Filed pursuant to Rule 424(b)(3)
Registration File No.: 33-63009
[Letterhead of Allied Bank Capital, Inc.]
November 2, 1995
To the Shareholders of
Allied Bank Capital, Inc.
A Special Meeting of Shareholders (the "Special Meeting") of
Allied Bank Capital, Inc. ("Allied") will be held on Wednesday, December
6, 1995, at 2:00 p.m., Eastern Standard time, at the Carolina Trace
Country Club, Highway 87 South, Sanford, North Carolina. At the Special
Meeting, the shareholders will be asked to approve an agreement pursuant
to which First Citizens BancShares, Inc. ("BancShares") will acquire
Allied (the "Merger"). Following the Merger, Allied's wholly-owned
savings bank subsidiaries, Summit Savings Bank, Inc., SSB and Peoples
Savings Bank, Inc., SSB shall be merged into First-Citizens Bank & Trust
Company, a wholly-owned banking subsidiary of BancShares. You can vote
in person at the Special Meeting or by completing and returning the
enclosed proxy card, as described below.
Upon consummation of the Merger, each Allied shareholder will
be entitled to receive for each share of Allied's common stock either
(i) $25.25 in cash, (ii) 0.531 shares of newly issued Class A common
stock of BancShares, or (iii) $25.25 in unsecured, subordinated
debentures of First-Citizens Bank & Trust Company, all subject to
adjustment and proration as described in the accompanying
Prospectus/Proxy Statement.
Detailed information about the proposed Merger, Allied, and
BancShares is set forth in the Prospectus/Proxy Statement. YOU ARE URGED
TO STUDY THE PROSPECTUS/PROXY STATEMENT BEFORE CASTING YOUR VOTE ON THE
PROPOSED MERGER. Your Board of Directors has received the written
opinions of Legg Mason Wood Walker, Incorporated and Friedman, Billings,
Ramsey & Co., Inc. that the terms of the proposed Merger are fair to
Allied's shareholders from a financial point of view.
Your Board of Directors believes that the proposed Merger is in
the best interests of Allied and its shareholders. Your Board
unanimously recommends that you vote "FOR" the Merger.
Your vote is important, regardless of the number of shares of
Allied's stock you own. Approval of the Merger requires the affirmative
vote of the holders of a majority of the outstanding shares of Allied's
common stock entitled to vote at the Special Meeting. Consequently,
failure to vote will have the same effect as a vote against the Merger.
Therefore, on behalf of your Board of Directors, I urge you to complete,
sign and date the enclosed proxy, and return it as soon as possible in
the enclosed postage-paid envelope.
Sincerely,
A. Harold Ausley
President and Chief Executive Officer
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ALLIED BANK CAPITAL, INC.
130 North Steele Street
Sanford, North Carolina 27330
(919) 775-7161
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 6, 1995
Notice is hereby given that a Special Meeting of Shareholders
(the "Special Meeting") of Allied Bank Capital, Inc. ("Allied") will be
held at the Carolina Trace Country Club, Highway 87 South, Sanford,
North Carolina, on Wednesday, December 6, 1995, at 2:00 p.m., Eastern
Standard time, for the purpose of considering and voting upon the
following matters:
1. PROPOSED MERGER. To consider and vote upon the
Agreement and Plan of Reorganization and Merger dated August 7,
1995 (the "Agreement"), between Allied and First Citizens
BancShares, Inc. ("BancShares"), pursuant to which Allied will
merge with and into BancShares (the "Merger"). Each outstanding
share of Allied's common stock will be converted into the right
to receive either (i) $25.25 in cash, (ii) 0.531 shares of
newly issued Class A common stock of BancShares, or (iii)
$25.25 in unsecured, subordinated debentures of First-Citizens
Bank & Trust Company, all subject to adjustment as provided in
the Agreement. The Agreement is attached as Appendix I to the
Prospectus/Proxy Statement accompanying this Notice.
2. OTHER BUSINESS. To transact such other business,
including, in particular, adjournment of the Special Meeting,
to allow further solicitation of proxies if necessary, as
properly may come before the Special Meeting or any adjournment
thereof.
Under North Carolina law, each holder of Allied's common stock
has the right to dissent from the Merger and to demand payment of the
fair value of his or her shares in the event the Merger is approved and
consummated. The right of any such shareholder to dissent is contingent
upon strict compliance with the requirements of Sections 55-13-01
through 55-13-31 of the North Carolina General Statutes ("Article 13").
The full text of Article 13 is attached as Appendix III to the
Prospectus/Proxy Statement which accompanies this Notice and is
incorporated herein by reference.
Shareholders of record at the close of business on October 20,
1995, are entitled to receive notice of and to vote at the Special
Meeting and any adjournment thereof.
YOUR PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF ALLIED.
THE BOARD OF DIRECTORS OF ALLIED UNANIMOUSLY RECOMMENDS THAT HOLDERS
VOTE TO APPROVE THE AGREEMENT.
By Order of the Board of Directors
Betty S. Merritt
Corporate Secretary
Sanford, North Carolina
November 2, 1995
<PAGE>
PLEASE COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE
PROSPECTUS/PROXY STATEMENT. PROPERLY COMPLETED PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS INDICATED THEREON, OR IF NO
INSTRUCTIONS ARE GIVEN, "FOR" APPROVAL OF THE AGREEMENT.
<PAGE>
PROSPECTUS
FIRST CITIZENS BANCSHARES, INC.
Up to 850,000 Shares Class A Common Stock
($1.00 Par Value Per Share)
PROXY STATEMENT
ALLIED BANK CAPITAL, INC.
Special Meeting of Shareholders to be Held on December 6, 1995
This Prospectus/Proxy Statement is being furnished by the Board
of Directors of Allied Bank Capital, Inc. ("Allied") to the holders of
common stock, par value $0.50 per share, of Allied ("Allied Stock") in
connection with the solicitation of proxies for use at a Special Meeting
of Shareholders of Allied (the "Special Meeting") to be held at 2:00
p.m., Eastern Standard time, on Wednesday, December 6, 1995, at the
Carolina Trace Country Club, Sanford, North Carolina, and at any
adjournment thereof.
This Prospectus/Proxy Statement, the accompanying Notice of
Special Meeting, the form of proxy and other materials enclosed herewith
are first being mailed to shareholders of Allied on or about November 2,
1995.
At the Special Meeting, shareholders of Allied will vote upon a
proposal to approve an Agreement and Plan of Reorganization and Merger
dated August 7, 1995 (the "Agreement") between Allied and First Citizens
BancShares, Inc. ("BancShares"), pursuant to which Allied will merge
with and into BancShares (the "Merger"). Following the Merger, Allied's
wholly-owned savings bank subsidiaries, Summit Savings Bank, Inc., SSB
("Summit") and Peoples Savings Bank, Inc., SSB ("Peoples") will merge
with and into First-Citizens Bank & Trust Company ("First Citizens
Bank"), a wholly-owned banking subsidiary of BancShares. See "SUMMARY,"
"THE MERGER" and Appendix I to this Prospectus/Proxy Statement.
Upon consummation of the Merger, each outstanding share of
Allied Stock (excluding any shares held by dissenting shareholders) will
be converted into the right to receive, subject to adjustment and
proration as described below, either (i) if timely elected by the
shareholder in the manner prescribed in the Agreement, 0.531 shares of
newly issued shares of Class A common stock, $1.00 par value per share,
of BancShares ("BancShares Common Stock"), (ii) cash in the amount of
$25.25, or (iii) if timely elected by the shareholder in the manner
prescribed in the Agreement, an unsecured, subordinated debenture of
First Citizens Bank in the principal amount of $25.25 (the
"Debentures"). Any fractional shares resulting from the Merger will not
be issued and shareholders of Allied will receive cash in lieu of the
issuance of any fractional shares of BancShares Common Stock. The
exchange ratio of one share of Allied Stock for 0.531 shares of
BancShares Common Stock (the "Exchange Ratio") will not be adjusted
unless the Market Value (as defined below) of BancShares Common Stock is
less than $45.13 per share or more than $49.88 per share. The Market
Value will mean the average of the reported daily closing prices of
BancShares Common Stock on the Nasdaq National Market during the period
of ten consecutive trading days ending on the business day immediately
preceding the date of the Special Meeting. In the event that the Market
Value is less than $45.13 per share or more than $49.88 per share, the
Exchange Ratio will be adjusted by (x) dividing $45.13 by the Market
Value (in the event the Market Value is less than $45.13) or by dividing
$49.88 by the Market Value (in the event the Market Value is greater
than $49.88), (y) multiplying the quotient by 0.531, and (z) rounding
the result to three decimal places. As of October 27, 1995, the closing
price of BancShares Common Stock was $52.75. If the Special Meeting had
been held on such date, the Market Value would have been $52.972, and
the Exchange Ratio would have been adjusted from 0.531 shares of
BancShares Common Stock to 0.500 shares of BancShares Common Stock for
each share of Allied Stock. The Exchange Ratio and the amount of cash or
Debentures which a shareholder of Allied may elect to receive for each
share of Allied Stock shall be reduced on a per share basis to the
extent that cash dividends in an aggregate amount in excess of $0.12 per
share per calendar quarter or other distributions are declared or paid
by Allied between August 7, 1995 and the effective time of the Merger
(the "Effective Time"). See "THE MERGER - Terms of the Agreement -
Exchange of Allied Stock."
<PAGE>
In the event Allied shareholders elect to receive cash or
Debentures in lieu of BancShares Common Stock, or properly exercise
their dissenters' rights, for more than 60% of the outstanding shares of
Allied Stock, the Debentures will be prorated among all of the
shareholders of Allied electing to receive Debentures so that the total
number of shares paid for in Debentures and cash will not equal or
exceed 60% of the shares of Allied Stock. If after such proration of
Debentures, the aggregate number of outstanding shares of Allied Stock
held by shareholders of Allied who have elected to receive cash and
Debentures, or exercised their dissenters' rights, still exceeds 60% of
the shares of Allied Stock, the cash will be prorated among all of the
shareholders of Allied electing to receive cash so that the total number
of shares paid for in cash and Debentures will not exceed 60% of the
shares of Allied Stock. In the event Allied shareholders elect to
receive BancShares Common Stock in lieu of cash or Debentures for more
than 55% of the outstanding shares of Allied Stock, the BancShares
Common Stock will be prorated among all of Allied's shareholders
electing to receive BancShares Common Stock so that the total number of
shares of Allied Stock converted into shares of BancShares Common Stock
shall not exceed 55% of the shares of Allied Stock. In the event of such
proration of BancShares Common Stock, shares of Allied Stock will be
converted, at the election of the shareholder, into either cash or an
unsecured, subordinated debenture having a term of five years and a
fixed interest rate of 7.25%. See "THE MERGER Terms of the Agreement -
Exchange of Allied Stock." The proration of Debentures, cash or
BancShares Common Stock is intended to preserve the tax-free status of
the Merger.
Allied shareholders are entitled to their statutory dissenters'
rights in accordance with North Carolina law. See "THE MERGER -
Dissenters' Rights."
This document also constitutes the prospectus of BancShares
relating to the shares of BancShares Common Stock that are issuable to
holders of Allied Stock upon consummation of the Merger. See "CAPITAL
STOCK OF BANCSHARES" and "CERTAIN DIFFERENCES IN THE RIGHTS OF HOLDERS
OF ALLIED STOCK AND BANCSHARES COMMON STOCK."
Based on the 2,262,994 shares of Allied Stock outstanding on
October 20, 1995 (the "Record Date") and assuming that 55% of the
holders of Allied Stock elect to receive BancShares Common Stock at an
Exchange Ratio equal to 0.531, approximately 660,908 shares of
BancShares Common Stock will be issuable upon consummation of the
Merger.
BancShares Common Stock and Allied Stock are traded on the
Nasdaq National Market under the symbols "FCNCA" and "ABCI,"
respectively. On August 7, 1995, the last business day prior to public
announcement of the Merger, the last reported sale prices per share of
BancShares Common Stock and Allied Stock on the Nasdaq National Market
were $49.00 and $23.375, respectively. On October 27, 1995, such prices
were $52.75 and $23.75, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF BANCSHARES COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENT AGENCY.
THE DEBENTURES OF FIRST CITIZENS BANK OFFERED HEREBY ARE THE
UNSECURED OBLIGATIONS OF FIRST CITIZENS BANK, ARE NOT SAVINGS ACCOUNTS
OR DEPOSITS OF FIRST CITIZENS BANK AND ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENTAL AGENCY.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES BY REFERENCE OTHER
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
DOCUMENTS RELATING TO BANCSHARES OR ALLIED, INCLUDING EXHIBITS WHICH ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO THOSE DOCUMENTS, BUT
EXCLUDING EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE IN THOSE
DOCUMENTS, ARE AVAILABLE TO EACH PERSON INCLUDING ANY BENEFICIAL OWNER
TO WHOM A COPY OF THIS PROSPECTUS/ PROXY STATEMENT IS DELIVERED WITHOUT
CHARGE FROM BANCSHARES UPON REQUEST FROM THE CORPORATE FINANCE
DEPARTMENT, FIRST CITIZENS BANCSHARES, INC., POST OFFICE BOX 27131,
RALEIGH, NORTH CAROLINA 27611-7131, TELEPHONE (919) 755-7258; OR FROM
ALLIED FROM A. HAROLD AUSLEY, PRESIDENT, ALLIED BANK CAPITAL, INC., 130
NORTH STEELE STREET, SANFORD, NORTH CAROLINA
2
<PAGE>
27330, TELEPHONE (919) 775-7161. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS BEFORE THE SPECIAL MEETING, ANY SUCH REQUEST SHOULD BE
MADE BY NOVEMBER 29, 1995. THE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE,
BUT PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS WHICH ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED
THE COSTS OF REPRODUCTION AND MAILING.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS OCTOBER 31, 1995
3
<PAGE>
TABLE OF CONTENTS
Available Information...................................................4
Incorporation of Certain Documents by Reference.........................5
Summary.................................................................6
Parties to the Merger..........................................6
The Merger.....................................................7
Effective Time.................................................7
Consideration..................................................8
Debentures.....................................................9
Recommendation of the Board of Directors of Allied.............9
Opinions of Financial Advisors.................................9
Interest of Certain Persons in the Merger.....................10
Dissenters' Rights............................................10
Certain Income Tax Consequences...............................10
Resales by Affiliates.........................................11
Market Prices and Dividends...................................11
Certain Differences in Rights of Shareholders.................12
Business Purposes.............................................12
Accounting Treatment..........................................12
Selected Consolidated Financial Information............................13
Per Share Data.........................................................15
Information Concerning the Special Meeting.............................16
The Merger.............................................................17
Background and Reasons........................................17
Opinions of Financial Advisors................................20
Terms of the Agreement........................................29
Certain Income Tax Consequences...............................43
Accounting Treatment..........................................46
Dissenters' Rights............................................46
Information About First Citizens BancShares, Inc.......................48
Ownership of BancShares Voting Securities by
Certain Beneficial Owners and Management.............................51
Information about Allied Bank Capital, Inc.............................57
Market Prices and Dividends............................................60
Supervision, Regulation and Governmental Policy........................63
Capital Stock of BancShares............................................74
Certain Differences in the Rights of Holders
of Allied Stock and BancShares Common Stock..........................76
Opinions...............................................................79
Experts................................................................79
Proposals of Shareholders..............................................80
Appendices:
I. Agreement and Plan of Reorganization and Merger
II. Opinions of Legg Mason Wood Walker, Incorporated and Friedman,
Billings, Ramsey & Co., Inc.
III. Sections 55-13-01 through 55-13-31 of the North Carolina General
Statutes, concerning dissenters' rights
4
<PAGE>
AVAILABLE INFORMATION
This Prospectus/Proxy Statement constitutes part of the
Registration Statement on Form S-4 of BancShares, including any exhibits
and amendments thereto (the "Registration Statement"), filed with the
SEC under the Securities Act of 1933, as amended (the "Securities Act"),
in connection with the Merger described herein. This Prospectus/Proxy
Statement does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. Copies of the
Registration Statement can be obtained from the SEC at prescribed rates
by addressing written requests for such copies to the Public Reference
Section of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the Registration Statement may be
inspected and copied at the public reference facilities referred to
above and at the Northeast regional office located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and the Midwest regional
office located at Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511.
BancShares and Allied are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, file reports, proxy
statements and other information with the SEC. Such reports, proxy
statements and other information filed by BancShares and Allied may be
inspected without charge and copies may be obtained at prescribed rates
from the SEC offices set forth above.
All information contained or incorporated by reference in this
Prospectus/Proxy Statement with respect to BancShares was supplied by
BancShares, and all information contained or incorporated by reference
in this Prospectus/Proxy Statement with respect to Allied was supplied
by Allied.
No person or entity has been authorized to give any information
or to make any representation not contained in this Prospectus/Proxy
Statement in connection with the offering made hereby, and, if given or
made, any such other information or representation must not be relied
upon as having been authorized by BancShares or Allied. This
Prospectus/Proxy Statement does not constitute an offer to sell, or a
solicitation of an offer to buy, any of the securities offered hereby,
or any other securities, to any person in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making
such offer or solicitation is not authorized to do so, or to any person
to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus/Proxy Statement
nor any sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of BancShares
or Allied since any of the dates as of which information is furnished
herein or since the date hereof.
5
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by BancShares with the
SEC are incorporated herein by reference in this Prospectus/Proxy
Statement: (i) BancShares' Annual Report on Form 10-K for the year ended
December 31, 1994; (ii) BancShares' Quarterly Reports on Form 10-Q for
the three months ended March 31, 1995 and June 30, 1995; (iii)
BancShares' Current Report on Form 8-K dated April 25, 1995; and (iv)
the description of BancShares Common Stock contained in BancShares'
Current Report on Form 8-K dated October 21, 1986, as amended by Form 8
dated July 10, 1990. Each such document was filed pursuant to Section 13
of the Exchange Act.
The portion of BancShares' Annual Report to Shareholders for
the fiscal year ended December 31, 1994, and included as an exhibit to
BancShares' Annual Report on Form 10-K for the year ended December 31,
1994 ("1994 10-K"), captioned "Chairman's Letter" is not incorporated
herein and is not part of the Registration Statement. In addition, any
information included or incorporated by reference in the 1994 10-K in
response to Items 402(a)(8), (i), (k) or (l) of Regulation S-K of the
SEC is not incorporated herein and is not a part of the Registration
Statement.
The following documents previously filed by Allied with the SEC
are incorporated herein by reference in this Prospectus/Proxy Statement:
(i) Allied's Annual Report on Form 10-K for the year ended December 31,
1994; (ii) Allied's Quarterly Reports on Form 10-Q for the three months
ended March 31, 1995, and June 30, 1995; and (iii) Allied's Current
Reports on Form 8-K dated June 14, 1995, and August 15, 1995. Each such
document was filed pursuant to Section 13 of the Exchange Act.
The portion of Allied's Annual Report to Shareholders for the
fiscal year ended December 31, 1994, and included as an exhibit to
Allied's Annual Report on Form 10-K for the year ended December 31,
1994, captioned "Letter to Shareholders" is not incorporated herein and
is not part of the Registration Statement. In addition, any information
included or incorporated by reference in Allied's Annual Report on Form
10-K for the year ended December 31, 1994, in response to Items
402(a)(8), (i), (k), or (l) of Regulation S-K of the SEC is not
incorporated herein and is not part of the Registration Statement.
In addition, all documents filed by BancShares and Allied
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date hereof and prior to the date the Special Meeting has been
finally adjourned shall be deemed to be incorporated by reference. Any
statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus/Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus/Proxy Statement.
ALLIED'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994 AND QUARTERLY REPORT ON FORM 10-Q FOR THE THREE
MONTHS ENDED JUNE 30, 1995, ACCOMPANY THIS PROSPECTUS/PROXY STATEMENT.
6
<PAGE>
SUMMARY
The following is a brief summary of certain information
relating to the Merger contained elsewhere in this Prospectus/Proxy
Statement. This summary is not intended to be a summary of all material
information relating to the Merger and is qualified in its entirety by
reference to more detailed information contained elsewhere in this
Prospectus/Proxy Statement, including the Appendices hereto and in the
documents incorporated by reference in this Prospectus/Proxy Statement.
A copy of the Agreement is set forth in Appendix I to this
Prospectus/Proxy Statement and reference is made thereto for a complete
description of the terms of the Merger. Shareholders are urged to read
carefully the entire Prospectus/Proxy Statement, including the
Appendices. As used in this Prospectus/Proxy Statement, the terms
"BancShares," "First Citizens Bank" and "Allied" refer to such
organizations, respectively, and, unless the context otherwise requires,
such corporations and any respective subsidiaries.
PARTIES TO THE MERGER
BANCSHARES. BancShares is a registered bank holding company
organized under the laws of the State of Delaware and headquartered in
Raleigh, North Carolina. BancShares serves as the parent holding company
for four banks in three states: First Citizens Bank, a North
Carolina-chartered bank headquartered in Raleigh, North Carolina; Bank
of Marlinton, a West Virginia-chartered bank headquartered in Marlinton,
West Virginia ("Marlinton Bank"); First-Citizens Bank & Trust Company, a
Virginia-chartered bank headquartered in Lawrenceville, Virginia
("FCB-VA"); and Bank of White Sulphur Springs, a West Virginia-chartered
bank headquartered in White Sulphur Springs, West Virginia ("White
Sulphur Springs Bank"). At June 30, 1995, based on total assets of
approximately $6.9 billion, BancShares was the fifth largest banking
organization headquartered in North Carolina. BancShares' principal
assets are its investments in and receivables from its North Carolina
commercial bank subsidiary, First Citizens Bank. Its primary sources of
income are dividends from First Citizens Bank and interest income on
funds loaned by it to First Citizens Bank.
The principal offices of BancShares are located at First
Citizens Bank's main office, 239 Fayetteville Street, Raleigh, North
Carolina 27601. The telephone number is (919) 755-7000.
ALLIED. Allied is a registered bank holding company and North
Carolina corporation headquartered in Sanford, North Carolina. Allied
was organized in March 1992 for the purpose of becoming the parent
holding company of Summit. On July 7, 1992, Allied became the parent
holding company of Summit upon the acquisition of all of the common
stock of Summit issued in connection with Summit's conversion from a
North Carolina-chartered mutual savings bank to a North
Carolina-chartered capital stock savings bank. On January 28, 1994,
Allied became the parent holding company of Peoples upon the acquisition
of all of the common stock of Peoples issued in connection with Peoples'
conversion from a North Carolina-chartered mutual savings bank to a
North Carolina-chartered capital stock savings bank. Allied's principal
business activities consist of the ownership of Summit and Peoples. At
June 30, 1995, Allied had total assets of approximately $268.7 million,
total deposits of approximately $218.1 million and total shareholders'
equity of approximately $31.1 million.
The principal offices of Allied are located at Summit's main
office at 130 North Steele Street, Sanford, North Carolina 27330. The
telephone number is (919) 775-7161.
7
<PAGE>
THE MERGER
Allied's Board of Directors unanimously approved the Agreement
providing for the merger of Allied with and into BancShares. Following
the Merger, Allied's wholly-owned savings bank subsidiaries, Summit and
Peoples, will merge with and into First Citizens Bank, a wholly-owned
banking subsidiary of BancShares. Upon consummation of the Merger, each
of the issued and outstanding shares of Allied Stock will be converted
into, subject to adjustment and proration, either (i) $25.25 in cash,
(ii) 0.531 shares of newly issued BancShares Common Stock, or (iii)
$25.25 in Debentures. See "- Consideration."
The Agreement must be approved by the affirmative vote of a
majority of the shares of Allied Stock entitled to vote at the Special
Meeting to be held on December 6, 1995. As of the Record Date, directors
and executive officers of Allied and their affiliates owned and were
entitled to vote approximately 24.9% of the outstanding shares of Allied
Stock. The directors and executive officers of Allied and their
affiliates are expected to vote their shares in favor of the Agreement
and the Merger. See "INFORMATION CONCERNING THE SPECIAL MEETING - Record
Date, Voting Rights and Vote Required." Pursuant to Section 251(f) of
Delaware's General Corporation Law, Del. Code Ann. Title 8, shareholders
of BancShares are not required to approve the Merger if (i) the Merger
does not require the amendment of BancShares' Certificate of
Incorporation, (ii) the shares of BancShares capital stock issued and
outstanding immediately prior to the Effective Time will remain issued
and outstanding after the Effective Time with no changes in rights and
privileges, and (iii) the securities issued in the Merger do not exceed
20% of the aggregate shares of capital stock of BancShares issued and
outstanding immediately prior to the Effective Time. Because each of the
preceding conditions is satisfied, shareholders of BancShares are not
required to approve the Merger.
The material conditions to the Merger are (i) approval of the
Agreement by the shareholders of Allied as described above, (ii) final
approvals of the Board of Governors of the Federal Reserve System
("Federal Reserve"), the Administrator of the North Carolina Savings
Institutions Division (the "Administrator"), the North Carolina
Commissioner of Banks (the "NC Commissioner") and the North Carolina
Banking Commission (the "NC Commission"), and (iii) receipt by
BancShares and Allied of an opinion of the tax advisor of BancShares
that the Merger qualifies as a tax-free reorganization. The Special
Meeting will be held on December 6, 1995. The Administrator approved the
Merger on October 26, 1995. Applications for other required approvals
have been filed with the Federal Reserve, the NC Commissioner and the NC
Commission. While no assurances are or can be given, BancShares and
Allied believe that all such required regulatory approvals will be
obtained. The Merger must close not less than 15 or 30 days (as
determined by the Federal Reserve), and not more than 90 days, after
approval by the Federal Reserve. The favorable opinion of the tax
advisor has been received. See "-Certain Income Tax Consequences."
If the Merger is not approved by the shareholders of Allied at
the Special Meeting or an adjournment thereof, or a necessary approval
is not obtained, Allied will not be acquired by BancShares and Allied
will remain the parent holding company of Summit and Peoples.
EFFECTIVE TIME
Assuming satisfaction of all conditions to the consummation of
the Merger (see "THE MERGER Terms of the Agreement - Conditions to
Consummation of the Merger"), the "Effective Time" of the Merger will be
on the date and at the time specified in the Certificate of Merger filed
with the appropriate governmental bodies in accordance with law. The
Effective Time shall in no event be more
8
<PAGE>
than 10 days following the closing date. The Agreement may be terminated
by either party if the Effective Time has not occurred prior to the
close of business on March 31, 1996, unless such date is extended by
written mutual agreement of the parties. The Effective Time currently is
anticipated to be in February 1996.
CONSIDERATION
Upon consummation of the Merger, each outstanding share of
Allied Stock (excluding any shares held by dissenting shareholders) will
be converted into the right to receive, subject to adjustment and
proration as described below, either (i) if timely elected by the
shareholder in the manner prescribed in the Agreement, 0.531 shares of
newly issued BancShares Common Stock, (ii) cash in the amount of $25.25,
or (iii) if timely elected by the shareholder in the manner prescribed
in the Agreement, an unsecured, subordinated Debenture to be issued by
First Citzens Bank in the principal amount of $25.25. Any fractional
shares resulting from the Merger will not be issued and shareholders of
Allied will instead receive cash in lieu of the issuance of any
fractional shares of BancShares Common Stock. The Exchange Ratio will
not be adjusted unless the Market Value is less than $45.13 per share or
more than $49.88 per share. In the event that the Market Value is less
than $45.13 per share or more than $49.88 per share, the Exchange Ratio
will be adjusted by (x) dividing $45.13 by the Market Value (in the
event the Market Value is less than $45.13) or by dividing $49.88 by the
Market Value (in the event the Market Value is greater than $49.88), (y)
multiplying the quotient by 0.531, and (z) rounding the result to three
decimal places. As of October 27, 1995, the closing price of BancShares
Common Stock was $52.75. If the Special Meeting had been held on such
date, the Market Value would have been $52.972, and the Exchange Ratio
would have been adjusted from 0.531 shares of BancShares Common Stock to
0.500 shares of BancShares Common Stock for each share of Allied Stock.
The Exchange Ratio into which each share of Allied Stock will be
converted and the amount of cash or Debentures which a shareholder of
Allied may elect to receive for each share of Allied Stock, will be
reduced on a per share basis to the extent that cash dividends in an
aggregate amount in excess of $0.12 per share per calendar quarter, or
other distributions are declared or paid by Allied between August 7,
1995, and the Effective Time. See "THE MERGER - Terms of the Agreement -
Exchange of Allied Stock."
