,514 158,454 -- 250,968
Other Expenses:
Salaries and employee benefits...... 76,343 136,305 212,648
Occupancy expense................... 14,086 17,331 31,417
Furniture and equipment expense..... 7,500 17,713 25,213
Other............................... 57,329 72,687 130,016
-------- -------- ------ ---------
Total other expenses................ 155,258 244,036 -- 399,294
-------- -------- ------ ---------
Income before income taxes.......... 158,588 232,174 -- 390,762
Income taxes........................ 51,354 81,351 132,705
-------- -------- ------ ---------
Net income.......................... $107,234 $150,823 $ -- $ 258,057
======== ======== ====== =========
Net income per common share--basic.. $ 1.00 $ 3.77 $ 1.26
Net income per common share--
diluted............................ $ 0.99 $ 3.74 $ 1.24
Weighted average shares
outstanding--basic................. 106,749 39,944 57,919 204,612
Weighted averages shares
outstanding--diluted............... 108,823 40,315 58,457 207,595
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial information.
112
<PAGE>
NATIONAL COMMERCE BANCORPORATION
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(2) (3) (6)
(4) Pro Forma NCBC/CCB
NCBC CCB Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Loans.................................. $275,890 $470,664 $ -- $746,554
Securities:
Taxable................................ 110,649 83,754 194,403
Non-Taxable............................ 8,451 4,738 13,189
-------- -------- ------ --------
119,100 88,492 207,592
Other.................................. 8,118 18,270 26,388
-------- -------- ------ --------
Total interest income.................. 403,108 577,426 980,534
Interest Expense:
Deposits............................... 142,967 232,609 375,576
Borrowings............................. 57,245 21,953 79,198
-------- -------- ------ --------
Total interest expense................. 200,212 254,562 -- 454,774
-------- -------- ------ --------
Net interest income.................... 202,896 322,864 525,760
Provision for loan losses.............. 10,079 15,884 25,963
-------- -------- ------ --------
Net interest income after provision for
loan losses........................... 192,817 306,980 -- 499,797
Other income:
Trust service income................... 10,135 10,221 20,356
Service charges on deposits............ 19,747 54,117 73,864
Other service charges and fees......... 17,500 19,661 37,161
Broker/dealer revenue.................. 20,441 -- 20,441
Investment securities gains............ 224 2,178 2,402
Other.................................. 19,945 26,904 46,849
-------- -------- ------ --------
Total other income..................... 87,992 113,081 -- 201,073
Other Expenses:
Salaried and employee benefits......... 70,712 124,419 195,131
Occupancy expense...................... 12,643 15,890 28,533
Furniture and equipment expense........ 6,265 14,522 20,787
Other.................................. 59,279 75,386 134,665
-------- -------- ------ --------
Total other expenses................... 148,899 230,217 -- 379,116
-------- -------- ------ --------
Income before income taxes............. 131,910 189,844 -- 321,754
Income taxes........................... 43,890 68,632 112,522
-------- -------- ------ --------
Net income............................. $ 88,020 $121,212 $ -- $209,232
======== ======== ====== ========
Net income per common share--basic..... $ 0.85 $ 2.96 $ 1.03
Net income per common share--diluted... $ 0.83 $ 2.93 $ 1.01
Weighted average shares outstanding--
basic................................. 103,636 40,898 59,302 203,836
Weighted average shares outstanding--
diluted............................... 105,970 41,409 60,043 207,422
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial information.
113
<PAGE>
NATIONAL COMMERCE BANCORPORATION
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(2) (3) (6)
(4) Pro Forma NCBC/CCB
NCBC CCB Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Loans................................. $243,079 $442,618 $ -- $685,697
Securities:
Taxable............................... 98,268 90,229 188,497
Non-Taxable........................... 8,038 4,840 12,878
-------- -------- ------ --------
106,306 95,069 -- 201,375
Other................................. 4,573 12,776 17,349
-------- -------- ------ --------
Total interest income................. 353,958 550,463 -- 904,421
Interest Expense:
Deposits.............................. 126,741 229,600 356,341
Borrowings............................ 55,410 20,499 75,909
-------- -------- --------
Total interest expense................ 182,151 250,099 -- 432,250
-------- -------- ------ --------
Net interest income................... 171,807 300,364 -- 472,171
Provision for loan losses............. 17,363 16,376 33,739
-------- -------- ------ --------
Net interest income after provision
for loan losses...................... 154,444 283,988 -- 438,432
Other income:
Trust service income.................. 9,284 8,415 17,699
Service charges on deposits........... 17,673 44,937 62,610
Other service charges and fees........ 13,069 16,450 29,519
Broker/dealer revenue................. 13,115 -- 13,115
Investment securities gains (losses).. (127) 480 353
Other................................. 32,915 23,117 56,032
-------- -------- ------ --------
Total other income.................... 85,929 93,399 -- 179,328
Other Expenses:
Salaries and employee benefits........ 60,934 114,572 175,506
Occupancy expense..................... 11,162 15,595 26,757
Furniture and equipment expense....... 5,356 12,867 18,223
Other................................. 54,129 83,164 137,293
-------- -------- ------ --------
Total other expenses.................. 131,581 226,198 -- 357,779
-------- -------- ------ --------
Income before income taxes............ 108,792 151,189 -- 259,981
Income taxes.......................... 36,338 55,765 92,103
-------- -------- ------ --------
Net income............................ $ 72,454 $ 95,424 $ -- $167,878
======== ======== ====== ========
Net income per common share--basic.... $ 0.72 $ 2.31 $ 0.83
Net income per common share--diluted.. $ 0.69 $ 2.28 $ 0.81
Weighted average shares outstanding--
basic................................ 101,083 41,438 60,085 202,606
Weighted averages shares outstanding--
diluted.............................. 104,454 41,947 60,823 207,224
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial information.
114
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
(1) The Unaudited Pro Forma Condensed Financial Information presented herein is
not necessarily indicative of the results of operations or the combined
financial position that would have resulted had the merger been consummated
at the beginning of the earliest period presented, nor is it necessarily
indicative of the results of operations in future periods or the future
financial position of the combined entities. The Unaudited Pro Forma
Condensed Financial Information should be read together with the historical
consolidated financial statements and the related notes thereto of each
NCBC and CCB incorporated by reference herein.
(2) It is assumed that the merger will be accounted for on a pooling-of-
interests accounting basis, and accordingly, the related pro forma amounts
are included using the exchange ratio of 2.45 shares of NCBC common stock
for each share of CCB common stock. In addition, common stock and
additional paid in capital include a reclassification adjustment to reflect
the change in par value of outstanding shares of CCB to the $2.00 par value
of NCBC common stock.
(3) Earnings per share data has been computed based on the combined historical
net income applicable to NCBC shareholders and CCB shareholders using the
historical weighted average shares outstanding of NCBC common stock and the
weighted average outstanding shares of CCB common stock, adjusted to
equivalent shares of NCBC common stock for each of the periods presented.
(4) Certain reclassifications have been included to ensure consistent
presentation.
(5) The Unaudited Pro Forma Condensed Financial Information, with the exception
of the Unaudited Pro Forma Condensed Balance Sheet, does not include any
material expenses related to the merger. NCBC currently estimates pre-tax
merger and integration and other nonrecurring merger related charges of
approximately $110 million ($89.1 million net of taxes) will be recorded.
(6) NCBC expects to realize significant revenue enhancements and cost savings
from the merger, primarily through the realization of certain operating
efficiencies and reductions in systems, labor and administrative costs. The
Unaudited Pro Forma Condensed Financial Information, which does not reflect
any revenue enhancements, direct costs or potential savings, is therefore
not necessarily indicative of the results of future operations. There can
be no assurance that anticipated revenue enhancements or cost savings will
be achieved in the expected amounts or at the times anticipated.
115
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
CCB FINANCIAL CORPORATION
and
NATIONAL COMMERCE BANCORPORATION
----------------
Dated as of March 17, 2000
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
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AGREEMENT AND PLAN OF MERGER
ARTICLE I
The Merger
1.1 The Merger.......................................................... A-5
1.2 Effective Time...................................................... A-6
1.3 Effects of the Merger............................................... A-6
1.4 Conversion of CCB Common Stock...................................... A-6
1.5 NCBC Capital Stock.................................................. A-7
1.6 Options............................................................. A-7
1.7 Charter............................................................. A-8
1.8 By-Laws............................................................. A-8
1.9 Tax and Accounting Consequences..................................... A-8
1.10 Management.......................................................... A-8
1.11 Board of Directors.................................................. A-8
1.12 Headquarters of Surviving Corporation............................... A-9
ARTICLE II
Exchange of Shares
2.1 NCBC to Make Shares Available....................................... A-9
2.2 Exchange of Shares.................................................. A-9
ARTICLE III
Representations and Warranties of NCBC
3.1 Corporate Organization.............................................. A-11
3.2 Capitalization...................................................... A-12
3.3 Authority; No Violation............................................. A-13
3.4 Consents and Approvals.............................................. A-14
3.5 Reports............................................................. A-15
3.6 Financial Statements................................................ A-15
3.7 Broker's Fees....................................................... A-16
3.8 Absence of Certain Changes or Events................................ A-16
3.9 Legal Proceedings................................................... A-16
3.10 Taxes and Tax Returns............................................... A-17
3.11 Employees........................................................... A-18
3.12 SEC Reports......................................................... A-19
3.13 Compliance with Applicable Law...................................... A-20
3.14 Certain Contracts................................................... A-20
3.15 Agreements with Regulatory Agencies................................. A-21
3.16 Interest Rate Risk Management Instruments........................... A-21
3.17 Undisclosed Liabilities............................................. A-22
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
3.18 Insurance........................................................... A-22
3.19 Environmental Liability............................................. A-22
3.20 State Takeover Laws................................................. A-22
3.21 Reorganization; Pooling of Interests................................ A-22
3.22 Financial Holding Company Status.................................... A-23
ARTICLE IV
Representations and Warranties of CCB
4.1 Corporate Organization.............................................. A-23
4.2 Capitalization...................................................... A-23
4.3 Authority; No Violation............................................. A-24
4.4 Consents and Approvals.............................................. A-25
4.5 Reports............................................................. A-25
4.6 Financial Statements................................................ A-26
4.7 Broker's Fees....................................................... A-26
4.8 Absence of Certain Changes or Events................................ A-27
4.9 Legal Proceedings................................................... A-27
4.10 Taxes and Tax Returns............................................... A-27
4.11 Employees........................................................... A-29
4.12 SEC Reports......................................................... A-30
4.13 Compliance with Applicable Law...................................... A-30
4.14 Certain Contracts................................................... A-31
4.15 Agreements with Regulatory Agencies................................. A-32
4.16 Interest Rate Risk Management Instruments........................... A-32
4.17 Undisclosed Liabilities............................................. A-32
4.18 Insurance........................................................... A-32
4.19 Environmental Liability............................................. A-32
4.20 State Takeover Laws; CCB Rights Agreement........................... A-33
4.21 Reorganization; Pooling of Interests................................ A-33
4.22 Financial Holding Company Status.................................... A-33
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Conduct of Businesses Prior to the Effective Time................... A-33
5.2 Forbearances........................................................ A-34
ARTICLE VI
Additional Agreements
6.1 Regulatory Matters.................................................. A-36
6.2 Access to Information............................................... A-37
6.3 Shareholders' Approvals............................................. A-38
6.4 Legal Conditions to Merger.......................................... A-38
6.5 Affiliates; Publication of Combined Financial Results............... A-38
</TABLE>
A-3
<PAGE>
<TABLE>
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<C> <S> <C>
6.6 Stock Quotation.................................................... A-39
6.7 Employee Benefit Plans............................................. A-39
6.8 Indemnification; Directors' and Officers' Insurance................ A-40
6.9 Additional Agreements.............................................. A-40
6.10 Advice of Changes.................................................. A-41
6.11 Dividends.......................................................... A-41
6.12 Exemption from Liability Under Section 16(b)....................... A-41
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation To Effect the Merger......... A-41
7.2 Conditions to Obligations of CCB................................... A-43
7.3 Conditions to Obligations of NCBC.................................. A-43
ARTICLE VIII
Termination and Amendment
8.1 Termination........................................................ A-44
8.2 Effect of Termination.............................................. A-44
8.3 Amendment.......................................................... A-44
8.4 Extension; Waiver.................................................. A-45
ARTICLE IX
General Provisions
9.1 Closing............................................................ A-45
9.2 Nonsurvival of Representations, Warranties and Agreements.......... A-45
9.3 Expenses........................................................... A-45
9.4 Notices............................................................ A-46
9.5 Interpretation..................................................... A-46
9.6 Counterparts....................................................... A-46
9.7 Entire Agreement................................................... A-46
9.8 Governing Law...................................................... A-46
9.9 Publicity.......................................................... A-47
9.10 Assignment; Third Party Beneficiaries.............................. A-47
</TABLE>
Exhibit A--CCB Option Agreement
Exhibit B--NCBC Option Agreement
Exhibit 6.5(a)(1)--Form of Affiliate Letter Addressed to NCBC
Exhibit 6.5(a)(2)--Form of Affiliate Letter Addressed to CCB
A-4
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 17, 2000 (this "Agreement"),
by and between CCB Financial Corporation, a North Carolina corporation ("CCB"),
and National Commerce Bancorporation, a Tennessee corporation ("NCBC").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of NCBC and CCB have determined that it is
in the best interests of their respective corporations and shareholders to
consummate the strategic business combination transaction provided for herein
in which CCB will, subject to the terms and conditions set forth herein, merge
with and into NCBC (the "Merger"), so that NCBC is the surviving corporation
(hereinafter sometimes referred to in such capacity as the "Surviving
Corporation") in the Merger; and
WHEREAS, as a condition to, and immediately after, the execution of this
Agreement, and as a condition to the execution of the NCBC Option Agreement,
CCB and NCBC are entering into a stock option agreement (the "CCB Option
Agreement") in the form attached hereto as Exhibit A; and
WHEREAS, as a condition to, and immediately after, the execution of this
Agreement, and as a condition to the execution of the CCB Option Agreement, CCB
and NCBC are entering into a stock option agreement (the "NCBC Option
Agreement", and together with the CCB Option Agreement, the "Option
Agreements") in the form attached hereto as Exhibit B; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
The Merger
1.1 The Merger. (a) Subject to the terms and conditions of this Agreement,
in accordance with Business Corporation Act of the State of North Carolina (the
"NCBCA") and the Business Corporation Act of the State of Tennessee (the
"TBCA"), at the Effective Time (as defined below), CCB shall merge with and
into NCBC. NCBC shall be the Surviving Corporation in the Merger, and shall
continue its corporate existence under the laws of the State of Tennessee. Upon
consummation of the Merger, the separate corporate existence of CCB shall
terminate.
A-5
<PAGE>
(b) NCBC and CCB may at any time change the method of effecting the
combination of CCB and NCBC including without limitation the provisions of this
Article I, if and to the extent they deem such change to be desirable,
including without limitation to provide for a merger of either party with and
into a wholly-owned subsidiary of the other; provided, however, that no such
change shall (i) alter or change the amount of consideration to be provided to
holders of CCB Common Stock (as defined below) as provided for in this
Agreement (the "Merger Consideration"), (ii) adversely affect the tax treatment
of shareholders as a result of receiving the Merger Consideration or (iii)
materially impede or delay consummation of the transactions contemplated by
this Agreement.
1.2 Effective Time. The Merger shall become effective as set forth in the
"North Carolina Articles of Merger" and the "Tennessee Articles of Merger"
(each an "Article of Merger" and, together, the "Articles of Merger") which
shall, respectively, be filed with the Secretary of State of the State of North
Carolina (the "North Carolina Secretary") and the Secretary of State of the
State of Tennessee (the "Tennessee Secretary") on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective,
as set forth in the Articles of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Section 55-11-06 of the NCBCA and Section 48-21-
108 of the TBCA.
1.4 Conversion of CCB Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of CCB, NCBC or the holder of any of
the following securities:
(a) Subject to Section 2.2(e), each share of the common stock, par value
$5.00 per share, of CCB (the "CCB Common Stock") issued and outstanding
immediately prior to the Effective Time (together with the preferred share
purchase rights (the "CCB Shareholder Rights") issued to the holders
thereof pursuant to that certain Amended and Restated Rights Agreement,
dated as of October 1, 1998 (as such may be amended, supplemented, restated
or replaced from time to time), between CCB and Central Carolina Bank and
Trust Company (the "CCB Rights Agreement") except for shares of CCB Common
Stock owned, directly or indirectly, by CCB or NCBC or any of their
respective wholly-owned Subsidiaries (other than shares of CCB Common Stock
held, directly or indirectly, in trust accounts, managed accounts and the
like, or otherwise held in a fiduciary capacity, that are beneficially
owned by third parties (any such shares, whether held directly or
indirectly by CCB or NCBC, as the case may be, being referred to herein as
"Trust Account Shares")) or shares of CCB Common Stock held on account of a
debt previously contracted ("DPC Shares") shall be converted into the right
to receive 2.45 shares (the "Exchange Ratio") of the common stock, par
value $2.00 per share, of NCBC (the "NCBC Common Stock").
