UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 14, 1994
CCB Financial Corporation
(Exact name of registrant as specified in its charter)
North Carolina 0-12358 56-1347849
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
111 Corcoran Street, Post Office Box 931, Durham, NC 27702
(Address of principal executive offices)
Registrant's telephone number, including area code (919) 683-7777
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
The Registrant's acquisition of Graham Savings
Bank, SSB, Graham, North Carolina ("Graham"),
pursuant to a simultaneous Conversion/Acquisition,
was consummated October 1, 1993. Thereafter two
members of Graham petitioned the
Administrator, North Carolina Savings Institutions
Division ("Administrator"), for a public hearing
protesting the Conversion/Acquisition. The
request for a public hearing and a Stay of the
proceedings was denied by the Administrator on
December 9, 1993. Such decision was
reviewed by the North Carolina Savings
Institutions Commission on December 13, 1993 and
the Commission refused to overturn the
Administrator's decision. On December 28, 1993
the two protesting members of Graham filed a
petition for judicial review and request for a
Stay with the North Carolina Superior Court in
Alamance County. Additionally, on March 14, 1994
the two protesting members sought and obtained a
Temporary Restraining Order against the
Registrant and Graham which halted the data
processing conversion of the accounts at Graham
scheduled for March 21, 1994. On March 21, 1994 through
March 23, 1994, a hearing was held by the North Carolina
Superior Court in Alamance County regarding the requests
for judicial review of the denial of the
Petitioner's request for a public hearing. By Order
dated March 24, 1994, the North Carolina Superior
Court affirmed the decision of the Administrator,
thereby denying the Petitioner's request for
judicial review and removing the Temporary
Restraining Order placed in effect on March 14,
1994. Registrant and Graham are now free to
effect the data processing conversion previously
scheduled for March 21, 1994.
In connection with the Temporary Restraining Order
placed into effect on March 14, 1994, the two
protesting members filed a civil Complaint in the
General Court of Justice, Superior Court Division
in Alamance County against Registrant, Graham and
the individual members of the Board of Directors
of Graham and, as a derivative Defendant, Graham
Savings Bank, SSB, the mutual form of Graham
prior to the October 1, 1993 Conversion/Acquisition.
The relief sought in the Complaint is injunctive relief
staying any further acts by Registrant and Graham to further
the acquisition of Graham by Registrant, the recision
of the Conversion/Acquisition, declaring the
transaction null and void and unspecified money
damages. The Complaint alleges breach of
fiduciary duty by the directors and officers of
Graham and that the Conversion/Acquisition was
defective due to certain violations of North
Carolina law. The Complaint also alleges
violations of the United States Constitution and
specified federal statutes. On March 21, 1994 the
Registrant, Graham and the individual members of
the Board of Directors named as defendants
obtained removal of the suit from the North Carolina
Superior Court to the United States District Court for the
Middle District of North Carolina. Such action is
pending in said United States District Court.
The Registrant and Graham and the individual
members of the Board of Directors intend to
vigorously defend the action and believe the
action is without merit. Pursuant to the terms of
the Acquisition Agreement by and between Graham
and the Registrant, the Registrant has undertaken
to indemnify the individual members of the Board
of Directors of Graham from and against any and
all liability and the litigation expense
(including reasonable attorneys fees) arising out
of the civil proceeding described above.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 99.1 Civil action dated March 14, 1994
Exhibit 99.2 Press Release issued March 24, 1994
Exhibit 99.3 Removal petition from the North Carolina Superior
Court to the United States District Court for the
Middle District of North Carolina
Exhibit 99.4 Order in the Matter of a Petition for Judicial Review
by Maurice J. Koury and Cary B. Allred
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CCB FINANCIAL CORPORATION
Date: April 7, 1994 By: /s/ W. Harold Parker, Jr.
W. Harold Parker, Jr.
Senior Vice President
and Controller
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EXHIBIT INDEX
Exhibit No. Per
Regulation S-K Description
Exhibit 99.1 Civil action dated March 14, 1994
Exhibit 99.2 Press Release dated March 24, 1994
Exhibit 99.3 Removal petition from the North Carolina Superior
Court to the United States District Court for the
Middle District of North Carolina
Exhibit 99.4 Order in the Matter of a Petition for Judicial Review
by Maurice J. Koury and Cary B. Allred
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NORTH CAROLINA GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
ALAMANCE COUNTY FILE NO. __________
MAURICE J. KOURY and )
CARY D. ALLRED, )
Plaintiffs )
)
v. ) COMPLAINT
)
GRAHAM SAVINGS BANK, INC., SSB; )
CCB FINANCIAL CORPORATION; )
A. C. MOTSINGER; )
SARAH G. JOHNSTON; )
FORREST C. HALL; )
J. WORTH RICH; )
WILLIAM R. SIZEMORE; )
JAMES R. GUTHRIE, )
Defendants and )
)
GRAHAM SAVINGS BANK, SSB, )
Derivative Defendant ) JURY TRIAL REQUESTED
)
Plaintiffs, complaining of defendants, allege and say:
1. Plaintiffs are citizens and residents of Alamance
County, North Carolina, and are two of the members and
owners of Graham Savings Bank, SSB.
2. Defendant Graham Savings Bank, Inc., SSB (Graham
Inc.), claims to be, but is not, by reason of the illegal
actions as alleged herein, a North Carolina corporation with
its principal office and place of business in Alamance
County, North Carolina. It is named as a defendant in this
suit in its purported and assumed capacity as a corporation.
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3. Defendant CCB Financial Corporation (CCB) is a North
Carolina corporation with its principal office and place of
business in Durham County, North Carolina.