In the event Allied shareholders elect to receive cash or
Debentures in lieu of BancShares Common Stock, or properly exercise
their dissenters' rights, for more than 60% of the outstanding shares of
Allied Stock, the Debentures will be prorated among all of the
shareholders of Allied electing to receive Debentures so that the total
number of shares paid for in Debentures and cash will not exceed 60% of
the shares of Allied Stock. If, after such proration of Debentures, the
aggregate number of shares of Allied Stock held by shareholders of the
Saving Bank who have elected to receive cash and Debentures, or properly
exercise their dissenters' rights, still exceeds 60% of the outstanding
shares of Allied Stock, the cash will be prorated among all of the
shareholders of Allied electing to receive cash so that the total number
of shares paid for in cash and Debentures will not exceed 60% of the
shares of Allied Stock. In the event Allied shareholders elect to
receive BancShares Common Stock in lieu of cash or Debentures for more
than 55% of the outstanding shares of Allied Stock, the BancShares
Common Stock will be prorated among all of Allied's shareholders
electing to receive and and Debentures will not exceed 60% of the shares
of Allied Stock. In the event Allied shareholders elect to receive
BancShares Common Stock in lieu of cash or Debentures for more than 55%
of the outstanding shares of Allied Stock, the BancShares Common Stock
will be prorated among all of Allied's shareholders electing to receive
BancShares Common Stock so that the total number of shares of Allied
Stock converted into shares of BancShares Common Stock shall not exceed
55% of the shares of Allied Stock. In the event of such proration of
BancShares Common Stock, shares of Allied Stock will be converted at the
election of the
9
<PAGE>
shareholder into either cash or a Debenture having a term of five years
and a fixed interest rate of 7.25%. See "THE MERGER - Terms of the
Agreement - Exchange of Allied Stock." The proration of Debentures, cash
or BancShares Common Stock is intended to preserve the tax-free status
of the Merger.
DEBENTURES
If the Merger is consummated and if a shareholder of Allied
elects to receive a Debenture in exchange for his or her shares of
Allied Stock, First Citizens Bank will issue an unsecured, subordinated
Debenture which shall entitle the holder to semi-annual interest
payments in cash on the principal amount of the Debenture. Each
Debenture shall mature, at the election of the shareholder, on the
third, fifth or tenth anniversary of the Effective Time. Debentures with
a maturity of three years shall bear interest at a fixed rate of 7.00%
per annum, Debentures with a maturity of five years shall bear interest
at a fixed rate of 7.25% per annum, and Debentures with a maturity of
ten years shall bear interest at a fixed rate of 7.50% per annum. Each
Debenture shall be fully registered as to principal and interest on the
Debenture register maintained for that purpose by First Citizens Bank.
See "THE MERGER - Terms of the Agreement - Description of Debentures."
Shareholders of Allied electing to receive Debentures may elect
Debentures in any combination of term and interest rate. At June 30,
1995, the aggregate amount of outstanding long-term and short-term
indebtedness of First Citizens Bank that will be senior to the
Debentures was $312.5 million.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ALLIED
The Board of Directors of Allied believes that the Agreement
and the Merger contemplated thereby are in the best interests of Allied
and its shareholders and has unanimously approved the Agreement and the
Merger contemplated thereby. THE ALLIED DIRECTORS UNANIMOUSLY RECOMMEND
THAT THE ALLIED SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AGREEMENT AND
THE MERGER CONTEMPLATED THEREBY.
OPINIONS OF FINANCIAL ADVISORS
Allied has received the opinions of Legg Mason Wood Walker,
Incorporated ("Legg Mason") and Friedman, Billings, Ramsey & Co., Inc.
("FBR"), dated October 27, 1995 and October 27, 1995, respectively, to
the effect that, as of those dates, the consideration to be received by
Allied's shareholders in exchange for their stock in the Merger is fair,
from a financial point of view, to the holders of Allied Stock. It is a
condition to the Merger that Legg Mason and FBR provide written updates
of their opinions within 10 business days preceding the closing date. In
connection with rendering the fairness opinion and providing other
financial advisory services to Allied, Allied has agreed to pay Legg
Mason an aggregate fee of approximately $1.0 million. Allied also will
reimburse Legg Mason for all reasonable out-of-pocket expenses incurred
in connection with its services provided to Allied which shall not
exceed $10,000. Allied has paid Legg Mason $100,000 of such amount with
the balance of such fee payable upon consummation of the Merger. In
connection with rendering a fairness opinion and providing other
financial advisory services to Allied, Allied has agreed to pay FBR an
aggregate fee of approximately $334,000 and to reimburse FBR for all
reasonable out-of-pocket expenses incurred in connection with its
services provided to Allied. Allied has paid FBR $50,000 of such amount
with the balance of such fee payable upon consummation of the Merger.
For additional information concerning Legg Mason and FBR, and their
opinions, see "THE MERGER - Opinions of Financial Advisors" and the
opinions of such firms attached as Appendix II to the Prospectus/Proxy
Statement.
10
<PAGE>
INTEREST OF CERTAIN PERSONS IN THE MERGER
Following the Effective Time, BancShares' Board of Directors
will appoint one member of Allied's Board of Directors to serve as a
director of BancShares until the next annual meeting of shareholders of
BancShares at which time he will be nominated for election as a director
of BancShares. Such director also will be appointed to serve as a
director of First Citizens Bank. As of the Record Date, certain
employees and directors of Allied held options to acquire 558,364 shares
of Allied Stock. Such options, to the extent not exercised prior to the
Effective Time, will give rise to, by virtue of the Merger, the right to
receive $25.25 in cash (subject to adjustment), less the exercise price,
for each outstanding option. The Agreement also contains provisions
concerning other benefits to be provided to employees and directors of
Allied, including the continued employment of certain of Allied's
employees, employee benefits after the Merger, assumption of certain
Allied benefit plans and agreements, and the payment of advisory
directors' fees to those directors who have been invited to serve on a
local advisory board of First Citizens Bank. See "THE MERGER - Terms of
the Agreement - Interest of Certain Persons and the Effect of the Merger
on Employees and Benefit Plans."
DISSENTERS' RIGHTS
Under North Carolina law, shareholders of Allied will have
dissenters' rights in connection with the Merger. Any shareholder who
desires to assert dissenters' rights MUST, AMONG OTHER THINGS, (i) give
to Allied, and Allied must actually receive, BEFORE THE VOTE ON THE
MERGER IS TAKEN, written notice of his or her intent to demand payment
for his or her shares if the Merger is consummated, and (ii) not vote
his or her shares in favor of the Merger. Assuming shareholder approval
and consummation of the Merger, shareholders who properly exercise their
dissenters' rights will be entitled to the fair value of their shares in
accordance with Sections 55-13-01 through 55-13-31 of the North Carolina
General Statutes, a copy of which is attached to this Prospectus/Proxy
Statement as Appendix III. Failure to exercise dissenters' rights
properly will result in the loss of such rights. See "THE MERGER -
Dissenters' Rights."
CERTAIN INCOME TAX CONSEQUENCES
BancShares and Allied have received an opinion from KPMG Peat
Marwick LLP, tax advisors to BancShares, to the effect that the Merger
will constitute a tax-free reorganization under Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that the
shareholders of Allied will not recognize gain or loss for federal
income tax purposes to the extent such shareholders exchange shares of
Allied Stock for shares of BancShares Common Stock. Cash or Debentures
received by a shareholder of Allied generally will be treated as a
dividend or a sale or exchange of a capital asset. See "THE MERGER -
Certain Income Tax Consequences."
Because of the complexity of the federal income tax laws and
because the tax consequences may vary depending upon a shareholder's
individual circumstances or tax status, it is recommended that each
shareholder of Allied consult his or her tax advisor concerning the
federal (and applicable state, local or other) tax consequences of the
Merger.
11
<PAGE>
RESALES BY AFFILIATES
As a condition to BancShares' obligation to consummate the
Merger, affiliates of Allied must have entered into agreements that they
will not sell any shares of BancShares Common Stock received upon
consummation of the Merger except in compliance with Rule 145 of the
Securities Act or otherwise in compliance with the Securities Act and
the rules and regulations promulgated thereunder. See "THE MERGER -
Terms of the Agreement - Restrictions on Resales by Affiliates."
MARKET PRICES AND DIVIDENDS
BancShares Common Stock is traded in the over-the-counter
market and the shares are quoted on the Nasdaq National Market. On
October 27, 1995, the last reported sales price on the Nasdaq National
Market for BancShares Common Stock was $52.75. BancShares has paid cash
dividends since 1935. Although BancShares currently intends to continue
paying quarterly cash dividends on the BancShares Common Stock, there
can be no assurance that BancShares' dividend policy will remain
unchanged after completion of the Merger. The declaration and payment of
dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors.
Allied Stock is traded in the over-the-counter market and the
shares are quoted on the Nasdaq National Market. On October 27, 1995,
the last reported sale price on the Nasdaq National Market for Allied
Stock was $23.75. Allied paid its first cash dividend in 1994 and has
continued to pay quarterly cash dividends since that time. There can be
no assurance that, in the absence of the consummation of the Merger,
dividends would continue to be paid in the future. The declaration,
payment and amount of any such future dividends would depend upon
business conditions, operating results, capital, reserve requirements,
regulatory authorization and Allied's Board of Directors' consideration
of other relevant factors. Pursuant to the provisions of the Agreement,
if Allied pays cash dividends in an aggregate amount in excess of $0.12
per share per calendar quarter between August 7, 1995 and the Effective
Time, the consideration to be paid to shareholders of Allied will be
reduced on a per share basis by the excess amount of such cash dividend.
See "MARKET PRICES AND DIVIDENDS."
The following table sets forth the market value of the Allied
Stock (on an historical and equivalent per share basis) and the market
value of the BancShares Common Stock (on an historical basis) as of
August 7, 1995, the business date preceding public announcement of the
Merger.
At August 7, 1995
BancShares Common Stock (1).............................................$49.00
Allied Stock (1)....................................................... 23.375
Equivalent pro forma Allied Stock (giving effect to Merger only)(2).....$26.02
- ----------------------
1The closing prices for BancShares Common Stock and Allied Stock are
the closing prices on the Nasdaq National Market on the indicated date.
2Equivalent pro forma amount is calculated by multiplying the closing
price of the BancShares Common Stock by the Exchange Ratio.
12
<PAGE>
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
Upon completion of the Merger, shareholders of Allied who
receive BancShares Common Stock in exchange for their Allied Stock will
become shareholders of BancShares and their rights as such will be
governed by Delaware law and BancShares' Certificate of Incorporation
and Bylaws. The rights of the shareholders of BancShares are different
in some respects from the rights of the shareholders of Allied. See
"CAPITAL STOCK OF BANCSHARES" and "CERTAIN DIFFERENCES IN THE RIGHTS OF
HOLDERS OF ALLIED STOCK AND BANCSHARES COMMON STOCK."
BUSINESS PURPOSES
The Merger will give the former customers of Allied access to a
wider range of services and products due to the stronger financial
resources of BancShares. First Citizens Bank will succeed to all of the
assets and liabilities of Summit and Peoples and the combined resources
of Summit, Peoples and First Citizens Bank will enable First Citizens
Bank to maintain and expand its business in the market areas currently
served by Summit and Peoples.
ACCOUNTING TREATMENT
BancShares will account for the Merger as a purchase for
accounting and financial reporting purposes.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
BANCSHARES
The following table sets forth selected consolidated financial
data and other operating information of BancShares at the dates and for
the periods indicated. The selected consolidated financial data in the
table for the years ended December 31, 1994, 1993, 1992, 1991 and 1990,
are derived from, and should be read in conjunction with, BancShares'
consolidated financial statements, related notes and other financial
information incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The selected consolidated financial
data presented for the six months ended June 30, 1995, and 1994, are
derived from, and should be read in conjunction with, BancShares'
unaudited consolidated financial statements, related notes and other
financial information incorporated herein by reference. Management
believes such unaudited consolidated financial statements include all
adjustments (which consist only of normal recurring accruals) necessary
for a fair presentation of such results for such interim periods.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1995, ARE NOT NECESSARILY
INDICATIVE OF RESULTS THAT MAY BE EXPECTED FOR ANY OTHER INTERIM PERIOD
OR FOR THE FULL YEAR.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
(Unaudited)
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income.................$222,503 $180,548 $ 376,005 $ 364,881 $ 390,380 $ 421,844 $ 361,824
Interest expense................ 101,838 70,233 148,126 137,934 170,558 245,684 208,874
--------- --------- --------- --------- --------- --------- ---------
Net interest income............. 120,665 110,315 227,879 226,947 219,822 176,160 152,950
Provision for loan losses....... 1,994 141 2,786 15,245 17,506 15,626 9,623
--------- --------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses..... 118,671 110,174 225,093 211,702 202,316 160,534 143,327
Other income.................... 44,712 40,891 83,325 85,737 74,303 70,270 58,753
Other expense................... 125,239 113,777 230,582 213,213 199,199 187,596 159,923
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes...... 38,144 37,288 77,836 84,226 77,420 43,208 42,157
Income taxes.................... 13,342 12,933 26,867 28,641 25,657 14,027 13,757
--------- --------- --------- --------- --------- --------- ---------
Net income......................$ 24,802 $ 24,355 $ 50,969 $ 55,585 $ 51,763 $ 29,181 $ 28,400
======== ========= ========= ========= ========= ========= =========
PER SHARE OF BANCSHARES COMMON
STOCK
Net income...................... $2.45 $2.49 $5.13 $5.73 $5.45 $3.12 $3.05
Cash dividends.................. 0.40 0.35 0.725 0.625 0.525 0.425 0.40
SELECTED AVERAGE BALANCES
Total assets....................$6,515,649 $6,049,983 $6,098,944 $5,576,179 $5,308,165 $5,084,615 $4,000,874
Investment securities........... 1,437,231 1,679,583 1,599,565 1,522,715 1,522,571 1,597,060 1,079,501
Loans........................... 4,339,395 3,665,751 3,800,318 3,401,093 3,173,285 2,866,834 2,385,291
Interest-earning assets......... 5,890,106 5,410,997 5,476,690 5,002,144 4,762,846 4,557,240 3,531,263
Deposits........................ 5,696,864 5,289,396 5,335,057 4,894,319 4,684,982 4,491,509 3,458,603
Long-term obligations........... 28,672 58,719 52,499 29,318 18,245 29,960 27,436
Interest-bearing liabilities.... 5,155,267 4,820,077 4,838,749 4,445,120 4,299,143 4,156,635 3,115,562
Shareholders' equity............$ 471,050 $ 400,331 $ 416,983 $ 362,733 $ 307,818 $ 264,512 $ 240,858
Shares outstanding..............10,498,296 9,799,295 9,944,927 9,701,389 9,494,118 9,360,904 9,317,100
RATIOS (AVERAGES)
Rate of return on total
assets......................... 0.77% 0.81% 0.84% 1.00% 0.98% 0.57% 0.71%
Rate of return on
shareholders' equity........... 10.62 12.27 12.22 15.32 16.82 11.03 11.79
Dividend payout ratio........... 16.95 14.06 14.13 10.91 9.63 13.62 13.11
Loans to deposits............... 76.17 69.30 71.23 69.49 67.73 63.83 68.97
Shareholders' equity to
total assets................... 7.23 6.62 6.84 6.51 5.80 5.20 6.02
Time certificates of $100,000
or more to total deposits..... 7.42 6.61 6.41 5.81 6.36 7.88 6.36
</TABLE>
14
<PAGE>
ALLIED
The following table sets forth selected consolidated financial
data and other operating information of Allied at the dates and for the
periods indicated. The selected consolidated financial data in the table
for the years ended December 31, 1994 and 1993 and September 30, 1992,
1991 and 1990, are derived from, and should be read in conjunction with,
Allied's consolidated financial statements, related notes and other
information incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The selected consolidated financial
data presented for the six months ended June 30, 1995 and 1994 are
derived from, and should be read in conjunction with, Allied's unaudited
consolidated financial statements, related notes and other financial
information incorporated herein by reference. Management believes such
unaudited consolidated financial statements include all adjustments
(which consist only of normal recurring accruals) necessary for a fair
presentation of such results for such interim periods. RESULTS FOR THE
SIX MONTHS ENDED JUNE 30, 1995 ARE NOT NECESSARILY INDICATIVE OF RESULTS
THAT MAY BE EXPECTED FOR ANY OTHER INTERIM PERIOD OR FOR THE FULL YEAR
PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED
(Unaudited) DECEMBER 31, YEARS ENDED SEPTEMBER 30,
1995 1994 1994 1993 1992 1991 1990
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income.................$ 10,391 $ 8,142 $ 17,474 $ 11,007 $ 12,200 $ 13,969 $ 14,792
Interest expense................ 5,229 3,750 7,988 5,359 7,555 9,963 11,410
-------- -------- --------- --------- --------- --------- ---------
Net interest income before
provision for loan losses..... 5,162 4,392 9,486 5,648 4,645 4,006 3,382
Provision for loan losses....... 58 43 70 150 138 -- 10
-------- -------- --------- --------- --------- --------- ---------
Net interest income............. 5,104 4,349 9,416 5,498 4,507 4,006 3,372
Other operating income.......... 1,107 1,009 2,034 830 890 792 898
Other operating expense......... 3,850 3,436 7,230 4,006 3,609 3,467 3,500
-------- -------- --------- --------- --------- --------- ---------
Income before income taxes,
cumulative effect on prior
years of a change in an
accounting principle, and
extraordinary credit.......... 2,361 1,922 4,220 2,322 1,788 1,331 770
Income taxes.................... 754 575 1,301 873 640 420 237
-------- -------- --------- --------- --------- --------- ---------
Income before cumulative
effect on prior years of a
change in accounting
principle and extraordinary
credit........................ 1,607 1,347 2,919 1,449 1,148 911 533
Cumulative effect at
January 1, 1993 of change in
accounting for income
taxes......................... 250
Extraordinary credit, net of
applicable income taxes....... 55 107 13
-------- --------- --------- --------- --------- --------- ---------
Net income......................$ 1,607 $ 1,347 $ 2,919 $ 1,754 $ 1,148 $ 1,018 $ 546
======= ======= ========= ========= ========= ========= =========
PER SHARE DATA(1)
Net income......................$ 0.65 $ 0.61 $ 1.27 $ 1.07 $ 0.20(2) $ -- $ --
Book value......................$ 13.80 $ 12.47 $12.98 $13.66 $12.21 $ -- $ --
SELECTED RATIOS
Return on average assets........ 1.20% 1.16% 1.21% 1.21% 0.79% 0.68% 0.35%
Return on average equity........ 10.65% 10.21% 10.59% 8.50% 9.33% 11.00% 6.51%
Interest rate spread............ 3.54% 3.56% 3.67% 3.53% 2.96% 2.47% 2.08%
Net interest margin............. 4.04% 3.98% 4.12% 4.06% 3.33% 2.79% 2.30%
Percent of average assets:
Other income.................. 0.83% 0.87% 0.84% 0.57% 0.61% 0.53% 0.58%
Other expense................. 2.89% 2.97% 3.00% 2.76% 2.47% 2.31% 2.26%
SELECTED PERIOD END BALANCES
Total assets....................$ 268,654 $ 247,586 $ 257,979 $ 148,055 $ 143,665 $ 147,027 $ 152,381
Loans receivable, net........... 211,024 195,753 203,157 123,627 105,414 102,446 105,365
Mortgage-backed securities...... 9,800 7,325 9,778 6,285 12,949 16,599 10,452
Investment securities........... 21,175 23,089 32,816 11,547 18,090 21,870 30,088
Deposits........................ 218,079 203,911 210,227 121,838 121,723 134,228 140,596
Borrowings...................... 11,132 6,732 10,732 3,500 - - -
Shareholders' equity............ 31,129 28,019 29,180 21,521 19,226 9,839 8,821
Total regulatory capital........ 32,413 29,292 30,444 22,373 19,924 10,442 9,413
SELECTED OTHER DATA
Equity to end-of-period
assets........................ 11.59% 11.32% 11.31% 14.53% 13.37% 6.68% 5.67%
Non-performing assets to total
assets at end of period....... 0.22% 0.41% 0.21% 0.46% 0.77% 0.71% 0.66%
Allowance for loan losses to
non-performing assets......... 219.85% 126.48% 231.93% 125.11% 64.08% 63.64% 84.23%
Net charge-offs to average
loans outstanding............. 0.04% 0.03% 0.03% 0.02% 0.09% 0.18% 0.17%
- ---------------
</TABLE>
(1) On July 7, 1992, Summit completed its conversion from mutual
to stock form and Allied completed its initial public offering
of Allied Stock.
(2) For the period of July 7, 1992 to September 30, 1992.
15
<PAGE>
PER SHARE DATA
The following unaudited consolidated financial information
reflects certain per share data relating to (i) net income, book value,
and cash dividends declared per common share for both BancShares and
Allied on a historical basis, (ii) net income, book value, and cash
dividends declared per common share on a pro forma basis for BancShares
after giving effect to the Merger, and (iii) net income, book value, and
cash dividends declared per common share on a pro forma equivalent basis
for Allied assuming that the Merger had been effected for the periods
presented and had been accounted for as a purchase and that 55% of
Allied's shareholders elected to receive shares of BancShares Common
Stock in consideration of the Merger. The data presented should be read
in conjunction with and have been derived from historical consolidated
financial statements of BancShares and Allied and the related notes
thereto incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF OR FOR AS OF OR FOR
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
----------------- ----------------
<S> <C> <C>
PER COMMON SHARE:
NET INCOME:
BancShares - Historical.......................................... $ 5.13 $ 2.36
Allied - Historical.............................................. 1.27 .65
BancShares/Allied Pro Forma Combined (1)......................... 4.79 2.23
Allied Pro Forma Equivalent (1).................................. 2.55 1.19
BOOK VALUE:
BancShares - Historical.......................................... $44.11 $46.06
Allied - Historical.............................................. 12.98 13.80
BancShares/Allied Pro Forma Combined (1)......................... 44.48 46.27
Allied Pro Forma Equivalent (1).................................. 23.62 24.57
CASH DIVIDENDS:
BancShares - Historical.......................................... $ .725 $ .40
Allied - Historical (2).......................................... .10 .22
BancShares/Allied Pro Forma Combined............................. .70 .43
Allied Pro Forma Equivalent...................................... .37 .23
</TABLE>
(1) Pro Forma Combined Net Income and Book Value per share include
pro forma adjustments relating to amortization of goodwill
created from the Merger and the exercise of Allied options
prior to the Effective Time.
(2) Pursuant to the provisions of the Agreement, if Allied pays a
cash dividend in an aggregate amount in excess of $0.12 per
share per calendar quarter between August 7, 1995 and the
Effective Time, the cash paid in excess of such limitation will
reduce the consideration to be paid to Allied shareholders by
BancShares in the Merger. Allied does not intend to declare or
pay cash dividends on Allied Stock in excess of such limitation
unless the Agreement is terminated.
16
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
This Prospectus/Proxy Statement is being furnished to
shareholders of Allied as of the Record Date and is accompanied by a
form of proxy which is solicited by the Board of Directors of Allied for
use at the Special Meeting to be held on December 6, 1995 and at any
adjournment thereof. At the Special Meeting, shareholders will vote on a
proposal to approve the Agreement and Merger. Proxies will be voted on
such other matters as may properly come before the Special Meeting, or
any adjournment thereof, in the best judgment of a majority of the
proxyholders named therein. Allied is not aware of any other matters
which may properly come before the Special Meeting.
HOLDERS OF ALLIED STOCK ARE REQUESTED TO COMPLETE, DATE, AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Only the holders of Allied Stock on the Record Date are
entitled to receive notice of and to vote at the Special Meeting and at
any adjournment thereof. On the Record Date, there were 2,262,994 shares
of Allied Stock outstanding which were held by approximately 402 holders
of record. Each share of Allied Stock outstanding on the Record Date is
entitled to one vote on the proposal regarding the Merger.
Approval of the Agreement and the Merger will require the
affirmative vote of a majority of the shares of Allied Stock entitled to
vote at the Special Meeting. Failure of a holder of Allied Stock to vote
such shares, abstentions, and broker non-votes will have the same effect
as a vote "AGAINST" the Agreement and the Merger. As of the Record Date,
the directors and executive officers of Allied and their affiliates
owned a total of 564,086 shares, or 24.9%, of Allied Stock, all of which
are expected to be voted in favor of the Agreement and the Merger.
Information as to the nature of such persons' beneficial ownership is
included in the section of this Prospectus/Proxy Statement entitled
"INFORMATION ABOUT ALLIED BANK CAPITAL, INC. - Voting, Securities and
Beneficial Ownership Thereof."
VOTING AND REVOCATION OF PROXIES
The shares of Allied Stock represented by properly executed
proxies received at or prior to the Special Meeting will be voted as
directed by the shareholders, unless revoked as described below. IF NO
INSTRUCTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED "FOR" THE PROPOSAL TO
APPROVE THE AGREEMENT AND THE MERGER. SUCH VOTE WILL CONSTITUTE A WAIVER
OF THE SHAREHOLDER'S RIGHT TO DISSENT. If any other matters are properly
presented at the Special Meeting and may be properly voted on, the
proxies solicited hereby will be voted on such matters in accordance
with the best judgment of a majority of the proxyholders named therein.
However, in such event, voting authority will only be exercised to the
extent permissible under applicable federal securities laws. Management
is not aware of any other business to be presented at the Special
Meeting. This proxy is being solicited for the Special Meeting and any
adjournments of the Special Meeting and will not be used for any other
meeting.
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The presence of a shareholder at the Special Meeting will not
automatically revoke such shareholder's proxy. A shareholder may,
however, revoke a proxy at any time prior to its exercise (1) by filing
a written notice of revocation with, or by delivering a duly executed
proxy bearing a later date to, the President of Allied at Allied's main
office prior to the Special Meeting, or (2) by attending the Special
Meeting and voting in person. A proxy will not be revoked by the death
or incapacity of the shareholder executing it unless, before the shares
are voted, notice of such death or incapacity is filed with the
President of Allied or other person authorized to tabulate votes.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be deemed to be incurred
and shall be paid 50% by Allied and 50% by BancShares, but such amount
shall not exceed $20,000 for Allied. In addition to the use of the
mails, proxies may be solicited personally or by telephone or facsimile
by the directors, officers and employees of Allied who will not be
specially compensated for such solicitation activities. Allied will make
arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of Allied Stock held of record by such persons. Any
such brokers, custodians, nominees and fiduciaries will be reimbursed
for the out-of-pocket expenses incurred by them for such services.
RECOMMENDATION
The Board of Directors of Allied has unanimously approved the
Agreement and the Merger contemplated thereby and believes that the
Merger is fair to, and in the best interests of, Allied and its
shareholders. ALLIED'S BOARD OF DIRECTORS, THEREFORE, UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF ALLIED STOCK VOTE "FOR" APPROVAL OF THE
AGREEMENT AND THE MERGER CONTEMPLATED THEREBY. In making its
recommendation, the Board of Directors of Allied has considered, among
other things, the opinions of Legg Mason and of FBR that BancShares'
proposal is fair to Allied's shareholders from a financial point of
view. See "THE MERGER--Opinions of Financial Advisors" and " - Background
and Reasons."
THE MERGER
The following information describes material aspects of the
Merger. This description does not purport to be complete and is
qualified in its entirety by reference to the Agreement, which is
incorporated by reference herein and is attached hereto as Appendix I.
BACKGROUND AND REASONS
Summit and Peoples were organized, and for most of their
existence have operated, as traditional thrift institutions. Summit's
origins are in Sanford, Lee County, North Carolina, as a state-chartered
mutual building and loan association. Peoples' origins are in
Wilmington, New Hanover County, North Carolina, also as a
state-chartered mutual building and loan association. Over the years,
Summit has expanded by branching into other communities, including Wake
and Chatham Counties, North Carolina, and Peoples has expanded by
branching into new communities, such as Pender County, North Carolina.
The Sanford market, however, has
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remained the location of Summit's largest branches and its largest
market share in any of the Summit market areas, and the Wilmington
market has remained the strength of the Peoples franchise.
Like other thrifts, the core of Summit's and Peoples' business
has consisted of attracting deposits from the general public and
originating loans to finance the acquisition, construction, or
improvement of residential properties located in the respective market
areas served by Summit and Peoples. Summit and Peoples have worked over
a number of years to diversify their activities by expanding their
commercial and consumer lending and improving their array of deposit
products and non-deposit investment services. While the Board of
Directors and management of Allied believe that Summit and Peoples have
been more successful than many of their peers in such diversification,
they also recognize that the basic business and identity of each remains
closely tied to its roots as a traditional thrift institution.