(b) All of the shares of CCB Common Stock (together with the associated
CCB Shareholder Rights converted into the right to receive NCBC Common
Stock pursuant to this Article I shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the Effective
Time, and each certificate (each a "Certificate")
A-6
<PAGE>
previously representing any such shares of CCB Common Stock (and the
associated CCB Shareholder Rights) shall thereafter represent only the
right to receive (i) a certificate representing the number of whole shares
of NCBC Common Stock and (ii) cash in lieu of fractional shares into which
the shares of CCB Common Stock represented by such Certificate have been
converted pursuant to this Section 1.4 and Section 2.2(e). Certificates
previously representing shares of CCB Common Stock (together with the
associated CCB Shareholder Rights) shall be exchanged for certificates
representing whole shares of NCBC Common Stock and cash in lieu of
fractional shares issued in consideration therefor upon the surrender of
such Certificates in accordance with Section 2.2, without any interest
thereon. If, prior to the Effective Time, the outstanding shares of NCBC
Common Stock or CCB Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or
other similar change in capitalization, an appropriate and proportionate
adjustment shall be made to the Exchange Ratio.
(c) At the Effective Time, all shares of CCB Capital Stock (as defined
below) that are owned, directly or indirectly, by CCB or NCBC or any of
their respective wholly-owned Subsidiaries (other than Trust Account Shares
and DPC Shares) shall be cancelled and shall cease to exist and no stock of
NCBC or other consideration shall be delivered in exchange therefor. All
shares of NCBC Common Stock that are owned by CCB or any of its wholly-
owned Subsidiaries (other than Trust Account Shares and DPC Shares) shall
as of the Effective Time be cancelled and become authorized but unissued
shares of NCBC Common Stock.
1.5 NCBC Capital Stock. Except as otherwise provided in Section 1.4(c), at
and after the Effective Time, each share of NCBC Capital Stock (as defined
below) issued and outstanding immediately prior to the Closing Date shall
remain an issued and outstanding share of capital stock of the Surviving
Corporation and shall not be affected by the Merger.
1.6 Options. (a) At the Effective Time, each option granted by CCB to
purchase shares of CCB Common Stock which is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares of
CCB Common Stock and shall be converted automatically into an option to
purchase shares of NCBC Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the CCB
Stock Plans (as defined below) and the agreements evidencing grants
thereunder):
(i) The number of shares of NCBC Common Stock to be subject to the new
option shall be equal to the product of the number of shares of CCB Common
Stock subject to the original option and the Exchange Ratio, provided that
any fractional shares of NCBC Common Stock resulting from such
multiplication shall be rounded to the nearest whole share; and
(ii) The exercise price per share of NCBC Common Stock under the new
option shall be equal to the exercise price per share of CCB Common Stock
under the original
A-7
<PAGE>
option divided by the Exchange Ratio, provided that such exercise price
shall be rounded to the nearest whole cent.
(c) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")), shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code. The duration
and other terms of the new option shall be the same as the original option
except that all references to CCB shall be deemed to be references to NCBC.
1.7 Charter. Subject to the terms and conditions of this Agreement, at the
Effective Time, the Restated Charter of NCBC, with such amendments as to which
the parties may hereafter agree to submit to NCBC's shareholders, including,
without limitation, an amendment to increase the authorized number of shares of
NCBC Common Stock and NCBC Preferred Stock to levels reasonable in light of the
Surviving Corporation's overall capitalization, taking into account the
issuance of shares of NCBC Common Stock pursuant to the terms hereof and all
options, warrants and rights to purchase shares of NCBC Capital Stock which
will be outstanding following the consummation of the Merger, and which may be
properly approved by NCBC's Board of Directors and by such shareholders (the
"NCBC Charter"), shall be the Charter of the Surviving Corporation until
thereafter amended in accordance with applicable law.
1.8 By-Laws. Subject to the terms and conditions of this Agreement, at the
Effective Time, the By-Laws of NCBC shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 Tax and Accounting Consequences. It is intended that the Merger shall
constitute a "reorganization" within the meaning of Section 368(a) of the Code,
that this Agreement shall constitute a "plan of reorganization" for the
purposes of Sections 354 and 361 of the Code and that the Merger shall be
accounted for as a "pooling of interests" under generally accepted accounting
principles ("GAAP").
1.10 Management. At the Effective Time, Thomas M. Garrott shall be Chairman
of the Board of Directors and Chairman of the Executive Committee of the Board
of Directors of the Surviving Corporation and Ernest C. Roessler shall be
President and Chief Executive Officer of the Surviving Corporation.
1.11 Board of Directors. (a) From and after the Effective Time, until duly
changed in compliance with applicable law and the Charter and By-Laws of the
Surviving Corporation, the Board of Directors of the Surviving Corporation
shall consist of twenty (20) directors, and shall initially include Mr. Garrott
and Mr. Roessler and an equal number of NCBC Directors and CCB Directors (each
as defined below). The initial NCBC Directors shall be selected by NCBC's Board
of Directors and the initial CCB Directors shall be selected by CCB's Board of
Directors. The NCBC Directors and CCB Directors shall be allocated among each
class in as nearly equal a number as possible. From and after the Effective
Time and until the second anniversary thereof, all vacancies on the Board of
Directors of the
A-8
<PAGE>
Surviving Corporation created by (i) the cessation of service of a CCB Director
shall be filled by a nominee selected by the continuing CCB Directors and (ii)
the cessation of service of a NCBC Director shall be filled by a nominee
selected by the continuing NCBC Directors.
(b) From and after the Effective Time until the second anniversary thereof,
each of the committees of the Board of Directors of the Surviving Corporation
shall be comprised of an equal number of CCB Directors and NCBC Directors, and
the respective chairmen of such committees shall be drawn equally from the CCB
Directors and the NCBC Directors, the identity of the members of such
committees to be otherwise mutually defined by Mr. Garrott and Mr. Roessler.
(c) The term "CCB Director" means (i) any person serving as a Director of
CCB on the date of this Agreement who continues as a Director of the Surviving
Corporation at the Effective Time and (ii) any person who becomes a Director of
the Surviving Corporation and who is designated as such by the continuing CCB
Directors prior to his or her election; and the term "NCBC Director" means (i)
any person serving as a Director of NCBC on the date of this Agreement who
becomes a Director of the Surviving Corporation at the Effective Time and (ii)
any person who becomes a Director of the Surviving Corporation and who is
designated as such by the continuing NCBC Directors prior to his or her
election.
1.12 Headquarters of Surviving Corporation. From and after the Effective
Time, the location of the headquarters and principal executive offices of the
Surviving Corporation shall be that of the headquarters and principal executive
offices of NCBC as of the date of this Agreement.
ARTICLE II
Exchange of Shares
2.1 NCBC to Make Shares Available. At or prior to the Effective Time, NCBC
shall deposit, or shall cause to be deposited, with The Bank of New York, or
another bank or trust company reasonably acceptable to each of CCB and NCBC
(the "Exchange Agent"), for the benefit of the holders of Certificates, for
exchange in accordance with this Article II, certificates representing the
shares of NCBC Common Stock, and cash in lieu of any fractional shares (such
cash and certificates for shares of NCBC Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund"), to be issued pursuant to Section 1.4 and paid pursuant
to Section 2.2(a) in exchange for outstanding shares of CCB Common Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time,
and in no event later than five business days thereafter, the Exchange Agent
shall mail to each holder of record of one or more Certificates a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of NCBC
A-9
<PAGE>
Common Stock and any cash in lieu of fractional shares into which the shares of
CCB Common Stock represented by such Certificate or Certificates shall have
been converted pursuant to this Agreement. Upon proper surrender of a
Certificate or Certificates for exchange and cancellation to the Exchange
Agent, together with such properly completed letter of transmittal, duly
executed, the holder of such Certificate or Certificates shall be entitled to
receive in exchange therefor, as applicable, (i) a certificate representing
that number of whole shares of NCBC Common Stock to which such holder of CCB
Common Stock shall have become entitled pursuant to the provisions of Article I
and (ii) a check representing the amount of any cash in lieu of fractional
shares which such holder has the right to receive in respect of the Certificate
or Certificates surrendered pursuant to the provisions of this Article II, and
the Certificate or Certificates so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of Certificates.
(b) No dividends or other distributions declared with respect to NCBC Common
Stock shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II,
the record holder thereof shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of NCBC Common Stock represented by such
Certificate.
(c) If any certificate representing shares of NCBC Common Stock is to be
issued in a name other than that in which the Certificate or Certificates
surrendered in exchange therefor is or are registered, it shall be a condition
of the issuance thereof that the Certificate or Certificates so surrendered
shall be properly endorsed (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of NCBC Common Stock in any name other than that of the
registered holder of the Certificate or Certificates surrendered, or required
for any other reason, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of CCB of the shares of CCB Common Stock that were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of NCBC Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of NCBC Common Stock shall
be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to NCBC Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
NCBC. In lieu of the issuance of any such fractional share, NCBC shall pay to
each former
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shareholder of CCB who otherwise would be entitled to receive such fractional
share an amount in cash determined by multiplying (i) the average of the
closing-sale prices of NCBC Common Stock on the National Market System of The
Nasdaq Stock Market, Inc. (the "Nasdaq") as reported by The Wall Street Journal
for the five trading days immediately preceding the date of the Effective Time
by (ii) the fraction of a share (rounded to the nearest thousandth when
expressed in decimal form) of NCBC Common Stock to which such holder would
otherwise be entitled to receive pursuant to Section 1.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of CCB for 12 months after the Effective Time shall be paid to
NCBC. Any former shareholders of CCB who have not theretofore complied with
this Article II shall thereafter look only to NCBC for payment of the shares of
NCBC Common Stock, cash in lieu of any fractional shares and any unpaid
dividends and distributions on the NCBC Common Stock deliverable in respect of
each share of CCB Common Stock, as the case may be, such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of CCB, NCBC, the Exchange Agent
or any other person shall be liable to any former holder of shares of CCB
Common Stock for any amount delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if reasonably required by
NCBC, the posting by such person of a bond in such amount as NCBC may determine
is reasonably necessary as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of NCBC Common Stock
and any cash in lieu of fractional shares deliverable in respect thereof
pursuant to this Agreement.
ARTICLE III
Representations and Warranties of NCBC
Except as disclosed in the NCBC disclosure schedule delivered to CCB
concurrently herewith (the "NCBC Disclosure Schedule") NCBC hereby represents
and warrants to CCB as follows:
3.1 Corporate Organization. (a) NCBC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Tennessee.
NCBC has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not, either individually or in the aggregate, have
a Material Adverse Effect on NCBC. As used in
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this Agreement, the term "Material Adverse Effect" means, with respect to CCB,
NCBC or the Surviving Corporation, as the case may be, a material adverse
effect on (i) the business, operations, results of operations or financial
condition of such party and its Subsidiaries taken as a whole or (ii) the
ability of such party to timely consummate the transactions contemplated
hereby. As used in this Agreement, the word "Subsidiary" when used with respect
to any party means any bank, savings bank, corporation, partnership, limited
liability company, or other organization, whether incorporated or
unincorporated, which is consolidated with such party for financial reporting
purposes. NCBC is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). True and complete
copies of the NCBC Charter and By-Laws of NCBC, as in effect as of the date of
this Agreement, have previously been made available by NCBC to CCB.
(b) Each NCBC Subsidiary (i) is duly organized and validly existing under
the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on NCBC and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
3.2 Capitalization. (a) The authorized capital stock of NCBC consists of (i)
175,000,000 shares of NCBC Common Stock, of which, as of March 13, 2000,
108,179,637 shares were issued and outstanding and (ii) 5,000,000 shares of
preferred stock, no par value per share (the "NCBC Preferred Stock" and,
together with the NCBC Common Stock, the "NCBC Capital Stock"), of which, as of
the date hereof, no shares are issued and outstanding. All of the issued and
outstanding shares of NCBC Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except pursuant to the terms of (i) the NCBC Option Agreement, (ii)
options to acquire 5,529,423 shares of NCBC Common Stock issued pursuant to
employee and director stock plans of NCBC in effect as of the date hereof (the
"NCBC Stock Plans"), (iii) options to acquire up to a maximum of 152,569 shares
of NCBC Common Stock that may be issued to holders of options to acquire shares
of common stock of Piedmont Bancorp, Inc. ("Piedmont") in the event of
consummation of a merger (the "Piedmont Merger") of Piedmont into NCBC pursuant
to an Agreement and Plan of Reorganization dated as of December 27, 1999
between NCBC and Piedmont (the "Piedmont Merger Agreement") and (iv) the
obligation to issue a maximum of 1,514,108 shares of NCBC Common Stock to
shareholders of Piedmont pursuant to the Piedmont Merger Agreement (subject to
the satisfaction or waiver of conditions stated in the Piedmont Merger
Agreement) in the event of consummation of the Piedmont Merger, NCBC does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of NCBC Capital Stock or any other equity securities of
NCBC or any securities representing the right to purchase or otherwise receive
any shares of NCBC Capital Stock (collectively, including the items
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contemplated by clauses (i) through (iii) of this sentence, the "NCBC Rights").
As of the date hereof, no shares of NCBC Capital Stock were reserved for
issuance, except for 21,527,748 shares of NCBC Common Stock reserved for
issuance upon exercise of the NCBC Option Agreement, shares of NCBC Common
Stock reserved for issuance in connection with the NCBC Dividend Reinvestment
Plan (the "NCBC DRIP"), and 5,712,771 shares of NCBC Common Stock reserved for
issuance upon the exercise of stock options pursuant to the NCBC Stock Plans.
Since December 31, 1999, NCBC has not issued any shares of NCBC Capital Stock
or any securities convertible into or exercisable for any shares of NCBC
Capital Stock, other than as would be permitted by Section 5.2(b) hereof and
pursuant to the NCBC Option Agreement. NCBC has previously provided CCB with a
list of the option holders, the date of each option to purchase NCBC Common
Stock granted, the number of shares subject to each such option, the expiration
date of each such option and the price at which each such option may be
exercised under an applicable NCBC Stock Plan. In no event will the aggregate
number of shares of NCBC Common Stock outstanding at the Effective Time
(including all shares of NCBC Common Stock subject to then-outstanding NCBC
Rights other than the NCBC Option Agreement) exceed the number specified in
Section 3.2(a) of the NCBC Disclosure Schedule.
(b) NCBC owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of each of the NCBC
Subsidiaries, free and clear of any liens, pledges, charges, encumbrances and
security interests whatsoever ("Liens"), and all of such shares or equity
ownership interests are duly authorized and validly issued and are fully paid,
nonassessable (subject to 12 U.S.C. (S) 55) and free of preemptive rights, with
no personal liability attaching to the ownership thereof. No NCBC Subsidiary
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of such Subsidiary.
Section 3.2(b) of the NCBC Disclosure Schedule sets forth a list of the
material investments of NCBC in Non-Subsidiary Affiliates. As used in this
Agreement, the term "Non-Subsidiary Affiliate" when used with respect to any
party means any corporation, partnership, limited liability company, joint
venture or other entity other than such party's Subsidiaries.
3.3 Authority; No Violation. (a) NCBC has full corporate power and authority
to execute and deliver this Agreement and the NCBC Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the NCBC Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of NCBC. The Board of Directors of NCBC has
directed that this Agreement and the transactions contemplated hereby be
submitted to NCBC's shareholders for adoption at a meeting of such shareholders
and, except for (i) the adoption of this Agreement by the affirmative vote of
the holders of a majority of the outstanding shares of NCBC Common Stock and
(ii) the amendment of the NCBC Charter contemplated by Section 1.7, no other
corporate proceedings on the part of NCBC are necessary to approve this
Agreement and the
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NCBC Option Agreement and to consummate the transactions contemplated hereby
and thereby. This Agreement and the NCBC Option Agreement have been duly and
validly executed and delivered by NCBC and (assuming due authorization,
execution and delivery by CCB) constitute valid and binding obligations of
NCBC, enforceable against NCBC in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies).
(b) Neither the execution and delivery by NCBC of this Agreement and the
NCBC Option Agreement nor the consummation by NCBC of the transactions
contemplated hereby or thereby, nor compliance by NCBC with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the NCBC
Charter or By-Laws or (ii) assuming that the consents and approvals referred to
in Section 3.4 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
NCBC, any of its Subsidiaries or Non-Subsidiary Affiliates or any of their
respective properties or assets or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of NCBC, any of its Subsidiaries or Non-Subsidiary Affiliates under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which NCBC, any of its Subsidiaries or its Non-Subsidiary Affiliates is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which, either individually or in
the aggregate, will not have a Material Adverse Effect on NCBC.