4. Graham Savings Bank, SSB (herein Graham SSB), is an
unincorporated association and mutual savings bank organized
under the laws of North Carolina, and plaintiffs bring this
action for themselves individually and derivatively in the
right of Graham SSB to recover a judgment in its favor.
5. The individual defendants are citizens and residents
of Alamance County, North Carolina, and were officers and/or
directors of Graham SSB, the derivative defendant named
herein, at the time of the wrongs complained of herein, and,
upon information and belief, are directors of defendant
Graham Inc., controlling it at this time under the direction
of defendant CCB.
6. Defendants Graham Inc. and CCB, purportedly acting by
the authority of the North Carolina Savings Institutions
Division and its Administrator, Robert A. Jacobsen, have
gone forward with a so-called Plan of Conversion and
Acquisition (herein the Plan) by which Graham SSB purports
to have converted to a stock owned corporation and
simultaneously been acquired by CCB pursuant to G.S. 54C-33
and G.S. 54C195. The purpose of the Plan was to grossly
enrich the individual defendants and CCB to the detriment of
Graham SSB, its depositors and plaintiffs, as hereinafter
alleged.
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7. The defendants, together with Jacobsen, who acted
illegally under color of his office, conspired and acted
wrongfully to deprive plaintiffs individually and Graham SSB
of constitutional and other rights as hereinafter alleged.
8. References herein to defendants will refer to both
corporate and individual defendants (except the derivative
defendant) unless otherwise specified. Said corporate and
individual defendants were participants in the acts alleged
or aided and abetted them by inaction with full knowledge of
what was occurring.
9. Plaintiffs, through personal appeals to the
individual defendants, sought to stop the matters herein
complained but were refused. Plaintiffs have not made an
effort to have the officers and directors of Graham SSB
institute this action on behalf of Graham SSB because said
officers and directors are the very ones whose conduct
damaged the bank as alleged herein and who benefitted
greatly from the conduct alleged. Plaintiffs therefore
allege that any efforts to secure the initiation of this
action by the foregoing officers and directors would be
unreasonable and a vain act.
10. The officers and directors of Graham SSB were
subject to the provisions of G.S. 54C-103 which provides:
Officers and directors of a State savings bank shall act
in a fiduciary capacity towards the savings bank and its
members or stockholders. They shall discharge duties of
their respective positions in good faith, and with that
diligence and care which ordinarily prudent persons would
exercise under similar circumstances in like positions.
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11. The officers and directors of Graham SSB were also
subject to G.S. 54C-104 which provides:
Each director, officer, and employee of a State savings
bank has a fundamental duty to avoid placing himself in a
position which creates, or which leads to or could lead
to a conflict of interest or appearance of a conflict of
interest having adverse effects on the interests of
members, customers, or stockholders of the savings bank,
soundness of the savings bank, and the purposes of this
Chapter.
12. The officers and directors of Graham SSB were also
subject to the provisions of administrative regulations in 4
NCAC 16E.0103(b) which provides: "(b) A director shall not
vote on any matter in which he has a personal or financial
interest."
13. In 1992 the defendants, as officers and directors of
Graham SSB, in preparation for the acts of self-interest
hereinafter alleged, submitted to Graham's membership and
obtained by voting general proxies a favorable vote for a
change of Graham SSB from a federally regulated mutual
savings association to a state regulated mutual savings
bank. Upon information and belief, the purpose of the
officers and directors in effectuating this change was to
place the regulation of Graham SSB under the authority of
the Commission and Jacobsen, and thereby take Graham SSB
from under the supervision and control of the U.S. Office of
Thrift Supervision, the regulations and policies of which
were known to be much stricter than the lenient policies of
Jacobsen and the Commission in supervising payment of
unreasonable sums to officers and directors of savings
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institutions when their institutions converted from mutual
to stock ownership.
14. After the transformation of Graham SSB from a
federally chartered mutual savings and loan to a state
chartered mutual savings, the officers and directors of
Graham SSB began negotiations with defendant CCB, a publicly
traded holding company of various banking entities in North
Carolina. These negotiations contemplated conversion of
Graham SSB from a state chartered mutual savings bank to the
stock form of ownership as allowed by G.S. 54C-33, and
simultaneous acquisition of all of Graham Inc.'s new stock
by CCB. To assist them in this purpose, the officers and
directors of Graham SSB employed Ronald D. Raxter, Esq., and
his law firm of Ward and Smith. Upon information and belief,
until a short time previous Mr. Raxter had been legal
counsel and adviser to Administrator Jacobsen and had been
instrumental in obtaining the passage of the legislation
which purported to allow immediate acquisition by a holding
company of all of the stock of mutual savings banks when the
savings institution converted to stock ownership. Upon
information and belief, throughout the events alleged herein
the actions of the Administrator and therefore the Savings
Institutions Division were effectively controlled and
directed by Ward and Smith on behalf of its clients.
15. On May 5, 1993, the Board of Directors of Graham SSB
approved a plan of conversion to a stock form of ownership
pursuant to G.S. 54C-33 and immediate acquisition
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of all of Graham Inc.'s stock by CCB pursuant to G.S.
54C-195 (herein the "Plan" or "Plan of Conversion and
Acquisition"). Upon information and belief the primary
purpose of the Board of Directors was for each of them,
along with other insiders of Graham SSB, with the assistance
of Jacobsen, to profit in a grossly inequitable fashion to
the detriment of plaintiffs and Graham SSB, and the approval
of the Plan by defendant directors was in violation of the
fiduciary obligations of the officers and directors of
Graham SSB as set forth in G.S. 54C-103 and G.S. 54C-104,
the statutes set out above.