In recent years, the Board of Directors and management of
Allied have recognized that the increased competition from commercial
banks and other financial institutions has changed fundamentally the
environment in which traditional thrifts have operated and threatens the
market shares held by thrifts for their traditional services. Wake
County supports sixteen commercial banks and Chatham and Lee Counties
support eleven and six commercial banks, respectively. The Wilmington,
New Hanover County market supports twelve commercial banks, while Pender
County supports four commercial banking franchises. Competition with
these commercial banks, with other financial institutions and with other
providers of financial services, such as credit unions, is keen, making
it extremely difficult for Summit and Peoples, despite their
diversification efforts and accomplishments, to meaningfully expand into
the commercial banking business or make significant market share gains
in any one market area.
The Riegle-Neal Interstate Banking and Branching Efficiency
Act (the "Interstate Banking Act"), enacted by Congress in September
1994, also has raised new questions about the future nature and
structure of the financial services industry and the options open to
local institutions offering limited lines of financial services and
products. In addition, current proposals to recapitalize the Savings
Association Insurance Fund ("SAIF") and the current disparity between
SAIF and Bank Insurance Fund ("BIF") premiums, in addition to the
uncertainty currently surrounding such issues, are anticipated to result
in additional competitive advantages to commercial banks that will
further harm the thrift industry as a whole.
The Board of Directors and management of Allied have assessed
continuously the foregoing and other developments and their significance
to Allied and its shareholders. Allied's strategy thus far has been to
remain an independent company, at least so long as independence best
serves the long term interests of Allied and its shareholders. The Board
of Directors of Allied has reassessed this strategy from time to time,
recognizing that, over the past several years, large commercial bank
holding companies have acquired a substantial number of thrift
institutions and commercial banks in North Carolina and that a market
for such acquisitions still exists. The Board of Directors of Allied
also has received and considered expressions of interest in potential
acquisition transactions from other financial institutions. At the same
time, the Board of Directors has been cognizant of changes in Allied's
operating environment, including rising interest rates and shrinking
interest margins, causing the Board of Directors and management to
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project slower growth in earnings and a decline in the estimated fair
value of financial assets compared to their carrying values over the
next few years.
In light of these occurrences and conditions, the Board of
Directors, early in 1995, decided to undertake a comprehensive study of
Allied's future and the strategic options available to Allied.
Initially, the Board of Directors employed Legg Mason to provide
business and financial advice regarding the strategic future of Allied.
With the assistance of Legg Mason, the Board of Directors reviewed the
economic and competitive conditions in the market areas of Summit and
Peoples, changes in the residential mortgage industry, the trend of
consolidation among federally-insured depository institutions, the
potential effects of the effectiveness of the Interstate Banking Act and
the advent of interstate banking, and the effects that rising interest
rates and cyclical trends could have on bank and thrift stock prices in
coming years. The Board of Directors also analyzed the history and
market performance of Allied Stock since it converted to a stock
institution in 1992. Since the third quarter of 1992, Allied Stock had
been traded actively in comparison to stocks of other North Carolina
thrift institutions, and the market price had increased steadily. The
Board of Directors concluded that the market price of Allied Stock
included a premium that reflected a belief among purchasers of Allied
Stock and other participants in the securities market that Allied was an
attractive candidate for takeover. The Board of Directors further
concluded that, if Allied were not acquired within a reasonable period
of time, the takeover premium was likely to erode which, when coupled
with the projections for slower earnings growth and a decline in the
estimated fair value of financial assets compared to their carrying
value, likely would cause the market price of Allied Stock to decline,
thereby reducing the value of the Allied Stock held by Allied
shareholders.
The Board of Directors considered several options for the
future of Allied, including: (i) remaining independent and seeking to
generate growth and added profits by expanding and diversifying Allied's
financial services and product offerings, (ii) expanding through
establishment of new branches, (iii) expanding by acquiring smaller
savings institutions, commercial banks or branches, (iv) merging with an
institution of nearly equal size, and (v) being acquired by a larger
bank or thrift holding company. The Board reviewed each option and
concluded, in light of current business conditions, Allied's particular
circumstances and prospects, and the risks and expense of expanding its
products, services, and/or branch network on an independent basis, that
the best interests of Allied and its shareholders would be served by
exploring closely the possibility of combining with another institution
in a sale-of-control transaction in the near term.
Accordingly, the Board of Directors decided to survey the most
likely obtainable terms and conditions on which Allied could combine
with a larger in-state or out-of-state bank or thrift holding company.
Legg Mason, on behalf of Allied, communicated directly with the
financial institutions it considered to be the most likely potential
acquirors of Allied to invite acquisition proposals. Four companies
submitted proposals or expressions of interest in response to Legg
Mason's communications, each of which were subject to the completion of
due diligence examinations and further discussions between the parties.
One of the proposals was submitted by BancShares. In an effort to secure
as much information and input as possible to assist the Board of
Directors in making its decision, the Board of Directors determined, in
June 1995, that it would be in the best interests of Allied and its
shareholders to seek the assistance of an additional financial advisor.
As a result, the Board of Directors engaged FBR to work in conjunction
with Legg Mason in determining the best course for Allied to take to
maximize
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shareholder value. With the advice of Legg Mason and FBR, Allied
proceeded to enter into further discussions with three of the companies,
the fourth having submitted a proposal that was deemed to be well below
the range of consideration. Each of the companies conducted a due
diligence examination of Allied and its subsidiaries and met with the
Mergers and Acquisitions Committee appointed by the Chairman of Allied's
Board of Directors.
Following the due diligence examinations and the meetings with
the Mergers and Acquisitions Committee, Allied requested that final
proposals be submitted by each company to Allied. One company withdrew
its proposal at this time, and each of the remaining two companies
submitted a final proposal. The Board of Directors reviewed each of the
final proposals and met with Legg Mason, FBR, and Allied's attorneys to
discuss and review the final proposals. Each of Legg Mason and FBR
presented a detailed analysis of each of the final proposals to the
Board of Directors and each concluded separately that the consideration
offered by BancShares represented a greater value to the shareholders of
Allied than the consideration offered by the other proposal. In
addition, Legg Mason and FBR each advised the Board of Directors that,
in their opinions, BancShares' proposal was fair to Allied's
shareholders from a financial point of view.
As a result of the foregoing process, the Board of Directors
concluded that it had achieved the best value for Allied's shareholders
under the circumstances. On the basis of the foregoing conclusion, the
independent judgment of the members of the Board of Directors of Allied,
and the advice of Legg Mason and FBR that the BancShares proposal
represented a greater value than the other proposal and was fair to
Allied's shareholders from a financial point of view, the Board of
Directors concluded that BancShares' offer was in the best interests of
Allied and its shareholders. Accordingly, for all of the reasons
discussed above, on July 31, 1995, Allied's Board of Directors accepted
BancShares' offer and authorized execution of the Agreement.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF LEGG MASON. Allied retained Legg Mason to act as its
financial advisor in February 1995. Legg Mason is a nationally
recognized investment banking firm regularly engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities and private placements.
Legg Mason is familiar with Allied, having served as financial advisor
and stand-by underwriter to Allied in connection with its conversion
from mutual-to-stock form in 1992 and in connection with its acquisition
of a mutual savings bank in a merger conversion in 1994. Legg Mason also
follows Allied from a research perspective. Allied selected Legg Mason
to act as its financial advisor based upon its qualifications, expertise
and reputation, as well as Legg Mason's prior investment banking
relationship and familiarity with Allied.
On July 31, 1995, at the meeting at which the Allied Board of
Directors agreed in principle to merge with BancShares, Legg Mason
rendered an oral opinion to the Allied Board that, as of such date, the
consideration to be received by the shareholders of Allied from
BancShares was fair, from a financial point of view, to such
shareholders. On October 27, 1995, Legg Mason delivered a written
opinion to the Allied Board of Directors that, as of such date, the
consideration to be received by the shareholders of Allied was fair,
from a financial point of
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view, to such shareholders. THE FULL TEXT OF LEGG MASON'S OPINION, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEWS UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX II AND IS
INCORPORATED HEREIN BY REFERENCE, AND SHOULD BE READ IN ITS ENTIRETY IN
CONNECTION WITH THIS PROSPECTUS/PROXY STATEMENT. THE FOLLOWING SUMMARY
OF LEGG MASON'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.
In arriving at its opinion, Legg Mason (i) reviewed the
Agreement, certain publicly available business and financial information
for Allied and BancShares and certain other financial statements, data,
reports and analyses for Allied and BancShares prepared by their
respective managements, including the 1995 budget of Allied and
BancShares; (ii) discussed the current operations, financial condition
and prospects of Allied and BancShares with the managements of Allied
and BancShares; (iii) reviewed the reported market prices and historical
trading activity of Allied Stock and BancShares Common Stock and
compared certain financial and stock market information for Allied and
BancShares with similar information for certain other financial
institutions, the securities of which are publicly-traded; (iv) reviewed
the financial terms of certain recent business combinations involving
financial institutions that Legg Mason deemed comparable in whole or in
part; and (v) performed such other studies and analyses as Legg Mason
considered appropriate.
Legg Mason relied without independent verification upon the
accuracy and completeness of all the financial and other information
reviewed by it for purposes of its opinion. In that regard, Legg Mason
assumed that the financial forecasts were reasonably prepared on a basis
reflecting the best currently available judgments and estimates of the
managements of Allied and BancShares. Legg Mason did not make or obtain
an independent evaluation or appraisal of the assets or liabilities of
Allied or BancShares nor was it furnished with any such evaluation or
appraisal.
The following is a summary of the financial analyses performed
by Legg Mason in connection with its opinion:
COMPARISON OF SELECTED PUBLICLY TRADED COMPANIES. Using
publicly available information, Legg Mason compared selected financial
and market information for Allied and two peer groups of savings banks.
The first peer group ("Regional Peer Group") consisted of all
publicly-traded savings banks located in the Southeastern states of
Alabama, Georgia, Kentucky, North Carolina, South Carolina, Tennessee,
Virginia, and West Virginia with assets of less than $1 billion.
Companies that had agreed to merge with another institution were
excluded from the peer group. The second peer group ("Target Peer
Group") consisted of selected companies within the Regional Peer Group
that were located in North Carolina, South Carolina and Virginia, and
had assets of less than $500 million. The Target Peer Group included
Cooperative Bancshares, Inc., KS Bancorp, Inc., First SB of Moore
County, United Federal Savings Bank, Community Financial Corp., CSB
Financial Corporation, Fidelity Financial Bancshares, Coastal Financial
Corp. and First Southeast Financial Corp. Since Allied's market price
began to increase in early 1994, and such increase was believed to be
due to takeover speculation, Legg Mason used Allied's market price of
$15.38 on February 10, 1994 for comparative purposes. As of February 10,
1994 for Allied and September 26, 1995 for the Regional Peer Group and
Target Peer Group, the relative multiples implied by the market price
of Allied Stock and the median market price
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of the common stock of the Regional Peer Group and the Target Peer
Group, respectively, to such selected financial data was: (i) to latest
twelve months ("LTM") earnings, 12.1x for Allied and 12.7x and 13.0x for
the Regional Peer Group and the Target Peer Group, respectively, and
(ii) to book value, 118% for Allied and 110% and 109% for the Regional
Peer Group and the Target Peer Group, respectively. Financial comparison
as of June 30, 1995 showed that: (i) return on average assets ("ROA")
for the latest twelve months was 1.23% for Allied and 0.99% and 1.02%
for the Regional Peer Group and the Target Peer Group, respectively;
(ii) return on average equity ("ROE") for the latest twelve months was
10.76% for Allied and 8.93% and 8.53% for the Regional Peer Group and
the Target Peer Group, respectively; and (iii) the equity/assets ratio
for the most recent quarter ended was 11.59% for Allied and 9.40% and
12.98% for the Regional Peer Group and the Target Peer Group,
respectively.
Using publicly available information, Legg Mason also compared
selected financial and market information for BancShares and a group of
22 publicly-traded commercial banks located in the Southeastern states
of Alabama, Georgia, Kentucky, North Carolina, South Carolina,
Tennessee, Virginia and West Virginia with assets between $1 billion and
$10 billion ("Bank Peer Group"). Companies that had agreed to merge with
another institution were excluded from the peer group. As of September
26, 1995, the relative multiples implied by the market price of
BancShares Common Stock and the median market price of the common stock
of the Bank Peer Group to such selected financial data was: (i) to LTM
earnings, 10.6x for BancShares and 13.1x for the Bank Peer Group, and
(ii) to book value, 115% for BancShares and 168% for the Bank Peer
Group. The financial comparison for the most recent quarter showed that:
(i) ROA for the latest twelve months was 0.81% for BancShares and 1.18%
for the Bank Peer Group; (ii) ROE for the latest twelve months was
11.35% for BancShares and 14.24% for the Bank Peer Group, and (iii) the
equity/asset ratio for the most recent quarter ended was 7.12% for
BancShares and 8.33% for the Bank Peer Group. Legg Mason advised the
Allied Board that, in its opinion, the market prices for banks in the
Bank Peer Group generally included some premium reflecting the potential
for takeover, while the market price for BancShares may not have been so
affected to the same extent due to the existence of a controlling
shareholder.
COMPARISON OF SELECTED TRANSACTIONS. Legg Mason reviewed a
group of 34 transactions announced since the beginning of 1993 involving
acquisitions of savings banks with assets between $100 million and $1
billion in the Southeast ("Regional Transaction Group"). Legg Mason also
analyzed a subgroup of ten transactions within the Regional Transaction
Group that were deemed comparable to the Merger ("Target Transaction
Group"). Such transactions included: First Union Corporation/RS
Financial Corporation, Centura Banks/First Southern Bancorp, Bank South
Corporation / Gwinnett Bancshares, Union Planters Corporation/BNF
Bancorp, Security Capital Corporation/First FS & LA, Union Planters
Corporation/Liberty Bancshares, First Union Corporation/American
Bancshares, Southern National Corporation/Regency Bancshares, United
Carolina Bancshares/Home FSB-Eastern NC and BB&T Financial
Corporation/Citizens Savings Bank. Legg Mason calculated, as of the
respective dates of announcement of such transactions, the multiple of
LTM earnings and book value, as well as the core deposit premium,
implied by the consideration to be received by the shareholders of the
acquired company in each such transaction. Legg Mason also computed the
median of these multiples of LTM earnings and book value and the median
core deposit premium for the Regional Transaction Group and Target
Transaction Group. The analysis yielded a range of transaction values as
a multiple of LTM earnings of 6.3x to 28.9x, with a median of 14.8x, for
the Regional
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Transaction Group, a range of 10.5x to 19.9x, with a median of 14.8x,
for the Target Transaction Group, compared to 19.6x for the Merger. The
range of transaction values as a multiple of book value was .71x to
2.19x, with a median of 1.55x, for the Regional Transaction Group, a
range of 1.22x to 1.99x, with a median of 1.65x, for the Target
Transaction Group, compared to 1.86x for the Merger. The range of core
deposit premiums was 0.17% to 16.11%, with a median of 6.18%, for the
Regional Transaction Group, a range of 3.09% to 13.77%, with a median of
9.41%, for the Target Transaction Group, compared to 11.31% for the
Merger. The offer price used for the Merger in the preceding analysis
was $25.67 per share, derived from the market value of BancShares Common
Stock of $49.00 on July 27, 1995 and assuming that 55% of Allied's
shareholders elected BancShares Common Stock and 45% elected cash or
subordinated debentures at $25.25 per Allied share.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow
analysis, Legg Mason estimated the present value of the future dividend
streams that Allied could produce over a five year period under various
circumstances. Legg Mason then estimated the terminal value of Allied's
common equity at the end of five years by applying a range of 10x to 20x
Allied's terminal year earnings. In arriving at terminal year earnings,
Legg Mason used Allied's projection for 1995 and assumed five percent
growth in EPS thereafter. The dividend streams and terminal values were
then discounted to present values using discount ranges from 12% to 16%,
which reflect different assumptions regarding the required rate of
return of holders or prospective buyers of Allied Stock. The foregoing
analysis indicated a range of present values of Allied from $9.93 per
share to $21.42 per share.
ANALYSIS AT VARIOUS PRICES FOR BANCSHARES. Under the Agreement, the
Exchange Ratio for those Allied shareholders receiving BancShares Common
Stock is fixed at .531 shares of BancShares Common Stock for each share
of Allied Stock if the market value of BancShares Common Stock is
between $45.13 per share and $49.88 per share. If the market value of
BancShares Common Stock is below $45.13 per share or above $49.88 per
share then the Exchange Ratio will become floating to preserve a fixed
minimum stock consideration of approximately $24.00 per share and a
fixed maximum stock consideration of approximately $26.50 per share.
Assuming that 55% of Allied's shareholders elect to receive BancShares
Common Stock, the minimum and maximum Merger consideration would be
$24.54 per share and $25.93 per share, respectively. Using these minimum
and maximum per share Merger consideration amounts, the range of
transaction values as a multiple of Allied's LTM earnings is 18.7x to
19.8x, as a multiple of book value is 1.78x to 1.88x and as a premium to
core deposits is 10.01% to 11.62%.
The summary set forth above does not purport to be a complete
description of the analyses performed by Legg Mason in this regard. The
preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Selecting portions of the analysis or of the summary set forth above,
without considering the analysis as a whole, could create an incomplete
view of the processes underlying Legg Mason's opinion. In arriving at
its fairness determination, Legg Mason considered the results of all
such analyses. No company or transaction used in the above analysis as a
comparison is identical to Allied or BancShares or the contemplated
transaction. The analyses were prepared solely for purposes of Legg
Mason's providing its opinion to the Allied Board as to the fairness of
the Merger consideration to Allied shareholders and do not purport to be
appraisals or necessarily reflect the
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prices at which businesses or securities actually may be sold. Analyses
based upon forecasts of future results are not necessarily indicative of
actual future results, which may be significantly more or less favorable
than suggested by such analyses.
As described above, Legg Mason's opinion was one of many
factors taken into consideration by the Allied Board in making its
determination to approve the Merger. Legg Mason's opinion is directed
only to the fairness, from a financial point of view, of the Merger
consideration and does not address any other aspect of the Merger.
In the ordinary course of its business, Legg Mason trades the
equity securities of Allied for its own account and the accounts of
customers, and, accordingly, may at any time hold a long or short
position in such securities.
Pursuant to the terms of an engagement letter dated February 8,
1995, Allied has paid Legg Mason an initial fee of $25,000 and a
fairness opinion fee of $75,000. In addition, Allied has agreed to pay
Legg Mason a transaction fee, due upon consummation of the Merger, of
approximately $1.0 million, based on an incentive formula set forth in
Legg Mason's engagement letter, less the $75,000 fairness opinion fee
already paid to Legg Mason. The incentive formula is based upon the
aggregate consideration to be received by the Allied shareholders and
option holders pursuant to the Agreement. Whether or not the Merger is
consummated, Allied also has agreed to indemnify Legg Mason and certain
related persons against certain liabilities relating to or arising out
of its engagement.
OPINION OF FBR. Pursuant to an engagement letter dated July 10,
1995 (the "Engagement Letter") between Allied and FBR, Allied retained
FBR as an additional financial advisor to act in concert with Legg Mason
and to render its opinion with respect to the fairness, from a financial
point of view, of the consideration to be received by the shareholders
of Allied from BancShares in the Merger. FBR, as part of its
institutional brokerage, research and investment banking business, is
regularly engaged in the valuation of securities and the evaluation of
transactions in connection with initial and secondary offerings,
mutual-to-stock conversion of thrift institutions, mergers and
acquisitions of commercial banks, thrifts and their holding companies,
as well as business valuations for other corporate purposes for
financial institutions and real estate-related companies. As a
specialist in the valuation of securities of financial institutions, FBR
has experience in, and knowledge of, North Carolina and the surrounding
regional markets for thrift and bank securities and institutions
operating in North Carolina and the surrounding regional areas. Allied
engaged the services of FBR based upon its qualifications, expertise and
reputation.
At the July 31, 1995 meeting of the Allied Board of Directors,
FBR delivered its oral opinion, subsequently confirmed in writing as of
October 27, 1995, that the consideration to be received by the
shareholders of Allied from BancShares in the Merger was fair, from a
financial point of view, as of such dates. FBR's opinion is directed
only to the fairness, from a financial point of view, to Allied's
shareholders of the consideration to be received by them in the Merger
and does not address Allied's underlying business decision to effect the
Merger. No limitations were imposed by Allied on FBR with respect to the
investigation made or procedures followed in rendering its opinion. THE
FULL TEXT OF FBR'S WRITTEN OPINION TO THE ALLIED BOARD OF DIRECTORS IS
ATTACHED HERETO AS APPENDIX II AND IS
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INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONNECTION WITH THIS PROSPECTUS/PROXY STATEMENT. THE
FOLLOWING SUMMARY OF FBR'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION. FBR'S OPINION IS ADDRESSED TO
THE ALLIED BOARD OF DIRECTORS ONLY AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY ALLIED SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE WITH RESPECT TO THE MERGER. IN FURNISHING ITS OPINION, FBR
DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE TERM
"EXPERT" AS USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
In connection with rendering its opinion, FBR, among other
things, (i) reviewed Allied's Annual Reports to Shareholders and Annual
Reports on Form 10-K filed with the SEC for fiscal years ended December
31, 1992, 1993 and 1994, (ii) reviewed BancShares' Annual Reports to
Shareholders and Annual Reports on Form 10-K filed with the SEC for
fiscal years ended December 31, 1992, 1993 and 1994, (iii) reviewed the
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1995 and June 30, 1995, filed with the SEC by Allied and BancShares,
(iv) discussed the past and current operations, financial condition and
prospects of Allied and BancShares with the managements of Allied and
BancShares, (v) reviewed the reported market prices and trading activity
for Allied Stock and BancShares Common Stock and compared them with
those of certain publicly-traded financial institutions (or their
holding companies) which FBR deemed to be reasonably comparable to
Allied and BancShares, respectively, (vi) compared the results of
operations and financial condition of Allied and BancShares with those
of certain publicly-traded financial institutions (or their holding
companies) which FBR deemed to be reasonably comparable to Allied and
BancShares, respectively, (vii) reviewed the financial terms, to the
extent publicly available, of certain acquisition transactions which FBR
deemed to be reasonably comparable, (viii) reviewed an executed copy of
the Agreement, and (ix) performed such other analyses and reviewed and
analyzed such other information as FBR deemed appropriate.
In rendering its opinion, FBR did not assume responsibility for
independently verifying, and did not independently verify, any financial
or other information concerning Allied and BancShares furnished to it by
Allied and BancShares or the publicly-available financial and other
information regarding Allied, BancShares and other financial
institutions (or their holding companies). FBR has assumed that all such
information is accurate and complete. FBR has further relied on the
assurances of management of Allied and BancShares that they are not
aware of any facts that would make such financial or other information
relating to such entities inaccurate or misleading. With respect to
financial forecasts for Allied and BancShares provided to FBR by their
respective managements, FBR has assumed, for purposes of its opinion,
that the forecasts have been reasonably prepared on bases reflecting the
best available estimates and judgments of their respective managements
at the time of preparation as to the future financial performance of
Allied and BancShares and that they provide a reasonable basis upon
which FBR can form its opinion. FBR has assumed that there has been no
material change in Allied's or BancShares' assets, financial condition,
result of operations, business or prospects since June 30, 1995. FBR did
not undertake an independent appraisal of the assets or liabilities of
Allied or BancShares nor was FBR furnished with any such appraisals. FBR
is not an expert in the
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evaluation of allowances for loan losses and did not review any
individual credit files of Allied or BancShares. FBR's conclusions and
opinion were necessarily based upon economic, market and other
conditions as they existed on, and the information made available to FBR
as of, the date of its opinion. FBR expressed no opinion on matters of a
legal, regulatory, tax or accounting nature related to the Merger as set
forth in the Agreement.
The preparation of a fairness opinion is a complex project and
is not necessarily susceptible to partial or summary description. No
single analytical methodology used by FBR was critical to its overall
conclusions, as each analytical technique has inherent strengths and
weaknesses. The nature of available information may further affect the
value of any particular methodology or technique. FBR's conclusions are
based upon all the analyses and factors that it considered, taken as a
whole, and also on the application of FBR's experience and judgment.
FBR's conclusions involve significant elements of subjective judgment
and qualitative analysis. No single technique was assigned any special
value, merit or weight. Accordingly, FBR believes that its analyses must
be considered as a whole and that to focus upon specific portions of
such analyses and factors would create an incomplete and misleading view
of the process underlying the preparation of its opinion. In preparing
its analyses FBR made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters,
many of which are beyond FBR's control and are inherently imprecise.
The following is a brief summary of the analyses performed by
FBR in connection with its opinion:
COMPARISON OF SELECTED COMPLETED TRANSACTIONS. FBR reviewed 33
completed acquisition transactions announced after January 1, 1994 and
completed prior to July 27, 1995 involving Southeastern thrift
institutions (the "Completed Transaction Group"). FBR calculated, as of
the respective dates of announcement of such transactions, the multiple
of last twelve months ("LTM") earnings and book value, as well as the
core deposit premium, implied by the aggregate consideration to be
received by the shareholders and stock option holders of each acquired
institution in each such transaction. FBR also computed the average and
median of these multiples of LTM earnings and book value and the average
and median core deposit premium resulting in these transactions. The
analysis yielded a range of transaction values as a multiple of LTM
earnings of 8.87x to 33.33x, with an average of 17.11x and a median of
14.72x, for the Completed Transaction Group, compared to a 20.63x for
Allied in the Merger. The range of transaction values as a multiple of
book value was 1.11x to 2.54x, with an average of 1.65x and a median of
1.66x, for the Completed Transaction Group, compared to 2.13x for Allied
in the Merger. The range of core deposit premiums was 2.76% to 14.33%,
with an average of 7.97% and a median of 7.73%, for the Completed
Transaction Group, compared to 13.91% for Allied in the Merger. The
offer price used for Allied in the Merger in the preceding analysis was
$25.67 per share, derived from the market value of BancShares Common
Stock of $49.00 as of July 27, 1995 and assuming that 55% of Allied's
shareholders elected BancShares Common Stock and 45% elected cash at
$25.25 per share, with an aggregate cash value to be received for
unexercised Allied stock options of $8,364,349 based upon the cash-out
of the options for the difference between $25.25 and a weighted average
exercise price of $10.43 on a per share basis (the "Allied Merger
Valuation Assumption").
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COMPARISON OF SELECTED NATIONAL PENDING TRANSACTIONS. FBR
reviewed 41 acquisition transactions pending as of July 27, 1995 on a
nationwide basis involving thrift institutions with assets in excess of
$50 million (the "National Pending Transaction Group"). FBR calculated,
as of the respective dates of announcement of such transactions, the
multiple of LTM earnings and book value, as well as the core deposit
premium, implied by the aggregate consideration to be received by the
shareholders and stock option holders of each target institution in each
such transaction. FBR also computed the average and median of these
multiples of LTM earnings and book value and the average and median core
deposit premium resulting in these transactions. The analysis yielded a
range of transaction values as a multiple of LTM earnings of 8.49x to
31.16x, with an average of 16.51x and a median of 15.68x, for the
National Pending Transaction Group, compared to 20.63x for Allied in the
Merger. The range of transaction values as a multiple of book value was
0.82x to 2.30x, with an average of 1.51x and a median of 1.51x, for the
National Pending Transaction Group, compared to 2.13x for Allied in the
Merger. The range of core deposit premiums was 0.18% to 22.54%, with an
average of 6.47% and a median of 6.03%, for the National Pending
Transaction Group, compared to 13.91% for Allied in the Merger. The
Allied Merger Valuation Assumption was utilized in the preceding
analysis.
COMPARISON OF SELECTED SOUTHEASTERN PENDING TRANSACTIONS. FBR
reviewed 14 acquisition transactions pending as of July 27, 1995
involving Southeastern thrift institutions with assets in excess of $50
million (the "Southeastern Pending Transaction Group"). FBR calculated,
as of the respective dates of announcement of such transactions, the
multiple of LTM earnings and book value, as well as the core deposit
premium, implied by the aggregate consideration to be received by the
shareholders and stock option holders of each target institution in each
such transaction. FBR also computed the average and median of these
multiples of LTM earnings and book value and the average and median core
deposit premium resulting in these transactions. The analysis yielded a
range of transaction values as a multiple of LTM earnings of 8.87x to
21.38x, with an average of 14.20x and a median of 15.97x, for the
Southeastern Pending Transaction Group, compared to 20.63x for Allied in
the Merger. The range of transaction values as a multiple of book value
was 1.03x to 2.09x, with an average of 1.65x and a median of 1.64x, for
the Southeastern Pending Transaction Group, compared to 2.13x for Allied
in the Merger. The range of core deposit premiums was 0.18% to 22.54%,
with an average of 8.58% and a median of 7.04%, for the Southeastern
Pending Transaction Group, compared to 13.91% for Allied in the Merger.