3.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and the Federal Reserve
Act, as amended, and approval of such applications and notices, (ii) the filing
of any required applications or notices with any state or foreign agencies and
approval of such applications and notices (the "State Approvals"), (iii) the
filing with the Securities and Exchange Commission (the "SEC") of a joint proxy
statement in definitive form relating to the meetings of CCB's and NCBC's
shareholders to be held in connection with this Agreement and the transactions
contemplated hereby (the "Joint Proxy Statement"), and of the registration
statement on Form S-4 (the "S-4") in which the Joint Proxy Statement will be
included as a prospectus, (iv) the filing of the Articles of Merger with the
North Carolina Secretary and the Tennessee Secretary pursuant to the NCBCA and
TBCA, respectively, (v) any consents, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable provisions of
federal and state securities laws relating to the regulation of broker-dealers,
investment advisers or transfer agents, and federal commodities laws relating
to the regulation of futures commission merchants and the rules and regulations
thereunder and of any applicable industry self-regulatory organization ("SRO"),
and the rules of The New
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York Stock Exchange, Inc. ("NYSE"), or which are required under consumer
finance, mortgage banking and other similar laws, (vi) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of
NCBC Capital Stock pursuant to this Agreement and (vii) the approval of this
Agreement by the requisite vote of the shareholders of CCB and NCBC (including
the approval of the amendment of the NCBC Charter contemplated by Section 1.7),
no consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") are necessary in connection with
(A) the execution and delivery by NCBC of this Agreement and (B) the
consummation by NCBC of the Merger and the other transactions contemplated
hereby.
3.5 Reports. NCBC and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1997 with (i) the Federal Reserve Board, (ii) the Federal Deposit Insurance
Corporation, (iii) any state regulatory authority (each a "State Regulator"),
(iv) the Office of the Comptroller of the Currency (the "OCC"), (v) the SEC,
(vi) any SRO and (vii) the Office of Thrift Supervision (the "OTS")
(collectively "Regulatory Agencies"), and all other reports and statements
required to be filed by them since January 1, 1997, including, without
limitation, any report or statement required to be filed pursuant to the laws,
rules or regulations of the United States, any state, or any Regulatory Agency,
and have paid all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement or to
pay such fees and assessments, either individually or in the aggregate, will
not have a Material Adverse Effect on NCBC. Except for normal examinations
conducted by a Regulatory Agency in the ordinary course of the business of NCBC
and its Subsidiaries, no Regulatory Agency has initiated any proceeding or, to
the best knowledge of NCBC, investigation into the business or operations of
NCBC or any of its Subsidiaries since January 1, 1997, except where such
proceedings or investigation will not, either individually or in the aggregate,
have a Material Adverse Effect on NCBC. There is no unresolved violation,
criticism, or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of NCBC or any of its Subsidiaries
which, in the reasonable judgment of NCBC, will, either individually or in the
aggregate, have a Material Adverse Effect on NCBC.
3.6 Financial Statements. NCBC has previously made available to CCB true and
correct copies of the consolidated balance sheets of NCBC and its Subsidiaries
as of December 31, for the fiscal years 1997, 1998 and 1999 and the related
consolidated statements of income and changes in stockholders' equity and cash
flows for the fiscal years 1997 through 1999, inclusive (the "NCBC Financial
Statements"), in each case accompanied by the audit report of Ernst & Young
LLP, independent public accountants with respect to NCBC. The December 31, 1999
consolidated balance sheet of NCBC (including the related notes, where
applicable) fairly presents in all material respects the consolidated financial
position of NCBC and its Subsidiaries as of the date thereof, and the other
financial statements referred to in this Section 3.6 (including the related
notes, where applicable)
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fairly present in all material respects the results of the consolidated
operations, changes in stockholders' equity, cash flows and consolidated
financial position of NCBC and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth, subject to normal
adjustments in the case of unaudited statements; each of such statements
(including the related notes, where applicable) complies in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been prepared in all
material respects in accordance with GAAP consistently applied during the
periods involved, except, in each case, as indicated in such statements or in
the notes thereto. The books and records of NCBC and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions.
3.7 Broker's Fees. Except for Credit Suisse First Boston Corporation,
neither NCBC nor any NCBC Subsidiary nor any of their respective officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the Merger or
related transactions contemplated by this Agreement or the Option Agreements.
3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in NCBC Reports filed prior to the date hereof, since December 31, 1999, no
event or events have occurred that have had, either individually or in the
aggregate, a Material Adverse Effect on NCBC.
(b) Except as publicly disclosed in NCBC Reports filed prior to the date
hereof, since December 31, 1999, NCBC and its Subsidiaries have carried on
their respective businesses in all material respects in the ordinary course.
(c) Since December 31, 1999, neither NCBC nor any of its Subsidiaries has
(i) except for such actions as are in the ordinary course of business or except
as required by applicable law, (A) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of December
31, 1999, or (B) granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any
bonuses, which in the aggregate exceed 5% of NCBC's 1999 salary and employee
benefits expenses (other than customary year-end bonuses for fiscal 1999) or
(ii) suffered any strike, work stoppage, slowdown, or other labor disturbance
which will, either individually or in the aggregate, have a Material Adverse
Effect on NCBC.
3.9 Legal Proceedings. (a) Neither NCBC nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of NCBC's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against NCBC
or any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the NCBC Option Agreement as to
which, in any such case, there is a reasonable probability of an adverse
determination and which, if adversely determined, will, either individually or
in the aggregate, have a Material Adverse Effect on NCBC.
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(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon NCBC, any of its Subsidiaries or the assets of
NCBC or any of its Subsidiaries that has had, or will have, either individually
or in the aggregate, a Material Adverse Effect on NCBC or the Surviving
Corporation.
3.10 Taxes and Tax Returns. (a) Each of NCBC and its Subsidiaries has duly
filed all federal, state, foreign and local information returns and tax returns
required to be filed by it on or prior to the date hereof (all such returns
being accurate and complete in all material respects) and has duly paid or made
provisions for the payment of all Taxes and other governmental charges which
have been incurred or are due or claimed to be due from it by federal, state,
foreign or local taxing authorities on or prior to the date of this Agreement
(including, without limitation, if and to the extent applicable, those due in
respect of its properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls) other than (i) Taxes or other charges
which are not yet delinquent or are being contested in good faith and have not
been finally determined, or (ii) information returns, tax returns, Taxes or
other governmental charges as to which the failure to file, pay or make
provision for will not, either individually or in the aggregate, have a
Material Adverse Effect on NCBC. The federal income tax returns of NCBC and its
Subsidiaries have been examined by the Internal Revenue Service (the "IRS") for
all years to and including the taxable year ended December 31, 1996 and any
liability with respect thereto has been satisfied or any liability with respect
to deficiencies asserted as a result of such examination is covered by adequate
reserves. To the best of NCBC's knowledge, there are no material disputes
pending, or claims asserted for, Taxes or assessments upon NCBC or any of its
Subsidiaries for which NCBC does not have adequate reserves. In addition, (A)
proper and accurate amounts have been withheld by NCBC and its Subsidiaries
from their employees for all prior periods in compliance in all material
respects with the tax withholding provisions of applicable federal, state and
local laws, except where failure to do so will not, either individually or in
the aggregate, have a Material Adverse Effect on NCBC, (B) federal, state, and
local returns which are accurate and complete in all material respects have
been filed by NCBC and its Subsidiaries for all periods for which returns were
due with respect to income tax withholding, Social Security and unemployment
taxes, except where failure to do so will not, either individually or in the
aggregate, have a Material Adverse Effect on NCBC, (C) the amounts shown on
such federal, state or local returns to be due and payable have been paid in
full or adequate provision therefor has been included by NCBC in its
consolidated financial statements, except where failure to do so will not,
either individually or in the aggregate, have a Material Adverse Effect on NCBC
and (D) there are no Tax liens upon any property or assets of NCBC or its
Subsidiaries except liens for current taxes not yet due or liens that will not,
either individually or in the aggregate, have a Material Adverse Effect on
NCBC. Neither NCBC nor any of its Subsidiaries has been required to include in
income any adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by NCBC or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case which has had or will have, either
individually or in the aggregate, a Material Adverse Effect on NCBC. Except as
set forth in the financial statements described in Section 3.6, neither
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NCBC nor any of its Subsidiaries has entered into a transaction which is being
accounted for as an installment obligation under Section 453 of the Code, which
will have, either individually or in the aggregate, a Material Adverse Effect
on NCBC.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, local, and foreign income, excise, gross receipts, gross income, ad
valorem, profits, gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon.
(c) Neither NCBC nor any of its Subsidiaries is a party to or is bound by an
Tax sharing, allocation or indemnification agreement or arrangement (other than
such an agreement or arrangement solely among NCBC and its Subsidiaries).
Neither NCBC nor any of its Subsidiaries has any liability for the 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). Within the
past five years, neither NCBC nor any of its Subsidiaries has been a
"distributing corporation" or a "controlled corporation" in a distribution
intended to qualify under Section 355 (a) of the Code.
(d) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by NCBC or any Subsidiary
of NCBC under any contract, plan, program, arrangement or understanding will
have, either individually or in the aggregate, a Material Adverse Effect on
NCBC.
3.11 Employees. (a) The NCBC Disclosure Schedule sets forth a true and
complete list of each material employee or director benefit plan, arrangement
or agreement that is maintained, or contributed to, as of the date of this
Agreement (the "NCBC Benefit Plans") by NCBC, any of its Subsidiaries or by any
trade or business, whether or not incorporated (a "NCBC ERISA Affiliate"), all
of which together with NCBC would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
(b) NCBC has heretofore made available to CCB true and complete copies of
each of the NCBC Benefit Plans and certain related documents, including, but
not limited to, (i) the actuarial report for such NCBC Benefit Plan (if
applicable) for each of the last two years and (ii) the most recent
determination letter from the IRS (if applicable) for such NCBC Benefit Plan.
(c) (i) Each of the NCBC Benefit Plans has been operated and administered in
all material respects in compliance with applicable laws, including, but not
limited to, ERISA and the Code, (ii) each of the NCBC Benefit Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code is so
qualified, and there are no existing circumstances or any events that have
occurred that will adversely affect the qualified status of any such NCBC
Benefit Plan, (iii) with respect to each NCBC Benefit Plan that is subject to
Title IV of ERISA, the present value of accrued benefits under such NCBC
Benefit Plan, based upon the actuarial assumptions used for funding purposes in
the most recent actuarial
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report prepared by such NCBC Benefit Plan's actuary with respect to such NCBC
Benefit Plan, did not, as of its latest valuation date, exceed the then current
value of the assets of such NCBC Benefit Plan allocable to such accrued
benefits, (iv) no NCBC Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees or directors of NCBC or its Subsidiaries beyond
their retirement or other termination of service, other than (A) coverage
mandated by applicable law, (B) death benefits or retirement benefits under any
"employee pension plan" (as such term is defined in Section 3(2) of ERISA), (C)
deferred compensation benefits accrued as liabilities on the books of NCBC or
its Subsidiaries or (D) benefits the full cost of which is borne by the current
or former employee or director (or his beneficiary), (v) no material liability
under Title IV of ERISA has been incurred by NCBC, its Subsidiaries or any NCBC
ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a material risk to NCBC, its Subsidiaries or any NCBC ERISA
Affiliate of incurring a material liability thereunder, (vi) no NCBC Benefit
Plan is a "multiemployer pension plan" (as such term is defined in Section
3(37) of ERISA), (vii) all contributions or other amounts payable by NCBC or
its Subsidiaries as of the Effective Time with respect to each NCBC Benefit
Plan in respect of current or prior plan years have been paid or accrued in
accordance with GAAP and Section 412 of the Code, (viii) none of NCBC, its
Subsidiaries or any other person, including any fiduciary, has engaged in a
transaction in connection with which NCBC, its Subsidiaries or any NCBC Benefit
Plan will be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code, and (ix) to the best knowledge of NCBC there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against, any of the NCBC Benefit Plans or any
trusts related thereto that will have, either individually or in the aggregate,
a Material Adverse Effect on NCBC.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result (either alone or upon the
occurrence of any additional acts or events) in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
(within the meaning of Section 280G of the Code), forgiveness of indebtedness
or otherwise) becoming due to any director or any employee of NCBC or any of
its affiliates from NCBC or any of its affiliates under any NCBC Benefit Plan
or otherwise, (ii) increase any benefits otherwise payable under any NCBC
Benefit Plan or (iii) other than the NCBC Corporation Directors' Stock Deferral
Plan and the NCBC Corporation Employees' Stock Deferral Plan, result in any
acceleration of the time of payment or vesting of any such benefits which will,
either individually or in the aggregate, have a Material Adverse Effect on
NCBC.
3.12 SEC Reports. NCBC has previously made available to CCB an accurate and
complete copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since January 1, 1997 by NCBC
(the "NCBC Reports") with the SEC pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and prior to the date
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hereof and (b) communication mailed by NCBC to its shareholders since January
1, 1997 and prior to the date hereof, and no such NCBC Report or communication,
as of the date thereof, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading, except that information as of a later date (but
before the date hereof) shall be deemed to modify information as of an earlier
date. Since January 1, 1997, as of their respective dates, all NCBC Reports
filed under the Securities Act and the Exchange Act complied in all material
respects with the published rules and regulations of the SEC with respect
thereto.
3.13 Compliance with Applicable Law. (a) NCBC and each of its Subsidiaries
hold all material licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses under and pursuant to
each, and have complied in all material respects with and are not in default in
any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to NCBC
or any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default will not,
either individually or in the aggregate, have a Material Adverse Effect on
NCBC.
(b) Except as will not have, either individually or in the aggregate, a
Material Adverse Effect on NCBC, NCBC and each NCBC Subsidiary have properly
administered all accounts for which it acts as a fiduciary, including accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of
the governing documents, applicable state and federal law and regulation and
common law. None of NCBC, any NCBC Subsidiary, or any director, officer or
employee of NCBC or of any NCBC Subsidiary, has committed any breach of trust
with respect to any such fiduciary account that will have a Material Adverse
Effect on NCBC, and the accountings for each such fiduciary account are true
and correct in all material respects and accurately reflect the assets of such
fiduciary account.
3.14 Certain Contracts. (a) Neither NCBC nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees, other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or shareholder approval
of the transactions contemplated by this Agreement will (either alone or upon
the occurrence of any additional acts or events) result in any payment (whether
of severance pay or otherwise) becoming due from CCB, NCBC, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the NCBC
Reports, (iv) which materially restricts the conduct of any line of business by
NCBC or upon consummation of the Merger will materially restrict the ability of
the Surviving Corporation to engage in any line of business in which a bank
holding company may lawfully engage, (v) with or to a labor union or guild
(including any collective bargaining agreement) or (vi) (including any stock
option plan, stock
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appreciation rights plan, restricted stock plan or stock purchase plan) any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any shareholder approval or the
consummation of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. NCBC has previously made
available to CCB true and correct copies of all employment and deferred
compensation agreements which are in writing and to which NCBC is a party. Each
contract, arrangement, commitment or understanding of the type described in
this Section 3.14(a), whether or not set forth in the NCBC Disclosure Schedule,
is referred to herein as a "NCBC Contract", and neither NCBC nor any of its
Subsidiaries knows of, or has received notice of, any violation of the above by
any of the other parties thereto which, either individually or in the
aggregate, will have a Material Adverse Effect on NCBC.
(b) (i) Each NCBC Contract is valid and binding on NCBC or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) NCBC and each
of its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each NCBC Contract, except where
such noncompliance, either individually or in the aggregate, will not have a
Material Adverse Effect on NCBC, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of NCBC or any of its Subsidiaries under any such
NCBC Contract, except where such default, either individually or in the
aggregate, will not have a Material Adverse Effect on NCBC.
3.15 Agreements with Regulatory Agencies. Neither NCBC nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1997, a recipient of any supervisory letter from, or since January
1, 1997, has adopted any board resolutions at the request of any Regulatory
Agency or other Governmental Entity that currently restricts in any material
respect the conduct of its business or that in any material manner relates to
its capital adequacy, its credit policies, its management or its business
(each, whether or not set forth in the NCBC Disclosure Schedule, an "NCBC
Regulatory Agreement"), nor has NCBC or any of its Subsidiaries been advised
since January 1, 1997, by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any such Regulatory Agreement.
3.16 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of NCBC or for the account
of a customer of NCBC or one of its Subsidiaries, were entered into in the
ordinary course of business and, to NCBC's knowledge, in accordance with
prudent banking practice and applicable rules, regulations and policies of any
Regulatory Authority and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of NCBC or
one of its Subsidiaries enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of
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creditors generally and the availability of equitable remedies), and are in
full force and effect. NCBC and each of its Subsidiaries have duly performed in
all material respects all of their material obligations thereunder to the
extent that such obligations to perform have accrued; and, to NCBC's knowledge,
there are no material breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
3.17 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of NCBC
included in the NCBC Financial Statements and for liabilities incurred in the
ordinary course of business consistent with past practice, since December 31,
1999, neither NCBC nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either individually or in the aggregate,
has had or will have a Material Adverse Effect on NCBC.
3.18 Insurance. NCBC and its Subsidiaries have in effect insurance coverage
with reputable insurers or are self-insured, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by bank holding companies and
their subsidiaries comparable in size and operations to NCBC and its
Subsidiaries.
3.19 Environmental Liability. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition, on
NCBC of any liability or obligation arising under common law or under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or
threatened against NCBC, which liability or obligation will, either
individually or in the aggregate, have a Material Adverse Effect on NCBC. To
the knowledge of NCBC, there is no reasonable basis for any such proceeding,
claim, action or governmental investigation that would impose any liability or
obligation that will, individually or in the aggregate, have a Material Adverse
Effect on NCBC. NCBC is not subject to any agreement, order, judgment, decree,
letter or memorandum by or with any court, governmental authority, regulatory
agency or third party imposing any liability or obligation with respect to the
foregoing that will have, either individually or in the aggregate, a Material
Adverse Effect on NCBC.