16. Further the Plan of Conversion and Acquisition was
grossly inequitable to plaintiffs and Graham SSB in that the
officers and directors of Graham SSB, together with CCB,
received grossly inequitable gains and advantages by reason
thereof, all in violation of G.S. 54C-33(c)(3) and G.S. 54C-
195(c)(v). G.S. 54C-33 provides that in order for the
Administrator to approve a plan of conversion of a mutual to
a stock savings bank it must appear that, "the conversion
will be fair and equitable to the members of the savings
bank and no person whether member, employee, or otherwise,
will receive any inequitable gain or advantage by reason of
the conversion." G.S. 54C-195(c)(v) provides that when a
holding company simultaneously acquires the shares of a
savings bank when the savings bank converts to the stock
form of ownership, "the plan of reorganization [must be]
fair and equitable to all members of the savings bank."
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17. The Plan of Conversion and Acquisition provided to
CCB grossly inequitable gain and advantage by reason of the
fact that it obtained a state savings institution with a net
worth of $20,000,000 with an outlay of no more than
$6,730,000, none of which inured to the benefit of
plaintiffs or Graham SSB.(1) No benefit was to go to
plaintiffs or Graham SSB except an alleged benefit by which
plaintiffs and other owners were allowed to purchase CCB
stock at discounts of 5 to 15% off market price, provided
the stock so purchased was restricted from resale for
stipulated periods of time. By such alleged benefit CCB, in
truth, benefitted itself, because the proceeds from the sale
of such stock then became available to CCB to cover its cost
in acquiring Graham SSB.
18. The Plan of Conversion and Acquisition as
purportedly approved by Commissioner Jacobsen on August 13,
1993, provided to the directors and officers gross
inequitable gains and advantage, to the exclusion of
plaintiffs and Graham SSB, in violation of G.S. 54C-33 and
G.S. 54C-195 in many respects, including, but not limited
to, the following:
(a) Outright grants of stock of CCB in the sum of
$3,000,000, and payment of income taxes thereon in the sum
of
(1) Based on information provided depositors it cannot be
determined exactly what the transaction was to cost CCB, but
based on CCB's prospectus $6,730,000 appears to be an amount
CCB might claim. This would apparently include $1,000,000 to
be paid Alamance County charities over a five year period as
part of the consideration for Graham's assets.
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an additional $1,080,000, were to be made to six directors
of Graham SSB and five other officers. Defendant Board
Chairman A. C. Motsinger was to receive, net of taxes, stock
valued at $780,000, and defendant Sarah G. Johnston was to
receive, net of taxes, stock valued at $660,000. The other
individual defendants herein were to receive as members of
the Board of Directors outright grants of stock as follows:
Forrest C. Hall, $240,000; William R. Sizemore, $240,000; J.
Worth Rich, $240,000; James R. Guthrie, $150,000.
(b) Large projected annual salary increases and bonuses
were provided to five executive officers, including
Motsinger and Johnston; Motsinger and Johnston were given
five year contracts for compensation which increased from
$94,200 and $83,450 to $182,000 and $137,000 respectively,
plus fringe benefits for both and bonuses for Johnston.
(c) Increases in fees paid directors for attendance at
meetings went from $5,400 annually to $12,000 annually, for
a total annual increase of $39,800.
(d) Additional fringe benefits were promised in
unspecified amounts.
(e) A contract to pay A. C. Motsinger, commencing at the
end of his five year employment contract, retirement
payments equal to $90,000 per year for a period of ten
years, or $900,000.
(f) Retirement benefits to directors in sums of $6,000
to $12,000 annually for ten years.
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(g) Incentive stock options whereby defendant officers
and directors of Graham SSB were granted the right to
purchase an estimated 52,288 shares of CCB stock over a ten
year period for an option exercise price of $38.25, which
was the then current market price of CCB's publicly traded
stock.
(h) Distribution of Graham SSB's profit sharing funds to
employees of $1,756,512, including $453,522 to A. C.
Motsinger, and enrollment of the other employees in CCB's
defined benefit plan as if they had been in such plan since
the date of their employment with Graham SSB.
19. On July 3, 1993, the officers and directors of
Graham SSB caused to be placed in the Daily Times News, a
newspaper in Alamance County, a 3 3/4 inch advertisement
purporting to give notice that Graham SSB had filed an
application with the Administrator of the Savings
Institutions Division to convert to the stock form of
organization. EXHIBIT 1. Said notice was designed to be
inconspicuous and it did not disclose and thereby concealed
that Graham SSB expected, upon converting to a stock form of
organization, to be acquired immediately by CCB.
20. On August 13, 1993, at the request of Ward and
Smith, the Administrator wrote a letter to Mr. Raxter at
Ward and Smith purporting to give his approval to the Plan
of Conversion and Acquisition and to allow mailing of proxy
materials and prospectuses in connection therewith. The
approval by the Administrator violated G.S. 54C-33(c)(3) and
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G.S. 54C-195(c)(v) in that he made no finding that the
conversion was fair and equitable to the members, no finding
that no person would receive any inequitable gain or
advantage, and no finding that the Plan is fair and
equitable to all members of the savings bank. Upon
information and belief, the defendants and the Administrator
knew said approval was defective and violative of North
Carolina statutes.
21. Plaintiffs received the proxy statement describing
the Plan shortly after August 19, 1993. Thereafter,
plaintiffs repeatedly objected to the Plan and to the
procedure whereby management of Graham SSB sought its
approval. Further, plaintiff Allred, as was his right under
the statutes and regulations, voiced his opposition to the
plan in newspaper and mail communications regulated by
Jacobsen. A detailed account of these contacts by plaintiffs
with the Administrator is provided by an Affidavit of Cary
Allred which is attached as Exhibit D to the Amended
Petition for Judicial Review filed in this Court in No.