The Allied Merger Valuation Assumption was utilized in the preceding
analysis.
ANALYSIS AT VARIOUS PRICES FOR BANCSHARES. Under the Agreement,
the value of the cash component to be paid by BancShares is constant at
$25.25 per share. However, the Exchange Ratio for BancShares Common
Stock to be received by Allied's shareholders in the transaction
fluctuates if the market value of the BancShares Common Stock at the
time the Exchange Ratio is fixed is less than $45.13 (but not less than
$42.00) or greater than $49.88 per share. Assuming a market value of
BancShares Common Stock of less than $45.13 at the time the Exchange
Ratio is fixed (with Allied shareholders electing to receive 40% of the
consideration in stock currency) in calculating the minimum
consideration, and assuming a market value of BancShares Common Stock of
more than $49.88 at the time the Exchange Ratio is fixed (with Allied
shareholders receiving 55% of the consideration in stock currency) in
calculating the maximum consideration, the aggregate value of the
consideration to be received in the Merger by the shareholders and
option holders of Allied will be a minimum of $64,189,288 and a maximum
of $66,883,974. Using these minimum and maximum consideration amounts,
the range of transaction values as
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a multiple of Allied's LTM earnings is 19.98x to 20.81x and as a
multiple of book value is 2.06x to 2.15x and as a premium to core
deposits is 12.94% to 14.17%.
BANCSHARES COMPARABLE BANK ANALYSIS. FBR compared certain
valuation ratios and profitability, operations, credit quality and
capital ratios, for BancShares with the average ratios (excluding in
each case the low and high ratio) for Bank South Corporation (GA),
Carolina First Corporation (SC), Centura Banks, Inc. (NC), CCB Financial
Corporation (NC), Central Fidelity Banks, Inc. (VA), First American
Corporation (TN), First American Bancorp (GA), F & M National
Corporation (VA), First Tennessee National Corp. (TN), First Virginia
Banks, Inc. (VA), Jefferson Bankshares, Inc. (VA), One Valley Bancorp of
WV, Inc. (WV), Signet Banking Corporation (VA), and United Carolina
Bancshares (NC) (the "Comparable Banks"), using market data as of July
27, 1995, and publicly reported financial data as of March 31, 1995 and
for the 12 months ended as of that date. Among the valuation ratios
considered were (a) the ratio of market price to LTM earnings per share,
which was 9.48x for BancShares and averaged 12.39x for the Comparable
Banks, (b) the ratio of market price to estimated 1995 earnings per
share, which was 9.80x for BancShares and averaged 11.39x for the
Comparable Banks, (c) the ratio of market price to March 31, 1995 book
value, which was 1.09x for BancShares and averaged 1.67x for the
Comparable Banks, and (d) the ratio of market price to March 31, 1995
tangible book value, which was 1.24x for BancShares and averaged 1.88x
for the Comparable Banks. The figures used for estimated 1995 earnings
per share were based on earnings estimates for BancShares as provided by
BancShares management and for the Comparable Banks as published by First
Call, a publication that collates earnings estimates for financial
institutions and other companies. Among the profitability, operations,
credit quality and capital ratios compared by FBR were (i) return on
average assets for the 12 months ended March 31, 1995 which was 0.81%
for BancShares and averaged 1.15% for the Comparable Banks, (ii) return
on average common equity for the 12 months ended March 31, 1995, which
was 11.35% for BancShares and averaged 13.08% for the Comparable Banks,
(iii) net interest margin for the 12 months ended March 31, 1995, which
was 4.23% for BancShares and averaged 4.77% for the Comparable Banks,
(iv) the ratio of non-interest expense to average assets for the 12
months ended March 31, 1995, which was 3.94% for BancShares and averaged
3.69% for the Comparable Banks, (v) the ratio of non-performing loans to
total loans at March 31, 1995, which was 0.46% for BancShares and
averaged 0.54% for the Comparable Banks, (vi) the ratio of loan loss
reserves to non-performing loans at March 31, 1995, which was 370.36%
for BancShares and averaged 338.74% for the Comparable Banks, (vii) the
ratio of tangible common equity to tangible common assets at March 31,
1995, which was 6.45% for BancShares and averaged 8.06% for the
Comparable Banks, and (viii) the risk-based capital ratio at March 31,
1995, which was 11.02% for BancShares and averaged 13.62% for the
Comparable Banks.
In the ordinary course of business, FBR trades the equities
securities of Allied for its own account and the accounts of its
customers, and, accordingly, may at any time hold a long or short
position in such securities.
Pursuant to the Engagement Letter, Allied has paid FBR $50,000.
In addition, Allied has agreed to pay FBR for its services as a
financial advisor an additional fee of 1/2 of one percent of the
aggregate consideration to be received by Allied's shareholders and
option holders pursuant to the Agreement which amounts to approximately
$334,000. This additional fee is contingent upon consummation of the
Merger. Allied also has agreed to indemnify FBR and certain related
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persons against certain liabilities, including but not limited to,
liabilities under the federal securities laws, and to pay its legal and
other out-of-pocket expenses.
TERMS OF THE AGREEMENT
GENERAL. At the Effective Time, holders of Allied Stock will
receive, subject to adjustment and proration (as described below), for
each share of Allied Stock either (i) if timely elected by the
shareholder in the manner prescribed in the Agreement, 0.531 shares of
newly issued BancShares Common Stock, (ii) cash in the amount of $25.25,
or (iii) if timely elected by the shareholder in the manner prescribed
in the Agreement, a Debenture in the principal amount of $25.25. In the
event of a proration of cash, Debentures or BancShares Common Stock,
shareholders may receive a combination of either cash and BancShares
Common Stock or a Debenture and BancShares Common Stock. See "- Terms of
the Agreement - Exchange of Allied Stock." At the Effective Time, Allied
will merge with and into BancShares. Following the Merger, Allied's
wholly-owned savings bank subsidiaries, Summit and Peoples, will merge
with and into First Citizens Bank, a wholly-owned banking subsidiary of
BancShares.
The Agreement provides that, whether or not the transactions
contemplated thereby are consummated, each party will pay its own costs
and expenses incurred in connection with the Agreement and the
transactions contemplated thereby; provided, however, that costs
incurred in connection with the preparation, printing and mailing of
this Prospectus/Proxy Statement shall be paid 50% by Allied and 50% by
BancShares, but such amount shall not exceed $20,000 for Allied.
DESCRIPTION OF DEBENTURES. If the Merger is approved and
becomes effective and if any shareholder of Allied elects to receive a
Debenture in exchange for his or her shares of Allied Stock, First
Citizens Bank will issue unsecured, subordinated Debentures which shall
entitle the holder to semi-annual interest payments in cash on the
principal amount of the Debenture. Each Debenture shall mature, at the
option of the shareholder, on the third, fifth or tenth anniversary of
the Effective Time. Debentures with a maturity of three years shall bear
interest at a fixed rate of 7.00% per annum, Debentures with a maturity
of five years shall bear interest at a fixed rate of 7.25% per annum and
Debentures with a maturity of ten years shall bear interest at a fixed
rate of 7.50% per annum. Interest shall begin accruing at the Effective
Time, with the first interest payment being payable on March 1, 1996
(assuming the Merger has been consummated prior to that date) and the
next interest payment being payable on September 1, 1996. Subsequent
interest payments shall be payable on the anniversaries of the foregoing
interest payment dates. Interest shall cease to accrue on and after the
maturity date of the Debenture. Principal shall be paid at maturity upon
surrender of the Debenture. In the case of each shareholder whose shares
of Allied Stock are converted into the right to receive a Debenture, the
shareholder shall have the option of electing to receive Debentures in
any combination of term and interest rate. If, however, a shareholder
elects a Debenture with only one term and interest rate, only one
Debenture shall be issued for all such Allied Stock of the shareholder
and the principal or "face" amount of that Debenture shall be an amount
(rounded to the next higher whole dollar)
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equal to the number of shares of Allied Stock multiplied by $25.25.
Registered owners of the Debentures on the tenth
day prior to each such interest payment date shall be entitled to
receive interest on the Debentures.
The Debentures will be fully registered as to principal and
interest on the Debenture register maintained for that purpose by First
Citizens Bank. The Debentures are nonnegotiable and nontransferable and
are not redeemable prior to maturity; provided, however, (i) upon the
death of the registered owner thereof, the Debentures owned by the
decedent shall be transferable by the representative of the estate of
the decedent upon receipt of such documentation as may be required by
First Citizens Bank, or, at the option of such representative, such
Debenture shall be redeemed by First Citizens Bank for the principal
amount thereof plus accrued interest to the redemption date, and (ii)
the Debentures may be transferred to any member of an Allied
shareholder's immediate family (i.e., spouses and their children) or to
an inter vivos trust for the benefit of any member of such family.
Permitted transfers of the Debentures shall be effected only by
delivering the same to First Citizens Bank for transfer on the Debenture
register maintained by First Citizens Bank together with such
documentation as First Citizens Bank may require.
The Debentures provide that if a default in either the payment
of any installment of interest or in the payment of principal of any
Debenture upon surrender at maturity shall continue for a period of 30
days after written notice has been received by First Citizens Bank, the
registered owner may at any time (unless the default has been remedied
or waived), by written notice to First Citizens Bank, declare the unpaid
principal and all interest accrued on the Debenture to be immediately
due and payable without presentment or any other demand or notice of any
kind.
The Debentures will be unsecured obligations of First Citizens
Bank and will not be eligible as collateral for loans made by First
Citizens Bank. The Debentures will not be deposits of First Citizens
Bank and will not be insured by the FDIC or any other governmental
agency.
At June 30, 1995, the aggregate amount of outstanding long-term
and short-term indebtedness of First Citizens Bank that will be senior
to the Debentures was $312.5 million.
EXCHANGE OF ALLIED STOCK. At the Effective Time, each
shareholder of Allied Stock will have the option, exercisable in
writing, to exchange each share of Allied Stock outstanding immediately
prior to the Effective Time for (i) if timely elected, 0.531 shares of
BancShares Common Stock, (ii) cash in the amount of $25.25, or (iii) if
timely elected, a Debenture in the principal amount of $25.25, in each
case subject to adjustment and proration as described below. In the
event Allied shareholders elect to receive cash or Debentures in lieu of
BancShares Common Stock, or properly exercise their dissenters' rights,
for more than 60% of the outstanding shares of Allied Stock, the
Debentures will be prorated among all of the shareholders of Allied
electing to receive Debentures so that the total number of shares
receiving cash and Debentures will not exceed 60% of the outstanding
shares of Allied Stock. If after such proration of Debentures, the
aggregate number of outstanding shares of Allied Stock held by
shareholders of Allied who have elected to receive cash and Debentures,
or exercise their dissenters' rights, still exceeds 60% of the shares of
Allied Stock, the cash will be prorated among all of the shareholders of
Allied electing to receive cash so that the total number of shares paid
for in cash
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and Debentures will not exceed 60% of the shares of Allied Stock. In
the event Allied shareholders elect to receive BancShares Common Stock
in lieu of cash or Debentures for more than 55% of the outstanding
shares of Allied Stock, the BancShares Common Stock will be prorated
among all of Allied shareholders electing to receive BancShares Common
Stock so that the total number of shares of Allied Stock converted into
shares of BancShares Common Stock shall not exceed 55% of the shares of
Allied Stock. In the event of such proration of BancShares Common
Stock, shares of Allied Stock will be converted at the election of the
Allied shareholder into either cash or a Debenture having a term of five
years and a fixed interest rate of 7.25% per annum. In the event of a
proration of cash, Debentures or BancShares Common Stock, Allied
shareholders may receive a combination of cash and BancShares Common
Stock or a Debenture and BancShares Common Stock. The proration of
Debentures, cash or BancShares Common Stock is intended to preserve the
tax-free status of the Merger.
The Exchange Ratio will not be adjusted unless the Market Value
is less than $45.13 per share or more than $49.88 per share. In the
event that the Market Value is less than $45.13 per share or more than
$49.88 per share, the Exchange Ratio will be adjusted by (x) dividing
$45.13 by the Market Value (in the event the Market Value is less than
$45.13) or by dividing $49.88 by the Market Value (in the event the
Market Value is greater than $49.88), (y) multiplying the quotient by
0.531, and (z) rounding the result to three decimal places. As of
October 27, 1995, the closing price of BancShares Common Stock was
$52.75. If the Special Meeting had been held on such date, the Market
Value would have been $52.972, and the Exchange Ratio would have been
adjusted from 0.531 shares of BancShares Common Stock to 0.500 shares of
BancShares Common Stock for each share of Allied Stock. The Exchange
Ratio and the amount of cash or Debentures which a shareholder of Allied
may elect to receive for each of his or her shares of Allied Stock will
be reduced on a per share basis to the extent that any cash dividends in
an aggregate amount in excess of $0.12 per share per calendar quarter or
other distributions are declared or paid by Allied between August 7,
1995 and the Effective Time. Allied does not intend to declare or pay
any cash dividends or make other distributions on Allied Stock in excess
of such limitation unless the Agreement is terminated.
No fractional shares of BancShares Common Stock will be issued
in connection with the Merger. In the event the exchange of shares of
Allied Stock results in the creation of fractional shares, in lieu of
the issuance of fractional shares of BancShares Common Stock, BancShares
will deliver cash to its transfer agent in an amount equal to the
aggregate market value of all such fractional shares; and in such event
the transfer agent shall divide such cash among and remit it, without
interest, to the former shareholders of Allied in accordance with their
respective interests.
The market price of BancShares Common Stock following the
completion of the Merger will depend on the results of operations and
the financial condition of BancShares, the general level of interest
rates, the perception of the banking industry generally, and other
relevant factors that may affect the price of BancShares Common Stock
and that may affect the securities markets generally. Accordingly,
BancShares Common Stock could trade at prices higher or lower than those
trading prices that were considered by the Board of Directors of Allied
in approving the Merger.
EXCHANGE OF ALLIED STOCK CERTIFICATES. Following approval of
the Agreement by Allied shareholders, Allied will mail to all holders of
Allied Stock a form which the shareholder may
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use to notify BancShares of an election to receive either newly issued
shares of BancShares Common Stock, cash or a Debenture (the "Notice of
Election"). The Notice of Election will specify a date (the "Election
Date"), which shall not be less than 15 or more than 30 days following
the mailing of such form, by which the Notice of Election must be
received by BancShares. Any shareholder who does not deliver a Notice of
Election to BancShares or who delivers one after the close of business
on the Election Date shall be deemed to have elected to receive cash for
his or her Allied Stock, and at the Effective Time all such shares of
Allied Stock will be converted into cash, subject to adjustment and
proration as described above. See "- Terms of the Agreement - Exchange
of Allied Stock."
As promptly as practicable following the Effective Time,
BancShares will mail to each holder of record of Allied Stock a letter
of instruction and transmittal materials (the "Transmittal Letter")
regarding the procedures to be followed in the exchange of certificates
representing shares of Allied Stock for cash, a Debenture or a
certificate representing shares of BancShares Common Stock. When the
Transmittal Letter is received, holders of Allied Stock should follow
the instructions contained therein. ALLIED SHAREHOLDERS SHOULD NOT
FORWARD ANY CERTIFICATES REPRESENTING SHARES OF ALLIED STOCK EXCEPT IN
ACCORDANCE WITH THE TRANSMITTAL LETTER.
Upon surrender of certificates representing shares of Allied
Stock to First Citizens Bank, as the transfer agent for BancShares (the
"Transfer Agent"), after the Effective Time, each holder of Allied Stock
will receive cash, a certificate representing the number of shares of
BancShares Common Stock (if a proper Notice of Election was filed), or a
Debenture (if a proper Notice of Election was filed) to which such
holder is entitled, or a combination of cash and BancShares Common Stock
or a Debenture and BancShares Common Stock if the cash, Debentures or
BancShares Common Stock are prorated. Each holder of Allied Stock
entitled to receive a fraction of a share of BancShares Common Stock
shall receive cash in the amount provided in the Agreement. Following
the Effective Time, there shall be no further transfers of Allied Stock
on the stock transfer books of Allied or the registration of any
transfer of an Allied stock certificate by any holder thereof.
A certificate for BancShares Common Stock or a Debenture will
be issued only in the name in which the certificate for Allied Stock
surrendered for exchange is registered. BancShares will issue a single
certificate for shares of BancShares Common Stock and a single Debenture
to which an Allied shareholder is entitled. In no event will the
Transfer Agent, BancShares or any party to the Merger be liable to any
person for any BancShares Common Stock or dividends thereon, Debentures
and interest thereon or cash delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
After the Effective Time and until surrender of Allied Stock to
the Transfer Agent, each certificate that represented outstanding Allied
Stock immediately prior to the Effective Time will be deemed to evidence
(i) the right to receive the number of shares of BancShares Common Stock
into which the shares represented by such certificates have been
exchanged and cash in lieu of fractional shares into which such shares
would have converted, if a Notice of Election was properly filed, (ii)
the right to receive cash, (iii) the right to receive a Debenture into
which the shares represented by such certificates have been exchanged,
if a Notice of Election was properly filed, or (iv) in the event of a
proration, a combination of either cash and BancShares Common Stock or a
Debenture and BancShares Common Stock. See "- Terms of the Agreement -
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Exchange of Allied Stock." No shareholder will, however, receive the
dividends or other distributions on BancShares Common Stock, interest on
a Debenture or cash payments in lieu of BancShares Common Stock or in
lieu of fractional shares until the surrender for exchange of his or her
certificates representing shares of Allied Stock. Upon surrender of
certificates representing Allied Stock, each shareholder will receive
cash, the number of shares of BancShares Common Stock or a Debenture to
which he or she is entitled (or a combination of cash and BancShares
Common Stock or a Debenture and BancShares Common Stock in the event of
proration) and cash in lieu of any fractional share, plus any dividends
on BancShares Common Stock which are payable to holders as of any record
date following the Effective Time or interest on the Debenture which is
payable to holders of Debentures as of any interest payment date
following the Effective Time. No interest will be payable with respect
to cash to be paid for Allied Stock, cash to be paid in lieu of
fractional shares, if any, withheld dividends or other distributions or
cash payments in respect of BancShares Common Stock or interest in
respect of the Debentures payable after the Effective Time.
CONDITIONS TO CONSUMMATION. The respective obligations of
BancShares and Allied to consummate the Merger are subject to the
satisfaction of certain conditions, including, without limitation, (i)
the approval of the Boards of Directors of BancShares and Allied; (ii)
the approval of the shareholders of Allied; (iii) the receipt of all
necessary regulatory approvals and expiration of all notice periods and
waiting periods required after the granting of any such approval,
without the imposition of any condition contained in any such approval
which, in the reasonable opinion of BancShares, is materially
disadvantageous or burdensome or would so adversely impact the business
or economic benefits of the Agreement as to render consummation of the
Merger inadvisable; (iv) the receipt of an opinion, in form and
substance satisfactory to Allied and BancShares, substantially to the
effect that (A) the Merger will constitute a tax-free reorganization
under Section 368 of the Code, (B) the shareholders of Allied will not
recognize any gain or loss to the extent that such shareholders exchange
shares of Allied Stock solely for shares of BancShares Common Stock, (C)
dividend income or gain, if any, will be recognized by a shareholder of
Allied who receives shares of BancShares Common Stock and either cash or
Debentures in exchange for his or her Allied Stock, limited to an amount
not in excess of the cash or the fair market value of the Debentures
received, (D) the basis of the BancShares Common Stock received by the
shareholder in the Merger will be the same basis as his or her Allied
Stock surrendered in exchange therefor, decreased by the amount of cash
or the fair market value of the Debenture received, if any, and
increased by the amount of dividend income or gain recognized, if any,
in the exchange, (E) if Allied Stock is a capital asset in the hands of
the shareholder at the Effective Time, then the holding period of the
BancShares Common Stock received by the shareholder in the Merger will
include the holding period of Allied Stock surrendered in exchange
therefor, (F) cash or Debentures received by a shareholder will be
treated as a distribution in redemption of his or her Allied Stock, and
(G) a shareholder who receives cash in lieu of a fractional share of
BancShares Common Stock will recognize gain or loss equal to any
difference between the amount of cash received and the shareholder's
basis in the fractional share interest; (v) the absence of any order,
decree, or injunction of any court or governmental agency which enjoins
or prohibits consummation of the transactions contemplated by the
Agreement or either party from consummating the transactions
contemplated by the Agreement, any pending or threatened investigation
of the Merger by the United States Department of Justice ("DOJ") or any
actual or threatened litigation under federal antitrust laws relating to
the Merger, any suit, action, or proceeding, pending or threatened
before any court or
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governmental agency, in which it is sought to restrain or prohibit the
parties from consummating the Merger, or any other suit, claim or
proceeding, pending or threatened, against any of the parties or any of
their respective officers or directors which shall reasonably be
considered by any of the parties to be materially burdensome in relation
to the proposed Merger or materially adverse in relation to the
financial condition, results of operations, prospects, or businesses of
any of the parties and which has not been dismissed or terminated within
90 days of the institution thereof; (vi) the accuracy of the
representations and warranties of BancShares and Allied set forth in the
Agreement as of the Effective Time as if made on and as of such date;
(vii) the performance in all material respects of all obligations,
covenants and agreements imposed on BancShares and Allied by the
Agreement; (viii) the absence of a material adverse change in the
consolidated financial condition, results of operations or business of
BancShares or Allied or any condition or circumstance which, with the
lapse of time or otherwise, may cause, create or result in such material
adverse change; (ix) the compliance in all material respects with all
federal and state laws and regulations applicable to the Merger, in
which the violation of or failure to comply with any such law or
regulation could have a material adverse effect on the consolidated
financial condition, results of operations or businesses of Allied or
BancShares; (x) receipt of all required consents to the assignment to
BancShares of Allied's rights and obligations under any personal
property leases material to the business of Allied and any real property
leases; (xi) effectiveness of the Registration Statement under the
Securities Act and the absence of issuance, or threat of issuance, of a
stop order suspending such effectiveness, and BancShares' satisfaction
of all actions required by applicable state securities laws to cause the
issuance of BancShares Common Stock in the Merger to be duly qualified
or registered under such laws or to be exempt therefrom; (xii) receipt
by BancShares of written agreements from each of the affiliates of
Allied regarding restrictions on resales by such affiliates; (xiii)
execution and delivery of a Certificate of Merger to effect the Merger;
(xiv) receipt of certain opinions of counsel and certificates from
officers of Allied and BancShares; and (xv) BancShares will have
satisfied all requirements for the BancShares Common Stock to be issued
in the Merger to be listed on the Nasdaq National Market as of the
Effective Time. In addition, Allied's shareholders shall not have (a)
filed valid Notices of Election to receive cash or Debentures in lieu of
BancShares Stock and (b) properly exercised dissenters' rights for more
than 60% of the outstanding shares of Allied Stock; PROVIDED, HOWEVER,
that in the event that the holders of more than 60% of the outstanding
shares of Allied Stock elect to exchange their shares for cash or
Debentures or exercise dissenters' rights, all of the shareholders of
Allied Stock electing to receive Debentures shall be prorated to the
extent necessary to preserve the non-taxable status of the Merger such
that the total number of shares receiving cash and Debentures, either
through filing a valid Notice of Election or dissenters' rights, will
not exceed 60% of the outstanding shares of Allied Stock; PROVIDED,
FURTHER, if after such proration of Debentures, the aggregate number of
outstanding shares of Allied Stock held by shareholders of Allied who
have elected to receive cash and Debentures, or exercise their
dissenters' rights, still exceeds 60% of the outstanding shares of
Allied Stock, the cash will be prorated among all of the shareholders of
Allied electing to receive cash so that the total number of shares paid
for in cash and Debentures will not exceed 60% of the shares of Allied
Stock. In addition, Allied shareholders shall not have filed valid
Notices of Election to receive BancShares Common Stock in lieu of cash
or Debentures for more than 55% of the outstanding shares of Allied
Stock; PROVIDED, FURTHER, that in the event the holders of more than 55%
of the outstanding shares of Allied Stock elect to exchange their shares
for BancShares Common Stock, all of the shareholders of Allied Stock
electing to receive BancShares Common Stock will be prorated so that the
total number of shares of Allied Stock converted into shares
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of BancShares Common Stock shall not exceed 55% of Allied Stock. In the
event of such proration of BancShares Common Stock, shares of Allied
Stock will be converted, at the shareholder's election, into either cash
or a Debenture having a term of five years and a fixed interest rate of
7.25%.
It also is a condition to consummation that Allied will have
received (i) the opinions of Legg Mason and FBR dated as of a date prior
to this Prospectus/Proxy Statement, to the effect that the terms of the
Merger are fair from a financial point of view to Allied and its
shareholders and (ii) a letter from each of Legg Mason and FBR dated as
of a date within 10 business days preceding the closing date, to the
effect that it remains the opinions of Legg Mason and FBR that the terms
of the Merger are fair from a financial point of view to Allied and its
shareholders. See "- Opinions of Financial Advisors."
Either Allied or BancShares may waive in writing certain of the
conditions imposed with respect to its or their respective obligations to
consummation of the Merger upon a determination by the waiving party that such
waiver would not adversely affect the interests of the waiving party or its
shareholders. The requirements that the Merger be approved by Allied's
shareholders, that all required regulatory approvals be received and that all
notice periods and waiting periods required after such regulatory approvals be
expired cannot be waived.
TERMINATION. The Agreement may be terminated at any time prior
to the Effective Time by the mutual consent of the parties. Any party,
upon written notice to the other party, may elect to terminate the
Agreement if (i) the conditions precedent to the obligations of such
party to consummate the transactions contemplated by the Agreement have
not been satisfied or waived by March 31, 1996; (ii) the shareholder
approval required to consummate the Merger is not obtained, or (iii) if
the Merger shall not have become effective by March 31, 1996 (unless
such date is extended by the mutual agreement of the parties). In
addition, BancShares, upon written notice to Allied, may elect to
terminate the Agreement if the average of the reported closing prices of
BancShares Common Stock on the Nasdaq National Market for the ten
consecutive trading days ending 30 days prior to the date of the Special
Meeting is less than $42.00. Either party may elect to terminate the
Agreement (x) if the other party shall have failed to perform or
violates any obligation, covenant or agreement contained in the
Agreement, or (y) if the other party determines that any representation
or warranty contained in the Agreement shall have been false or
misleading in any material respect; provided, however, that the other
party may not terminate the Agreement if such breach, default or
violation has been cured by the earlier of 30 days after the date on
which written notice of such breach, default or violation is given to
the party committing such breach, default or violation. In addition,
BancShares may terminate the Agreement if the sum of environmental
expenses or liabilities on certain real property previously disclosed to
BancShares that BancShares and First Citizens Bank could incur or for
which either of them could become responsible or liable for on account
of any and all remediation, corrective action or monetary damages equals
or exceeds $250,000.
If either party to the Agreement breaches the Agreement by
willfully or intentionally failing to perform or violating its
obligations, agreements or covenants contained in the Agreement, such
party shall be obligated to pay all costs and expenses incurred or to be
incurred by the other party, including, without limitation, all
accounting fees, legal fees, filing fees,
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printing costs, mailing costs and travel expenses, together with other
damages recoverable at law or in equity.
AMENDMENT. The Agreement may be amended or supplemented in
writing by mutual agreement of BancShares and Allied, provided that such
amendment or supplement must be approved by their respective Boards of
Directors and provided further that no amendment or supplement executed
after approval of the Agreement by Allied's shareholders may change the
Exchange Ratio or the amount of cash or Debentures into which each share
of Allied Stock may be converted.