3.20 State Takeover Laws. (a) The Board of Directors of NCBC has approved
the transactions contemplated by this Agreement and the Option Agreements for
purposes of Sections 48-103-301 through 312 of the TBCA such that the
provisions of such Sections of the TCBA will not apply to this Agreement or the
Option Agreements or any of the transactions contemplated hereby or thereby.
3.21 Reorganization; Pooling of Interests. As of the date of this Agreement,
NCBC has no reason to believe that the Merger will not qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and as a
"pooling of interests" for accounting purposes.
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3.22 Financial Holding Company Status. As of the date of this Agreement, and
following the consummation of the transactions contemplated hereby, NCBC meets
and (assuming the accuracy of Section 4.22) reasonably expects to meet, all
applicable criteria to become and remain a "financial holding company", as such
term is defined in Section 2(p) of the BHC Act, set forth in such act as well
as in any regulations, rules or interpretations issued by the Federal Reserve
Board.
ARTICLE IV
Representations and Warranties of CCB
Except as disclosed in the CCB disclosure schedule delivered to NCBC
concurrently herewith (the "CCB Disclosure Schedule") CCB hereby represents and
warrants to NCBC as follows:
4.1 Corporate Organization. (a) CCB is a corporation duly organized, validly
existing and in good standing under the laws of the State of North Carolina.
CCB has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not, either individually or in the aggregate, have a Material
Adverse Effect on CCB. CCB is duly registered as a bank holding company under
the BHC Act. True and complete copies of the Amended and Restated Articles of
Incorporation, as amended, (the "CCB Articles") and By-Laws of CCB, as in
effect as of the date of this Agreement, have previously been made available by
CCB to NCBC.
(b) Each CCB Subsidiary (i) is duly organized and validly existing under the
laws of its jurisdiction of organization, (ii) is duly qualified to do business
and in good standing in all jurisdictions (whether Federal, state, local or
foreign) where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on CCB, and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
4.2 Capitalization. (a) The authorized capital stock of CCB consists of
(i) 100,000,000 shares of CCB Common Stock, of which, as of February 29, 2000,
39,450,660 shares were issued and outstanding, and (ii) 10,000,000 shares of
serial preferred stock (the "CCB Preferred Stock" and together with the CCB
Common Stock, the "CCB Capital Stock") of which (i) 800,000 shares were
designated as CCB Series A Preferred Stock, par value $5.00 of which none are
issued and outstanding. As of the date hereof, no shares of CCB Common Stock or
CCB Preferred Stock were reserved for issuance, except for (i) 7,846,175 shares
of CCB Common Stock issuable pursuant to the CCB Option Agreement and (ii)
2,383,065 shares reserved for issuance pursuant to the CCB Amended and Restated
Long-Term and Equity Incentive Plans and other employee and director stock
plans of CCB in effect as of the date hereof (the "CCB Stock Plans"). All of
the issued and
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outstanding shares of CCB Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except for the CCB Option Agreement, the CCB Stock Plans and the CCB
Rights Agreement (as defined below), CCB does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of CCB
Capital Stock or any other equity securities of CCB or any securities
representing the right to purchase or otherwise receive any shares of CCB
Capital Stock (collectively, "CCB Rights"). Since December 31, 1999, CCB has
not issued any shares of CCB Capital Stock or any securities convertible into
or exercisable for any shares of CCB Capital Stock, other than as permitted by
Section 5.2(b) and pursuant to (A) the exercise of employee stock options
granted prior to such date, and (B) pursuant to the CCB Option Agreement. CCB
has previously provided NCBC with a list of the option holders, the date of
each option to purchase CCB Common Stock granted, the number of shares subject
to each such option, the expiration date of each such option and the price at
which each such option may be exercised under an applicable CCB Stock Plan. In
no event will the aggregate number of shares of CCB Common Stock outstanding at
the Effective Time (including all shares of CCB Common Stock subject to then-
outstanding CCB Rights other than the CCB Option Agreement) exceed the number
specified in Section 4.2(a) of the CCB Disclosure Schedule.
(b) CCB owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of each of the CCB
Subsidiaries, free and clear of any Liens, and all of such shares or equity
ownership interests are duly authorized and validly issued and are fully paid,
nonassessable (subject to N.C. Gen. Stat. (S)54-42) and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No CCB
Subsidiary has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary. Section 4.2(b) of the CCB Disclosure Schedule sets forth a list of
the material investments of CCB in Non-Subsidiary Affiliates.
4.3 Authority; No Violation. (a) CCB has full corporate power and authority
to execute and deliver this Agreement and the CCB Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the CCB Option Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of CCB. The Board of Directors of CCB has
directed that this Agreement and the transactions contemplated hereby be
submitted to CCB's shareholders for adoption at a meeting of such shareholders
and, except for the adoption of this Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of CCB Common Stock, no other
corporate proceedings on the part of CCB are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement and the CCB Option Agreement have been duly and validly executed and
delivered by CCB and (assuming due authorization,
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execution and delivery by NCBC) constitute valid and binding obligations of
CCB, enforceable against CCB in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies).
(b) Neither the execution and delivery of this Agreement or the CCB Option
Agreement by CCB, nor the consummation by CCB of the transactions contemplated
hereby or thereby, nor compliance by CCB with any of the terms or provisions
hereof or thereof, will (i) violate any provision of the CCB Articles or By-
Laws, or (ii) assuming that the consents and approvals referred to in Section
4.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to CCB, any
of its Subsidiaries or Non-Subsidiary Affiliates or any of their respective
properties or assets or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties or assets of CCB, any of its
Subsidiaries or its Non-Subsidiary Affiliates under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which CCB, any
of its Subsidiaries or Non-Subsidiary Affiliates is a party, or by which they
or any of their respective properties or assets may be bound or affected,
except (in the case of clause (y) above) for such violations, conflicts,
breaches or defaults which either individually or in the aggregate will not
have a Material Adverse Effect on CCB.
4.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
the Federal Reserve Act, as amended, and approval of such applications and
notices, (ii) the State Approvals, (iii) the filing with the SEC of the Joint
Proxy Statement and the S-4, (iv) the filing of the Articles of Merger with the
North Carolina Secretary and the Tennessee Secretary pursuant to the NCBCA and
the TBCA, respectively, (v) any consents, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable provisions of
federal and state securities laws relating to the regulation of broker-dealers,
investment advisers or transfer agents, and federal commodities laws relating
to the regulation of futures commission merchants and the rules and regulations
thereunder and of any applicable SRO, and the rules of the NYSE, or which are
required under consumer finance, mortgage banking and other similar laws, (vi)
such filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of the shares of NCBC Capital Stock pursuant to this Agreement and (vii) the
approval of this Agreement by the requisite vote of the shareholders of CCB and
NCBC, no consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with (A) the execution and
delivery by CCB of this Agreement and (B) the consummation by CCB of the Merger
and the other transactions contemplated hereby.
4.5 Reports. CCB and each of its Subsidiaries have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect
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thereto, that they were required to file since January 1, 1997 with the
Regulatory Agencies, and all other reports and statements required to be filed
by them since January 1, 1997, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations of
the United States, any state, or any Regulatory Agency, and have paid all fees
and assessments due and payable in connection therewith, except where the
failure to file such report, registration or statement or to pay such fees and
assessments, either individually or in the aggregate, will not have a Material
Adverse Effect on CCB. Except for normal examinations conducted by a Regulatory
Agency in the ordinary course of the business of CCB and its Subsidiaries, no
Regulatory Agency has initiated any proceeding or, to the best knowledge of
CCB, investigation into the business or operations of CCB or any of its
Subsidiaries since January 1, 1997, except where such proceedings or
investigation will not have, either individually or in the aggregate, a
Material Adverse Effect on CCB. There is no unresolved violation, criticism, or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of CCB or any of its Subsidiaries which, in the
reasonable judgment of CCB, will have, either individually or in the aggregate,
a Material Adverse Effect on CCB.
4.6 Financial Statements. CCB has previously made available to NCBC true and
correct copies of the consolidated balance sheets of CCB and its Subsidiaries
as of December 31, for the fiscal years 1997, 1998, and 1999 and the related
consolidated statements of income and changes in shareholders' equity and cash
flows for the fiscal years 1997 through 1999, inclusive, as reported in CCB's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (the
"CCB 10-K"), filed with the SEC under the Exchange Act in each case accompanied
by the audit report of KPMG LLP, independent public accountants with respect to
CCB. The December 31, 1999 consolidated balance sheet of CCB (including the
related notes, where applicable) fairly presents in all material respects the
consolidated financial position of CCB and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 4.6
(including the related notes, where applicable) fairly present in all material
respects the results of the consolidated operations and changes in
shareholders' equity, cash flows and consolidated financial position of CCB and
its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth, subject to normal year-end audit adjustments in the
case of unaudited statements; each of such statements (including the related
notes, where applicable) complies in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been prepared in all material respects in accordance with
GAAP consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto. The books and records of
CCB and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
4.7 Broker's Fees. Except for J.P. Morgan & Co. Incorporated, neither CCB
nor any CCB Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in
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connection with the Merger or related transactions contemplated by this
Agreement or the Option Agreements.
4.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in CCB Reports filed prior to the date hereof, since December 31, 1999, no
event or events have occurred which have had, individually or in the aggregate,
a Material Adverse Effect on CCB.
(b) Except as publicly disclosed in CCB Reports filed prior to the date
hereof, since December 31, 1999, CCB and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course.
(c) Since December 31, 1999, neither CCB nor any of its Subsidiaries has (i)
except for such actions as are in the ordinary course of business or except as
required by applicable law, (A) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of December
31, 1999, or (B) granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any
bonuses, which in the aggregate exceed 5% of CCB's 1999 salary and employee
benefit expenses (other than customary year-end bonuses for fiscal 1999) or
(ii) suffered any strike, work stoppage, slowdown, or other labor disturbance
which will have, either individually or in the aggregate, a Material Adverse
Effect on CCB.
4.9 Legal Proceedings. (a) Neither CCB nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of CCB's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against CCB
or any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the CCB Option Agreement as to
which, in any such case, there is a reasonable probability of an adverse
determination and which, if adversely determined, will have, either
individually or in the aggregate, a Material Adverse Effect on CCB.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon CCB, any of its Subsidiaries or the assets of
CCB or any of its Subsidiaries that has had or will have, either individually
or in the aggregate, a Material Adverse Effect on CCB or the Surviving
Corporation.
4.10 Taxes and Tax Returns. (a) Each of CCB and its Subsidiaries has duly
filed all federal, state, foreign and local information returns and tax returns
required to be filed by it on or prior to the date hereof (all such returns
being accurate and complete in all material respects) and has duly paid or made
provisions for the payment of all Taxes and other governmental charges which
have been incurred or are due or claimed to be due from it by federal, state,
foreign or local taxing authorities on or prior to the date of this Agreement
(including, without limitation, if and to the extent applicable, those due in
respect of its properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls)
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other than (i) Taxes or other charges which are not yet delinquent or are being
contested in good faith and have not been finally determined, or (ii)
information returns, tax returns, Taxes or other governmental charges as to
which the failure to file, pay or make provision for will not have, either
individually or in the aggregate, a Material Adverse Effect on CCB. The federal
income tax returns of CCB and its Subsidiaries have been examined by the IRS
through the taxable year ended December 31, 1993 and for the taxable year ended
December 31, 1996 and any liability with respect thereto has been satisfied or
any liability with respect to deficiencies asserted as a result of such
examination is covered by adequate reserves. To the best of CCB's knowledge,
there are no material disputes pending, or claims asserted for, Taxes or
assessments upon CCB or any of its Subsidiaries for which CCB does not have
adequate reserves. In addition, (A) proper and accurate amounts have been
withheld by CCB and its Subsidiaries from their employees for all prior periods
in compliance in all material respects with the tax withholding provisions of
applicable federal, state and local laws, except where failure to do so will
not, either individually or in the aggregate, have a Material Adverse Effect on
CCB, (B) federal, state and local returns which are accurate and complete in
all material respects have been filed by CCB and its Subsidiaries for all
periods for which returns were due with respect to income tax withholding,
Social Security and unemployment taxes, except where failure to do so will not,
either individually or in the aggregate, have a Material Adverse Effect on CCB,
(C) the amounts shown on such federal, state or local returns to be due and
payable have been paid in full or adequate provision therefor has been included
by CCB in its consolidated financial statements, except where failure to do so
will not, individually or in the aggregate, have a Material Adverse Effect on
CCB and (D) there are no Tax liens upon any property or assets of CCB or its
Subsidiaries except liens for current taxes not yet due or liens that will not
have, either individually or in the aggregate, a Material Adverse Effect on
CCB. Neither CCB nor any of its Subsidiaries has been required to include in
income any adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by CCB or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case, which has had or will have, either
individually or in the aggregate, a Material Adverse Effect on CCB. Except as
set forth in the financial statements described in Section 4.6, neither CCB nor
any of its Subsidiaries has entered into a transaction which is being accounted
for as an installment obligation under Section 453 of the Code, which will
have, either individually or in the aggregate, a Material Adverse Effect on
CCB.
(b) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by CCB or any Subsidiary of
CCB under any contract, plan, program, arrangement or understanding will have,
either individually or in the aggregate, a Material Adverse Effect on CCB.
(c) Neither CCB nor any of its Subsidiaries is a party to or is bound by any
Tax sharing, allocation or indemnification agreement or arrangement (other than
such an agreement or arrangement solely among CCB and its Subsidiaries).
Neither CCB nor any of its Subsidiaries has any liability for the Taxes of any
person (other than CCB and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state,
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local or foreign law). Within the past five years, neither CCB nor any of its
Subsidiaries has been a "distributing corporation" or a "controlled
corporation" in a distribution intended to qualify under Section 355(a) of the
Code.
4.11 Employees. (a) The CCB Disclosure Schedule sets forth a true and
complete list of each material employee benefit plan, arrangement or agreement
that is maintained, or contributed to, as of the date of this Agreement (the
"CCB Benefit Plans") by CCB, any of its Subsidiaries or by any trade or
business, whether or not incorporated (a "CCB ERISA Affiliate"), all of which
together with CCB would be deemed a "single employer" within the meaning of
Section 4001 of ERISA.
(b) CCB has heretofore made available to NCBC true and complete copies of
each of the CCB Benefit Plans and certain related documents, including, but not
limited to, (i) the actuarial report for such CCB Benefit Plan (if applicable)
for each of the last two years, and (ii) the most recent determination letter
from the IRS (if applicable) for such CCB Benefit Plan.
(c) (i) Each of the CCB Benefit Plans has been operated and administered in
all material respects in compliance with applicable laws, including, but not
limited to, ERISA and the Code, (ii) each of the CCB Benefit Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code is so
qualified, and there are no existing circumstances or any events that have
occurred that will adversely affect the qualified status of any such CCB
Benefit Plan, (iii) with respect to each CCB Benefit Plan which is subject to
Title IV of ERISA, the present value of accrued benefits under such CCB Benefit
Plan, based upon the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such CCB Benefit Plan's actuary with
respect to such CCB Benefit Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such CCB Benefit Plan allocable
to such accrued benefits, (iv) no CCB Benefit Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees or directors of CCB or
its Subsidiaries beyond their retirement or other termination of service, other
than (A) coverage mandated by applicable law, (B) death benefits or retirement
benefits under any "employee pension plan" (as such term is defined in Section
3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on
the books of CCB or its Subsidiaries or (D) benefits the full cost of which is
borne by the current or former employee or director (or his beneficiary), (v)
no material liability under Title IV of ERISA has been incurred by CCB, its
Subsidiaries or any CCB ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to CCB, its Subsidiaries
or any CCB ERISA Affiliate of incurring a material liability thereunder, (vi)
no CCB Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by
CCB or its Subsidiaries as of the Effective Time with respect to each CCB
Benefit Plan in respect of current or prior plan years have been paid or
accrued in accordance with GAAP and Section 412 of the Code, (viii) none of
CCB, its Subsidiaries or any other person, including any fiduciary, has engaged
in a transaction in connection with which CCB, its Subsidiaries or any CCB
Benefit Plan will be subject to either a material civil penalty assessed
pursuant to
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Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code, and (ix) to the best knowledge of CCB there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the CCB Benefit Plans or any
trusts related thereto which will have, either individually or in the
aggregate, a Material Adverse Effect on CCB.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result (either alone or upon the
occurrence of any additional acts or events) in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
(within the meaning of Section 280G of the Code), forgiveness of indebtedness
or otherwise) becoming due to any director or any employee of CCB or any of its
affiliates from CCB or any of its affiliates under any CCB Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any CCB Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting of
any such benefits that will have, either individually or in the aggregate, a
Material Adverse Effect on CCB.