93-CVS-2736. Nonetheless, the Administrator wrongfully
allowed defendants to go forward with the Plan and on
September 21, 1993, defendants claim to have achieved
acceptance of the plan by the members of Graham SSB by a
favorable vote of 53% of its members, a vote in excess of
50% of all members (including those who did not vote) being
required for acceptance.
22. Upon information and belief, said vote of 53% was
not in fact achieved, but whatever vote was achieved by
defendants occurred in various unlawful ways which are
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specifically described in plaintiffs' Second Amended
Request for Public Hearing, filed as an exhibit to
plaintiffs' Amended Petition for Judicial Review in this
Court, No. 93-CVS-2736, and which include, but are not
limited to:
(a) Illegal use of general proxies by defendants in
violation of their fiduciary duties, including but not
limited to the illegal use of general proxies obtained after
the conversion and acquisition plan was in process, in
violation of Regulation NCAC 16G.0512(b) which prohibits the
use of proxies obtained "pursuant" to the Plan; upon
information and belief, at least 425 of such general proxies
obtained pursuant to the Plan after May 15, 1993, (and the
Plan was in process by March 30, 1993, or earlier) were
voted by defendants for the Plan and some general proxies
were voted which were obtained even after August 19, 1993,
when the proxy statement was mailed.
(b) Despite the fact that, upon information and belief,
more than 150 special proxies and proxy statements mailed to
owners were returned undelivered, defendants, upon
information and belief, caused to be voted many general
proxies of persons whose proxy statements were returned
undelivered, in violation of Regulation NCAC 16G.0512(d)
which requires that a proxy statement be furnished each
person for whom a general proxy is voted; and, upon
information and belief, it is impossible to determine how
many such general proxies were voted, and the number of
votes they represented, but upon information and belief, 79
or more
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were so voted, and the returned proxy statements have been
destroyed or lost by defendants so that an accurate
determination of how many votes in favor of the Plan were
voted in that way is impossible to determine.
(c) Misrepresentations and nondisclosures in the proxy
statement and in advertisements by management in the news
media, including but not limited to:
(1) A specific representation that members of a
savings institution are not its owners, which representation
was directly contrary to G.S. 54C-100, but approved by
Jacobsen;
(2) A flat statement that after a stand alone
conversion a stock savings bank could not negotiate a sale
of stock to an interested buyer for three years, without any
explanation of significant legal exceptions to that
statement;
(3) The form of special proxy forms used by
defendants for the September 21, 1993, meeting and approved
by Jacobsen was not in compliance with regulation NCAC
16G.0512 in that the form did not indicate in bold face that
the proxy was solicited on behalf of management.
(d) Defendants amended the Plan less than twenty-four
hours before the meeting of members called to vote on the
Plan. The amendment was illegally approved by the
Administrator on September 21, 1993, over the stringent
objection of plaintiff Allred, the very day of the meeting
of members. The amendment was hastily passed by the Board of
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Directors of Graham SSB in the late afternoon of September
20, 1993, because it was apparent that a letter mailed by
plaintiff Allred to the members opposing the Plan on
September 17 and other statements by members in opposition,
were having a marked effect and that the Plan was likely to
fail of enactment. The September 20 amendment to the Plan
was that Graham SSB would deposit in the account of each
member funds amounting to 1 1/4% of said members' accounts
(which, upon information and belief, would be 1 1/4% of the
$93,000,000 total deposits on October 1, 1993), and an
additional 1% in the same members' accounts if they remained
depositors on July 1, 1994, but not to exceed 1% of the
amount on deposit in any account as of October 1, 1993. The
five year employment contracts of Motsinger and Johnston
were reduced to $135,000 and $100,000, respectively, and the
stock grants to officers and directors were reduced from
S3,000,000 net of taxes [15% of Graham SSB's value] to
$1,500,000 net of taxes [7.5% of Graham SSB value]. The
terms of the September 20 amendment were used by management
to telephone and call personally on members seeking, on the
basis of those terms, to get members to change their
proxies, where they had voted against adoption of the Plan,
or to submit proxies in favor of the Plan, where they had
not previously voted. Upon information and belief management
used inside information, not available to plaintiffs, as to
how proxies previously received had been voted in making
their calls on September 20 and 21. Said illegal amendment
to the plan on the eve of the
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meeting of members, and its use, unconstitutionally and
illegally deprived plaintiffs of their rights to a fair vote
of the membership.
Plaintiff Allred was called by Anthony Gaeta, of Ward
and Smith, to meet defendant Forrest Hall, Richard Furr,
Vice President of Operations for CCB, and Gaeta on the
afternoon of September 20, 1993. The persons in that meeting
stated to Mr. Allred, in substance, that the amendment to
the Plan extending additional benefits to the members of
Graham SSB was due to the opposition of plaintiff Allred to
the Plan. On the basis of the amendment plaintiff Allred was
asked to join with the Board in recommending the Plan.
Plaintiff Allred, recognizing that the Plan was still not
fair and equitable to members and did not cure the
violations of G.S. 54C-33(c)(3) and G.S. 54C-195(c)(5),
refused to endorse the amendment to the Plan. Early the
following morning plaintiff Allred communicated to counsel
for the Administrator his strong objection to the
Administrator's approval of the amendment and to the
allowance of the vote on the same day, but nonetheless the
Administrator through counsel approved, upon application of
Ward and Smith, the amendment later on the mid-morning of
September 21, 1993, the same day of the meeting of members
for the vote. EXHIBIT 2.