CONDUCT OF ALLIED'S BUSINESS PRIOR TO THE EFFECTIVE TIME. Under
the terms of the Agreement, from the date of the Agreement until
consummation or termination thereof, Allied may not, without the prior
written consent of BancShares, among other things: (i) carry on its
business other than in the regular and usual course in substantially the
same manner as it was conducted prior to the date of the Agreement; (ii)
declare or pay any dividend or other distribution in respect of its
capital stock, except as to cash dividends in an aggregate amount not in
excess of $0.12 per share per calendar quarter; (iii) make any change in
its capital stock, create any other or additional capital stock, or
issue, sell, purchase, redeem, retire, reclassify, combine or split any
shares of its capital stock or enter into any agreement or understanding
with respect to such action; (iv) grant or issue any options, warrants,
calls, puts or other rights of any kind relating to the purchase,
redemption or conversion of shares of its capital stock or enter into
any agreement or understanding with respect to such action; (v) amend
its Articles of Incorporation or Bylaws or the Certificates of
Incorporation or Bylaws of Summit and Peoples; (vi) mortgage, pledge or
impose, or suffer the imposition, on any of its assets of any lien or
encumbrance or to permit such lien to remain to exist (other than in the
ordinary course of business consistent with its past practices in
connection with securing public funds deposits, repurchase agreements or
other similar operating matters); (vii) waive, release or compromise any
material rights other than in the ordinary course of business, except in
good faith for fair value in money or money's worth, nor waive, release
or compromise any rights against or with respect to its officers,
directors or shareholders or their associates; (viii) acquire, or merge
with, or acquire any branch or all or any significant part of the assets
of, another person or entity or open any new branch office or enter into
any contract or agreement relating to any such transaction; (ix)
increase the compensation or benefits of, or pay any bonus or other
special or additional compensation to any of its directors, officers,
employees or consultants, except for specific exceptions relating to the
Peoples' MBO program, the Summit Independent Director Retirement Plan
(the "Summit DRP"), the Peoples' Independent Director Retirement Plan
(the "Peoples DRP") and the Summit annual bonus plan described in the
Agreement and for reasonable and customary increases in annual salary
and annual employee bonuses based on fiscal year 1995 based on merit and
effected at such times and in such manner and amounts as to be
consistent with past compensation policies and practices; (x) enter into
any contract or agreement for the employment or compensation of any
director, officer, employee or consultant which is not immediately
terminable by Allied or its subsidiaries without cost or other liability
for no more than 30 days' notice, enter into or become bound by any new
or additional profit-sharing, bonus, incentive, change of control or
"golden parachute," stock option, stock purchase, pension, retirement,
insurance (hospitalization, life or other), paid leave (sick leave,
vacation leave or other) or similar contract agreement, understanding,
plan or arrangement (whether formal or informal) with respect to or
which provides for benefits for any of its current or former directors,
officers, employees or consultants
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or enter into or become bound by any contract with any labor or trade
union or association or any collective bargaining group; (xi) solicit,
encourage or attempt to initiate or procure discussions, negotiations or
offers with or from any person or entity relating to a merger or other
acquisition of Allied or the purchase or acquisition of Allied Stock,
Summit, Peoples, any branch office of Summit or Peoples or all or any
significant part of Allied or its subsidiaries' assets, provide
assistance to any person in connection with any such offer, disclose to
any such person or entity any information not customarily disclosed to
the public concerning Allied and its subsidiaries or their respective
businesses, sell or transfer any branch office of either Summit or
Peoples or all or any significant part of Allied's or its subsidiaries'
assets to any person or enter into any contract or agreement to take any
action in furtherance of any such transaction; (xii) enter into any
contract, agreement or understanding (a) with governmental or regulatory
authorities, (b) pursuant to which Allied or either of its subsidiaries
would assume, guarantee, endorse or otherwise become liable for the
debt, liability or obligation of any other person or entity, (c) which
is entered into other than in the ordinary course of its business, (d)
with respect to any charitable contribution, or (e) which, in the case
of any one contract, agreement or understanding and whether or not in
the ordinary course of its business, obligates Allied or one of its
subsidiaries to make expenditures of more than $10,000 (other than
contracts, agreements or understandings entered into in the ordinary
course of Summit's or Peoples' lending operations); (xiii) except as may
be required by governmental or other regulatory authority or as shall be
required by applicable law or regulation, change in any material respect
the nature of Allied's business or the manner in which it conducts its
business, discontinue any material portion or line of its business, or
change in any material respect its lending, investment, asset-liability
management or other material banking or business policies; (xiv)
generally change its accounting methods, practices or procedures or its
depreciation or amortization policies, schedules or rates, except as
required by generally accepted accounting principles or governmental
regulations; (xv) sell or lease or enter into a contract, agreement or
option to sell, lease or dispose of any real estate, any equipment, or
any other fixed or capital asset having a value on its books or a fair
market value, whichever is greater, of more than $50,000 for any
individual item or asset, or more than $100,000 in the aggregate for all
assets or items; (xvi) purchase or lease, or enter into a contract,
agreement or option relating to the purchase, lease or acquisition of
any real property, any equipment or other acquisition of any other fixed
asset having a purchase price or involving aggregate lease payments in
excess of $50,000 for any individual item or asset or more than $100,000
in the aggregate for all items or assets; (xvii) enter into a purchase
commitment for supplies or services which calls for prices or fees of
goods or fees for services materially higher than current market prices
or which obligates Allied or its subsidiaries for a period longer than
12 months; (xviii) sell, purchase or repurchase or enter into a
contract, agreement or option to do so with respect to any loan or other
receivable or participation in any loan or other receivable except in
the ordinary course of business; (xix) sell or dispose of or enter into
a contract, agreement or option to sell or dispose of any other asset
whether tangible or intangible of Allied including without limitation
any trademark, trade name, copyright, service mark or intellectual
property right or license, or assign its right to or otherwise give
permission or consent to use or do business under Allied's or its
subsidiaries' corporate names or any names similar thereto or release,
transfer or waive any license or right granted to it by any other person
to use any trademark, trade name, copyright, service mark or
intellectual property right; (xx) enter into any note, loan agreement or
arrangement pertaining to its borrowing money, or assume, guarantee,
endorse or otherwise become responsible or liable for the obligation of
another entity or incur any other liability or obligation (absolute or
contingent), except in the ordinary course of
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business; or (xxi) change its current deposit policy, including pricing
and acceptance, and take no actions designed to decrease materially the
level of deposits as of the date of the Agreement.
REGULATORY CONSIDERATIONS. The Merger is subject to certain
regulatory approvals, as set forth below. To the extent that the
following information describes statutes and regulations, it is
qualified in its entirety by reference to such statutes and regulations
and the regulations promulgated under such statutes.
The Merger is subject to approval by the Federal Reserve under
the Bank Holding Company Act of 1956, as amended ("BHC Act"), which
permits a bank holding company, such as BancShares, to merge with a
savings bank holding company, such as Allied, if the Federal Reserve has
approved of the transaction based upon its review of the financial and
managerial resources and future prospects of the existing and proposed
institutions and the convenience and needs of the community to be
served. See "SUPERVISION, REGULATION AND GOVERNMENTAL POLICY - Bank
Holding Company Regulation." This consideration includes an evaluation
by the Federal Reserve as to whether the Merger would result in a
monopoly or otherwise would substantially lessen competition or impair
the financial and managerial resources and future prospects of
BancShares or Allied. In addition, the Federal Reserve must take into
account the records of BancShares and Allied in meeting the credit needs
of the entire community, including low- and moderate-income
neighborhoods, served by such institutions.
The Merger also is subject to approval by the Administrator.
The Administrator may approve the Merger only after determining that
BancShares is qualified by character, experience and financial
responsibility to control Allied in a legal and responsible manner. In
making this determination, the Administrator must consider BancShares'
financial and managerial resources, and the organizational structure and
future prospects and plans of BancShares and Allied. The Administrator
also must consider whether the business and activities of BancShares, or
its officers and directors or any other person controlling, controlled
by, or associated with BancShares by having a common controlling person,
would create a material deterioration of confidence in the safety,
soundness, and financial integrity of Allied. The Administrator approved
the Merger on October 26, 1995.
The Merger also is subject to approval by the NC Commissioner
and the NC Commission.
The merger of Allied with and into BancShares is subject to
review by the DOJ which may challenge the Merger on antitrust grounds.
Applications for required approvals have been filed with the
Federal Reserve, the NC Commissioner, and the NC Commission and are
pending. While no assurances of obtaining such required approvals are or
can be given, BancShares and Allied believe that all such required
regulatory approvals will be obtained.
If any condition is imposed which, in the reasonable opinion of
BancShares is materially disadvantageous or burdensome or adversely
affects the anticipated economic or business benefits of the Agreement
to BancShares as to render consummation of the Merger inadvisable, the
Agreement permits BancShares to terminate the Agreement. See "- Terms of
the Agreement--Conditions to Consummation."
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BancShares and Allied are not aware of any other governmental
approvals or actions that are required for consummation of the Merger
except as described above. Should any such approval or action be
required, it is presently contemplated that such approval or action
would be sought or taken. There can be no assurance that any such
approval or action, if needed, could be obtained, would not delay
consummation of the Merger or would not be conditioned in a manner that
would cause BancShares to abandon the Merger.
INTEREST OF CERTAIN PERSONS AND EFFECT OF THE MERGER ON
EMPLOYEES AND BENEFIT PLANS.
EMPLOYEES AND BENEFIT PLANS. Provided they remain employed by
Allied or one of its subsidiaries at the Effective Time, the Agreement
provides that, subject to the availability of suitable positions, First
Citizens Bank will make a good faith effort to offer employment
commencing at the Effective Time to each employee of Allied or one of
its subsidiaries through state-wide job posting for open positions. Any
employment offered by First Citizens Bank shall be in such position, at
such location and for such compensation as First Citizens Bank shall
determine in its sole discretion. In the case of any employee of Allied
or one of its subsidiaries who accepts employment with First Citizens
Bank, such employment shall be "at will" and First Citizens Bank will
have the right to terminate any such employees in accordance with First
Citizens Bank's employment policies and practices. Any employee of
Allied or one of its subsidiaries who becomes an employee of First
Citizens Bank will be eligible to receive all employee benefits and to
participate in all benefit plans provided by BancShares or First
Citizens Bank on the same basis and subject to the same eligibility and
vesting requirements, and to the same conditions, restrictions and
limitations, as generally are in effect and applicable to newly hired
employees of First Citizens Bank. Employees will be given credit for his
or her full years of service with Allied and its subsidiaries for
purposes of (i) entitlement to vacation and sick leave and for
participation in all welfare, insurance and other fringe benefit plans
of First Citizens Bank, and (ii) eligibility for participation and
vesting in BancShares' 401(k) savings plan and its defined benefit
pension plan (the "Pension Plan"); provided, however, that employees
will not be entitled to or be given credit for past service with Allied
or its subsidiaries for purposes of calculating or determining accrued
benefits under the Pension Plan. Employees of Allied or its subsidiaries
will be able to participate under the health insurance coverage of First
Citizens Bank without regard to pre-existing condition requirements
under First Citizens Bank's health insurance plan, to the extent any
such condition existing at the Effective Time would have been covered
under the health insurance plans of Allied or its subsidiaries.
After the Effective Time, First Citizens Bank will grant to all
employees of Allied or its subsidiaries who accept employment with First
Citizens Bank a pro rata amount of sick leave and vacation leave, in
accordance with the standard policy of First Citizens Bank, for the
period of time between the Effective Time and the end of the calendar
year during which the Effective Time occurs. Each such employee will be
permitted to carry over any accrued unused sick leave and vacation leave
to the extent that such carryover is consistent with and does not exceed
the limitations imposed by First Citizens Bank's personnel policy then
in effect.
Allied will be permitted to pay severance compensation to any
employee of Allied or one of its subsidiaries at the Effective Time who
is not placed through First Citizens Bank's state-wide job posting for
open positions and not offered employment with First Citizens Bank
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following the Merger. The amount of such compensation shall equal the
amount of such employee's accrued but unused vacation leave, plus an
amount equal to (i) three month's salary or normal wages (at the
person's then current salary or wage rate) in the case of employees who
have total continuous, full years of service with Allied or one of its
subsidiaries of less than five years, or (ii) four month's salary or
wages (at the person's then current salary or wage rate) in the case of
employees who have total continuous, full years of service with Allied
or one of its subsidiaries of five years or more. The person must
remain an employee of Allied or one of its subsidiaries at the Effective
Time in order to be eligible for consideration for such severance
compensation, which will be paid by Allied at the Effective Time. No
severance compensation will be paid to any employee of Allied or one of
its subsidiaries who is a party to a written employment or
change-in-control agreement with Allied or one of its subsidiaries.
TREATMENT OF ALLIED COMPENSATION AND BENEFIT PLANS AND
AGREEMENTS. Upon consummation of the Merger, BancShares will assume the
existing obligations of Allied related to any deferred directors' fee
plans, with pro rata adjustments to be made for the cessation or
adjustment of amounts deferred by each individual director, if
applicable, as allowed under the plan.
At the Effective Time, BancShares will assume the existing
obligations of Summit and Peoples under the Summit DRP and the Peoples
DRP. All directors currently participating in such plans will be fully
vested at the Effective Time regardless of years of service. In
addition, BancShares will permit the Summit DRP to be amended at or
prior to the Effective Time to increase the retirement fee payable
thereunder from $12,000 to $14,400 with a further cost of living
increase in such amount every two years thereafter based upon the
percentage increase in the Consumer Price Index. BancShares will permit
(i) the Peoples MBO program to continue for calendar 1995 as currently
written and (ii) the Summit annual bonus plan to be paid; provided,
however, that amounts paid under each program for 1995 may not exceed
$100,000.
BancShares will not assume the 1994 Allied Bank Capital, Inc.
Management Recognition Plan and, therefore, at the Effective Time, such
plan will cease to exist. However, outstanding stock awards under such
plan will become fully vested.
BancShares will assume at the Effective Time, the existing
qualified defined contribution plans of Summit and Peoples and will
merge such plans (or cause such plans to be merged) with the qualified
defined contribution plan maintained for employees of BancShares and/or
First Citizens Bank, and fully vest affected participants thereunder. In
the alternative, BancShares may permit Summit or Peoples to terminate
such plans prior to the Effective Time.
BancShares will assume at the Effective Time, the existing
qualified defined benefit plans of the subsidiaries of Allied, and will
provide for the prompt termination of such plans following consummation
of the Merger. Summit and Peoples may commence termination proceedings
with respect to their defined benefit plans prior to consummation of the
Merger.
In addition, as a result of the Merger, First Citizens Bank
will assume the obligations of Summit and Peoples under certain existing
employment or change in control agreements between Summit and A. Harold
Ausley and Del F. Jones, officers of Summit, and between Peoples and
Donald F. Pelling, Richard B. Bennett, Jesse L. Thomas, Joey D. Marlowe,
and Betty V. Norris,
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officers of Peoples (collectively the "Employment Agreements"). The
Employment Agreements generally provide for payments to each of the
covered officers in the event of a "change in control," as that term is
defined therein, of Summit or Peoples, as applicable, followed within 24
months by (i) a termination of such officer's employment for reasons
other than "cause," as defined in the Employment Agreements, (ii) an
assignment to duties or responsibilities inconsistent with the officer's
current position, (iii) a reduction in annual base salary below that
which is in effect at the Effective Time, (iv) a termination of the
officer's insurance or other employee benefits, or (v) a transfer of the
officer an unreasonable distance from his or her current principal
office. Upon the occurrence of any such event, the covered officers
would be entitled to payments in amounts ranging from one and one-half
to three times, as applicable, such officer's "base amount," as such
term is defined in the Employment Agreements and, if any of the covered
officers are not retained by First Citizens Bank following the Merger,
such persons would be entitled to receive the payments provided for
therein.
BancShares has agreed to assume Allied's obligations under
Supplemental Income Agreements by and between Allied and A. Harold
Ausley and Del F. Jones. A termination of employment pursuant to each
executive's existing employment agreement with Summit shall be
considered to be the equivalent of termination for reasons other than
death or attainment of age 65, and, therefore, shall entitle Mr. Ausley
and Mr. Jones to receive annual benefit payments thereunder. In
addition, BancShares will assume Peoples' obligations to pay benefits to
Donald F. Pelling under the Deferred Compensation and Income
Continuation Agreement entered into by and between Peoples and Mr.
Pelling pursuant to which Mr. Pelling is entitled to receive monthly
benefit payments.
DIRECTORS. Following the Effective Time, BancShares' Board of
Directors shall appoint one member of Allied's Board of Directors who
will be chosen in BancShares' sole discretion to serve as a director of
BancShares until the next meeting of shareholders at which members of
BancShares' Board of Directors are elected. Thereafter, such person
shall be nominated and recommended for election as a director of
BancShares for a one-year term at such meeting and at each of the next
three consecutive meetings at which directors are elected. During the
period he serves as a BancShares director, BancShares' Board of
Directors also will appoint such person to serve as a director of First
Citizens Bank. Such service as a director of BancShares and First
Citizens Bank shall be subject to reasonable and customary review,
regulatory approval, qualification under BancShares' and First Citizens
Bank's bylaws and, in the case of BancShares, to election by BancShares'
shareholders. For his services as a director of BancShares and First
Citizens Bank, such person, provided he remains as a director of
BancShares and First Citizens Bank, and further provided he is not or
does not serve as a director or advisory director of another financial
institution or financial institution holding company, will be
compensated until the end of such person's fourth elected one-year term
at the fee schedule in effect on March 31, 1995 for directors of Allied
and its subsidiaries. Thereafter, if such person continues to serve as a
director of BancShares and First Citizens Bank, he will be compensated
in accordance with BancShares' and First Citizens Bank's then current
standard fee schedule. The current fee schedule for directors of
BancShares provides for an annual retainer of $10,000 and a fee of $500
for each Board meeting attended. The current fee schedule for advisory
directors of First Citizens Bank provides for annual compensation in an
amount equal to $500.
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At the Effective Time, each of the directors of Allied (other
than the director who is appointed to BancShares' Board of Directors and
directors who do not desire to serve, and excluding A. Harold Ausley and
Donald F. Pelling), and each of Royce N. Angel and R. Allen Rippy (both
of whom are directors of Peoples), shall be appointed to serve for a
term of four years following the Effective Time as a member of a local
Advisory Board for one of First Citizens Bank's banking offices in the
former geographic market of Summit or Peoples. Such directors, provided
they remain directors of First Citizens Bank and provided further that
they do not serve as directors or advisory directors of another
financial institution or financial institution holding company, shall be
compensated for their services as Advisory Board members at the fee
schedule in effect on March 31, 1995 for directors of Allied and its
subsidiaries for a period of four years from the Effective Time.
Subsequent to the fourth year after the Effective Time, each person's
continued service as an advisory director will be at First Citizens
Bank's pleasure and will be subject to First Citizens Bank's normal
policies and procedures regarding the appointment and service of
advisory directors, and each person who continues to serve as an
advisory director will receive fees for such service in accordance with
First Citizens Bank's then current fee schedule for advisory directors.
The current fee schedule for advisory directors of First Citizens Bank
is described above. The fee schedule in effect on March 31, 1995, for
directors of Allied and its subsidiaries provided for annual
compensation in amounts ranging from $22,900 to $30,600.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. After the Effective
Time, without releasing any insurance carrier and after exhaustion of
all applicable director and liability insurance coverage for Allied or
its subsidiaries and their respective officers and directors, BancShares
will indemnify, hold harmless and defend directors and officers of
Allied and its subsidiaries at the Effective Time, to the same extent as
BancShares' indemnifies its directors and officers, from and against any
claims, disputes, suits, proceedings, losses, costs, liabilities and
expenses of every kind and nature arising out of, or resulting from any
act or failure to act by such office or director in the ordinary scope
of his or her duties brought against any such director or officer by
reason of the fact that he or she was a director or officer of Allied or
one of its subsidiaries or any action brought in connection with the
Merger.
The Bylaws of BancShares provide that officers and directors of
BancShares shall be indemnified by BancShares to the greatest extent
permitted by law. Delaware's General Corporation Law (the "General
Corporation Law") contains provisions prescribing the extent to which
directors and officers shall or may be indemnified. The General
Corporation Law permits a corporation, with certain exceptions, to
indemnify a current or former officer or director against liability if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. A corporation may not indemnify a
director in connection with a proceeding by or in the right of the
corporation in which such director was adjudged liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of
all the circumstances of the case, such director is fairly and
reasonably entitled to indemnity for such expenses which the court shall
deem proper. The General Corporation Law requires the corporation to
indemnify an officer or director in the defense of any proceeding to
which he was a party against expenses actually and reasonably incurred
to the extent that he is successful on the merits or otherwise in his
defense.
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Indemnification under the General Corporation Law (unless
ordered by a court) shall be made by the corporation only upon a
determination that indemnification of the director or officer was proper
under the circumstances because he met the applicable standard of
conduct set forth in the General Corporation Law. Such determination
may be made by (i) the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding, (ii) if
such a quorum is not obtainable, or even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the shareholders of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling
BancShares pursuant to the foregoing provisions, BancShares has been
informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
OPTIONS. As of the Record Date, certain employees and directors
of Allied and its subsidiaries held options under existing Allied option
plans to acquire up to 558,364 shares of Allied Stock. At the Effective
Time, Allied will trigger or cause to be triggered for the benefit of
such participating employees or directors, as the case may be, all
options under such plans which are outstanding and unexercised at the
Effective Time. Such options will be converted, by virtue of the Merger,
into the right to receive $25.25 in cash (or such lesser amount as may
result from the adjustments described herein), less the exercise price,
for each outstanding option. Allied will deliver payment to option
holders on account of the trigger of such options immediately prior to
the Effective Time.
RESTRICTIONS ON RESALES BY AFFILIATES. The directors and
executive officers of Allied and any shareholder owning 5% or more of
Allied Stock are deemed to be "affiliates" of Allied. Any sale or other
disposition by such affiliates of shares of BancShares Common Stock
received by them pursuant to the Merger may be made only in compliance
with an exemption from the registration requirements of the Securities
Act and the restrictions set forth below.
The respective obligations of BancShares and Allied to
consummate the Merger are subject to the condition that each affiliate
of Allied must execute and deliver to BancShares an agreement to the
effect that each such person will not dispose of any shares of
BancShares Common Stock to be received pursuant to the Merger in
violation of the Securities Act or the applicable rules and regulations
of the SEC. The stock certificates representing shares of BancShares
Common Stock issued to persons deemed to be affiliates of Allied will
bear a legend summarizing the restrictions, and BancShares will instruct
its transfer agent to impose stop orders with respect to such
certificates.
This Prospectus/Proxy Statement may not be used by any such
affiliate of Allied for the resale of any shares of BancShares Common
Stock received pursuant to the Merger.
CERTAIN INCOME TAX CONSEQUENCES
The following is a summary discussion of the material federal
income tax consequences of the Merger to shareholders of Allied. This
summary is based on the law as currently constituted and is subject to
change in the event of changes in the law, including amendments to
applicable statutes or regulations or changes in judicial or
administrative rulings, some of which could be given retroactive effect.
The summary does not address any foreign, state or local tax
44
<PAGE>
consequences, except for certain North Carolina income tax consequences,
nor does it address all aspects of federal income taxation that may
apply to the Merger. ALLIED SHAREHOLDERS ARE URGED, THEREFORE, TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE MERGER AND THE EXCHANGE OF THEIR ALLIED STOCK FOR SHARES OF
BANCSHARES COMMON STOCK, CASH OR DEBENTURES, OR A COMBINATION OF
BANCSHARES COMMON STOCK AND CASH OR BANCSHARES COMMON STOCK AND
DEBENTURES, INCLUDING, WITHOUT LIMITATION, TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE AND
LOCAL AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES
IN THE TAX LAWS.
BancShares and Allied have received an opinion dated September
25, 1995 of KPMG Peat Marwick LLP, tax advisors to BancShares, which
reaches certain conclusions with respect to certain federal and North
Carolina income tax consequences of the Merger (the "Tax Opinion"). It
is a condition to consummation of the Merger that the Tax Opinion be
confirmed as of the Effective Time. Where appropriate or useful, this
discussion will refer to the Tax Opinion and particular conclusions
expressed therein. Additionally, the facts and representations upon
which the Tax Opinion is based are set forth in such Tax Opinion which
is an exhibit to the Registration Statement. See "AVAILABLE
INFORMATION." However, such an opinion represents only that advisor's
best judgment as to the matters expressed therein and has no binding
effect on the Internal Revenue Service (the "IRS"), or the North
Carolina Department of Revenue (the "Department of Revenue"), or
official status of any kind. There can be no assurance that the IRS or
the Department of Revenue could not successfully contest in the courts
an opinion expressed by the advisor as set forth in the Tax Opinion or
that legislative, administrative or judicial decisions or
interpretations may not be forthcoming that would significantly change
the opinion set forth in the Tax Opinion. The IRS will not currently
issue private letter rulings concerning a transaction's qualification
under certain types of reorganizations or certain federal income tax
consequences resulting from such qualification. Accordingly, no private
letter ruling has been, nor is it anticipated that such a ruling will
be, requested from the IRS with respect to the Merger.
The Tax Opinion provides in substance that the federal income
tax consequences of the Merger will be as follows:
(i) Provided the Merger qualifies as a statutory merger
under North Carolina and Delaware law, then the
Merger will constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the
Code;
(ii) No gain or loss will be recognized by BancShares,
First Citizens Bank, Allied, Summit or Peoples by
reason of the Merger;
(iii) No gain or loss will be recognized by the
shareholders of Allied upon receipt of solely
BancShares Common Stock (including any fractional
share interests to which they may be entitled) in
exchange for their holdings of Allied Stock. Allied
shareholders who receive cash or Debentures may
recognize income or gain up to the amount of cash
or the fair market value of the Debentures received
in exchange for Allied Stock pursuant to the
Agreement. Whether the receipt of cash or
Debentures is accorded dividend or capital gain
treatment may depend on the number of shares of
BancShares Common Stock received by the
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<PAGE>
Allied shareholder after the exchange and whether
the receipt of cash or Debentures meets one of the
four tests under Section 302 of the Code. Due to
the exchange procedures, despite an election by an
Allied shareholder to receive only BancShares
Common Stock, he or she may receive cash or
Debentures, which could result in the recognition
of income or gain. Loss, if any, will not be
recognized by a shareholder who receives BancShares
Common Stock and cash or Debentures in exchange for
his or her Allied Stock pursuant to the Agreement;
(iv) The tax basis in the BancShares Common Stock
received by a shareholder (including any fractional
share interests to which they may be entitled) will
be the same as the tax basis in Allied Stock
surrendered in exchange therefor, decreased by the
amount of cash or the fair market value of the
Debentures received, if any, and increased by the
amount of dividend income or gain recognized, if
any, in the exchange;
(v) The holding period for BancShares Common Stock
received by a shareholder (including any fractional
share interests to which they may be entitled) in
exchange for Allied Stock will include the period
during which the shareholder held Allied Stock
surrendered in the exchange, provided that Allied
Stock was held as a capital asset at the Effective
Time;
(vi) The receipt of cash in lieu of a fractional share
of BancShares Common Stock will be treated as if
the fractional share of BancShares Common Stock was
distributed as part of the exchange to Allied
shareholder and then redeemed by BancShares,
resulting in capital gain or loss measured by the
difference, if any, between the amount of cash
received for such fractional share and the
shareholder's basis in the fractional share;
(vii) The receipt of solely cash by a Allied shareholder
who elects to receive cash for his or her Allied
Stock, or who exercises his or her statutory
dissenter's rights, will be treated as having been
received by the shareholder as a distribution in
redemption of his or her stock. If the redemption
meets one of the four tests set forth in Section
302 of the Code, it will result in capital gain or
loss measured by the difference, if any, between
the amount of cash received for such stock and the
shareholder's basis in the stock. If the
redemption does not meet one of the four tests of
Section 302, such distribution will be treated as a
dividend pursuant to Section 301 of the Code; and,
(viii) Gain or loss will be recognized by a shareholder of
Allied who receives solely Debentures measured by
the difference between (a) the total principal
payments of the Debenture received and (b) the
shareholder's basis in Allied Stock surrendered in
exchange therefor. In calculating the amount of
income realized on receipt of the Debentures, the
fair market value of the Debentures must be
recognized in the year of
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receipt, notwithstanding the fact that the
Debentures may be paid over a number of years. The
distribution of the Debentures could be treated as
a redemption of the Allied Stock. If the redemption
meets one of the four tests set forth in Section
302 of the Code, it will result in capital gain or
loss measured by the difference, if any, between
the fair market value of the Debentures received
for such stock and the shareholder's basis in the
stock. If the redemption does not meet one of the
four tests of Section 302, such distribution will
be treated as a dividend pursuant to Section 301 of
the Code.
The Tax Opinion also concludes that the Merger will be treated in
substantially the same manner for North Carolina income tax purposes as for
federal income tax purposes.
ACCOUNTING TREATMENT
BancShares will account for the Merger as a purchase for
accounting and financial reporting purposes.