4.12 SEC Reports. CCB has previously made available to NCBC an accurate and
complete copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since January 1, 1997 by CCB with
the SEC pursuant to the Securities Act or the Exchange Act (the "CCB Reports")
and prior to the date hereof and (b) communication mailed by CCB to its
shareholders since January 1, 1997 and prior to the date hereof, and no such
CCB Report or communication, as of the date thereof, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading, except that
information as of a later date (but before the date hereof) shall be deemed to
modify information as of an earlier date. Since January 1, 1997, as of their
respective dates, all CCB Reports filed under the Securities Act and the
Exchange Act complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
4.13 Compliance with Applicable Law. (a) CCB and each of its Subsidiaries
hold all material licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses under and pursuant to
each, and have complied in all material respects with, and are not in default
in any material respect under, any applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to CCB
or any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default will not,
either individually or in the aggregate, have a Material Adverse Effect on CCB.
(b) Except as will not have, either individually or in the aggregate, a
Material Adverse Effect on CCB, CCB and each CCB Subsidiary have properly
administered all accounts for which it acts as a fiduciary, including accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of
the governing documents, applicable state and federal law and
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regulation and common law. None of CCB, any CCB Subsidiary, or any director,
officer or employee of CCB or of any CCB Subsidiary, has committed any breach
of trust with respect to any such fiduciary account that will have a Material
Adverse Effect on CCB, and the accountings for each such fiduciary account are
true and correct in all material respects and accurately reflect the assets of
such fiduciary account.
4.14 Certain Contracts. (a) Neither CCB nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or shareholder approval
of the transactions contemplated by this Agreement will (either alone or upon
the occurrence of any additional acts or events) result in any payment (whether
of severance pay or otherwise) becoming due from CCB, NCBC, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the CCB
Reports, (iv) which materially restricts the conduct of any line of business by
CCB or upon consummation of the Merger will materially restrict the ability of
the Surviving Corporation to engage in any line of business in which a bank
holding company may lawfully engage, (v) with or to a labor union or guild
(including any collective bargaining agreement) or (vi) (including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan) any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any
shareholder approval or the consummation of any of the transactions
contemplated by this Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement. CCB has previously made available to NCBC true and correct copies of
all employment and deferred compensation agreements which are in writing and to
which CCB is a party. Each contract, arrangement, commitment or understanding
of the type described in this Section 4.14(a), whether or not set forth in the
CCB Disclosure Schedule, is referred to herein as a "CCB Contract", and neither
CCB nor any of its Subsidiaries knows of, or has received notice of, any
violation of the above by any of the other parties thereto which will have,
individually or in the aggregate, a Material Adverse Effect on CCB.
(b) (i) Each CCB Contract is valid and binding on CCB or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) CCB and each of
its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each CCB Contract, except where
such noncompliance, either individually or in the aggregate, will not have a
Material Adverse Effect on CCB, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of CCB or any of its Subsidiaries under any such
CCB Contract, except where such default, either individually or in the
aggregate, will not have a Material Adverse Effect on CCB.
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4.15 Agreements with Regulatory Agencies. Neither CCB nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1997, a recipient of any supervisory letter from, or since January
1, 1997, has adopted any board resolutions at the request of any Regulatory
Agency or other Governmental Entity that currently restricts in any material
respect the conduct of its business or that in any material manner relates to
its capital adequacy, its credit policies, its management or its business
(each, whether or not set forth in the CCB Disclosure Schedule, a "CCB
Regulatory Agreement"), nor has CCB or any of its Subsidiaries been advised
since January 1, 1997, by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any such Regulatory Agreement.
4.16 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of CCB or for the account of
a customer of CCB or one of its Subsidiaries, were entered into in the ordinary
course of business and, to CCB's knowledge, in accordance with prudent banking
practice and applicable rules, regulations and policies of any Regulatory
Authority and with counterparties believed to be financially responsible at the
time and are legal, valid and binding obligations of CCB or one of its
Subsidiaries enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect. CCB and each of its Subsidiaries
have duly performed in all material respects all of their material obligations
thereunder to the extent that such obligations to perform have accrued; and to
CCB's knowledge, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
4.17 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of CCB included
in the CCB Form 10-K and for liabilities incurred in the ordinary course of
business consistent with past practice, since December 31, 1999, neither CCB
nor any of its Subsidiaries has incurred any liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to
become due) that, either individually or in the aggregate, has had or will
have, a Material Adverse Effect on CCB.
4.18 Insurance. CCB and its Subsidiaries have in effect insurance coverage
with reputable insurers or are self-insured, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by bank holding companies and
their subsidiaries comparable in size and operations to CCB and its
Subsidiaries.
4.19 Environmental Liability. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could result in the imposition, on
CCB of any liability or obligation arising under
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common law or under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, CERCLA, pending or
threatened against CCB, which liability or obligation will have, either
individually or in the aggregate, a Material Adverse Effect on CCB. To the
knowledge of CCB, there is no reasonable basis for any such proceeding, claim,
action or governmental investigation that would impose any liability or
obligation that will have, either individually or in the aggregate, a Material
Adverse Effect on CCB. CCB is not subject to any agreement, order, judgment,
decree, letter or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any liability or obligation with
respect to the foregoing that will have, either individually or in the
aggregate, a Material Adverse Effect on CCB.
4.20 State Takeover Laws CCB Rights Agreement. (a) The Board of Directors of
CCB has approved the transactions contemplated by this Agreement and the Option
Agreements for purposes of Sections 55-9A-01 through 09 of the NCBCA, and for
purposes of Section 13 of the CCB Certificate, such that the provisions of such
Sections will not apply to this Agreement or the Option Agreements or any of
the transactions contemplated hereby or thereby.
(b) CCB has taken all action, if any, necessary or appropriate so that the
entering into of this Agreement and the Option Agreements, and the consummation
of the transactions contemplated hereby and thereby do not and will not result
in the ability of any person to exercise any CCB Shareholder Rights under the
CCB Rights Agreement or enable or require the CCB Shareholder Rights to
separate from the shared of CCB Common Stock to which they are attached or to
become triggered or exercisable. No "Distribution Date" or "Shares Acquisition
Date" (as such terms are defined in the CCB Rights Agreement) has occurred.
4.21 Reorganization; Pooling of Interests. As of the date of this Agreement,
CCB has no reason to believe that the Merger will not qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and as a
"pooling of interests" for accounting purposes.
4.22 Financial Holding Company Status. As of the date of this Agreement, CCB
meets all applicable criteria to become and remain a "financial holding
company", as such term is defined in Section 2(p) of the BHC Act, set forth in
such act as well as in any regulations, rules or interpretations issued by the
Federal Reserve Board.
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Conduct of Businesses Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement (including the NCBC
Disclosure Schedule and the CCB Disclosure Schedule) or the Option Agreements,
each of CCB and NCBC shall, and shall cause each of their respective
Subsidiaries to, (a) conduct its business in the ordinary course, (b) use
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reasonable best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its key officers and key employees and (c) take no action which
would adversely affect or delay the ability of either CCB or NCBC to obtain any
necessary approvals of any Regulatory Agency or other governmental authority
required for the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement or the Option Agreements or to consummate
the transactions contemplated hereby or thereby.
5.2 Forbearances. During the period from the date of this Agreement to the
Effective Time, except as set forth in the CCB Disclosure Schedule or the NCBC
Disclosure Schedule, as the case may be, and, except as expressly contemplated
or permitted by this Agreement or the Option Agreements, neither CCB nor NCBC
shall, and neither CCB nor NCBC shall permit any of their respective
Subsidiaries to, without the prior written consent of the other party to this
Agreement:
(a) other than in the ordinary course of business, incur any
indebtedness for borrowed money (other than short-term indebtedness
incurred to refinance short-term indebtedness and indebtedness of NCBC or
any of its wholly-owned Subsidiaries to NCBC or any of its Subsidiaries, on
the one hand, or of CCB or any of its Subsidiaries to CCB or any of its
wholly-owned Subsidiaries, on the other hand), assume, guarantee, endorse
or otherwise as an accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make any loan or
advance (it being understood and agreed that incurrence of indebtedness in
the ordinary course of business shall include, without limitation, the
creation of deposit liabilities, purchases of Federal funds, sales of
certificates of deposit and entering into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other
distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible (whether currently convertible or convertible
only after the passage of time or the occurrence of certain events)
into or exchangeable for any shares of its capital stock (except (A) in
the case of NCBC, for regular quarterly cash dividends at a rate not in
excess of $.105 per share of NCBC Common Stock, (B) in the case of CCB,
for regular quarterly cash dividends on CCB Common Stock at a rate not
in excess of $.31 per share of CCB Common Stock, and (C) dividends paid
by any of the Subsidiaries of each of CCB and NCBC to CCB or NCBC or
any of their Subsidiaries, respectively, and dividends paid in the
ordinary course of business consistent with past practice by any
subsidiaries (whether or not wholly-owned) of each of CCB and NCBC);
(iii) grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its
capital stock, other than (A) pursuant to the NCBC Stock Plans, the CCB
Stock Plans or the CCB Rights Agreement, as the case may be, in the
ordinary course of business consistent with past practice, or (B) the
conversion of employee or director stock options pursuant to the
consummation of the transactions contemplated by the Piedmont Merger
Agreement; or
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(iv) issue any additional shares of capital stock except pursuant to
(A) the exercise of stock options, outstanding as of the date hereof or
issued in compliance with Section 5.2(b)(iii), (B) the Option
Agreements, and (C) in connection with the Piedmont Merger Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties or assets to any individual, corporation or other
entity other than a Subsidiary, or cancel, release or assign any
indebtedness to any such person or any claims held by any such person,
except in the ordinary course of business or pursuant to contracts or
agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of business or
pursuant to contracts or agreements in force at the date of or permitted by
this Agreement, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of
any property or assets of any other individual, corporation or other entity
other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of business,
terminate, or waive any material provision of, any NCBC Contract or CCB
Contract, as the case may be, or make any change in any instrument or
agreement governing the terms of any of its securities, or material lease
or contract, other than normal renewals of contracts and leases without
material adverse changes of terms;
(f) increase in any manner the compensation or fringe benefits of any of
its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee other than in the ordinary course of business, or
accelerate the vesting of, or the lapsing of restrictions with respect to,
any stock options or other stock-based compensation;
(g) solicit or encourage from any third party or enter into any
negotiations, discussions or agreement in respect of, or authorize any
individual, corporation or other entity to solicit or encourage from any
third party or enter into any negotiations, discussions or agreement in
respect of, or provide or cause to be provided any confidential information
in connection with any inquiries or proposals relating to, the disposition
of all or substantially all of its business or assets, or the acquisition
of its voting securities, or the merger of it or any of its Subsidiaries
with any corporation or other entity, other than as provided by this
Agreement (and each party shall promptly notify the other of all of the
relevant details relating to all inquiries and proposals which it may
receive relating to any of such matters);
(h) settle any material claim, action or proceeding involving money
damages, except in the ordinary course of business;
(i) knowingly take any action that would prevent or impede the Merger
from qualifying (i) for "pooling of interests" accounting treatment or (ii)
as a reorganization within the meaning of Section 368 of the Code;
provided, however, that nothing contained herein shall limit the ability of
CCB or NCBC to exercise its rights under the NCBC Option Agreement or the
CCB Option Agreement, as the case may be;
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(j) amend its charter or articles of incorporation or its bylaws;
(k) other than in prior consultation with the other party to this
Agreement, restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or otherwise, or
the manner in which the portfolio is classified or reported;
(l) take any action that is intended or expected to result in any of its
representations, warranties, covenants or agreements set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law;
(m) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or regulatory
guidelines; or
(n) agree to take, make any commitment to take, or adopt any resolutions
of its board of directors in support of, any of the actions prohibited by
this Section 5.2.
ARTICLE VI
Additional Agreements
6.1 Regulatory Matters. (a) CCB and NCBC shall promptly prepare and file
with the SEC the Joint Proxy Statement and NCBC shall promptly prepare and file
with the SEC the S-4, in which the Joint Proxy Statement will be included as a
prospectus. Each of CCB and NCBC shall use their reasonable best efforts to
have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and CCB and NCBC shall thereafter mail or
deliver the Joint Proxy Statement to their respective shareholders. NCBC shall
also use its reasonable best efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and CCB shall furnish all information
concerning CCB and the holders of CCB Capital Stock as may be reasonably
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger) and the Option
Agreements, and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities. CCB
and NCBC shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
NCBC or CCB, as the case may be, and any of their respective Subsidiaries,
which appear in any filing made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the
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foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and the
Option Agreements and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
(c) CCB and NCBC shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Joint Proxy Statement, the S-4 or any other statement,
filing, notice or application made by or on behalf of CCB, NCBC or any of their
respective Subsidiaries to any Governmental Entity in connection with the
Merger and the other transactions contemplated by this Agreement.
(d) CCB and NCBC shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement or
the Option Agreements that causes such party to believe that there is a
reasonable likelihood that any Requisite Regulatory Approval (as defined below)
will not be obtained or that the receipt of any such approval will be
materially delayed.
6.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of CCB and NCBC,
for the purposes of verifying the representations and warranties of the other
and preparing for the Merger and the other matters contemplated by this
Agreement, shall, and shall cause each of their respective Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of the other party, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, each of CCB and
NCBC shall, and shall cause their respective Subsidiaries to, make available to
the other party (i) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking laws (other
than reports or documents which CCB or NCBC, as the case may be, is not
permitted to disclose under applicable law) and (ii) all other information
concerning its business, properties and personnel as such party may reasonably
request. Neither CCB nor NCBC nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of CCB's or NCBC's, as the
case may be, customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Each of NCBC and CCB agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this Section
6.2 (as well as any other
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information obtained prior to the date hereof in connection with entering into
this Agreement) for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. Subject to the requirements of
law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
Section 6.2 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) unless such information
(i) was already known to such party, (ii) becomes available to such party from
other sources not known by such party to be bound by a confidentiality
obligation, (iii) is disclosed with the prior written approval of the providing
party or (iv) is or becomes readily ascertainable from publicly available
sources. If this Agreement is terminated or the transactions contemplated by
this Agreement shall otherwise fail to be consummated, each party shall
promptly cause all copies of documents or extracts thereof containing
information and data as to the other party to be returned to the other party.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other
set forth herein.
6.3 Shareholders' Approvals. Each of CCB and NCBC shall call a meeting of
its shareholders to be held as soon as reasonably practicable for the purpose
of voting upon the requisite shareholder approvals required in connection with
this Agreement and the Merger, and each shall use its reasonable best efforts,
except as may otherwise be required by applicable law, to cause such meetings
to occur as soon as reasonably practicable and on the same date. The Board of
Directors of each of NCBC and CCB shall use its reasonable best efforts to
obtain from the shareholders of NCBC and CCB, as the case may be, the vote in
favor of the adoption of this Agreement required by the NCBCA and TBCA,
respectively to consummate the transactions contemplated hereby.
6.4 Legal Conditions to Merger. Each of CCB and NCBC shall, and shall cause
its Subsidiaries to, use their reasonable best efforts (a) to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with
all legal requirements that may be imposed on such party or its Subsidiaries
with respect to the Merger and, subject to the conditions set forth in Article
VII hereof, to consummate the transactions contemplated by this Agreement, and
(b) to obtain (and to cooperate with the other party to obtain) any material
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party that is required to be obtained
by NCBC or CCB or any of their respective Subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement.
6.5 Affiliates; Publication of Combined Financial Results. (a) Each of CCB
and NCBC shall use its reasonable best efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying the Merger for
"pooling of interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement,
and prior to the date of the shareholders' meetings called by CCB and NCBC to
approve this Agreement, a written agreement, in the form of Exhibit 5.5(a)(1)
or (2), as
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applicable, hereto, providing that such person will not sell, pledge, transfer
or otherwise dispose of any shares of CCB Capital Stock, or NCBC Capital Stock
held by such "affiliate" and, in the case of the "affiliates" of CCB, the
shares of NCBC Capital Stock to be received by such "affiliate" in the Merger.
(b) The Surviving Corporation shall use its best efforts to publish as
promptly as reasonably practical, but in no event later than 90 days after the
end of the first month after the Effective Time in which there are at least 30
days of post-Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income data as contemplated
by and in accordance with the terms of SEC Accounting Series Release No. 135.
6.6 Stock Quotation. NCBC shall cause the shares of NCBC Common Stock to be
issued in the Merger to be qualified for quotation on the Nasdaq, subject to
official notice of issuance, prior to the Effective Time.
6.7 Employee Benefit Plans. (a) From and after the Effective Time, unless
otherwise mutually determined, the NCBC Benefit Plans and CCB Benefit Plans in
effect as of the date of this Agreement shall remain in effect with respect to
employees of NCBC or CCB (or their Subsidiaries), respectively, covered by such
plans at the Effective Time until such time as the Surviving Corporation shall,
subject to applicable law, the terms of this Agreement and the terms of such
plans, adopt new benefit plans with respect to employees of the Surviving
Corporation and its Subsidiaries (the "New Benefit Plans"), or otherwise merge
or combine existing CCB Benefit Plans into NCBC Benefit Plans, or vice versa.