The last minute amendment was not described in any proxy
statement or in any other written communication sent to all
members. Its deliberate use and the activities relating
thereto by the individual defendants and CCB and the
approval by the Administrator, deprived plaintiffs and
Graham SSB of
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their rights under the Due Process and Equal Protection
Clauses of the 14th Amendment to the United States
Constitution and Article I, SECTION 19 of the North Carolina
Constitution, deprived plaintiffs and Graham SSB of rights
pursuant to 42 U.S.C. SECTION 1983, and deprived plaintiffs and
Graham SSB of their rights pursuant to the Administrator's
Regulations set forth in 4 NCAC 16G.0509 through .0516,
specifically including but not limited to 4 NCAC 16G.0514
which provides that any member, upon defraying reasonable
expenses, can require an applicant, such as Graham SSB, to
mail to such members copies of any communication or form of
proxy opposing the applicant's plan. Obviously, the
September 20, 1993, amendment to the plan, approved by the
Administrator on September 21, 1993, deprived plaintiffs
individually and Graham SSB derivatively of their rights
pursuant to the foregoing regulation. All effective
opposition to the amended Plan was thus wrongfully
precluded.
23. On September 21, 1993, plaintiffs appeared at the
owners' meeting and voiced their objection to the Plan, to
the last minute amendment thereof, and to the vote being
taken in light of that amendment.
24. On September 28, 1993, plaintiff Allred, accompanied
by counsel for himself and plaintiff Koury, visited the
offices of the Administrator and voiced objections to the
entire transaction, including the matters set forth above.
Counsel for the Administrator, David C.
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Worth, Esq., was told that plaintiffs Allred and Koury were
preparing to file documents challenging the transaction.
Regulations 4 NCAC 16A.0401, and .0403 of the North Carolina
Administrative Code provide, in .0401:
Whenever the Administrator acts in such a way as to
affect the rights, duties or privileges of a specific
identified party, the party may appeal for a final
decision by the Administrator in accordance with Article
3A of G.S. 150B.
In .0403 the Regulations provide:
(a) Form or Request. A request for an administrative
hearing must be in writing and must contain the following
information:
(1) name and address of the person requesting the
hearing,
(2) a concise statement of the action by the
Administrator that is being challenged,
(3) a concise statement of the manner in which the
petitioner is aggrieved, and
(4) a clear and specific demand for a public hearing,
(b) Address for Request. The request for hearing shall
be filed with the Division at its mailing address.
25. The foregoing regulations are based upon G.S. 54C-
52 which provides:
* * * *
(b) The Commission may review, approve, disapprove, or
modify any action taken by the Administrator in the
exercise of the powers, duties, and functions granted to
the Administrator by this Chapter.
26. At the meeting on September 28 counsel for
plaintiffs Allred and Koury asked counsel for the
Administrator, David C. Worth, Esq., when he should submit
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the documents to the Commission opposing the Administrator's
actions in order for them to be timely. Mr. Worth stated
that he understood the attorneys for the banks wanted to get
their documents in by October 1, and that his office had to
review the sufficiency of their filings. Thus, he said, it
would be a week or so before the Administrator would act
upon the banks' filings. Therefore, he said that filing of
plaintiffs' request for public hearing by the first of the
following week would be timely and that he would consider it
and render a written decision before the Administrator
certified the completion of the Plan of Conversion and
Acquisition. At no time did Mr. Worth intimate in any way
that the Administrator would (as he did) sign any document
purportedly certifying the transaction, or any part thereof,
on September 30, 1993, the same day the banks made some of
the filings said to be required by the Administrator. In
fact, on September 30 counsel for the Administrator sent
copies of the documents which plaintiffs' counsel had
requested on September 28, 1993, for plaintiffs' purpose in
filing a Request for Public Hearing on behalf of plaintiffs.
The same day, September 30, without notice to plaintiffs,
contrary to the conversations on September 28, the
Administrator purported to sign a document, presented to him
by Ward and Smith, approving the amendment of the charter of
Graham SSB from that of a mutual to a stock savings bank.
EXHIBIT 3. Upon information and belief Administrator
Jacobsen signed said document purporting to amend Graham
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SSB's charter without examining the documents for
sufficiency, said by his attorney to be needed, in order to
aid and abet defendants in attempting to deprive plaintiffs
of their rights to contest the approval of the Plan.
27. On Monday, October 4, 1993, the next working day
from the receipt by attorneys for plaintiffs of the
documents requested, a Request for Public Hearing on behalf
of plaintiffs was filed.
28. The original Request for Public Hearing, filed
October 4, 1993, set out the matters complained of, asked
that all previous proceedings in the proposed conversion and
acquisition be voided, and prayed that no further actions be
taken which would permit the conversion and acquisition to
go forward. Although the original Request for Public Hearing
was thus already a request for stay, a formal motion for
stay was filed by plaintiffs on October 15, 1993.
29. NCAC 16A.0402 provides that, before acting upon a
request for public hearing, the Administrator should hold a
settlement conference. On October 13, 1993, the
Administrator held a purported settlement conference at
which appeared counsel for plaintiffs Koury and Allred, the
Administrator and his counsel, and attorneys from the firm
of Ward and Smith. Settlement was not reached at said
conference.
30. In November the Administrator requested briefing on
the legal questions involved, briefs were filed on behalf of
18
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plaintiffs and opposing letter briefs were filed by Ward and
Smith.
31. Upon information and belief, in November Jacobsen
learned of the voting irregularities alleged above involving
the use of at least 425 general proxies obtained pursuant to
the Plan, the destruction of returned proxy mailings so that
there could be no determination of how many general proxies
were voted illegally, the change of numerous votes pursuant
to the September 20, 1993, Plan amendment, and other
irregularities. Upon information and belief these matters,
unknown until recently by plaintiffs, were discussed with
defendant Johnston and others, and formed a principal
motivation for the denial by the Administrator of the public
hearing requested by plaintiffs.