DISSENTERS' RIGHTS
The Merger will give rise to Dissenters' Rights under Article
13 of the North Carolina Business Corporation Act ("Article 13").
PURSUANT TO ARTICLE 13, ANY SHAREHOLDER OF ALLIED WHO OBJECTS TO THE
MERGER MAY EXERCISE DISSENTERS' RIGHTS AND BECOME ENTITLED TO BE PAID
THE FAIR VALUE OF HIS SHARES OF ALLIED STOCK IF THE MERGER IS
CONSUMMATED. THE FOLLOWING IS ONLY A SUMMARY OF THE DISSENTERS' RIGHTS
OF ALLIED'S SHAREHOLDERS. A COMPLETE COPY OF ARTICLE 13 IS ATTACHED
HERETO AS APPENDIX III AND INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS/PROXY STATEMENT. ANY SHAREHOLDER WHO INTENDS TO EXERCISE
DISSENTERS' RIGHTS SHOULD REVIEW THE TEXT OF ARTICLE 13 CAREFULLY AND
COMPLY EXACTLY WITH ITS REQUIREMENTS, AND ALSO SHOULD CONSULT WITH HIS
OR HER ATTORNEY. EXCEPT AS PROVIDED BELOW, NO FURTHER NOTICES WILL BE
GIVEN TO SHAREHOLDERS BY ALLIED REGARDING THE EXISTENCE OF DISSENTERS'
RIGHTS OR ANY TIME PERIODS WITHIN WHICH THOSE RIGHTS MUST BE EXERCISED.
Article 13 provides in detail for shareholders' Dissenters'
Rights and the procedure for exercising those rights that must be
followed by a dissenting shareholder. In summary, that procedure is
described below.
Any shareholder who desires to assert Dissenters' Rights MUST
(I) give to Allied, and Allied must actually receive, BEFORE THE VOTE ON
THE MERGER IS TAKEN, written notice of his intent to demand payment for
his shares if the Merger is consummated, and (II) not vote his shares in
favor of the Merger. Failure by a shareholder to satisfy both
requirements will mean that the shareholder will not be entitled to
assert Dissenters' Rights and obtain payment for his shares under
Article 13. SHAREHOLDERS SHOULD NOTE THAT IF THEY SIGN AND RETURN A
BLANK APPOINTMENT OF PROXY WITH NO INSTRUCTIONS AS TO HOW THEIR SHARES
SHOULD BE VOTED, THEY WILL BE DEEMED TO HAVE VOTED IN FAVOR OF THE
MERGER AND THEREAFTER WILL NOT BE ENTITLED TO ASSERT DISSENTERS' RIGHTS.
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If the Agreement is approved by Allied's shareholders at the
Special Meeting (or at any adjournments thereof), then, within 10 days
of the date the Merger is consummated, Allied must send a written notice
(by registered or certified mail, return receipt requested) to each
shareholder who has taken the actions described above and is entitled to
exercise Dissenters' Rights. That notice will:
(A) State where the dissenting shareholder's payment
demand must be sent, and where and when share certificates must be
deposited;
(B) Supply a form for demanding payment;
(C) Set a date by which Allied must receive the
dissenting shareholder's payment demand (which may not be fewer than 30
nor more than 60 days after the date the dissenters' notice is mailed);
and,
(D) Be accompanied by a copy of Article 13.
A shareholder who has been sent the dissenters' notice must
demand payment and must deposit his share certificates by the date set
forth in and in accordance with the terms and conditions of the
dissenters' notice; otherwise, such shareholder is not entitled to
payment for his shares under Article 13. A shareholder who demands
payment and deposits his share certificates as required retains all
other rights as a shareholder until such rights are cancelled or
modified by consummation of the Merger.
As soon as the Merger is consummated or upon receipt of a
payment demand, Allied will offer to pay each dissenter who timely
demanded payment and deposited his share certificates, the amount Allied
estimates to be the fair value of his shares, plus interest accrued to
the date of payment, and will pay this amount to each dissenter who
agrees in writing to accept it in full satisfaction of his demand.
Allied's offer of payment will be accompanied by:
(A) Certain of Allied's most recent available financial
statements;
(B) A statement of Allied's estimate of the fair value
of the shares;
(C) An explanation of how the interest was calculated;
(D) A statement of the dissenter's right to demand
payment if dissatisfied with Allied's offer; and,
(E) A copy of Article 13.
If Allied does not consummate the Merger within 60 days after
the date set for demanding payment and depositing share certificates,
Allied must return the deposited certificates, and if, thereafter, the
Merger is consummated, Allied must send a new dissenters' notice and
repeat the payment demand procedure set forth above.
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<PAGE>
If a dissenter believes that the amount offered by Allied as
described above is less than the fair value of his shares or that the
interest due is incorrectly calculated, or if Allied fails to make
payment to a dissenter who accepts its offer within 30 days after such
acceptance, or if Allied fails to consummate the Merger and does not
return the deposited certificates within 60 days after the date set for
demanding payment, then the dissenter may notify Allied in writing of
his own estimate of the fair value of his shares and the amount of
interest due and may demand payment of his estimate, or may reject
Allied's offer and demand payment of the fair value of his shares and
interest due. In any such event, if a dissenting shareholder fails to
take any such action within the 30-day period, he will be deemed to have
waived his rights under Article 13 and to have withdrawn his dissent and
demand for payment.
If a dissenter has taken all required actions and his demand
for payment remains unsettled, the dissenter may commence a proceeding
within 60 days after the date of his payment demand and petition the
court to determine the fair value of his shares and accrued interest.
Upon service on it of the petition filed with the court, Allied must pay
to the dissenter the amount originally offered by Allied. If the
dissenter does not commence the proceeding within said 60-day period, he
has an additional 30 days to either (I) accept in writing the amount
offered by Allied, upon which acceptance Allied will pay such amount in
full satisfaction of the dissenter's demand, or (II) withdraw his demand
for payment and resume the status of a nondissenting shareholder. A
dissenter who takes no action within this 30-day period is deemed to
have withdrawn his dissent and demand for payment.
In the court proceeding described above, the court may appoint
one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value, and has discretion to make all
dissenters whose demands remain unsettled parties to the proceeding.
Each dissenter made a party to the proceeding must be served with a copy
of the petition and is entitled to judgment for the amount, if any, by
which the court finds the fair value of his shares, plus interest, to
exceed the amount paid by Allied. Court costs, appraisal and counsel
fees may be assessed by the court as it deems equitable.
Article 13 contains certain additional provisions with respect
to dissent by nominees who hold shares for others, and by beneficial
owners whose shares are held in the name of other persons, and reference
is made to Appendix III for a more complete description thereof.
For a discussion of certain tax consequences applicable to
shareholders who exercise Dissenters' Rights, see " - Certain Income Tax
Consequences."
INFORMATION ABOUT FIRST CITIZENS BANCSHARES, INC.
BANCSHARES
BancShares was incorporated under the laws of Delaware on
August 7, 1986, to become the successor to First Citizens Bank
Corporation ("FCC"), a North Carolina corporation that was the bank
holding company of First Citizens Bank, its commercial banking
subsidiary. On October 21, 1986, FCC was merged into BancShares, and
BancShares became the sole shareholder of First Citizens Bank.
BancShares' principal assets are its investments in and the receivables
from its subsidiary, First Citizens Bank. Its primary sources of income
are dividends
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from First Citizens Bank and interest income on funds
loaned by it to First Citizens Bank. At June 30, 1995, based on total
assets of $6.9 billion, BancShares was the fifth largest banking
organization headquartered in North Carolina. The pro forma combined
assets of BancShares and Allied would have been approximately $7.2
billion as of June 30, 1995.
FIRST CITIZENS BANK
First Citizens Bank was chartered on March 4, 1893, as the Bank
of Smithfield, Smithfield, North Carolina and through a series of
mergers and name changes, it later became First Citizens Bank. First
Citizens Bank provides a wide range of banking services designed to meet
the needs of both consumers and commercial entities of North Carolina.
These services, offered at most of its branches, include, among others,
normal taking of deposits, cashing checks, and providing for individual
commercial cash needs; numerous checking and savings plans, including
fixed-rate certificates of deposits of varying terms, insured money
market savings, NOW checking, master note and repurchase agreements, and
fixed-and variable-rate IRAs; commercial and consumer lending;
commercial leasing; corporate cash and management services; a full
service trust department; and other activities incidental to commercial
banking. The deposits of First Citizens Bank are insured either by the
BIF or the SAIF of the FDIC up to the maximum amount permitted by law.
First Citizens Bank's business strategy historically has
emphasized maintaining liquidity and superior credit quality. At June
30, 1995, First Citizens Bank's loans-to-deposits ratio was
approximately 74.3% and its nonperforming assets totaled $20 million, or
0.3% of total assets.
At June 30, 1995, based on total deposits, First Citizens Bank
was the fifth largest commercial bank in North Carolina. Also at that
date, First Citizens Bank operated 295 offices in 173 cities in North
Carolina.
MARLINTON BANK AND WHITE SULPHUR SPRINGS BANK
On September 1, 1994 and June 1, 1995, BancShares consummated
its acquisitions of Marlinton Bank and White Sulphur Springs Bank,
respectively, which enabled BancShares to establish a limited presence
in West Virginia, where, prior to such acquisitions, it had none. At
June 30, 1995, Marlinton Bank had two branches located in Pocahontas
County, West Virginia and had total assets of $57.5 million and total
deposits of $47.6 million. Marlinton Bank is a community-oriented
financial institution offering primarily lending and deposit banking
services to the community it serves. The deposits of Marlinton Bank are
insured by the BIF of the FDIC up to the maximum amount permitted by
law. The principal office of Marlinton Bank is located at 201 Eighth
Street, Marlinton, West Virginia 24954, and its telephone number is
(304) 799-4306. At June 30, 1995, White Sulphur Springs Bank had two
branches located in Greenbrier County, West Virginia and had total
assets of $70 million and total deposits of $59.2 million. White Sulphur
Springs Bank also is a community-oriented financial institution offering
primarily lending and deposit banking services to the community it
serves. The deposits of White Sulphur Springs Bank are insured by the
BIF of the FDIC up to the maximum amount permitted by law. The principal
office of White Sulphur Springs Bank is located at 1 East Main Street,
White Sulphur Springs, West Virginia 24986, and its telephone number is
(304) 536-1400.
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FCB-VA
On February 2, 1995, BancShares consummated its acquisition of
Pace American Bank (now FCB-VA) which enabled BancShares to establish a
limited presence in Virginia where, prior to such acquisition, it had
none. At June 30, 1995, FCB-VA had total assets of $239.7 million and
total deposits of $201 million. FCB-VA provides commercial and consumer
banking services to customers throughout south-central Virginia. On June
30, 1995, FCB-VA had 13 offices. On August 17, 1995, FCB-VA acquired a
fourteenth branch in Clifton Forge, Virginia. The deposits of FCB-VA are
insured by the BIF of the FDIC up to the maximum amount permitted by
law. The principal office of FCB-VA is located at 112 East Hicks Street,
Lawrenceville, Virginia 23868, and its telephone number is (804)
848-4115. FCB-VA is expected to be merged into First Citizens Bank
during 1996 under the Interstate Banking Act.
ADDRESS AND ADDITIONAL INFORMATION
The principal offices of BancShares and First Citizens Bank are
located at 239 Fayetteville Street, Raleigh, North Carolina 27601. Their
telephone number is (919) 755-7000.
Additional information with respect to BancShares and First
Citizens Bank is included in BancShares' annual report on Form 10-K for
the year ended December 31, 1994, which is incorporated herein by
reference, and in BancShares' 1994 Annual Report, selected portions of
which are incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
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OWNERSHIP OF BANCSHARES VOTING SECURITIES BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of July 31, 1995, the shareholders identified in the
following table beneficially owned more than 5% of one or both classes
of the voting securities of BancShares:
<TABLE>
<CAPTION>
Beneficial Ownership Combined
Class A and
Class A Common Class B Common Class B Common
Name and Address and Percentage and Percentage Percentage of
of Beneficial Owner of Class of Class Total Votes*
- ------------------------- ------------------------------------------- ------------
<S> <C> <C> <C>
Claire Holding Bristow 50,995(1) 100,812(1) 4.47%
Columbia, SC (.57%) (5.70%)
George H. Broadrick 1,265,048(2) 325,916(2) 17.40%
Charlotte, NC (14.17%) (18.42%)
Hope Holding Connell 39,569(3) 109,197(3) 4.80%
Raleigh, NC (.44%) (6.17%)
Elizabeth C. Holding 51,153(4) 100,885(4) 4.47%
Washington, DC (.57%) (5.70%)
Frank B. Holding 2,579,413(5) 632,577(5) 34.11%
Smithfield, NC (28.89%) (35.75%)
Frank B. Holding, Jr. 55,475(6) 105,943(6) 4.70%
Raleigh, NC (.62%) (5.99%)
Lewis R. Holding 1,199,137(7) 327,094(7) 17.28%
Lyford Cay, Bahamas (13.43%) (18.49%)
============================================ ========================= ========================= ========================
Olivia B. Holding 48,656(8) 104,015(8) 4.60%
Raleigh, NC (.55%) (5.88%)
============================================ ========================= ========================= ========================
</TABLE>
- -----------------
* This column reflects the aggregate votes attributable to the
combined shares of Class A and Class B beneficially owned as
a percentage of the aggregate number of votes that may be
cast by the holders of all shares of BancShares' outstanding
voting securities.
** The amounts and percentages of BancShares voting securities
shown for Frank B. Holding and Lewis R. Holding include
shares of Class A and Class B beneficially owned by certain
other persons, as set forth in the table above and the notes
below, and as to which beneficial ownership is disclaimed by
Frank B. Holding and Lewis R. Holding. If such amounts were
not included in their beneficial ownership, Frank B. Holding
would beneficially own 2,358,265 shares (26.42%) and 117,900
shares (6.66%) of Class A and Class B, respectively, Lewis R.
Holding would beneficially own 1,172,409 shares (13.13%) and
325,931 shares (18.42%) of Class A and Class B, respectively,
and the combined Class A and Class B percentage of total
votes beneficially owned by Frank B. Holding and Lewis R.
Holding would be 11.40% and 17.15%, respectively.
(1) Claire Holding Bristow exercises sole voting and investment
power as to 45,995 shares of Class A and 99,562 shares of
Class B held on her own behalf. She exercises shared voting
and investment power as to an additional 5,000 shares of
Class A and 1,250 shares of Class B held in a trust for her
benefit in a nominee name by the Trust Department of First
Citizens Bank. All of such shares also are included in the
beneficial
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ownership shown above for her father, Frank B.
Holding, who disclaims beneficial ownership as to such
shares.
(2) George H. Broadrick exercises sole voting and investment
power as to 55,742 shares of Class A held on his own behalf
and as to 953,806 shares of Class A and 262,041 shares of
Class B held by him as sole trustee of two irrevocable trusts
for the benefit of the adult daughters of Lewis R. Holding.
He exercises shared voting and investment power as to 245,500
shares of Class A and 61,375 shares of Class B held by him
and Carolyn S. Holding as co-trustees of four irrevocable
trusts for the benefit of Lewis R. Holding's adult daughters,
which shares also are included in the beneficial ownership of
Lewis R. Holding. Mr. Broadrick disclaims beneficial
ownership as to 10,000 shares of Class A and 2,500 shares of
Class B included above and owned by his spouse.
(3) Hope Holding Connell exercises sole voting and investment
power as to 33,469 shares of Class A and 101,722 shares of
Class B held on her own behalf. She disclaims beneficial
ownership as to 1,200 shares of Class A and 6,250 shares of
Class B held by her spouse on his own behalf and/or as
custodian for their minor son. She exercises shared voting
and investment power as to an additional 4,900 shares of
Class A and 1,225 shares of Class B held in a trust for her
benefit in a nominee name by the Trust Department of First
Citizens Bank. All of such shares also are included in the
beneficial ownership shown above for her father, Frank B.
Holding, who disclaims beneficial ownership as to such
shares.
(4) Elizabeth C. Holding exercises sole voting and investment
power as to 46,153 shares of Class A and 99,635 shares of
Class B held on her own behalf. She exercises shared voting
and investment power as to an additional 5,000 shares of
Class A and 1,250 shares of Class B held in a trust for her
benefit in a nominee name by the Trust Department of First
Citizens Bank. All of such shares also are included in the
beneficial ownership shown above for her father, Frank B.
Holding, who disclaims beneficial ownership as to such
shares.
(5) Frank B. Holding exercises sole voting and investment power
as to 1,638,350 shares of Class A held on his own behalf. He
disclaims beneficial ownership as to 318,124 shares of Class
A and 514,677 shares of Class B held by his spouse, adult
son and daughters and their spouses, and 24,700 shares of
Class A and 6,175 shares of Class B held in a nominee name by
the Trust Department of First Citizens Bank for the benefit
of his adult son and daughters, all of which shares are
included above. He exercises shared voting and investment
power as to an aggregate of 598,239 shares of Class A and
111,725 shares of Class B held by the following corporations
and other entities which, for beneficial ownership purposes,
are deemed controlled by Mr. Holding: First Citizens
Bancorporation of South Carolina, Inc. (183,600 shares of
Class A and 45,900 shares of Class B); Fidelity BancShares
(N.C.), Inc. (100,000 shares of Class A); Southern BancShares
(N.C.), Inc. (19,100 shares of Class A and 19,775 shares of
Class B); Southern Bank and Trust Company (46,000 shares of
Class A); Goshen, Inc. (54,000 shares of Class A); The
Heritage Bank (23,628 shares of Class A); Yadkin Valley
Company (1,300 shares of Class A and 325 shares of Class B);
Yadkin Valley Life Insurance Company (700 shares of Class A
and 175 shares of Class B); Twin States Farming, Inc. (4,900
shares of Class A and 1,225 shares of Class B); The Robert P.
Holding Foundation, Inc., a charitable foundation of which
Mr. Holding is a director, (134,682 shares of Class A and
36,525 shares of Class B); and in a nominee name by the Trust
Department of First Citizens Bank (30,329 shares of Class A
and 7,800 shares of Class B held in a fiduciary capacity for
the benefit of various third parties). Included in Frank B.
Holding's beneficial ownership are 267,011 shares of Class A
and 44,825 shares of Class B also shown as beneficially owned
by his brother, Lewis R. Holding, of which 30,329 shares of
Class A and 7,800 shares of Class B also are included in the
beneficial ownership of James B. Hyler, Jr. (See the table
below), and an aggregate of 245,848 shares of Class A and
520,852 shares of Class B also are included in the ownership
of Mr. Holding's adult son and daughters, each of whom is
listed individually in the table above.
(6) Frank B. Holding, Jr. exercises sole voting and investment
power as to 40,095 shares of Class A and 85,318 shares of
Class B held on his own behalf and 6,780 shares of Class A
and 18,750 shares of Class B held by him as custodian for his
minor children. He exercises shared voting and investment
power as to an additional 4,900 shares of Class A and 1,225
shares of Class B held in a trust for his benefit in a
nominee name by the
53
<PAGE>
Trust Department of First Citizens Bank, and he disclaims
beneficial ownership as to 3,700 shares of Class A and 650
shares of Class B included above and held by his spouse. All
of such shares also are included in the beneficial ownership
shown above for his father, Frank B. Holding, who disclaims
beneficial ownership as to such shares.
(7) Lewis R. Holding exercises sole voting and investment power
as to 610,935 shares of Class A and 207,706 shares of Class B
held on his own behalf. He disclaims beneficial ownership as
to certain shares included above and held by his spouse
individually (48,963 shares of Class A and 12,025 shares of
Class B); by his spouse and George H. Broadrick as
co-trustees of four irrevocable trusts for the benefit of his
adult daughters (245,500 shares of Class A and 61,375 shares
of Class B) and by his adult daughters (26,728 shares of
Class A and 1,163 shares of Class B). He exercises shared
voting and investment power as to an aggregate of 267,011
shares of Class A and 44,825 shares of Class B held by the
following corporations and other entities which, for
beneficial ownership purposes, are deemed controlled by Mr.
Holding: Fidelity BancShares (N.C.), Inc. (100,000 shares of
Class A); Yadkin Valley Company (1,300 shares of Class A and
325 shares of Class B); Yadkin Valley Life Insurance Company
(700 shares of Class A and 175 shares of Class B); The Robert
P. Holding Foundation, Inc., a charitable foundation of which
Mr. Holding is a director (134,682 shares of Class A and
36,525 shares of Class B); and in a nominee name by the Trust
Department of First Citizens Bank (30,329 shares of Class A
and 7,800 shares of Class B held in a fiduciary capacity for
the benefit of various third parties). Included in Lewis R.
Holding's beneficial ownership are 267,011 shares of Class A
and 44,825 shares of Class B also shown as beneficially owned
by his brother, Frank B. Holding, of which 30,329 shares of
Class A and 7,800 shares of Class B also are included in the
beneficial ownership of James B. Hyler, Jr. (See the table
below).
(8) Olivia B. Holding exercises sole voting and investment power
as to 43,756 shares of Class A and 102,790 shares of Class B
held on her own behalf. She exercises shared voting and
investment power as to an additional 4,900 shares of Class A
and 1,225 shares of Class B held in a trust for her benefit
in a nominee name by the Trust Department of First Citizens
Bank. All of such shares also are included in the beneficial
ownership shown above for her father, Frank B. Holding, who
disclaims beneficial ownership as to such shares.
As of July 31, 1995, the beneficial ownership of the voting
securities of BancShares by the directors, certain named executive
officers, and by all directors and executive officers as a group, of
BancShares and First Citizens Bank was as follows:
<TABLE>
<CAPTION>
Beneficial Ownership* Combined
Class A and
Class A Common Class B. Common Class B Common
Name and Address and Percentage and Percentage Percentage of
of Beneficial Owner of Class of Class Total Votes**
- ------------------------ --------------------------------------------------- -------------
<S> <C> <C> <C>
John M. Alexander, Jr. 1,012(1) 225(1) .01%
Raleigh, NC (.01%) (.01%)
Ted L. Bissett 7,142(2) 1,375(2) .08%
Spring Hope, NC (.08%) (.08%)
B. Irvin Boyle 700 175 .01%
Charlotte, NC (.01%) (.01%)
George H. Broadrick 1,265,048(3) 325,916(3) 17.40%
Charlotte, NC (14.17%) (18.42%)
H. Max Craig, Jr. 12,299(4) 3,550(4) .19%
Stanley, NC (.14%) (.20%)
54
<PAGE>
Betty M. Farnsworth 1,536(5) 250 .01%
Pilot Mountain, NC (.02%) (.01%)
Lewis M. Fetterman 12,787(6) 2,750(6) .15%
Clinton, NC (.14%) (.16%)
Frank B. Holding 2,579,413(7) 632,577(7) 34.11%
Smithfield, NC (28.89%) (35.75%)
Frank B. Holding, Jr. 55,475(8) 105,943(8) 4.70%
Raleigh, NC (.62%) (5.99%)
Lewis R. Holding 1,199,137(9) 327,094(9) 17.28%
Lyford Cay, Bahamas (13.43%) (18.49%)
Charles B. C. Holt 2,570(10) -0- .01%
Fayetteville, NC (.03)
James B. Hyler, Jr. 35,134(11) 7,900(11) .43%
Raleigh, NC (.39%) (.45%)
Gale D. Johnson 473 50 .01%
Dunn, NC (.01%) (.01%)
Freeman R. Jones 4,400 250 .02%
Midland, NC (.05%) (.01%)
Lucius S. Jones 1,000 -0- .01%
Wendell, NC (.01%)
I. B. Julian 14,000 3,500 .19%
Fayetteville, NC (.16%) (.20%)
Joseph T. Maloney, Jr. 22,452 5,400 .29%
Fayetteville, NC (.25%) (.31%)
J. Claude Mayo, Jr. 1,000 -0- .01%
Rocky Mount, NC (.01%)
William McKay 1,080(12) -0- .01%
Flat Rock, NC (.01%)
Brent D. Nash 13,341(13) -0- .04%
Tarboro, NC (.15%)
Lewis T. Nunnelee, II 600 450 .02%
Wilmington, NC (.01%) (.03%)
James M. Parker 1,595(14) -0- .01%
Raleigh, NC (.02%)
Talbert O. Shaw 117 -0- .01%
Raleigh, NC (.01%)
55
<PAGE>
R. C. Soles, Jr. 13,738 -0- .04%
Tabor City, NC (.15%)
David L. Ward, Jr. 30,600(15) 8,638(15) .45%
New Bern, NC (.34%) (.49%)
All directors, nominees for director, 4,690,220(16) 1,206,300(16) 64.42%(16)(17)
and executive officers as a group (52.51%)(17) (68.18%)
(35 persons)
============================================ ========================= ========================= ========================
</TABLE>
- ------------------
* Except as otherwise stated in the footnotes following this
table, shares shown as beneficially owned, to the best of
BancShares' management's knowledge, are owned directly by the
persons named and such persons exercise sole voting and
investment power with respect to those shares.
** This column reflects the aggregate votes attributable to the
combined shares of Class A and Class B beneficially owned by
each director, nominee for director, and executive officer, and
by the group, as a percentage of the aggregate votes that may
be cast by the holders of all shares of BancShares' outstanding
voting securities.
(1) John M. Alexander, Jr. exercises sole voting and investment
power as to 112 shares of Class A held on his own behalf. He
exercises shared voting and investment power as to 900 shares
of Class A and 225 shares of Class B held of record by Raleigh
Tractor & Truck Company, of which he is President.
(2) Ted L. Bissett exercises sole voting and investment power as to
5,486 shares of Class A and 1,075 shares of Class B held on his
own behalf. He exercises shared voting and investment power as
to 1,656 shares of Class A and 300 shares of Class B held by
his children.
(3) For an explanation of the nature of the beneficial ownership of
George H. Broadrick, see footnote (2) in the previous table
above.
(4) H. Max Craig, Jr. exercises sole voting and investment power as
to 699 shares of Class A and 400 shares of Class B held on his
own behalf. He exercises shared voting and investment power as
to 11,600 shares of Class A and 3,150 shares of Class B held by
Gaston County Dyeing Machine Company, of which he is President
and Chairman of the Board.
(5) Betty M. Farnsworth exercises sole voting and investment power
as to 1,436 shares of Class A and 250 shares of Class B held on
her own behalf. She disclaims beneficial ownership as to 100
shares of Class A held by an adult son.
(6) Lewis M. Fetterman exercises sole voting and investment power
as to 10,026 shares of Class A and 2,200 shares of Class B held
on his own behalf. He disclaims beneficial ownership as to
2,761 shares of Class A and 550 shares of Class B included
above and held in trust for his spouse.
(7) For an explanation of the nature of the beneficial ownership of
Frank B. Holding, see footnote (5) in the previous table above.
56
<PAGE>
(8) For an explanation of the nature of the beneficial ownership of
Frank B. Holding, Jr., see footnote (6) in the previous table
above.
(9) For an explanation of the nature of the beneficial ownership of
Lewis R. Holding, see footnote (7) in the previous table above.
(10) Charles B. C. Holt exercises sole voting and investment power
as to 1,966 shares of Class A held on his own behalf. He
exercises shared voting and investment power as to 139 shares
of Class A held by him as Trustee of the Holt Oil Company, Inc.
Retirement Plan, and disclaims beneficial ownership as to 465
shares of Class A held by his spouse.
(11) James B. Hyler, Jr. exercises sole voting and investment power
as to 4,244 shares of Class A and 100 shares of Class B held on
his own behalf. In addition, he holds options exercisable
within 60 days to buy 561 shares of Class A. He exercises
shared voting and investment power as to certain shares held in
a nominee name by the Trust Department of First Citizens Bank,
which shares, for beneficial ownership purposes, are deemed
controlled by Mr. Hyler (30,329 shares of Class A and 7,800
shares of Class B held in a fiduciary capacity for the benefit
of various third parties); such shares also are included in the
beneficial ownership shown above for Lewis R. Holding and Frank
B. Holding.
(12) William McKay exercises sole voting and investment power as to
938 shares of Class A held on his own behalf, and shared voting
and investment power as to 142 shares of Class A held jointly
with his spouse.
(13) Brent D. Nash exercises sole voting and investment power as to
6,176 shares of Class A held on his own behalf. He disclaims
beneficial ownership as to 6,079 shares of Class A owned by his
spouse and 1,086 shares of Class A owned by his daughter.
(14) James M. Parker exercises sole voting and investment power as
to 1,041 shares of Class A held on his own behalf, and holds
options exercisable within 60 days to buy an additional 551
shares of Class A.