Prior to the Closing Date, NCBC and CCB shall cooperate in reviewing,
evaluating and analyzing the CCB Benefit Plans and NCBC Benefit Plans with a
view towards developing appropriate New Benefit Plans or combining or merging
existing benefit plans for the employees covered thereby.
(b) The foregoing notwithstanding, the Surviving Corporation agrees to honor
in accordance with their terms all benefits vested as of the date hereof under
the CCB Benefit Plans or the NCBC Benefit Plans or under other contracts,
arrangements, commitments, or understandings described in the CCB Disclosure
Schedule and the NCBC Disclosure Schedule.
(c) Nothing in this Section 6.7 shall be interpreted as preventing the
Surviving Corporation from amending, modifying or terminating any CCB Benefit
Plans, NCBC Benefit Plans, or other contracts, arrangements, commitments or
understandings, in accordance with their terms and applicable law.
(d) It is the intention of NCBC and CCB, during the period shortly following
the execution of the Merger Agreement, to coordinate efforts towards
establishing a retention and severance program, consistent with the strategy
for the Merger, in an effort to retain and provide incentives to key personnel
for the benefit of the Surviving Corporation in a manner that provides for
equitable treatment of similarly situated employees of NCBC and CCB.
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6.8 Indemnification; Directors' and Officers' Insurance. (a) In the event of
any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any individual
who is now, or has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Time, a director or officer or employee of CCB
or any of its Subsidiaries, including any entity specified in the CCB
Disclosure Schedule (the "Indemnified Parties"), is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of CCB or any of its Subsidiaries or any entity specified in the CCB
Disclosure Schedule or any of their respective predecessors or (ii) this
Agreement, the Option Agreements or any of the transactions contemplated hereby
or thereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best
efforts to defend against and respond thereto. It is understood and agreed that
after the Effective Time, NCBC shall indemnify and hold harmless, as and to the
fullest extent permitted by law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation.
(b) NCBC shall use its reasonable best efforts to cause the individuals
serving as officers and directors of CCB, its Subsidiaries or any entity
specified in the CCB Disclosure Schedule immediately prior to the Effective
Time to be covered for a period of six (6) years from the Effective Time (or
the period of the applicable statute of limitations, if longer) by the
directors' and officers' liability insurance policy maintained by CCB (provided
that NCBC may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such.
(c) In the event NCBC or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of NCBC assume the
obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 shall survive the Effective Time and
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
6.9 Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
NCBC, on the one hand, and a
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Subsidiary of CCB, on the other) or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals, immunities and franchises
of any of the parties to the Merger, the proper officers and directors of each
party to this Agreement and their respective Subsidiaries shall take all such
necessary action as may be reasonably requested by, and at the sole expense of,
NCBC.
6.10 Advice of Changes. CCB and NCBC shall each promptly advise the other
party of any change or event (i) having a Material Adverse Effect on it or (ii)
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained herein.
6.11 Dividends. After the date of this Agreement, each of CCB and NCBC shall
coordinate with the other the declaration of any dividends in respect of CCB
Common Stock and NCBC Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties hereto that holders of
CCB Common Stock shall not receive two dividends, or fail to receive one
dividend, for any quarter with respect to their shares of CCB Common Stock and
any shares of NCBC Common Stock any such holder receives in exchange therefor
in the Merger.
6.12 Exemption from Liability Under Section 16(b). If CCB delivers to NCBC
in a timely fashion prior to the Effective Time accurate information regarding
those officers and directors of CCB subject to the reporting requirements of
Section 16(a) of the Exchange Act (the "CCB Insiders"), the number of shares of
CCB Common Stock held or to be held by each such CCB Insider expected to be
exchanged for NCBC Common Stock in the Merger, and the number and description
of the options to purchase shares of CCB Common Stock held by each such CCB
Insider and expected to be converted into options to purchase NCBC Common Stock
in the Merger, the Board of Directors of NCBC, or a committee of non-employee
directors thereof (as such term is defined for purposes of Rule 16b-3(d) under
the Exchange Act), shall reasonably promptly thereafter, and in any event prior
to the Effective Time, adopt a resolution providing that the receipt by the CCB
Insiders of NCBC Common Stock in exchange for shares of CCB Common Stock, and
of option to purchase shares of NCBC Common Stock upon conversion of options to
purchase CCB Common Stock, in each case pursuant to the transactions
contemplated hereby and to the extent such securities are listed in the
information provided by CCB, are approved by such Board of Directors or by such
committee thereof, and are intended to be exempt from liability pursuant to
Section 16(b) of the Exchange Act, such that any such receipt shall be so
exempt.
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
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(a) Shareholder Approval. This Agreement (including the amendment of the
NCBC Certificate contemplated by Section 1.7) shall have been adopted by
the respective requisite affirmative votes of the holders of NCBC Common
Stock and CCB Common Stock entitled to vote thereon.
(b) Nasdaq Listing. The shares of NCBC Common Stock which shall be
issued to the shareholders of CCB upon consummation of the Merger shall
have been qualified for quotation on the Nasdaq, subject to official notice
of issuance.
(c) Other Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect
thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by
this Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, materially restricts
or makes illegal consummation of the Merger.
(f) Federal Tax Opinion. The parties hereto shall have received the
opinion of Wachtell, Lipton, Rosen & Katz, in form and substance reasonably
satisfactory to CCB and NCBC, dated the Closing Date, substantially to the
effect that, on the basis of facts, representations and assumptions set
forth in each such opinion which are consistent with the state of facts
existing at the Effective Time:
(i) The Merger will constitute a reorganization under Section 368(a)
of the Code and CCB and NCBC will each be a party to the
reorganization;
(ii) No gain or loss will be recognized by CCB or NCBC as a result
of the Merger; and
(iii) No gain or loss will be recognized by shareholders of CCB who
exchange their CCB Common Stock solely 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).
In rendering such opinions, counsel may require and rely upon
representations contained in certificates of officers of CCB, NCBC and
others.
(g) Pooling of Interests. CCB and NCBC shall each have received a letter
from their respective independent accountants addressed to NCBC or CCB, as
the case may be, to the effect that the Merger will qualify for "pooling of
interests" accounting treatment.
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7.2 Conditions to Obligations of CCB. The obligation of CCB to effect the
Merger is also subject to the satisfaction, or waiver by CCB, at or prior to
the Effective Time, of the following conditions:
(a) Representations and Warranties. The representations and warranties
of NCBC set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties (other than the representation set forth in the last sentence of
Section 3.2(a)) shall be deemed to be true and correct unless the failure
or failures of such representations and warranties to be so true and
correct, either individually or in the aggregate, and without giving effect
to any qualification as to materiality set forth in such representations or
warranties, will have a Material Adverse Effect on NCBC or the Surviving
Corporation. CCB shall have received a certificate signed on behalf of NCBC
by the Chief Executive Officer and the Chief Financial Officer of NCBC to
the foregoing effect.
(b) Performance of Obligations of NCBC. NCBC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and CCB shall have received a
certificate signed on behalf of NCBC by the Chief Executive Officer and the
Chief Financial Officer of NCBC to such effect.
7.3 Conditions to Obligations of NCBC. The obligation of NCBC to effect the
Merger is also subject to the satisfaction or waiver by NCBC at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of CCB set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, provided,
however, that for purposes of this paragraph, such representations and
warranties (other than the representation set forth in the last sentence of
Section 4.2(a)) shall be deemed to be true and correct unless the failure
or failures of such representations and warranties to be so true and
correct, either individually or in the aggregate, and without giving effect
to any qualification as to materiality set forth in such representations or
warranties, will have a Material Adverse Effect on CCB. NCBC shall have
received a certificate signed on behalf of CCB by the Chief Executive
Officer and the Chief Financial Officer of CCB to the foregoing effect.
(b) Performance of Obligations of CCB. CCB shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and NCBC shall have received a
certificate signed on behalf of CCB by the Chief Executive Officer and the
Chief Financial Officer of CCB to such effect.
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ARTICLE VIII
Termination and Amendment
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of CCB or NCBC:
(a) by mutual consent of CCB and NCBC in a written instrument, if the
Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either the Board of Directors of CCB or the Board of Directors of
NCBC if any Governmental Entity that must grant a Requisite Regulatory
Approval has denied approval of the Merger and such denial has become final
and nonappealable or any Governmental Entity of competent jurisdiction
shall have issued a final nonappealable order permanently enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either the Board of Directors of CCB or the Board of Directors of
NCBC if the Merger shall not have been consummated on or before the first
anniversary of the date of this Agreement, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein; or
(d) by either the Board of Directors of CCB or the Board of Directors of
NCBC (provided that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement contained herein) if
there shall have been a breach of any of the covenants or agreements or any
of the representations or warranties set forth in this Agreement on the
part of NCBC, in the case of a termination by CCB, or CCB, in the case of a
termination by NCBC, which breach, either individually or in the aggregate,
would constitute, if occurring or continuing on the Closing Date, the
failure of the conditions set forth in Section 7.2 or 7.3, as the case may
be, and which is not cured within 45 days following written notice to the
party committing such breach or by its nature or timing cannot be cured
prior to the Closing Date.
8.2 Effect of Termination. In the event of termination of this Agreement by
either CCB or NCBC as provided in Section 8.1, this Agreement shall forthwith
become void and have no effect, and none of CCB, NCBC, any of their respective
Subsidiaries or any of the officers or directors of any of them shall have any
liability of any nature whatsoever hereunder, or in connection with the
transactions contemplated hereby, except that (i) Sections 6.2(b), 8.2, 9.2 and
9.3 shall survive any termination of this Agreement, and (ii) notwithstanding
anything to the contrary contained in this Agreement, neither CCB nor NCBC
shall be relieved or released from any liabilities or damages arising out of
its willful breach of any provision of this Agreement.
8.3 Amendment. Subject to compliance with applicable law and Section 1.1(b),
this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented
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in connection with the Merger by the shareholders of CCB and NCBC; provided,
however, that after any approval of the transactions contemplated by this
Agreement by the respective shareholders of CCB or NCBC, there may not be,
without further approval of such shareholders, any amendment of this Agreement
that changes the amount or the form of the consideration to be delivered
hereunder to the holders of CCB Common Stock, other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by this Agreement by the respective
shareholders of CCB or NCBC, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the holders of CCB Common Stock hereunder, other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
General Provisions
9.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date
and at a place to be specified by the parties, which shall be no later than
five business days after the satisfaction or waiver (subject to applicable law)
of the latest to occur of the conditions set forth in Article VII hereof,
unless extended by mutual agreement of the parties (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than the Option
Agreements and the Confidentiality Agreement, which shall terminate in
accordance with terms) shall survive the Effective Time, except for Section 6.8
and for those other covenants and agreements contained herein and therein which
by their terms apply in whole or in part after the Effective Time.
9.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense; provided, however, that the costs and expenses of
printing and mailing the Joint Proxy Statement, and all filing and other fees
paid to the SEC in connection with the Merger, shall be borne equally by CCB
and NCBC.
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9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to CCB, to:
CCB Financial Corporation
111 Corcoran Street
P.O. Box 931
Durham, North Carolina 27702
Attention: Ernest C. Roessler
Chairman, President and Chief Executive Officer
Telecopier: (919) 683-7254
and
(b) if to NCBC, to:
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Attention: Charles A. Neale
Vice President and General Counsel
Telecopier: (901) 523-3303
9.5 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement, unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
9.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Option
Agreements.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law principles, except to the extent mandatory
provisions of federal, North Carolina or Tennessee law apply.
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9.9 Publicity. Except as otherwise required by applicable law or the rules
of the NYSE or the Nasdaq, neither CCB or NCBC shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of NCBC, in the case of a proposed announcement or statement by
CCB, or CCB, in the case of a proposed announcement or statement by NCBC, which
consent shall not be unreasonably withheld.
9.10 Assignment; Third Party Beneficiaries. Neither this Agreement nor any
of the rights, interests or obligations shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Except as otherwise specifically
provided in Section 6.8, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
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IN WITNESS WHEREOF, CCB and NCBC have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
above written.
National Commerce Bancorporation
/s/ Thomas M. Garrott
By___________________________________
Name: Thomas M. Garrott
Title: Chairman, President and
Chief Executive Officer
CCB Financial Corporation
/s/ Ernest C. Roessler
By___________________________________
Name: Ernest C. Roessler
Title: Chairman, President and
Chief Executive Officer
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THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated March 17, 2000, between National Commerce
Bancorporation, a Tennessee corporation ("Issuer"), and CCB Financial
Corporation, a North Carolina corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor and for Grantee's entering into the CCB Option
Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
21,527,748 fully paid and nonassessable shares of Issuer's Common Stock,
par value $2.00 per share ("Common Stock"), at a price of $20.3125 per
share (the "Option Price"); provided, however, that in no event shall the
number of shares of Common Stock for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock
without giving effect to any shares subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of the
Agreement, the number of shares of Common Stock subject to the Option shall
be increased or decreased, as appropriate, so that, after such issuance,
such number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event
(as hereinafter defined) shall
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have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 90 days following such Subsequent Triggering Event. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering Event,
except a termination by Grantee pursuant to Section 8.1(d) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional); or (iii) the passage of 12 months after
termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional)
(provided that if an Initial Triggering Event continues or occurs beyond
such termination and prior to the passage of such 12-month period, the
Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination). The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean the holder or
holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer shall have recommended that the
Shareholders of Issuer approve or accept any Acquisition Transaction.
For purposes of this Agreement, "Acquisition Transaction" shall mean
(w) a merger or consolidation, or any similar transaction, involving
Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC")) of Issuer, (x) a purchase, lease or other acquisition or
assumption of all or a substantial portion of the assets or deposits of
Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction;
provided, however, that in any event neither the Piedmont Merger nor
any merger, consolidation, purchase or similar transaction involving
(A) only the Issuer and one or more of its Subsidiaries or involving
only any two or more of such Subsidiaries, provided that any such
transaction is not entered into in violation of the terms of the Merger
Agreement, or (B) any pending acquisition by Issuer disclosed by Issuer
in its disclosure schedule delivered to Grantee in connection with
entering into the
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Merger Agreement and consummated pursuant to such disclosed terms, be
deemed to be an Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or the Board of Directors of
Issuer shall have publicly withdrawn or modified, or publicly announced
its interest to withdraw or modify, in any manner adverse to Grantee,
its recommendation that the Shareholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of its business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the 1934 Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its Shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
Shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the Notice Date
(as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with
the Federal Reserve Board, or other federal or state bank regulatory
authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a
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"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from
the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve
Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application
for approval and shall expeditiously process the same and the period of
time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer, provided that failure or refusal of Issuer to designate such a
bank account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer
shall deliver to the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer a copy of this Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose
of such shares in violation of applicable law or the provisions of this
Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions
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to this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the conditions in
the preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed, subject to the
receipt of applicable regulatory approvals, to be the holder of record
of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this
Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. (S) 18a
and regulations promulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), or the Change in Bank
Control Act of 1978, as amended, or any state banking law, prior approval
of or notice to the Federal Reserve Board or to any state regulatory
authority is necessary before the Option may be exercised, cooperating
fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as
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used herein include any Stock Option Agreements and related Options for
which this Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by Issuer of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer
will execute and deliver a new Agreement of like tenor and date. Any such
new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5. In the event of any change
in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or in
respect of the Common Stock, or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 90 days of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total
or partial exercise of this Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee. Issuer will use its reasonable
best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180 days from
the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the inclusion of the
Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the
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registration statement contemplated hereby may be reduced; and provided,
however, that after any such required reduction the number of Option Shares
to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a registration statement
for the balance as promptly as practical and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this Section 6
from any Holder, Issuer agrees to send a copy thereof to any other person
known to Issuer to be entitled to registration rights under this Section 6,
in each case by promptly mailing the same, postage prepaid, to the address
of record of the persons entitled to receive such copies. Notwithstanding
anything to the contrary contained herein, in no event shall Issuer be
obligated to effect more than two registrations pursuant to this Section 6
by reason of the fact that there shall be more than one Grantee as a result
of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to
an Exercise Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase
Price") equal to the amount by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Option Price, multiplied by the number of shares for
which this Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered within 90
days of such occurrence (or such later period as provided in Section 10),
Issuer shall repurchase such number of the Option Shares from the Owner as
the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the Market/Offer Price multiplied by the number of Option Shares
so designated. The term "Market/Offer Price" shall mean the highest of (i)
the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the sum
of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than
cash shall be determined by a nationally recognized investment
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banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. Within the latter to occur of (x) five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices
relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that
it is not so prohibited from delivering, within five business days after
the date on which Issuer is not so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation from delivering to the Holder and/or the Owner, as appropriate,
the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its best efforts
to obtain all required regulatory and legal approvals and to file any
required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
for which the surrendered Stock Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion
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of the assets of Issuer, other than any such transaction which would not
constitute an Acquisition Transaction pursuant to the proviso to Section
2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial
ownership of 50% or more of the then outstanding shares of Common Stock,
provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of
an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii)
to permit any person, other than Grantee or one of its Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding voting shares and voting share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of
its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, and (iii) the transferee of all or substantially
all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by the person
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merging into Issuer or by any company which controls or is controlled
by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by
the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Holder equal
to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be
exercised, and at the request of the owner (the "Substitute Share Owner")
of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding
the date
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the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business days after
the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share Repurchase
Price therefor or, in either case, the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or
the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is not prohibited from delivering, within five
business days after the date on which the Substitute Option Issuer is not
so prohibited; provided, however, that if the Substitute Option Issuer is
at any time after delivery of a notice of repurchase pursuant to subsection
(b) of this Section 9 prohibited under applicable law or regulation from
delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to obtain all required
regulatory and legal approvals, in each case as promptly as practicable, in
order to accomplish such repurchase), the Substitute Option Holder or
Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute Option
Issuer shall promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the Substitute
Option Repurchase Price or the Substitute Share Repurchase Price that the
Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common
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Stock obtained by multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator
of which is the Substitute Option Repurchase Price, or (B) to the
Substitute Share Owner, a certificate for the Substitute Common Shares it
is then so prohibited from repurchasing.