32. On December 9 the Administrator issued his ruling,
EXHIBIT 4 hereto, which was left unchanged by the
Commission, as announced in the letter attached to EXHIBIT 4
from William D. Hoover, Chairman, dated December 15, 1993,
and received by plaintiffs on December 22, 1993. The ruling
issued by the Administrator reflected the arguments in the
letter brief by Ward and Smith, and the decision by the
Commission was in line with the positions expressed by Ward
and Smith.
33. Pursuant to G.S. 150B-43, plaintiffs have the right
to review in this Court.
34. On and after September 30, 1993, defendants
proceeded, in spite of plaintiffs' Request for Public
Hearing, and in spite of plaintiffs' Petition for Judicial
19
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Review, as if the Plan of Conversion and Acquisition was
properly approved and in effect. In fact, because of all the
illegalities previously stated herein and in addition
because of the following the defendants have no authority to
proceed at all because:
(a) G.S. 54C-33 provides that following certification of
the vote by an appropriate officer of the savings bank, "the
Administrator shall then either approve or disapprove the
requested conversion." There has here been no valid
certification of the vote and the Administrator therefore
could not give approval of the requested conversion. Dorn C.
Pittman, a Burlington attorney, filed a vote certification,
denominated as such but expressly disclaimed in said vote
certification any certification on his part other than that
the votes furnished him were counted accurately. EXHIBIT 5.
Mr. Pittman did not certify, nor has there been any
certification, that the votes counted either by general
proxy or special proxy were votes by persons entitled to
vote, or cast for the number of votes to which each was
entitled.
(b) The form signed by the Administrator on September
30, 1993, does not even purport to do anything other than
approve the amendment of Graham SSB's charter to allow it to
be a stock institution rather than a mutual institution. It
in no way approves the acquisition by CCB as required by
Regulation NCAC 16I.0902 (c) set out below:
(c) The results of the stockholder's meeting shall
be confirmed to the Administrator by filing
attested minutes of the meeting. If the
stockholders approve reorganization of ownership of
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the savings institution to provide for ownership by
a holding company, the Administrator shall enter
his final order approving the reorganization.
(Emphasis supplied).
The Administrator has never entered any final order
approving the "reorganization."
(d) Regulation NCAC 16G.0823(2)(a-c) provides that an
applicant whose plan of conversion has been approved by the
Administrator must file with the Administrator various
documents which include, among others, an opinion of counsel
to the effect that:
(a) the meeting of members was duly held in
accordance with all requirements of applicable
state and federal law and regulation;
(b) all requirements of state and federal law
applicable to the conversion have been complied
with; and
(c) if the savings bank has used proxies executed
prior to the proxy solicitation required by Rule
.0511 of this Subchapter, the authority conferred
by such proxies includes authority to vote on this
plan of conversion.
No letter from Ward and Smith or any other counsel has been
filed stating the required opinion of counsel as to the
matters set out above in NCAC 16G.0823(2)(a-c).
(e) A letter of September 30, 1993, to the
Administrator from management's legal counsel, Ward and
Smith, while claiming that the above September 20 amendment
to the Plan did not make a material change in the pro forma
data set forth in the Subscription and Community Offering
Prospectus dated August 19, 1993, misleadingly failed to
state what was obviously a material adverse change in the
pro
21
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forma data set forth in the aforesaid prospectus of August
19, 1993, in that the acquisition by CCB of Shelby Savings
Bank, which was abandoned between August 19, 1993, and
September 21, 1993, was materially and prominently set forth
in the pro forma data in the Subscription and Community
Offering Prospectus.
35. On December 28, 1993, plaintiffs filed their
Petition for Judicial Review which is pending in this Court,
File No. 93-CVS-2736, and on January 10, 1994, amended said
Petition, joining and serving as parties thereto CCB and
Graham Inc..
36. Plaintiffs show the Court that by reason of the
actions of the Administrator and the defendants herein the
defendant officers and directors are allowed to pay
themselves large salaries, bonuses, and other benefits
illegally provided by the Plan of Conversion and
Acquisition, such payments being made from the assets of
Graham SSB, to pay from said assets greatly increased fees
to defendant directors, additional fringe benefits of
unspecified amounts, greatly increased retirement benefits,
to distribute Graham SSB's profit sharing funds, and to take
other actions violative of the rights of Graham SSB and its
members and owners. Such actions as are now allowed by the
decisions of the Administrator, affirmed by the Commission,
are of a continuous and recurrent nature and a stay against
defendants' such continuing and recurrent activity, or any
related activity, is reasonably necessary to protect
22
<PAGE>
plaintiffs' rights and the rights of Graham SSB during the
pendency of this action. Furthermore, defendants have, in
the past, made representations to the public that the
acquisition by CCB of Graham SSB was final, which statements
are likely to continue in the absence of court action and
which statements are misleading and damage the image of
Graham SSB as an institution, all to the damage of
plaintiffs and Graham SSB. Further, in view of the
Administrator's decision, approved by the Commission, CCB,
as the holding company owning all of Graham SSB's presently
issued stock, is free to transfer the institution's real and
personal property at any time to any third party, to merge
Graham SSB with CCB or other corporations in function and
operation or to take other actions detrimental to plaintiffs
and to Graham SSB as an institution.
37. Plaintiffs in their Petition for Judicial Review
sought to stay all the decisions of the Administrator which
would allow the Plan to go forward, and has noticed on
several occasions a hearing on said stay, but the notice of
hearing filed for January 7, 1994, could not be heard
because the resident Superior Court Judge of Alamance County
had a conflict of interest. The motion for stay was noticed
again for February 14, 1994, but was not heard because the
Attorney General of North Carolina withdrew as counsel for
the Administrator.
23
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38. The Assistant Attorney General, as counsel for the
Administrator, in the course of discussing a motion to
continue plaintiffs' motion for stay stated:
COURT: All right. So do your clients wish to
participate in the, in the stay hearing and also do
they wish to participate in any way, shape, or form
in the CCB motion to dismiss?