(15) David L. Ward, Jr. exercises sole voting and investment power
as to 26,100 shares of Class A and 7,513 shares of Class B held
on his own behalf. He exercises shared voting and investment
power as to 1,000 shares of Class A and 250 shares of Class B
held by him and J. Troy Smith, Jr. as Co-Trustees of the Ward
and Smith, P.A. Profit-Sharing Trust. He disclaims beneficial
ownership as to 3,500 shares of Class A and 875 shares of Class
B owned by his spouse.
(16) Certain numbers of shares included in the beneficial ownership
of Frank B. Holding, Lewis R. Holding, James B. Hyler, Jr. and
Frank B. Holding, Jr. are reflected separately in the
beneficial ownership of each of such individuals shown above,
but are included only once in the total beneficial ownership
shown for the group.
(17) Includes a total of 5,019 shares of Class A as to which the
executive officers included in the group hold options that may
be exercised within 60 days. The calculation of the percentage
of Class A beneficially owned by the group and the percentage
of combined Class A and Class B total votes is based on the
8,927,406 shares of Class A outstanding at July 31, 1995, plus
the 5,019 shares of Class A capable of being issued within 60
days to the executive officers in the group upon the exercise
of their stock options pursuant to the 1994 Employee Stock
Purchase Plan. No stock options were issued to non-employee
members of the Board of Directors of First Citizens Bank or to
Lewis R. Holding, Frank B. Holding, or Frank B. Holding, Jr.
57
<PAGE>
INFORMATION ABOUT ALLIED BANK CAPITAL, INC.
ALLIED
Allied is a North Carolina corporation organized in March 1992
for the purpose of becoming the savings bank holding company of Summit.
On July 7, 1992, Allied became the parent holding company of Summit upon
the acquisition of all of the common stock of Summit issued in
connection with Summit's conversion from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered capital stock savings
bank. On January 28, 1994, Allied became the parent holding company of
Peoples upon the acquisition of all of the common stock of Peoples
issued in connection with Peoples' conversion from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered
capital stock savings bank. Allied's principal business activities
consist of the ownership of Summit and Peoples.
At June 30, 1995, Allied had total assets of approximately
$268.7 million, total deposits of approximately $218.1 million and total
shareholders' equity of approximately $31.1 million.
SUMMIT AND PEOPLES
Summit is a community-oriented financial institution which
offers a variety of financial services to meet the needs of the
communities it serves. Headquartered in Sanford, North Carolina, Summit
currently conducts business through five offices and one loan production
office located in Lee, Chatham, and Wake Counties, North Carolina.
Summit is principally engaged in the business of attracting deposits
from the general public and using such deposits, together with
borrowings and other funds, to make residential and, to a lesser extent,
consumer and other loans, primarily in Lee, Chatham and Wake Counties,
North Carolina. Peoples is a community- oriented financial institution
headquartered in Wilmington, North Carolina. Peoples conducts business
through four offices located in New Hanover and Pender Counties, North
Carolina. Peoples offers a variety of financial services to meet the
needs of the communities it serves. Peoples is primarily engaged in the
business of attracting deposits from the general public and using such
deposits, together with borrowings and other funds, to make residential
and, to a lesser extent, consumer and other loans, primarily in New
Hanover and Pender Counties, North Carolina. The deposits of Summit and
Peoples are insured by the SAIF of the FDIC up to the maximum amount
permitted by law.
The principal office of Summit is located at 130 North Steele
Street, Sanford, North Carolina 27330, and its telephone number is (919)
775-7161. The principal office of Peoples is located at 315 Market
Street, Wilmington, North Carolina 28401, and its telephone number is
(910) 763-9984.
RECENT OPERATING RESULTS
Net income for Allied for the third quarter ended September 30,
1995 was $734,000, or $0.29 per share, on 2,564,750 shares outstanding.
This compares to net income of $762,000, or $0.32 per share, on
2,366,302 shares outstanding, for the third quarter ended September 30,
1994 and net income of $808,611, or $0.32 per share, on 2,509,048 shares
outstanding, for the second quarter ended June 30, 1995. The decrease in
net income from the corresponding quarter of the
58
<PAGE>
prior year was caused primarily by an increase in general and
administrative expenses of $119,000 related to a 7.8% growth in assets
and a decrease in the spread between earning assets and deposits.
Allied's allowance for loan losses as a percentage of
non-performing assets at September 30, 1995 was 181%, compared to 147%
at September 30, 1994 and 220% at June 30, 1995. As a percentage of
average loans, annualized net charge-offs were .05% for the first nine
months of 1995 compared to .03% for the same period last year. Total
non-performing assets were $703,789 at September 30, 1995, as compared
to $854,594 at September 30, 1994 and $584,178 at June 30, 1995.
At September 30, 1995, Allied had consolidated assets of $269.5
million, consolidated deposits of $215.9 million, and consolidated
shareholders' equity of $32.0 million, compared to $250.0 million,
$206.4 million, and $28.8 million, respectively, at September 30, 1994.
ADDRESS AND ADDITIONAL INFORMATION
The principal office of Allied is located at 130 North Steele
Street, Sanford, North Carolina 27330, and its telephone number is (919)
775-7161.
Additional information with respect to Allied is included in
Allied's Annual Report on Form 10-K for the year ended December 31,
1994, and Allied's Quarterly Reports on Form 10-Q for the three months
ended March 31, 1995, and June 30, 1995, which are incorporated herein
by reference, and in Allied's 1994 Annual Report to Shareholders,
selected portions of which are incorporated herein by reference. A copy
of each of Allied's 1994 Annual Report to Shareholders and Quarterly
Report on Form 10-Q for the three months ended June 30, 1995,
accompanies this Prospectus/Proxy Statement.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP THEREOF
Set forth below is certain information regarding persons who
were known to management of Allied to own beneficially more than 5% of
Allied's voting securities as of June 30, 1995.
<TABLE>
<CATPION>
TITLE OF AMOUNT AND NATURE PERCENTAGE
CLASS NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS(1)
<S> <C> <C> <C>
Common A. Harold Ausley 218,126(2) 9.70%
130 N. Steele Street
Sanford, NC 27330
Common Jeffrey S. Halis 200,339(3) 8.85%
500 Park Avenue
New York, NY 10022
Common John Hancock Advisors, Inc. 123,864(4) 5.47%
101 Huntington Avenue
Boston, MA 02199
================= ============================================ ================================== ====================
</TABLE>
- ------------
(1) The calculation of the percentage of class beneficially owned
is based on the 2,262,994 shares of Allied's Stock which were
issued and outstanding on the Record Date.
59
<PAGE>
(2) Includes options to purchase 95,500 shares of Allied stock.
Also includes 63,232 shares of Allied Stock held by a
tax-qualified savings plan (the "Savings Plan") maintained by
Allied for participants thereunder which shares, for beneficial
ownership purposes, are deemed controlled by Mr. Ausley as a
result of his exercise of shared voting power with respect
thereto in his capacity as a Trustee under the Savings Plan.
(3) Includes 188,439 shares owned by Tyndall Partners, L.P., a Delaware
limited partnership, and 11,900 shares owned by Madison Avenue
Partners, L.P., a Delaware limited partnership. Pursuant to the
Agreement of Limited Partnership of each of the aforementioned
partnerships, Jeffrey S. Halis possesses sole voting and investment
control over all shares owned by each limited partnership.
(4) The Southeastern Thrift & Bank Fund holds 32,864 shares and the
John Hancock Regional Bank Fund holds 91,000 shares. John
Hancock Advisors, Inc. ("JHA") possesses sole voting and
investment control over all shares owned by each Fund under
advisory agreements. JHA is an indirect subsidiary of the John
Hancock Mutual Life Insurance Company.
Set forth below is certain information regarding the beneficial
ownership of Allied Stock by directors and certain executive officers
individually and by directors and executive officers as a group.
<TABLE>
<CAPTION>
TITLE OF Name of AMOUNT AND NATURE PERCENTAGE
CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- -------- ------------------ -------------------------- -----------
<S> <C> <C> <C>
Common A. Harold Ausley 218,126 9.70%
Common James L. Brewer 74,276 3.24
Common William J. Brinn, Jr. 111,324 4.87
Common Edwin A. Hubbard 86,266 3.76
Common Paul D. Johnson, Jr. 65,956 2.87
Common Del F. Jones 64,666 2.80
Common William N. Kingoff 55,852 2.45
Common Donald F. Pelling 91,164 3.94
Common Howard A. Penton, Jr. 58,642 2.57
Common Hugh P. Perry 107,146 4.67
Common Franklin E. Williams, Sr. 46,268 2.03
- ------------------ ----------------------------------------- ------------------------------------------- --------------------
Common All Current Directors and 907,154 33.98%
Executive Officers as a Group
(11 Persons)
================== ========================================= =========================================== ====================
</TABLE>
- ------------------
(1) All share ownership data is stated as of August 31, 1995. Each
person, to the best of management's knowledge, exercises sole
voting and investment power with respect to such shares, except for
the following shares over which the director, and each of the
directors and three executive officers of Allied included in the
group, indicated that he either has no voting or investment power
or shares voting and/or investment power: Mr. Ausley - 78,116
shares; Mr. Brewer - 4,602 shares; Mr. Brinn - 7,880 shares; Mr.
Hubbard - 23,458 shares; Mr. Johnson - 6,000 shares; Mr. Jones -
4,374; Mr.
60
<PAGE>
Kingoff - 13,930 shares; Mr. Pelling - 11,144 shares;
Mr. Penton - 1,114 shares; Mr. Perry - 63,520 shares; Mr. Williams
- 11,032 shares; and directors and officers as a group - 225,170
shares.
This column includes the number of shares which each director, and
all directors and the three executive officers of Allied included
in the group, for which each holds options to purchase that are
exercisable upon the payment of per share exercise prices ranging
from $5.75 to $12.80 within 60 days of August 31, 1995: Mr. Ausley
- 95,500 shares; Mr. Brewer - 32,574 shares; Mr. Brinn - 24,574
shares; Mr. Hubbard - 32,574 shares; Mr. Johnson -32,574 shares;
Mr. Jones - 46,934 shares; Mr. Kingoff - 20,316 shares; Mr. Pelling
- 48,048 shares; Mr. Penton - 20,316 shares; Mr. Perry - 32,574
shares; Mr. Williams - 20,316 shares; and directors and officers as
a group - 406,300 shares;
For information on beneficial ownership of Allied Stock by Mr.
Ausley, see Footnote 4 to the preceding table.
(2) The calculation of the percentage of class beneficially owned is
based on the 2,262,994 shares of Allied Stock which were issued and
outstanding at August 31, 1995 plus the number of shares capable of
being issued to that individual (if any) and to directors and
officers as a group within 60 days of August 31, 1995, upon the
exercise of stock options held by each of them (if any) and by the
group, respectively.
MARKET PRICES AND DIVIDENDS
The Class A common stock of BancShares has been traded on the
Nasdaq National Market under the symbol "FCNCA" since 1986. As of June
30, 1995, BancShares had 8,921,136 shares of its Class A common stock
outstanding. The Allied Stock has been traded on the Nasdaq National
Market under the symbol "ABCI" since 1992. As of June 30, 1995, there
were 2,255,570 shares of Allied Stock outstanding.
The following table presents quarterly information on the price
range of the Class A common stock of BancShares and the Allied Stock for
the periods indicated and indicates the high and low sales prices as
reported by the Nasdaq National Market. The prices are shown without
retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
BANCSHARES ALLIED
High Low High Low
<S> <C> <C> <C> <C>
1995:
Fourth Quarter* $53.25 $52.50 $24.50 $23.125
Third Quarter 53.75 48.50 24.50 20.50
Second Quarter 50.00 44.00 22.25 16.75
First Quarter 46.00 42.00 17.50 13.75
1994:
Fourth Quarter 46.50 41.50 14.75 13.00
Third Quarter 45.50 41.00 15.00 12.50
Second Quarter 44.50 40.00 13.125 10.125
First Quarter 45.00 40.00 11.25 10.25
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
BANCSHARES ALLIED
High Low High Low
<S> <C> <C> <C> <C>
1993:
Fourth Quarter 49.50 44.50 12.00 10.00
Third Quarter 50.00 47.50 10.125 8.75
Second Quarter 57.00 45.50 9.813 8.50
First Quarter 63.50 49.50 10.063 9.00
</TABLE>
- ----------------------
*Through October 27, 1995.
On October 27, 1995, the last sale prices of BancShares Common
Stock and Allied Stock on the Nasdaq National Market were $52.75 and
$23.75, respectively. On August 7, 1995, the last day before
announcement of the Merger, the last sale prices of BancShares Common
Stock and Allied Stock on the Nasdaq National Market were $49.00 and
$23.375, respectively.
As of October 20, 1995, there were approximately 3,879
shareholders of record of the BancShares Common Stock and there were 402
shareholders of record of the Allied Stock.
The following table shows the cash dividends declared per share
of BancShares Common Stock for the indicated periods. BancShares has
paid cash dividends on its common stock since 1935.
Cash
Dividend
Declared
1995:
Fourth Quarter.......................................... $ .225
Third Quarter........................................... .20
Second Quarter.......................................... .20
First Quarter........................................... .20
1994:
Fourth Quarter.......................................... .20
Third Quarter........................................... .175
Second Quarter.......................................... .175
First Quarter........................................... .175
1993:
Fourth Quarter.......................................... .175
Third Quarter........................................... .15
Second Quarter.......................................... .15
First Quarter........................................... .15
62
<PAGE>
The timing and amount of future dividends will be within the
discretion of the Board of Directors of BancShares and will depend upon
the earnings of BancShares and its subsidiaries, their financial
condition, liquidity and capital requirements, applicable government
regulations and policies and other factors deemed relevant by the Board
of Directors. Subject to the foregoing, it is currently BancShares'
anticipation that cash dividends comparable to those paid during the
past three years will continue to be paid in the future. No assurances
can be given, however, that any dividends will be declared in the future
or, if declared, what the amount of such dividends would be or whether
such dividends would continue for future periods. The ability of
BancShares to accumulate earnings for the payment of dividends to its
stockholders is substantially dependent upon the ability of First
Citizens Bank to pay dividends to BancShares. First Citizens Bank's
ability to pay dividends to BancShares is subject to certain statutory
and regulatory restrictions and the need to maintain adequate capital.
See "SUPERVISION, REGULATION AND GOVERNMENTAL POLICY - Bank Regulation
- -- First Citizens Bank."
Allied paid its first cash dividend in 1994. The following
table shows the cash dividends declared per share of Allied Stock for
the indicated periods.
Cash
Dividend
Declared
1995:
Fourth Quarter.......................................... $ .12
Third Quarter........................................... .12
Second Quarter.......................................... .12
First Quarter........................................... .10
1994:
Fourth Quarter.......................................... .10
There can be no assurance that dividends would continue to be
paid by Allied in the future if the Merger were not consummated. The
declaration, payment and amount of any such future dividends would
depend upon business conditions, operating results, capital, reserve
requirements, regulatory authorizations and the consideration of other
relevant factors by Allied's Board of Directors. See "SUPERVISION,
REGULATION AND GOVERNMENTAL POLICY - Savings Institution Regulation." In
addition, the number of shares of BancShares Common Stock into which
each share of Allied Stock will be converted and the amount of cash or
Debentures which a shareholder of Allied may elect to receive for each
of his or her shares of Allied Stock will be reduced to the extent that
cash dividends in an aggregate amount in excess of $0.12 per share per
calendar quarter or other distributions are declared or paid by Allied
between August 7, 1995, and the Effective Time. See "THE MERGER - Terms
of the Agreement - Exchange of Allied Stock."
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SUPERVISION, REGULATION AND GOVERNMENTAL POLICY
Financial institutions and many of their affiliates are
extensively regulated under both federal and state law. The following is
a brief summary of certain statutes, rules, and regulations affecting
BancShares, Allied and their respective subsidiaries. This summary is
qualified in its entirety by reference to the particular statutory and
regulatory provisions referred to below and is not intended to be an
exhaustive description of the statutes or regulations applicable to
BancShares' or Allied's respective businesses. Supervision, regulation,
and examination of financial institutions by regulatory agencies is
intended primarily for the protection of depositors rather than holders
of the stock of such institutions.
BANK HOLDING COMPANY REGULATION
BancShares and Allied are bank holding companies, registered
with the Federal Reserve under the BHC Act. As such, BancShares, Allied
and their respective subsidiaries are subject to the supervision,
examination, and reporting requirements contained in the BHC Act and the
regulations of the Federal Reserve. The BHC Act requires that a bank
holding company obtain the prior approval of the Federal Reserve before
(i) acquiring direct or indirect ownership or control of more than 5% of
the voting shares of any bank, (ii) taking any action that causes a bank
to become a subsidiary of the bank holding company, (iii) acquiring all
or substantially all of the assets of any bank, or (iv) merging or
consolidating with any other bank holding company.
The BHC Act further provides that the Federal Reserve may not
approve any transaction that would result in a monopoly or would be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any region of the United States,
or the effect of which may be substantially to lessen competition or to
tend to create a monopoly in any region of the country, or that in any
other manner would be in restraint of trade, unless the anti-competitive
effects of the proposed transaction are clearly outweighed by the public
interest in meeting the convenience and needs of the community to be
served. The Federal Reserve is also required to consider the financial
and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the
community to be served. Consideration of financial resources generally
focuses on capital adequacy and consideration of convenience and needs
issues includes the parties' performance under the Community
Reinvestment Act of 1977 (the "CRA"), both of which are discussed below.
See "- Capital Requirements" and "- Bank Regulation."
The BHC Act prohibits the Federal Reserve from approving a bank
holding company's application to acquire a bank or bank holding company
located outside the state in which the deposits of the banking
subsidiary were greatest on the date the company became a bank holding
company, such state being North Carolina in the case of BancShares and
Allied, unless such acquisition is specifically authorized by statute of
the state in which the bank or bank holding company to be acquired is
located. Under current North Carolina law, BancShares and Allied
generally may acquire banks or bank holding companies in any of the
following states or jurisdictions: Alabama, Arkansas, the District of
Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi,
North Carolina, South Carolina, Tennessee, Texas, Virginia, and West
Virginia. Acquisitions in other states are also possible if expressly
authorized by the laws of the state where the acquired bank is located
or if acquired pursuant to federal statutes
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permitting the interstate acquisition of failed or failing banks or
thrifts. See "- Recent Banking Legislation."
The BHC Act generally prohibits a bank holding company, with
certain exceptions, from engaging in activities other than banking, or
managing or controlling banks or other permissible subsidiaries, and
from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking, or managing or
controlling banks, as to be a proper incident thereto. In determining
whether a particular activity is permissible, the Federal Reserve must
consider whether the performance of such an activity can reasonably be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible
adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices.
For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing services,
acting as agent or broker in selling credit life insurance, and certain
other types of insurance underwriting activities have all been
determined by regulations of the Federal Reserve to be permissible
activities of bank holding companies. Pursuant to delegated authority,
the Federal Reserve Bank of Richmond has authority to approve certain
activities of holding companies within its district, including
BancShares and Allied, provided the nature of the activity has been
approved by the Federal Reserve. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary, when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to
the financial safety, soundness or stability of any bank subsidiary of
that bank holding company.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve on any extensions of
credit to the bank holding company or any of its subsidiaries,
investments in the stock or securities thereof and the acceptance of
such stock or securities as collateral for loans to any borrower. A bank
holding company and its subsidiaries are also prevented from engaging in
certain tie-in arrangements in connection with any extension of credit,
lease or sale of property, or furnishing of services.
The Federal Reserve may issue cease and desist orders against
bank holding companies and non-bank subsidiaries to stop actions
believed to present a serious threat to a subsidiary bank. The Federal
Reserve also regulates certain debt obligations, changes in control of
bank holding companies, and capital requirements.
Under the provisions of the North Carolina Bank Holding Company
Act of 1984, BancShares is registered with and subject to regulations of
the NC Commissioner. On September 1, 1994, BancShares became subject to
the jurisdiction of the West Virginia Board of Banking and Financial
Institutions (the "West Virginia Board") upon its acquisition of
Marlinton Bank. On February 2, 1995, BancShares became subject to
jurisdiction of the Virginia Bureau of Financial Institutions (the
"Virginia Bureau") upon its acquisition of FCB-VA. As a savings bank
holding company, Allied is subject to the jurisdiction and supervision
of the Administrator.
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BANK REGULATION
FIRST CITIZENS BANK. First Citizens Bank is a North
Carolina-chartered institution and is supervised and regulated by the NC
Commissioner, the NC Commission, and the FDIC. Deposits in First
Citizens Bank are insured either by the BIF or the SAIF of the FDIC up
to the maximum extent permitted by law. Approximately 70% and 30% of the
deposits in First Citizens Bank are insured by the BIF and the SAIF,
respectively, of the FDIC. First Citizens Bank also is subject to
numerous state and federal statutes and regulations which affect its
businesses, activities and operations.
The FDIC and the NC Commissioner regularly examine First
Citizens Bank and its operations. Each is given authority to approve or
disapprove the establishment of branches, mergers, consolidations, and
other similar corporate actions, and is given the right to prevent the
continuance or development of unsafe or unsound banking practices or
other violations of law.
Banks are subject to the CRA. Under the CRA, the appropriate
federal bank regulatory agency is required, in connection with its
examination of a bank, to assess such bank's record in meeting the
credit needs of the community served by that bank, including low- and
moderate- income neighborhoods. The regulatory agencies' assessment of
the bank's record is made available to the public. Further, such
assessment is required of any bank which has applied to (i) charter a
national bank, (ii) obtain deposit insurance coverage for a newly
chartered institution, (iii) establish a new branch office that will
accept deposits, (iv) relocate an office, or (v) merge or consolidate
with, or acquire the assets or assume the liabilities of, a federally
regulated financial institution. In the case of a bank holding company
applying for approval to acquire a bank or other bank holding company,
the Federal Reserve will assess the record of each subsidiary bank of
the applicant bank holding company, and such records may be the basis
for denying the application. As of April 11, 1994, First Citizens Bank
had received an overall CRA rating of "outstanding."
North Carolina-chartered banks also are subject to restrictions
under state law upon their ability to pay dividends. Generally, a North
Carolina bank of a specified size may declare cash dividends out of its
undivided profits, so long as the bank's surplus is at least equal to
50% of its paid-in capital stock. Under the foregoing restriction, the
amount available for payment of dividends as of June 30, 1995, by First
Citizens Bank to BancShares was approximately $304 million.
Federal bank regulatory agencies also have the general
authority to limit the dividends paid by insured banks and bank holding
companies if such payment may be deemed to constitute an unsafe and
unsound practice. The ability of First Citizens Bank to make funds
available to BancShares also is subject to restrictions imposed by
federal law on the ability of First Citizens Bank to extend credit to
BancShares, to purchase the assets thereof, to issue a guarantee,
acceptance, or letter of credit on behalf thereof, or to invest in the
stock or securities thereof, or to take such stock or securities as
collateral for loans to any borrower.
MARLINTON BANK AND WHITE SULPHUR SPRINGS BANK. As West
Virginia banking corporations, Marlinton Bank and White Sulphur Springs
Bank are subject to the supervision and regular examination by the FDIC
and the West Virginia Department of Banking. Areas of
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operation subject to regulation by the FDIC and the West Virginia
Department of Banking include reserves on deposits, interest rates and
other terms on deposits, investments, loans, fiduciary activities,
mergers, issuance of securities, payment of dividends, establishment of
branches and other aspects of operations. While Marlinton Bank is not a
member of the Federal Reserve, White Sulphur Springs Bank is a member of
the Federal Reserve, and, as such, is subject to the supervision and
regular examination by the Federal Reserve.
The ability of Marlinton Bank and White Sulphur Springs Bank to
pay dividends is subject to certain limitations of the State Banking
Code of West Virginia. The directors of any West Virginia-chartered
banking institution may quarterly, semiannually or annually, declare a
dividend of so much of the net profits of such banking institution as
they shall judge expedient, except that until the surplus fund of such
banking institution shall equal its common stock, no dividends shall be
declared unless there has been carried to the surplus fund not less than
one-tenth part of such banking institution's net profits of the
preceding half year in the case of quarterly or semiannual dividends, or
not less than one-tenth part of its net profits of the preceding two
consecutive half-year periods in the case of annual dividends. The prior
approval of the Commissioner of Banking shall be required if the total
of all dividends declared by a West Virginia-chartered banking
institution in any calendar year shall exceed the total of its net
profits of that year combined with its retained net profits of the
preceding two years.
Federal bank regulatory agencies also have the general
authority to limit the dividends paid by insured banks if such payment
may be deemed to constitute an unsafe and unsound practice.
FCB-VA
As a Virginia banking corporation organized under the Virginia
Banking Act, as amended, FCB-VA is subject to the supervision and
regular examination of the Federal Reserve, the Virginia Bureau, and the
FDIC. Areas of operation subject to regulation by the regulatory
agencies include corporate practices, such as payment of dividends,
incurring debt and acquisition of financial institutions and other
companies, and affect business practices, such as payment of interest on
deposits, the charging of interest on loans, types of business conducted
and location of offices. Deposits in FCB-VA are insured by the FDIC up
to the maximum extent permitted by law.
The amount of dividends payable by FCB-VA depends upon FCB-VA's
earnings and capital position, and is limited by federal and state law,
regulations and policies.
As a state member bank subject to the regulations of the
Federal Reserve, FCB-VA must obtain the approval of the Federal Reserve
for any dividend if the total of all dividends declared in any calendar
year would exceed the total of its net profits, as defined by the
Federal Reserve, for that year, combined with its retained net profits
for the preceding two years. In addition, FCB-VA may not pay a dividend
in an amount greater than its undivided profits then on hand after
deducting its losses and bad debts. For this purpose, bad debts are
generally defined to include the principal amount of loans which are in
arrears with respect to interest by six months or more unless such loans
are fully secured and in the process of collection. Moreover, for the
purposes of this limitation, FCB-VA is not permitted to add the balance
in its allowance for loan
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losses account to its undivided profits then on hand; however, it may
net the sum of its bad debts as so defined against the balance in its
allowance for loan losses account and deduct from undivided profits only
bad debts as so defined in excess of that account.
In addition, the Federal Reserve is authorized to determine
under certain circumstances relating to the financial condition of a
national bank, a state member bank or a bank holding company that the
payment of dividends would be an unsafe or unsound practice and to
prohibit payment thereof. The payment of dividends that depletes a
bank's capital base could be deemed to constitute such an unsafe or
unsound practice. The Federal Reserve has indicated that banking
organizations should generally pay dividends only out of current
operating earnings.
SAVINGS INSTITUTION REGULATION
GENERAL. Summit and Peoples are North Carolina-chartered
savings banks, are members of the FHLB System, and their deposits are
insured by the SAIF of the FDIC. Summit and Peoples are subject to
examination and regulation by the FDIC and the Administrator and to
regulations governing such matters as capital standards, mergers,
establishments of branch offices, subsidiary investments and activities,
and general investment authority. Such examination and regulation is
intended primarily for the protection of depositors and the federal
deposit insurance funds. As subsidiaries of Allied, Summit and Peoples
are indirectly subject to regulation by the Federal Reserve. As such,
regulations promulgated by the Federal Reserve and applicable to Allied
may affect activities of Summit and Peoples.
As a creditor and a financial institution, each of Summit and
Peoples are subject to the CRA and to various regulations promulgated by
the Federal Reserve including, without limitation, regulations relating
to Equal Credit Opportunity, Reserves, Electronic Fund Transfers, Truth
in Lending, Availability of Funds and Truth in Savings. As creditors of
loans secured by real property and as owners of real property, financial
institutions, including Summit and Peoples, may be subject to potential
liability under various statutes and regulations applicable to property
owners generally, including statutes and regulations relating to the
environmental condition of real property. Summit and Peoples are also
subject to the usury laws of North Carolina and other states in which
they make loans. In North Carolina there are generally no maximum
interest rates applicable to first mortgage loans secured by the
borrower's residence. There are limitations on interest rates for other
loans, such as consumer loans, and limitations on the amounts of fees
which may be charged in connection with such loans.
The FDIC has extensive enforcement authority over North
Carolina-chartered savings banks, including Summit and Peoples. This
enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease and desist or removal
orders and to initiate injunctive actions. In general, these enforcement
actions may be initiated in response to violations of laws and
regulations and unsafe or unsound practices.