10. The 90-day, or 6-month periods for exercise of certain rights under
Sections 2, 6, 7, 13 and 15 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such rights, for the
expiration of all statutory waiting periods; (ii) to the extent necessary
to avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise; and (iii) during any period in which Grantee is precluded from
exercising such rights due to an injunction or other legal restriction,
plus in each case such additional period as is reasonably necessary for the
exercise of such rights promptly following the obtaining of such approvals
or the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred
to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
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(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent Triggering
Event (or such later period as provided in Section 10); provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board approves an application by Grantee under the BHCA to acquire the
shares of Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (iii) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated
by this Agreement, including without limitation making application to
authorize for quotation the shares of Common Stock issuable hereunder on
the National Market System of the Nasdaq Stock Market, Inc. upon official
notice of issuance and applying to the Federal Reserve Board under the BHCA
for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to
acquire the shares of Common Stock issuable hereunder until such time, if
ever, as it deems appropriate to do so.
15. (a) Grantee in its sole discretion may, at any time during which
Issuer would be required to repurchase the Option or any Option Shares
pursuant to Section 7, surrender the Option (together with any Option
Shares issued to and then owned by the Holder) to Issuer in exchange for a
cash payment equal to the Surrender Price (as defined herein); provided,
however, that Grantee may not exercise its rights pursuant to this Section
15 if Issuer has previously repurchased the Option (or any portion thereof)
or any Option Shares pursuant to Section 7. The "Surrender Price" shall be
equal to (i) $45,000,000, plus (ii) if applicable, the aggregate purchase
price previously paid pursuant hereto by Grantee with respect to any Option
Shares, minus (iii) if applicable, the excess of (A) the net cash, if any,
received by Grantee pursuant to the arm's-length sale of Option Shares (or
any other securities into which such Option Shares were converted or
exchanged) to any party not affiliated with Grantee, over (B) the purchase
price paid by Grantee with respect to such Option Shares.
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<PAGE>
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purchase
to Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice
stating (i) that Grantee elects to surrender the Option and Option Shares,
if any, in accordance with the provisions of this Section 15 and (ii) the
Surrender Price. Within two business days after the surrender of the Option
and the Option Shares, if applicable, Issuer shall deliver or cause to be
delivered to Grantee the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver, or cause to be
delivered, from time to time, to Grantee, that portion of the Surrender
Price that Issuer is not or no longer prohibited from paying, within two
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
Surrender pursuant to Section 15(b) is prohibited under applicable law or
regulation from paying to Grantee the Surrender Price in full, (i) Issuer
shall (A) use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within two business days of the submission
or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (C) keep Grantee
advised of both the status of any such request for regulatory and legal
approvals and any discussions with any relevant regulatory or other third
party reasonably related to the same, and (ii) Grantee may revoke such
notice of surrender by delivery of a notice of revocation, the Exercise
Termination Event shall be extended to a date six months from the date on
which the Exercise Termination Event would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise
any of its rights hereunder, including any and all rights pursuant to this
Section 15).
(d) Grantee shall have rights substantially identical to those set forth
in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in
which the Substitute Option Issuer would be required to repurchase the
Substitute Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire,
or Issuer or Substitute Option Issuer, as the case may be, is not permitted
to repurchase pursuant to Section 7 or Section 9, as the case may be, the
full number of shares of Common Stock provided in
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Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), or
Issuer or Substitute Option Issuer is not permitted to pay the full
Surrender Price, it is the express intention of Issuer (which shall be
binding on the Substitute Option Issuer) to allow the Holder to acquire or
to require Issuer or the Substitute Option Issuer, as the case may be, to
repurchase such lesser number of shares, or to pay such portion of the
Surrender Price, as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person,
by cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal or Tennessee law
apply).
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
National Commerce Bancorporation
/s/ Thomas M. Garrott
By: _________________________________
CCB Financial Corporation
/s/ Ernest C. Roessler
By: _________________________________
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<PAGE>
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated March 17, 2000, between CCB Financial
Corporation, a North Carolina corporation ("Issuer"), and National Commerce
Bancorporation, a Tennessee corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor and for Grantee's entering into the NCB Option
Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
7,846,175 fully paid and nonassessable shares of Issuer's Common Stock, par
value $5.00 per Share ("Common Stock"), at a price of $39.75 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The
number of shares of Common Stock that may be received upon the exercise of
the Option and the Option Price are subject to adjustment as herein set
forth.
(b) In the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of the
Agreement, the number of shares of Common Stock subject to the Option shall
be increased or decreased, as appropriate, so that, after such issuance,
such number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter
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defined) and a Subsequent Triggering Event (as hereinafter defined) shall
have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 90 days following such Subsequent Triggering Event. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering Event,
except a termination by Grantee pursuant to Section 8.1(d) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional); or (iii) the passage of 12 months after
termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional)
(provided that if an Initial Triggering Event continues or occurs beyond
such termination and prior to the passage of such 12-month period, the
Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination). The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean the holder or
holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer shall have recommended that the
Shareholders of Issuer approve or accept any Acquisition Transaction.
For purposes of this Agreement, "Acquisition Transaction" shall mean
(w) a merger or consolidation, or any similar transaction, involving
Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC")) of Issuer, (x) a purchase, lease or other acquisition or
assumption of all or a substantial portion of the assets or deposits of
Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction;
provided, however, that in no event shall any merger, consolidation,
purchase or similar transaction involving only the Issuer and one or
more of its Subsidiaries or involving only any two or more of such
Subsidiaries, provided that any such transaction is not entered into in
violation of the terms of the Merger Agreement, be deemed to be an
Acquisition Transaction;
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<PAGE>
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or the Board of Directors of
Issuer shall have publicly withdrawn or modified, or publicly announced
its interest to withdraw or modify, in any manner adverse to Grantee,
its recommendation that the Shareholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of its business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the 1934 Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its Shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
Shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the Notice Date
(as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with
the Federal Reserve Board, or other federal or state bank regulatory
authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event and/or Subsequent Triggering Event of which it
has notice (together, a
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<PAGE>
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from
the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve
Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application
for approval and shall expeditiously process the same and the period of
time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer, provided that failure or refusal of Issuer to designate such a
bank account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer
shall deliver to the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer a copy of this Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose
of such shares in violation of applicable law or the provisions of this
Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
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<PAGE>
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required
by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed, subject to the
receipt of applicable regulatory approvals, to be the holder of record
of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this
Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued shares of Common
Stock so that the Option may be exercised without additional authorization
of Common Stock after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid
or seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. (S) 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of
1978, as amended, or any state banking law, prior approval of or notice to
the Federal Reserve Board or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to
the Federal Reserve Board or such state regulatory authority as they may
require) in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the rights of
the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to
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the same conditions as are set forth herein, in the aggregate the same
number of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Stock Option Agreements
and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5. In the event of any change
in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or in
respect of the Common Stock, or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 90 days of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total
or partial exercise of this Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee. Issuer will use its reasonable
best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180 days from
the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the inclusion of the
Holder's Option or
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Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may be
reduced; and provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the account of
the Holder shall constitute at least 25% of the total number of shares to
be sold by the Holder and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any such
Holder in connection with such registration, Issuer shall become a party to
any underwriting agreement relating to the sale of such shares, but only to
the extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a copy thereof to any
other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid,
to the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event
shall Issuer be obligated to effect more than two registrations pursuant to
this Section 6 by reason of the fact that there shall be more than one
Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to
an Exercise Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase
Price") equal to the amount by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Option Price, multiplied by the number of shares for
which this Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered within 90
days of such occurrence (or such later period as provided in Section 10),
Issuer shall repurchase such number of the Option Shares from the Owner as
the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the Market/Offer Price multiplied by the number of Option Shares
so designated. The term "Market/Offer Price" shall mean the highest of (i)
the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the sum
of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Issuer, divided by the number of
shares of Common Stock of Issuer
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outstanding at the time of such sale. In determining the Market/Offer
Price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or
Owner, as the case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. Within the latter to occur of (x) five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices
relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that
it is not so prohibited from delivering, within five business days after
the date on which Issuer is not so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation from delivering to the Holder and/or the Owner, as appropriate,
the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its best efforts
to obtain all required regulatory and legal approvals and to file any
required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
for which the surrendered Stock Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
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(d) For purposes of this Section 7, a Repurchase Event shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition
Transaction pursuant to the proviso to Section 2(b)(i) hereof or (ii) upon
the acquisition by any person of beneficial ownership of 50% or more of the
then outstanding shares of Common Stock, provided that no such event shall
constitute a Repurchase Event unless a Subsequent Triggering Event shall
have occurred prior to an Exercise Termination Event. The parties hereto
agree that Issuer's obligations to repurchase the Option or Option Shares
under this Section 7 shall not terminate upon the occurrence of an Exercise
Termination Event unless no Subsequent Triggering Event shall have occurred
prior to the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii)
to permit any person, other than Grantee or one of its Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding voting shares and voting share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of
its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined
in Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding
the consolidation,
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merger or sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging
into Issuer or by any company which controls or is controlled by such
person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by
the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Holder equal
to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be
exercised, and at the request of the owner (the "Substitute Share Owner")
of shares of Substitute
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Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to the Highest Closing Price multiplied by the
number of Substitute Shares so designated. The term "Highest Closing Price"
shall mean the highest closing price for shares of Substitute Common Stock
within the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the Substitute
Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business days after
the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share Repurchase
Price therefor or, in either case, the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or
the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is not prohibited from delivering, within five
business days after the date on which the Substitute Option Issuer is not
so prohibited; provided, however, that if the Substitute Option Issuer is
at any time after delivery of a notice of repurchase pursuant to subsection
(b) of this Section 9 prohibited under applicable law or regulation from
delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to obtain all required
regulatory and legal approvals, in each case as promptly as practicable, in
order to accomplish such repurchase), the Substitute Option Holder or
Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute Option
Issuer shall promptly (i) deliver to the Substitute
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<PAGE>
Option Holder or Substitute Share Owner, as appropriate, that portion of
the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Substitute Option
Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common
Stock obtained by multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator
of which is the Substitute Option Repurchase Price, or (B) to the
Substitute Share Owner, a certificate for the Substitute Common Shares it
is then so prohibited from repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights under
Sections 2, 6, 7, 13 and 15 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such rights, and for
the expiration of all statutory waiting periods; (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason
of such exercise and (iii) during any period in which Grantee is precluded
from exercising such rights due to an injunction or other legal
restriction, plus in each case such additional period as is reasonably
necessary for the exercise of such rights promptly following the obtaining
of such approvals or the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action so that the entering into of this
Option Agreement, the acquisition of shares of Common Stock hereunder
and the other transactions contemplated hereby do not and will not
result in the grant of any rights
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to any person under the Amended and Restated Rights Agreement, dated as
of October 1, 1998, between Issuer and Central Carolina Bank and Trust
Company, or enable or require the shareholder rights thereunder to be
exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred
to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent Triggering
Event (or such later period as provided in Section 10); provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board approves an application by Grantee under the BHCA to acquire the
shares of Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (iii) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated
by this Agreement, including without limitation making application to list
the shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the Federal
Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
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<PAGE>
15. (a) Grantee may in its sole discretion, at any time during which
Issuer would be required to repurchase the Option or any Option Shares
pursuant to Section 7, surrender the Option (together with any Option
Shares issued to and then owned by the Holder) to Issuer in exchange for a
cash payment equal to the Surrender Price (as defined herein); provided,
however, the Grantee may not exercise its rights pursuant to this Section
15 if Issuer has previously repurchased the Option (or any portion thereof)
or any Option Shares pursuant to Section 7. The "Surrender Price" shall be
equal to (i) $45,000,000, plus (ii) if applicable, the aggregate purchase
price previously paid pursuant hereto by Grantee with respect to any Option
Shares, minus (iii) if applicable, the excess of (A) the net cash, if any,
received by Grantee pursuant to the arm's-length sale of Option Shares (or
any other securities into which such Option Shares were converted or
exchanged) to any party not affiliated with Grantee, over (B) the purchase
price paid by Grantee with respect to such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purpose
to Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice
stating (i) that Grantee elects to surrender the Option and Option Shares,
if any, in accordance with the provisions of this Section 15 and (ii) the
Surrender Price. Within two business days after the surrender of the Option
and the Option Shares, if applicable, Issuer shall deliver or cause to be
delivered to Grantee the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver, or cause to be
delivered, from time to time, to Grantee, that portion of the Surrender
Price that Issuer is not or no longer prohibited from paying, within two
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
surrender pursuant to Section 15(b) is prohibited under applicable law or
regulation from paying to Grantee the Surrender Price in full, (i) Issuer
shall (A) use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within two business days of the submission
or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (c) keep Grantee
advised of both the status of any such request for regulatory and legal
approvals and any discussions with any relevant regulatory or other third
party reasonably related to the same, and (ii) Grantee may revoke such
notice or surrender by delivery of a notice of revocation to Issuer and,
upon delivery of such notice of revocation, the Exercise Termination Event
shall be extended to a date six months from the date on which the Exercise
Termination Event would have occurred if not for the provisions of this
Section 15(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 15).
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(d) Grantee shall have rights substantially identical to those set forth
in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in
which the Substitute Option Issuer would be required to repurchase the
Substitute Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire,
or Issuer or Substitute Option Issuer, as the case may be, is not permitted
to repurchase pursuant to Section 7 or Section 9, as the case may be, the
full number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), or Issuer or Substitute
Option Issuer is not permitted to pay the full amount of the Surrender
Price pursuant to Section 15, it is the express intention of Issuer (which
shall be binding on the Substitute Option Issuer) to allow the Holder to
acquire or to require Issuer or Substitute Option Issuer to repurchase such
lesser number of shares, or to require Issuer or Substitute Option Issuer
to pay such portion of the Surrender Price, as may be permissible, without
any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person,
by cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal or North
Carolina law apply).
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the
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transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereof, written or oral. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CCB Financial Corporation
/s/ Ernest C. Roessler
By: _________________________________
National Commerce Bancorporation
/s/ Thomas M. Garrott
By: _________________________________
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APPENDIX D
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON]
March 17, 2000
The Board of Directors
National Commerce Bancorporation
One Commerce Square
Memphis, TN 38150
Ladies and Gentlemen:
You have asked us to advise you with respect to the fairness to National
Commerce Bancorporation (the "Company") from a financial point of view of the
Exchange Ratio (as defined below) pursuant to the terms of the Agreement and
Plan of Merger, dated as of March 17, 2000 (the "Agreement"), by and between
the Company and CCB Financial Corporation ("CCB"). The Agreement provides for
the merger (the "Merger") of CCB with and into the Company with the Company
being the surviving corporation of the Merger. Pursuant to the Merger, each
outstanding share of common stock, par value $5.00 per share, of CCB will be
converted into 2.45 shares of common stock of the Company (the "Exchange
Ratio").
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and CCB, as well as
the Merger Agreement. We have also reviewed certain other information,
including financial forecasts, provided to us by the Company and CCB, and have
met with the Company's and CCB's management to discuss the business and
prospects of the Company and CCB.
We have also considered certain financial and stock market data of the
Company and CCB, and we have compared those data with similar data for other
publicly held companies in businesses similar to those of the Company and CCB
and we have considered the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant. We have also relied upon the views of the Company's and CCB's
management concerning the business, operational and strategic benefits and
implications of the Merger, including financial forecasts provided to us by the
Company and CCB relating to the synergistic values and operating cost savings
expected to be achieved through the combination of the operations of the
Company and CCB.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available
<PAGE>
estimates and judgments of the Company's and CCB's management as to the future
financial performance of the Company and CCB and as to the cost savings and
other potential synergies (including the amount, timing and achievability
thereof) anticipated to result from the Merger.