MR. ROSSER: No, sir. I don't think the clients
would wish to participate, you know, as an active
advocate in either of those.
COURT: Okay. Well, then if I allow your motion,
then from what I hear you saying, there's no reason
that we cannot go on with the rest of this case
today.
MR. ROSSER: No, sir. I don't think there is.
Hearinq Transcript February 14, 1994, p. 7.
However, after private conferences with an attorney from
Ward and Smith, who stated that he represented both CCB and
Graham, Inc., and after oral argument by that attorney,
counsel for the Administrator changed his position. The
following occurred:
COURT: So you're telling me the Administrator wants
to come into court with counsel and make certain
arguments regarding that stay request.
MR. ROSSER: That's correct, sir. That's correct.
Hearinq Transcript February 14, 1994, pp. 15-16.
39. Further, in the course of the argument on the motion
for continuance on February 14, 1994, an attorney from Ward
and Smith, who stated he represented both CCB and Graham
Inc., represented to the Court that:
There will not be any prejudice by delaying this at all.
The conversion of Graham Savings of mutual to stock, Your
Honor, was completed on October 1, 1993. The approved
regulatory documents require that Graham Savings Bank,
Inc., SSB remain in that status as a separate corporate
entity until at least September 30, 1996. There's not
going to be any change in the status of this bank.
(Emphasis
24
<PAGE>
supplied). Hearinq Transcript February 14, 1994, P. 17.
40. Despite the pendency of plaintiffs' Petition for
Judicial Review, and their efforts to obtain a stay, in or
around the week of March 7, 1994, defendants caused to be
mailed to the owners of Graham SSB booklets and other
correspondence announcing that on March 21, 1994, pursuant
to the acquisition of Graham SSB by CCB, account numbers
would be changed, new service charge schedules for other
services would be changed, account statements would be
changed, new checks would be issued, interest rates would be
changed, new passbooks would be issued, new payment books
would be issued, mortgage account numbers would be changed,
billing dates would be changed, deposit agreements would be
changed, fee schedules and rules for opening new accounts
would be promulgated, and other steps taken obviously to
incorporate Graham SSB's computerized and other operations
into those of CCB.
41. The foregoing action was taken with full knowledge
on the part of defendants and Ward and Smith of the motion
for stay pending in the Petition for Judicial Review set for
hearing on March 21, 1994, in the Superior Court of Alamance
County, and, upon information and belief, said actions were
taken in defiance of the authority of and for the purpose of
frustrating the orders of this Court, in order to deprive
plaintiffs and Graham SSB of their rights.
25
<PAGE>
42. The actions by defendants set forth in paragraphs 36
and 40 above will, unless restrained, immediately and
permanently, cause immediate and irreparable injury, loss
and damage to plaintiffs and to Graham SSB, in that the
losses to Graham Inc. will inure as losses to plaintiffs and
to the other owners and members of Graham SSB and to Graham
SSB, and will arise from the necessity to undo all the
matters which are contemplated by defendants for Graham
Inc., to the great expenses of Graham SSB, for which, along
with the losses arising from the acts alleged in paragraph
36 above there is no adequate remedy at law.
WHEREFORE, plaintiffs pray the Court:
(l) That a temporary and permanent injunction be issued
against defendants CCB, Graham Inc., and the individual
defendants restraining the commission of any acts or
threatened acts which are alleged herein or which might have
as their purpose the furtherance of the acquisition of
Graham SSB by CCB;
(2) That to the extent the conversion and acquisition,
as contemplated by defendants in the Plan, has occurred that
the same be rescinded and declared void, and Graham SSB be
placed back in the position it occupied before the matters
and things alleged in this complaint occurred;
(3) That Graham SSB have and recover of the defendants,
jointly and severally, all damages which may have accrued to
it by reason of the matters and things alleged herein;
26
<PAGE>
(4) That the costs of this action, including reasonable
attorneys' fees, be taxed to the defendants.
This the 14th day of March, 1994.
OF COUNSEL: /s/ David M. Clark /vss
CLARK WHARTON & BERRY David M. Clark
125 South Elm Street
P. O. Box 1349 /s/ Frederick L. Berry /vss
Greensboro, NC 27402 Frederick L. Berry
(910) 275-7275
/s/ Virginia S. Schabacker
Virginia S. Schabacker
Attorneys for Plaintiffs
27
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NORTH CAROLINA
ALAMANCE COUNTY
CARY D. ALLRED, being first duly sworn, deposes and says
that he is one of plaintiffs in the above action; that he
has read the foregoing complaint and knows the contents
thereof; that the same are true of his own knowledge, save
and except those matters and things alleged therein upon
information and belief, and as to those he believes them to
be true.
/s/ Cary D. Allred
Cary D. Allred
Sworn to and subscribed before me this 11th day of March 1994
/s/ Margaret T. Bell
Notary Public
My commission expires 1/15/95
PRESS RELEASE
CONTACT: Richard L. Furr (919) 683-7697
FOR IMMEDIATE RELEASE March 24, 1994
JUDGE AFFIRMS CCB AND GRAHAM SAVINGS
BANK ACQUISITION
Durham, North Carolina-----March 24, 1994. A North Carolina Superior
Court Judge affirmed the position of the North Carolina
Savings Administrator who had denied a public hearing to two depositors
who had protested the conversion/acquisition of Graham Savings Bank by
CCB Financial Corporation ("CCB") and who sought to void the transaction.
After the completion of the transaction on October 1, 1993, Mr. Maurice
Koury and Mr. Cary Allred, two Graham Savings Bank depositors who had
organized opposition to the transaction, sought to cause the North
Carolina Administrator to grant them a public hearing. The court
affirmed the decision of the Administrator after a two-day hearing held
in Graham, North Carolina.