You also have informed us, and we have assumed, that the Merger will be
treated as a tax-free reorganization for federal income tax purposes and
accounted for as a pooling of interests in accordance with generally accepted
accounting principles. In addition, we have not been requested to make, and
have not made, an independent evaluation or appraisal of the assets or
liabilities (contigent or otherwise) of the Company, nor have we been furnished
with any such evaluations or appraisals. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. We are not expressing any opinion as to the
actual value of the common stock of the Company when issued to CCB's
stockholders pursuant to the Merger or the prices at which such stock will
trade subsequent to Merger.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and CCB for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Merger and
is not to be quoted or referred to, in whole or in part, in any registration
statement, prospectus or proxy statement, or in any other document used in
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the Company from a financial point
of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ P. Olivier Sarkozy
By: ____________________________________
P. Olivier Sarkozy
<PAGE>
Appendix E
JPMorgan
March 17, 2000
The Board of Directors
CCB Financial Corporation
111 Corcoran Street
Durham, NC 27702-0931
Attention: Ernest C. Roessler
Chairman, President and CEO
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of CCB Financial Corporation (the "Company") of the
consideration proposed to be paid to them in connection with the proposed
merger (the "Merger") of the Company with National Commerce Bancorporation (the
"Surviving Corporation"). Pursuant to the Agreement and Plan of Merger, dated
as of March 17, 2000 (the "Agreement"), among the Company and the Surviving
Corporation, stockholders of the Company will receive for each share of Common
Stock, par value $5.00 per share, of the Company held by them consideration
equal to 2.45 shares of Common Stock, par value $2.00 per share, of the
Surviving Corporation (the "Exchange Ratio").
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving companies comparable to the Company and the consideration received
for such companies; (iv) current and historical market prices of the common
stock of the Company and the Surviving Corporation; (v) the audited financial
statements of the Company and the Surviving Corporation for the fiscal year
ended December 31, 1999 and December 31, 1998; (vi) certain internal financial
analyses and forecasts prepared by the Company and the Surviving Corporation
and their respective managements; and (vii) the terms of other business
combinations that we deemed relevant.
In addition, we have held discussions with certain members of the management
of the Company and the Surviving Corporation with respect to certain aspects of
the Merger, and the past and current business operations of the Company and the
Surviving Corporation, the financial condition and future prospects and
operations of the Company and the Surviving
E-1
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JPMorgan
Corporation, the effects of the Merger on the financial condition and future
prospects of the Company and the Surviving Corporation, and certain other
matters we believed necessary or appropriate to our inquiry. We have reviewed
such other financial studies and analyses and considered such other information
as we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company and the Surviving
Corporation or otherwise reviewed by us, and we have not assumed any
responsibility or liability therefor. We have not conducted any valuation or
appraisal of any assets or liabilities, nor have any such valuations or
appraisals been provided to us. In relying on financial analyses and forecasts
provided to us, we have assumed that they have been reasonably prepared based
on assumptions reflecting the best currently available estimates and judgments
by management as to the expected future results of operations and financial
condition of the Company and the Surviving Corporation to which such analyses
or forecasts relate. We have also assumed that the Merger will have the tax and
accounting consequences described in discussions with, and materials furnished
to us by, representatives of the Company, and that the other transactions
contemplated by the Agreement will be consummated as described in the
Agreement. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion.
We are expressing no opinion herein as to the price at which the Surviving
Corporation's stock will trade at any future time. In connection with our
engagement, we were not requested to, and did not, solicit third party
indications of interest in acquiring all or any portion of the Company.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the Merger.
We maintain customary banking relationships with the Company and the Surviving
Corporation. In the ordinary course of their businesses, J.P. Morgan and its
affiliates may actively trade the debt and equity securities of the Company or
the Surviving Corporation for their own account or for the accounts of
customers and, accordingly, they may at any time hold long or short positions
in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the proposed Merger is fair, from a
financial point of view, to the Company's stockholders.
E-2
<PAGE>
JPMorgan
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger. This opinion
may not be disclosed, referred to, or communicated (in whole or in part) to any
third party for any purpose whatsoever except with our prior written consent in
each instance. This opinion may be reproduced in full in any proxy or
information statement mailed to stockholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior written
approval and must be treated as confidential.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ John R. Chrin
---------------------
Name: John R. Chrin
Title: Managing Director
E-3
<PAGE>
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.
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, 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 SEC such indemnification is against
public policy as expressed in the Act and is, therefore,
II-1
<PAGE>
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 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 Joint 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.
II-2
<PAGE>
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 April 19, 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 SEC, 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 by 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
--------- ----- ----
<C> <S> <C>
/s/ Thomas M. Garrott Chairman of the Board, April 19, 2000
___________________________________ President and Chief
Thomas M. Garrott Executive Officer
(Principal Executive
Officer) and Director
/s/ Lewis E. Holland Vice Chairman, Treasurer April 19, 2000
___________________________________ and Chief Financial
Lewis E. Holland Officer (Principal
Financial Officer and
Principal Accounting
Officer) and Director
/s/ Mark A. Wendel Accounting Officer April 19, 2000
___________________________________ (Principal Accounting
Mark A. Wendel Officer)
/s/ William R. Reed, Jr. Vice Chairman and April 19, 2000
___________________________________ Director
William R. Reed, Jr.
/s/ Frank G. Barton, Jr. Director April 19, 2000
___________________________________
Frank G. Barton, Jr.
/s/ Bruce E. Campbell, Jr. Director April 19, 2000
___________________________________
Bruce E. Campbell, Jr.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ John D. Canale, III Director April 19, 2000
___________________________________
John D. Canale, III
/s/ James H. Daughdrill, Jr. Director April 19, 2000
___________________________________
James H. Daughdrill, Jr.
/s/ Thomas C. Farnsworth, Jr. Director April 19, 2000
___________________________________
Thomas C. Farnsworth, Jr.
Director
___________________________________
R. Lee Jenkins
Director
___________________________________
W. Neely Mallory, Jr.
Director
___________________________________
James E. McGehee, Jr.
/s/ Phillip H. McNeill, Sr. Director April 19, 2000
___________________________________
Phillip H. McNeill, Sr.
/s/ Harry J. Phillips, Sr. Director April 19, 2000
___________________________________
Harry J. Phillips, Sr.
Director
___________________________________
J. Bradbury Reed
/s/ G. Mark Thompson Director April 19, 2000
___________________________________
G. Mark Thompson
/s/ R. Grattan Brown, Jr. Director April 19, 2000
___________________________________
R. Grattan Brown, Jr.
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger by and between CCB Financial Corporation
and National Commerce Bancorporation dated as of March 17, 2000 (filed
as Appendix A to the Joint Proxy Statement/ Prospectus contained in
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 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 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 and incorporated herein
by reference.
4.2 Stock Option Agreement between CCB Financial Corporation and National
Commerce Bancorporation dated March 17, 2000 (filed as Appendix B to
the Joint Proxy Statement/Prospectus contained in this Registration
Statement).
4.3 Stock Option Agreement between National Commerce Bancorporation and
CCB Financial Corporation dated March 17, 2000 (filed as Appendix C to
the Joint Proxy Statement/Prospectus contained in this Registration
Statement).
5.1 Opinion of Bass, Berry & Sims PLC, counsel to the Registrant, as to
the validity of the shares of the Registrant's Common Stock.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz, 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 and incorporated herein by reference).
10.2 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 and incorporated herein by reference).
10.3 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 and
incorporated herein by reference).
10.4 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 and
incorporated herein by reference).
10.5 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 and
incorporated herein by reference).
10.6 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 and incorporated herein by
reference).
10.7 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 and
incorporated herein by reference).
10.8 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 and
incorporated herein by reference).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
10.9 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 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 Gary L. Lazarini (filed as Exhibit 10.10 to the
Registrant's Form 10-K for the year ended December 31, 1998 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 Mackie H. Gober (filed as Exhibit 10.11 to the
Registrant's Form 10-K for the year ended December 31, 1998 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 Lewis Holland (filed as Exhibit 10.12 to the
Registrant's Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
10.13 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 and incorporated herein by
reference).
10.14 Split Dollar Insurance Plan (filed as Exhibit 10c(3) to the
Registrant's Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference).
10.15 Bonus Incentive Plan (filed as Exhibit 10c(1) to the Registrant's Form
10-K for the year ended December 31, 1980 and incorporated herein by
reference).
10.16 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).
10.17 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).
10.18 Resolution authorizing Pension Restoration Plan (filed as Exhibit
10(c)(7) to the Registrant's Form 10-K for the year ended December 31,
1986 and incorporated herein by reference).
10.19 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 and incorporated herein by reference).
10.20 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 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 opinion filed as
Exhibit 5.1).
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in the opinion
filed as Exhibit 8.1).
23.5 Consent of Credit Suisse First Boston Corporation.
23.6 Consent of J. P. Morgan Securities, Inc. (included in the opinion
attached as Appendix E to the Joint Proxy Statement/Prospectus
contained in this Registration Statement)
99.1 Form of CCB Financial Corporation Proxy.
99.2 Form of National Commerce Bancorporation Proxy
</TABLE>
II-6
<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>
<CAPTION>
<S> <C> <C>
KNOXVILLE OFFICE: THE TOWER AT PEABODY PLACE NASHVILLE OFFICE:
1700 RIVERVIEW TOWER 100 PEABODY PLACE, SUITE 950 2700 FIRST AMERICAN CENTER
KNOXVILLE, TN 37901-1509 MEMPHIS, TENNESSEE 38103-2625 NASHVILLE, TN 37238-2700
(423) 521-6200 (901) 543-5900 (615) 742-6200
www.bassberry.com
</TABLE>
April 20, 2000
The Board of Directors of
National Commerce Bancorporation
One Commerce Square
Memphis, TN 38150
RE: Form S-4 Registration Statement Relating to
96,654,117 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 96,654,117 shares of NCBC common stock, par value $2.00 per share,
to be issued in connection with the Agreement and Plan of Merger, dated as of
March 17, 2000 (the "Merger Agreement"), by and between NCBC and CCB Financial
Corporation.
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
<PAGE>
National Commerce Bancorporation
April 20, 2000
Page 2
independent investigations with regard thereto, and, accordingly, we do not
express any opinion as to matters that might have been disclosed by independent
verification.
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 NCBC.
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,
/s/ Bass, Berry & Sims PLC
--------------------------
BASS, BERRY & SIMS PLC
<PAGE>
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD APPEARS HERE]
EXHIBIT 8.1
April 20, 2000
CCB Financial Corporation
111 Corcoran Street
P.O. Box 931
Durham, North Carolina
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Ladies and Gentlemen:
We have acted as special counsel to CCB Financial Corporation, a North
Carolina corporation ("CCB") and National Commerce Bancorporation, a Tennessee
corporation ("NCBC"), in connection with the proposed merger (the "Merger") of
CCB with and into NCBC upon the terms and conditions set forth in the Agreement
and Plan of Merger, dated as of March 17, 2000, by and between CCB and NCBC (the
"Agreement"). At your request, in connection with the filing of the
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), we are
rendering our opinion concerning certain federal income tax consequences of the
Merger. Any capitalized term used and not defined herein has the meaning given
to it in the Agreement.
For purposes of the opinion set forth below, we have relied, with the
consent of CCB and the consent of NCBC, upon the accuracy and completeness of
the statements and representations (which statements and representations we have
neither investigated nor verified) contained, respectively, in the certificates
of the officers of CCB and NCBC dated the date hereof, and have assumed that
such statements and representations will be complete and accurate at the
Effective Time and that all statements and representations made to the knowledge
of any person or entity or with similar qualification are and will be true and
correct as if made without such qualification. We have also relied upon the
accuracy of the Registration Statement and the joint proxy statement-prospectus
included therein (the "Proxy Statement").
<PAGE>
CCB Financial Corporation
National Commerce Bancorporation
April 20, 2000
Page 2
We have also assumed that (i) the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Registration Statement and the Proxy Statement (and no terms or conditions
therein material to this opinion will be waived), (ii) the Merger will be
reported by CCB and NCBC on their respective federal income tax returns in a
manner consistent with the opinion set forth below, and (iii) the Merger will
qualify as a statutory merger under the applicable laws of the States of North
Carolina and Tennessee.
Based upon and subject to the foregoing, under currently applicable
United States federal income tax law, it is our opinion that, for United States
federal income tax purposes, (i) the Merger will constitute a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended, and CCB
and NCBC will each be a party to the reorganization, (ii) no gain or loss will
be recognized by CCB or NCBC as a result of the Merger, and (iii) no gain or
loss will be recognized by the shareholders of CCB who exchange their CCB Common
Stock solely 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).
We express no opinion as to the United States federal income tax
consequences of the Merger to stockholders subject to special treatment under
United States federal income tax law (including, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who acquired their shares of CCB Common Stock through the
exercise of an employee stock option or right or otherwise as compensation, and
holders who hold CCB Common Stock as part of a hedge, straddle, conversion or
constructive sale transaction). In addition, no opinion is expressed with
respect to the tax consequences of the Merger under applicable foreign, state or
local laws or under any federal tax laws other than those pertaining to the
income tax.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "The Merger--Material Federal Income Tax
Consequences" and elsewhere in the Proxy Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
<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 April 20, 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
Hillsborough Savings Bank, Inc., SSB North Carolina NCBC 100.00
Prime Financial Services, Inc. Tennessee TransPlatinum 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 for the registration of up to 96,654,117 shares
of its common stock and to the incorporation by reference therein of our report
dated January 27, 2000, 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, 1999, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
----------------------------
Memphis, Tennessee
April 17, 2000
<PAGE>
EXHIBIT 23.2
The Board of Directors
CCB Financial Corporation:
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 joint proxy
statement/prospectus.
/s/ KPMG LLP
Raleigh, North Carolina
April 20, 2000
<PAGE>
EXHIBIT 23.5
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
CONSENT
OF
CREDIT SUISSE FIRST BOSTON CORPORATION
Board of Directors
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Members of the Board:
We hereby consent to the inclusion of our opinion letter, dated March 17, 2000,
to the Board of Directors of National Commerce Bancorporation (the "Company") as
an Exhibit to the Registration Statement of the Company on Form S-4 (the
"Registration Statement") relating to the proposed merger involving the Company
and CCB Financial Corporation. In giving such consent, we do not admit that we
come within the category of persons whose consent is required under, nor do we
admit that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ P. Olivier Sarkozy
----------------------
P. Olivier Sarkozy
Managing Director
April 6, 2000
<PAGE>
EXHIBIT 99.1
Please
mark REVOCABLE PROXY
[X] your CCB FINANCIAL CORPORATION
votes as
in this
example.
Special Meeting of Stockholders
________, 2000 -- 11:00 a.m.
The undersigned hereby appoints ______________ and _____________, and each
of them, with full power of substitution, as Proxies, and authorizes them to
represent and to vote, as designated below, all of the shares of common stock of
CCB Financial Corporation that the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held on ________, 2000, or at any
adjournments thereof. No Proxy that instructs a vote against the Agreement and
Plan of Merger described below will be voted in favor of any adjournment to
solicit further Proxies for such proposal.
1. Approval of the Agreement and Plan of Merger, dated as of March 17, 2000,
between CCB Financial Corporation and National Commerce Bancorporation.
For Against Abstain
[_] [_] [_]
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any adjournments
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1, THE APPROVAL OF THE
AGREEMENT AND 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.
Please be sure to sign and date Date
this Proxy in the box where -------------------------------
indicated
- --------------------------- -------------------------------
Shareholder sign above Co-holder (if any) sign above
Detach above card, date, sign and mail in postage-paid envelope provided.
CCB FINANCIAL CORPORATION
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 shareholder acknowledges receipt from CCB Financial
Corporation prior to the execution of this Proxy of the Notice of Special
Meeting and the related Joint Proxy Statement/Prospectus.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
EXHIBIT 99.2
Please
mark REVOCABLE PROXY
[X] your NATIONAL COMMERCE BANCORPORATION
votes as
in this
example.
SPECIAL MEETING OF STOCKHOLDERS
________, 2000 -- 10:00 A.M.
The undersigned hereby appoints _______________ and _______________, 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 National Commerce Bancorporation, that the
undersigned is entitled to vote at the Special Meeting of Shareholders to be
held on _________, 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 Merger, dated as of March 17, 2000, by and
between National Commerce Bancorporation and CCB Financial Corporation (the
"Agreement") or against the amendment of NCBC's 1994 Stock Plan will be voted
in favor of any adjournment to solicit further Proxies for such proposal.
1. Approval of the Agreement and Plan of Merger and approval of the amendment to
the NCBC Charter.
For Against Abstain
[_] [_] [_]
2. Amendment of NCBC's 1994 Stock Plan, which will be the stock plan of the
combined company after the merger, to increase the limitation on the number
of shares of NCBC common stock for which options may be granted to an
employee in any given year from 60,000 to 200,000, and in the case of NCBC's
Chief Executive Officer from 100,000 to 400,000.
For Against Abstain
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the special meeting or any adjournments
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2, THE APPROVAL OF
THE AGREEMENT AND THE AMENDMENT OF NCBC'S 1994 STOCK PLAN.
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.
Please be sure to sign and date Date
this Proxy in the box where -------------------------------
indicated.
- --------------------------- -------------------------------
Shareholder sign above Co-holder (if any) sign above
Detach above card, date, sign and mail in postage-paid envelope provided.
NATIONAL COMMERCE BANCORPORATION
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 ITEMS 1 AND 2. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR
TO ITS EXERCISE.
The above signed shareholder acknowledges receipt from National Commerce
Bancorporation prior to the execution of this Proxy of the Notice of Special
Meeting and the related Joint Proxy Statement/Prospectus.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