With this decision, a Temporary Restraining Order entered last week to
stop CCB and Graham Savings Bank from effecting a transition of the data
processing services was dissolved and CCB and Graham Savings Bank are
now free to complete that data processing change.
Ernest C. Roessler, President and Chief Executive Officer of CCB stated:
"We are delighted the Judge ruled in our favor since we have contended
from the beginning that everything Graham Savings Bank and CCB has done to
effect this transaction was proper and lawful. All depositors and the
community at large have benefited by this transaction, not just those
few who can afford to buy stock in a conversion. We look forward to
now being able
<PAGE>
Page 2
to deliver on the commitments made to bring enhanced banking products and
services to the customers of Graham Savings Bank."
A. C. Motsinger, Chairman of Graham Savings said: "The Judge has
affirmed our actions by denying the two depositors a hearing. This is
gratifying to us."
On Monday, March 14, 1994, the two depositors brought a separate civil
action against CCB, Graham Savings Bank and the individual members of
the Board of Directors of Graham Savings Bank and through that action
obtained a Temporary Restraining Order from a North Carolina
Superior Court Judge which halted the data processing conversion.
That action was removed to Federal Court and is pending. The Temporary
Restraining Order was dissolved by the Judge's ruling yesterday.
Mr. Roessler further stated: "We will continue to stand with Graham
Savings Bank and its directors in this other action and defend it
vigorously. The Restraining Order stopping us from enhancing the data
processing services at Graham Savings Bank was costly to depositors of
Graham Savings Bank and delayed many months of prior planning. We have
every confidence we will prevail in this other action."
Symbol: CCBF
STATE OF NORTH CAROLINA, IN THE GENERAL COURT OF JUSTICE
SUPERIOR COUNT DIVISION
COUNTY 0F ALAMANCE 94-CVS-044B
MAURICE J. KOURY and )
CARY D. ALLRED, )
)
Plaintiffs, )
)
v. )
)
GRAHAM SAVINGS BANK, INC., )
SSB; CCB FINANCIAL ) NOTICE OF REMOVAL OF CASE
CORPORATION; A.C. MOTSINGER; ) TO FEDERAL COURT
SARAH G. JOHNSTON; FORREST )
C. HALL; J. WORTH RICH; )
WILLIAM R. SIZEMORE; JAMES )
R. GUTHRIE, )
)
Defendants, )
)
and )
)
GRAHAM SAVINGS BANK, SSB, )
Derivative Defendant. )
TO: The Clerk of Court
Superior Court Division
Alamance County, North Carolina
PLEASE TAKE NOTICE that on March 21, 1994,
defendants Graham Savings Bank, Inc., SSB, CCB
Financial Corporation, A.C. Motsinger, Sarah G.
Johnston, Forrest C. Hall, J. Worth Rich, William R.
Sizemore, and James R. Guthrie (collectively
"Defendants") filed the attached Notice of Removal in
the United States District Court for the Middle
District of North Carolina, to remove this action to
that Court pursuant to 28 U. S. C. 1441 and 1446.
PLEASE TAKE FURTHER NOTICE that, pursuant to 28
U.S.C. 1446, the filing of said Notice of Removal
in the United States District Court for the Middle
District of North Carolina, together with the
filing of the attached copy of said Notice of
Removal with this Court, affects the removal of this
action, and this Court may proceed no further unless
and until the action is remanded.
This the 21st day of March, 1994.
POYNER & SPRUILL, L.L.P.
By: /s/ David W.Long
David W. Long
State Bar No. 2779
David Dreifus
State Bar No. 10160
3600 Glenwood Avenue
Raleigh, N.C. 27605-0096
Telephone: (919) 783-6400
Counsel for Defendants
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF ALAMANCE FILE NO.: 93-CVS-2736
IN THE MATTER OF: )
)
PETITION FOR JUDICIAL REVIEW ) ORDER
by MAURICE J. KOURY and )
CARY B. ALLRED )
)
This matter having been brought on for hearing before the undersigned
Presiding Judge on 21 March 1994 during the Special Civil Session of the
Alamance County Superior Court for resolution of an Amended Petition for
Judicial Review and an Amended Motion for Stay filed on behalf of Maurice J.
Koury and Cary D. Allred (the "Petitioners") on 10 January 1994 and 26 January
1994 (respectively), and it appearing to the Court that all parties properly
were before the Court and represented by counsel of record and that these
matters properly had been calendared, had been noticed for hearing, and were
before the Court for resolution, and it further appearing to the Court, after
reviewing and considering the pleadings, documents, and competent evidence of
record as well as the arguments of counsel, that the agency decisions rendered
in response to the Petitioners' Request for Public Hearing (as amended) and
Motion for Stay by the Administrator of the North Carolina Savings Institutions
Division on 9 December 1993 and by the North Carolina Savings Institution
Commission in its discretion on 13 December 1993 constitute final agency
decisions and should be affirmed, and that the Petitioners' Amended Motion for
Stay filed in this proceeding should be denied.
<PAGE>
IT IS THEREFORE ORDERED AND DECREED that the final agency decisions
rendered in response to the Petitioners' Request for Public Hearing (as
amended) and Motion for Stay by the Administrator of the North Carolina
Savings Institutions Division on 9 December 1993 and by the North Carolina
Savings Institutions Commission in its discretion on 13 December 1993 hereby
are affirmed and that the Petitioners' Amended Motion for Stay filed in this
proceeding hereby is denied.
This is the 24th day of March, 1994.
/s/ D. M. McLelland
D. Marsh McLelland
Superior Court Judge
Presiding
<PAGE>