The grounds for appointment of a conservator or receiver for a
state savings bank on the basis of an institution's financial condition
include: (i) insolvency, in that the assets of the savings bank are less
than its liabilities to depositors and others; (ii) substantial
dissipation of assets or earnings through violations of law or unsafe or
unsound practices; (iii) existence of an unsafe or unsound condition to
transact business; (iv) likelihood that the savings bank will be
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unable to meet the demands of its depositors or to pay its obligations
in the normal course of business; and (v) insufficient capital or the
incurring or likely incurring of losses that will deplete substantially
all of the institution's capital with no reasonable prospect of
replenishment of capital without federal assistance.
CAPITAL REQUIREMENTS APPLICABLE TO SUMMIT AND PEOPLES. Upon
their conversions to North Carolina-chartered mutual savings banks in
March 1992 and in May 1993, respectively, Summit and Peoples ceased to
be subject to the capital requirements of the Office of Thrift
Supervision ("OTS") and became subject to the capital requirements of
the FDIC and the Administrator. The FDIC imposes the same risk-based
capital requirements and leverage capital requirements on state
chartered savings banks, such as Summit and Peoples, as it imposes on
state chartered commercial banks such as First Citizens Bank. See
"-Capital Requirements."
The following table sets forth Summit's and Peoples' regulatory
capital position on June 30, 1995.
<TABLE>
<CAPTION>
June 30, 1995
Summit Peoples
<S> <C> <C> <C> <C>
Total Shareholder's $ 19,310 11.77% $ 9,652 9.42%
Equity
Regulatory Capital
Leverage:
Actual 19,310 11.77% 9,652 9.42%
Required 8,206 5.00% 5,121 5.00%
--------- ----- --------- ----
Excess $ 11,104 6.77% $ 4,531 4.42%
========= ===== ========= ====
Risk-Based:
Actual 20,199 20.56% 10,047 18.01%
Required 7,858 8.00% 4,463 8.00%
--------- ------ --------- ----
Excess $ 12,341 12.56% $ 5,584 10.01%
========= ===== ========= =====
Total Risk-Based Assets $ 98,229 $ 55,786
========= =========
Adjusted Assets $ 164,127 $ 102,425
========= =========
Total Assets $ 164,127 $ 102,425
========= =========
==================================== =================== ==================== =================== ====================
</TABLE>
The Administrator requires total adjusted capital equal to at
least 5% of total adjusted assets. As of June 30, 1995, Summit and
Peoples exceeded this requirement with total adjusted capital to total
adjusted assets of 11.77% and 9.42%, respectively.
LOANS-TO-ONE-BORROWER. Summit and Peoples also are subject to
the Administrator's limitations on loans-to-one-borrower. Under these
limits, no loans and extensions of credit to any borrower outstanding at
one time and not fully secured by readily marketable collateral shall
exceed 15% of the unimpaired capital and unimpaired surplus of the
savings institution. Loans and extensions of credit fully secured by
readily marketable collateral may comprise an additional 10% of
unimpaired capital and unimpaired surplus. These limits also authorize
savings institutions to make loans-to-one-borrower, for any purpose, in
an amount not to exceed $500,000. A savings institution also is
authorized to make loans-to-one-borrower to develop domestic residential
housing units, not to exceed the lesser of $30 million or 30% of the
savings
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institution's unimpaired capital and unimpaired surplus,
provided that (i) the purchase price of each single-family dwelling in
the development does not exceed $500,000; (ii) the savings institution
is in compliance with its fully phased-in capital requirements; (iii)
the loans comply with applicable loan-to-value requirements; (iv) the
aggregate amount of loans made under this authority does not exceed 150%
of unimpaired capital and surplus and (v) the institution's regulator
issues an order permitting the savings institution to use this higher
limit. These limits also authorize a savings institution to make
loans-to-one-borrower to finance the sale of real property acquired in
satisfaction of debts in an amount up to 50% of unimpaired capital and
surplus.
As of June 30, 1995, the largest aggregate amount of loans
which Summit and Peoples had to any one borrower was $1,519,722 and
$1,376,036, respectively. Summit and Peoples have no loans outstanding
which their respective managements believe violate the applicable
loans-to- one-borrower limits.
FEDERAL HOME LOAN BANK SYSTEM. The FHLB System provides a
central credit facility for member institutions. As members of the FHLB
of Atlanta, Summit and Peoples are required to own capital stock in the
FHLB of Atlanta in an amount at least equal to the greater of 1% of the
aggregate principal amount of its unpaid residential mortgage loans,
home purchase contracts and similar obligations at the end of each
calendar year, or 5% of its outstanding advances (borrowings) from the
FHLB of Atlanta. On June 30, 1995, Summit and Peoples were in compliance
with this requirement with investments in FHLB of Atlanta stock of
$1,371,000 and $806,000, respectively.
Recent federal provisions may have the effect of significantly
reducing the dividends that Summit and Peoples receive on their stock in
the FHLB of Atlanta. During fiscal 1994, 1993 and 1992, Summit recorded
dividend income of $84,000, $74,000 and $82,000, respectively, with
respect to its FHLB of Atlanta stock and Peoples recorded dividend
income of $47,853, $42,231 and $48,508, respectively, with respect to
its FHLB of Atlanta stock. Recently enacted federal law requires each
FHLB to transfer a certain amount of its reserves and undivided profits
to the Resolution Funding Corporation ("REFCORP"), the government entity
established to raise funds to resolve troubled savings association
cases, in order to fund the principal and a portion of the interest on
REFCORP bonds and certain other obligations. In addition, such recently
enacted federal law requires each FHLB to transfer a percentage of its
annual net earnings to the Affordable Housing Program. That amount will
increase from 5% of the annual net income of the FHLB in 1990 to at
least 10% of its annual income in 1995 and subsequent years. As a result
of these requirements, the FHLB of Atlanta's earnings may be reduced and
Summit and Peoples may receive reduced dividends on its FHLB of Atlanta
stock in future periods.
LIQUIDITY. Requirements of the Administrator provide that
Summit and Peoples must maintain a ratio of liquid assets to total
assets of at least 10%. The computation of liquidity under North
Carolina regulations allows the inclusion of mortgage-backed securities
and investments which, in the judgment of the Administrator, have a
readily marketable value, including investments with maturities in
excess of five years. On June 30, 1995, the liquidity ratio of Summit
and Peoples under the requirements of the Administrator were 13.6% and
26.2%, respectively.
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RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS.
North Carolina-chartered stock savings banks such as Summit and Peoples
may not declare or pay a cash dividend on, or purchase any of, its
capital stock if the effect of such transaction would be to reduce the
net worth of the institution to an amount which is less than the minimum
amount required by applicable federal and state regulations. In
addition, Summit and Peoples may not declare or pay dividends without
the prior written approval of the Administrator.
NORTH CAROLINA REGULATIONS. As North Carolina-chartered savings
banks, Summit and Peoples derive authority from, and are regulated by,
the Administrator. The Administrator has the right to promulgate rules
and regulations necessary for the supervision and regulation of state
savings banks under his jurisdiction and for the protection of the
public investing in such institutions. The regulatory authority of the
Administrator includes, but is not limited to, the establishment of
reserve requirements; the regulation of the payment of dividends; the
regulation of incorporators, shareholders, directors, officers and
employees; the establishment of permitted types of withdrawable accounts
and types of contracts for savings programs, loans and investments; and
the regulation of the conduct and management of savings banks,
chartering and branching of institutions, mergers, conversions and
conflicts of interest. North Carolina law requires that Summit and
Peoples maintain federal deposit insurance as a condition of doing
business.
The Administrator conducts regular annual examinations of
Summit and Peoples as well as other state-chartered savings institutions
in North Carolina. The purpose of such examinations is to insure that
institutions are being operated in compliance with applicable North
Carolina law and regulations and in a safe and sound manner. These
examinations are usually conducted on a joint basis with the FDIC. In
addition, the Administrator is required to conduct an examination of any
institution when he has good reason to believe the standing and
responsibility of the institution is of doubtful character or when he
otherwise deems it prudent. The Administrator is empowered to order the
revocation of the license of an institution if he finds that it has
violated or is in violation of any North Carolina law or regulation and
that revocation is necessary in order to preserve the assets of the
institution and protect the interests of its depositors. The
Administrator has the power to issue cease and desist orders if any
person or institution is engaging in, or has engaged in, any unsafe or
unsound practice or unfair and discriminatory practice in the conduct of
its business or in violation of any other law, rule or regulation.
Subject to limitation by the Administrator, North
Carolina-chartered savings institutions may make any loan or investment
or engage in any activity which is permitted to federally chartered
institutions. In addition to such lending authority, North
Carolina-chartered savings banks are authorized to invest funds, in
excess of loan demand, in certain statutorily permitted investments.
Additionally, a North Carolina-chartered savings bank is required to
maintain general valuation allowances and specific loss reserves in the
same amounts as required by the federal regulators.
In connection with the conversions of Summit and Peoples from
mutual to stock form, each subsidiary established a liquidation account
for the benefit of certain eligible account holders who maintained their
accounts in Summit or Peoples. In the event of a complete liquidation of
either Summit or Peoples, such account holders would be entitled to
receive liquidating distributions of any assets remaining after payment
of all creditors' claims (including claims of
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all depositors to the withdrawal values of their deposit accounts,
including accrued interest) before any distributions are made on Allied
Stock, equal to such holders' proportion interest in the remaining
liquidation account balance in accordance with the regulations of the
Administrator. The Merger is not considered to be a liquidation of
Allied or Summit or Peoples and as such will not affect the liquidation
accounts at Summit or Peoples. Upon consummation of the Merger,
BancShares will assume the liquidation accounts and the obligations of
Summit and Peoples related thereto.
CAPITAL REQUIREMENTS
In December 1988, the Federal Reserve approved final risk-based
capital guidelines for bank holding companies, such as BancShares and
Allied, and state member banks. The new guidelines, which became
effective on March 15, 1989, were phased in over four years and are
based on the capital framework for international banking organizations
developed by the Basle Committee on Banking Regulations and Supervisory
Practices. The FDIC also has adopted substantially similar guidelines
for state banks that are not members of the Federal Reserve System, such
as First Citizens Bank.
When the rules were fully phased-in at the end of 1992, the
minimum standard for the ratio of capital to risk-weighted assets,
including certain off-balance sheet obligations, such as standby letters
of credit, became 8%. At least half of this capital must consist of
common equity, retained earnings, and a limited amount of perpetual
preferred stock, less certain goodwill items ("Tier 1 capital"). The
remainder ("Tier 2 capital") may consist of a limited amount of other
preferred stock, subordinated debt and a limited amount of loan loss
reserves.
The Federal Reserve also has adopted, effective after December
31, 1990 a minimum (leverage) ratio of Tier 1 capital to total assets of
3%. The 3% Tier 1 capital to total assets ratio constitutes the leverage
standard for bank holding companies and state member banks, and will be
used in conjunction with the risk-based ratio in determining the overall
capital adequacy of banking organizations. In proposing such standards,
the Federal Reserve emphasized that in all cases the suggested standards
are supervisory minimums and that an institution would be permitted to
maintain such minimum levels of capital only if it were a strong banking
organization, rated composite one under the CAMEL rating system for
banks or the BOPEC rating system for bank holding companies. The Federal
Reserve noted that most expansion- oriented banking organizations have
maintained leverage capital ratios of between 4% and 5% of total assets,
and it is likely that these ratios will be applied to BancShares. The
FDIC also has adopted the 3% leverage ratio requirement effective April
10, 1991.
As of June 30, 1995, BancShares had Tier 1 risk-adjusted, Tier
2 and leverage capital of approximately 9.3%, 10.6% and 6.1%,
respectively, all in excess of the minimum requirements. After giving
effect to the Merger, at June 30, 1995, BancShares would have had Tier 1
risk-adjusted, Tier 2 and leverage capital of approximately 9.0%, 10.5%
and 5.9%, respectively, on a pro forma basis.
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RECENT BANKING LEGISLATION
In 1994, Congress passed the Interstate Banking Act. The
Interstate Banking Act permits adequately capitalized bank holding
companies to acquire control of banks in any state beginning in late
1995. States may require the bank being acquired to have been in
existence for a certain length of time, but not in excess of five years.
No bank may acquire more than ten percent of nationwide insured deposits
or thirty percent of any state's insured deposits. States have the right
to waive the thirty percent limit or legislate stricter deposit caps.
Beginning June 1, 1997, banks may establish a branch outside their home
state either by merger with an in-state bank or on a de novo basis under
the Interstate Banking Act. States may opt-in to such interstate
branching earlier or may opt-out of interstate branching by June 1,
1997. Under the Interstate Banking Act, establishing new branches in
another state will require that state's specific approval. North
Carolina passed legislation effective June 22, 1995, for early opt-in of
interstate branching. There can be no assurance as to what impact such
legislation or the Interstate Banking Act might have upon BancShares and
its subsidiaries.
The difficulties encountered nationwide by financial
institutions during the 1980s and early 1990s have prompted federal
legislation designed to reform the banking industry and to promote the
viability of the industry and of the deposit insurance system. Many of
the provisions of the new legislation did not become effective until
December 1993. In addition, many of the provisions will be implemented
through the adoption of regulations by the various federal banking
agencies. Accordingly, the precise effect of the legislation on
BancShares cannot be assessed at this time. Among such legislation was
the Federal Deposit Insurance Corporation Improvements Act of 1991
("FDICIA"), which became effective on December 19, 1991, and which
bolsters the deposit insurance fund, tightens bank regulation, and trims
the scope of federal deposit insurance as summarized below.
FDIC FUNDING. FDICIA bolsters the bank deposit insurance fund
with $70 billion in borrowing authority and increases to $30 billion
from $5 billion the amount the FDIC can borrow from the United States
Treasury to cover the costs of bank failures. The loans, plus interest,
would be repaid by premiums that banks pay on domestic deposits over the
next 15 years.
BANK REGULATION. Under FDICIA, regulatory supervision is linked
to bank capital. Regulators established five capital levels for banks,
ranging from "well capitalized" to "critically undercapitalized." See
"--Enforcement Powers" for a discussion of the five capital levels.
Regulatory action becomes mandatory as capital falls. In addition,
regulators have adopted a new set of non-capital measures of bank
safety, such as underwriting standards and minimum earnings levels,
which became effective on December 1, 1993. The legislation also
requires regulators to perform annual on-site bank examinations, place
limits on real estate lending by banks, and tighten auditing standards.
DEPOSIT INSURANCE. Effective January 1, 1994, FDICIA reduced
the scope of federal deposit insurance. The most significant change ends
the "too big to fail" doctrine under which the government protects all
deposits in most banks, including those exceeding the $100,000 insurance
limit. The FDIC's ability to reimburse uninsured deposits -- those over
$100,000 -- was sharply limited. Beginning in December 1993, the Federal
Reserve's ability to finance banks with extended loans from its discount
window also was restricted. In addition, only the best
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capitalized banks are able to offer insured brokered deposits or to
insure accounts established under employee pension plans. The
legislation instructed the FDIC to change the way it assesses banks for
deposit insurance, moving from flat premiums to fees that require banks
engaging in risky practices to pay higher premiums than conservatively
managed banks.
Effective January 1, 1994, the FDIC increased the annual
deposit insurance assessment for all covered banks and thrifts thereby
implementing the risk-related deposit insurance system required by
FDICIA. Under the FDIC risk-related deposit insurance system, each
insured depository institution is assigned to one of the three
categories, "well capitalized," "adequately capitalized," or
"undercapitalized" as defined in regulations promulgated pursuant to
FDICIA by the Federal Reserve, the FDIC, and the other federal bank
regulatory agencies. These categories are subdivided into three
subgroups based upon the FDIC's evaluations of the risk posed by the
depository institution, based in part on examinations by the
institution's primary federal and/or state regulator. The risk-related
system initially provided for assessments ranging from 0.23% for the
strongest institution and 0.31% for the weakest institutions. Effective
July 1, 1995, the FDIC reduced assessments to 0.04% for the strongest
banks. The new regulation leaves unchanged the 0.31% assessment rate for
the weakest banks and does not affect the deposit premiums paid on
SAIF-insured deposits.
Various proposals are currently being considered by committees
of the United States Congress concerning a possible merger of the SAIF
and BIF of the FDIC. One of the principal issues under discussion is the
amount of additional funds needed to recapitalize the SAIF prior to such
a merger. Substantially all of the proposals under consideration
contemplate a one-time special assessment to be levied on SAIF-insured
deposits, which assessment has ranged from $.66 to $.85 per $100 of
SAIF-insured deposits maintained by the institution assessed. In
addition, the varoius proposals differ as to whether the proposed
assessment will be deductible for tax purposes by the institution
assessed. At March 31, 1995, First Citizens Bank had approximately $1.7
billion of SAIF-insured deposits which would be subject to such a
special assessment. Due to the uncertainty as to which, if any, of the
various proposals will be adopted and the ultimate amount and tax
deductibility of the assessment to be levied on First Citizens Bank, the
impact of the proposals and the assessment on First Citizens Bank is
impossible to predict with certainty at this time.
ENFORCEMENT POWERS
Congress has provided the federal bank regulatory agencies with
an array of powers to enforce laws, rules, regulations, and orders.
Among other things, the agencies may require that institutions cease and
desist from certain activities, may preclude persons from participating
in the affairs of insured depository institutions, may suspend or remove
deposit insurance, and may impose civil money penalties against
institution-affiliated parties for certain violations.
Among other things, FDICIA required the federal banking
agencies to take "prompt corrective action" in respect of banks that do
not meet minimum capital requirements. FDICIA established five capital
tiers: "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized," as
defined by regulations promulgated by the Federal Reserve, the FDIC, and
the other federal depository institution regulatory agencies. A
depository institution is well capitalized if it significantly exceeds
the
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minimum level required by regulation for each relevant capital
measure, adequately capitalized if it meets each such measure,
undercapitalized if it fails to meet any such measure, significantly
undercapitalized if it is significantly below such measure and
critically undercapitalized if it fails to meet any critical capital
level set forth in the regulations. The critical capital level must be a
level of tangible equity capital equal to not less than 2% of total
assets and not more than 65% of the minimum leverage ratio prescribed by
regulation (except to the extent that 2% would be higher than such 65%
level). An institution may be deemed to be in a capitalization category
that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
POSSIBLE LEGISLATIVE CHANGES
Legislative and regulatory proposals regarding changes in
banking, and the regulation of banks, savings institutions, and other
financial institutions, are considered from time to time by the
executive branch of the federal government, Congress, and various state
governments, including North Carolina, West Virginia and Virginia.
Certain of these proposals, if adopted, could significantly change the
regulation of banks, savings institutions, and the financial services
industry generally. It cannot be predicted whether any of these
proposals will be adopted, and, if adopted, how these will affect
BancShares and its subsidiaries and Allied and its subsidiaries.
EFFECT OF GOVERNMENTAL POLICIES
The earnings and business of BancShares and Allied are and will
be affected by the policies of various regulatory authorities of the
United States, especially the Federal Reserve. The Federal Reserve,
among other functions, regulates the supply of credit in response to
general economic conditions within the United States. The instruments of
monetary policy employed by the Federal Reserve for these purposes
influence in various ways the overall level of investments, loans, other
extensions of credit and deposits, and the interest rates paid on
liabilities and received on assets.
CAPITAL STOCK OF BANCSHARES
The 13,000,000 shares of capital stock authorized by the
Certificate of Incorporation of BancShares are divided into two classes
of common stock consisting of 11,000,000 shares of BancShares Common
Stock and 2,000,000 shares of Class B common stock, par value $1.00 per
share ("Class B Stock"). Assuming that holders of 55% of the shares of
Allied Stock elect to receive BancShares Common Stock rather than cash
in the Merger and that such shares are converted into shares of
BancShares Common Stock at an Exchange Ratio equal to 0.531, it is
anticipated that 656,409 shares of BancShares Common Stock will be
issued in the Merger, resulting in approximately 9,577,545 shares of
BancShares Common Stock outstanding immediately after completion of the
Merger.
The following is a brief summary of BancShares Common Stock and
Class B Stock, the relevant provisions of Delaware law and BancShares'
Certificate of Incorporation and Bylaws. The following discussion is not
intended to be a complete description of BancShares Common Stock and
Class B Stock and is qualified in its entirety by reference to the
Delaware General Corporation Law and BancShares' Certificate of
Incorporation and Bylaws. SHARES OF
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BANCSHARES COMMON STOCK AND CLASS B STOCK ARE NOT, AND CANNOT BE,
INSURED BY THE FDIC.
VOTING RIGHTS
The holders of BancShares Common Stock and Class B Stock
generally will possess exclusive voting rights in BancShares. Each
holder of BancShares Common Stock will be entitled to one vote for each
share held of record, and each holder of Class B Stock will be entitled
to 16 votes for each share so held. Except as otherwise provided by
Delaware law, the vote of a majority of shares voting on any matter is
necessary for approval by the stockholders. Holders of BancShares Common
Stock and Class B Stock are not entitled to cumulative voting rights
and, therefore, holders of a majority of shares voting in the election
of directors may elect the entire Board of Directors at a stockholders'
meeting at which a quorum is present. In that event, holders of the
remaining shares will not be able to elect any director to the Board of
Directors.
DIVIDEND RIGHTS
Holders of BancShares Common Stock and Class B Stock are
entitled to receive dividends when, as, and if declared by the Board of
Directors out of funds legally available therefor. Dividends may be
declared on BancShares Common Stock without dividends being declared on
the Class B Stock, and vice versa. Similarly, dividends declared and
paid on the BancShares Common Stock need not be equal in an amount to
any dividends paid on the Class B Stock, and vice versa.
PREEMPTIVE RIGHTS
Holders of BancShares Common Stock and Class B Stock do not
have any preemptive or preferential right to purchase or subscribe for
any additional share thereof of BancShares common stock or any other
securities that may be issued by BancShares. Therefore, after completion
of the Merger, the Board of Directors may sell shares of BancShares
capital stock without first offering such shares to the existing
shareholders of BancShares.
ASSESSMENT AND REDEMPTION
The shares of BancShares Common Stock and Class B Stock
presently outstanding are, and the shares of BancShares Common Stock
that will be issued in connection with the Merger will be, fully paid
and nonassessable. There is no provision for redemption or conversion of
BancShares Common Stock or Class B Stock.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution, or winding-up of
BancShares, whether voluntary or involuntary, the holders of BancShares
Common Stock and Class B Stock would be entitled to share ratably in any
of the net assets or funds available for distribution to stockholders
after the satisfaction of all liabilities, or after adequate provision
is made therefor. The form of
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distribution would depend upon the nature of the liquidation and the
assets of BancShares at that time.
CERTAIN DIFFERENCES IN THE RIGHTS OF HOLDERS
OF ALLIED STOCK AND BANCSHARES COMMON STOCK
Upon consummation of the Merger, shareholders of Allied, other
than those shareholders who elect or are deemed to have elected under
the Agreement to receive cash or Debentures in lieu of BancShares Common
Stock for their shares or who exercise dissenters' rights, will become
shareholders of BancShares. Certain legal distinctions exist between
owning BancShares Common Stock and Allied Stock.
Allied is a North Carolina business corporation and the rights
of the holders of Allied Stock are governed by Chapter 55 of the North
Carolina General Statutes which is applicable to North Carolina business
corporations ("Chapter 55"). BancShares is a Delaware business
corporation and the rights of the holders of BancShares Common Stock are
governed solely by Delaware law.
Because of differences between North Carolina law and Delaware
law, the Merger will result in certain changes in the rights of Allied's
shareholders who receive BancShares Common Stock in exchange for their
Allied Stock. While it is not practical to describe all differences,
those basic differences which, in the opinion of Allied's management,
will have the most significant effect on the rights of Allied's
shareholders if they become shareholders of BancShares are discussed
below.
THE FOLLOWING IS ONLY A GENERAL SUMMARY OF CERTAIN DIFFERENCES
IN THE RIGHTS OF HOLDERS OF BANCSHARES COMMON STOCK AND THOSE OF HOLDERS
OF ALLIED STOCK. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN LEGAL
COUNSEL WITH RESPECT TO SPECIFIC DIFFERENCES AND CHANGES IN THEIR RIGHTS
AS SHAREHOLDERS WHICH WILL RESULT FROM THE PROPOSED MERGER.
VOTING RIGHTS
Each holder of BancShares Common Stock is entitled to one vote
for each share held of record, and each holder of BancShares' Class B
Stock is entitled to 16 votes for each share so held. The holders of
BancShares Common Stock and Class B Stock generally will possess
exclusive voting rights in BancShares. Except as otherwise provided by
Delaware law, the vote of a majority of shares voting on any matter is
necessary for approval by the stockholders. Holders of BancShares Common
Stock will not be entitled to cumulative voting rights and, therefore,
holders of a majority of shares voting in the election of directors may
elect an entire Board of Directors at a shareholders' meeting at which a
quorum is present. In that event, holders of the remaining shares will
not be able to elect any director to the Board of Directors.
Each holder of Allied Stock is entitled to one vote per share.
The holders of Allied Stock possess exclusive voting rights in Allied.
Except as otherwise provided by North Carolina law, the vote of a
majority of shares voting on any matter is necessary for approval by the
stockholders. Holders of Allied Stock are not entitled to cumulative
voting rights and, therefore, holders of a majority of shares voting in
the election of directors may elect an entire Board of
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Directors at a shareholders' meeting at which a quorum is present. In
that event, holders of the remaining shares will not be able to elect
any director to the Board of Directors.
DIVIDENDS
The shareholders of BancShares and Allied are entitled to
dividends when and if declared by their respective Boards of Directors,
subject to the restrictions described below. Pursuant to Chapter 55,
Allied is authorized to pay dividends as are declared by its Board of
Directors, provided that no such distribution results in its insolvency
on a going concern or balance sheet basis. Subject to certain
restrictions under Delaware law, dividends may be paid from BancShares'
surplus or from its net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year. See "MARKET
PRICES AND DIVIDENDS."
INDEMNIFICATION
BANCSHARES. Delaware's General Corporation Law, Del. Code Ann.
Title 8 ss.ss.101 et seq. (the "General Corporation Law"), contains
provisions prescribing the extent to which directors and officers shall
or may be indemnified. Section 145(a) and (b) of the General Corporation
Law permit a corporation, with certain exceptions, to indemnify a
current or former officer or director against liability if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, he had no reasonable cause to believe
his conduct was unlawful. A corporation may not indemnify him in
connection with a proceeding by or in the right of the corporation in
which he was adjudged liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the
case, he is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 144(c) of the General Corporation Law requires a
corporation to indemnify an officer or director in the defense of any
proceeding to which he was a party against expenses actually and
reasonably incurred to the extent that he is successful on the merits or
otherwise in his defense. Indemnification under Subsections (a) and (b)
of Section 145 of the General Corporation Law (unless ordered by a
court) shall be made by the corporation only upon a determination that
indemnification of the director or officer was proper under the
circumstances because he met the applicable standard of conduct set
forth in Sections (a) and (b). Such determination may be made by (i) the
Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such proceeding, (ii) if such quorum
is not obtainable, or, even if obtainable if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion,
or (iii) by the stockholders of the corporation.
In addition, Section 145 of the General Corporation Law permits
a corporation to provide for indemnification of directors and officers
in its Articles of Incorporation or Bylaws or by contract or otherwise,
against liability in various proceedings, and to purchase and maintain
insurance policies on behalf of these individuals.
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ALLIED. North Carolina law provides for the indemnification of
corporate directors and officers in accordance with the following
provisions:
PERMISSIBLE INDEMNIFICATION. Chapter 55 allows a corporation by
charter, bylaw, contract or resolution to indemnify or agree to
indemnify its officers, directors, employees and agents and any person
who is or was serving at the corporation's request as a director,
officer, employee or agent of another entity or enterprise or as a
trustee or administrator under an employee benefit plan, against
liability and expenses, including reasonable attorneys' fees, in any
proceeding (including without limitation a proceeding brought by or on
behalf of the corporation itself) arising out of their status as such or
their activities in any of the foregoing capacities as summarized
herein. Any provision in a corporation's charter or bylaws or in a
contract or resolution may include provisions for recovery from the
corporation of reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted
therein and may further include provisions establishing reasonable
procedures for determining and enforcing such rights.
The corporation may indemnify such person against expenses or
liability incurred only where such person conducted himself or herself
in good faith; reasonably believed (i) in the case of conduct in his or
her official corporate capacity, that his or her conduct was in the
corporation's best interests, and (ii) in all other cases, that his or
her conduct was at least not opposed to the corporation's best
interests; and, in the case of a criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful; provided,
however, that a corporation may not indemnify such person either in
connection with a proceeding by or in the right of the corporation in
which such person was adjudged liable to the corporation, or in
connection with any other proceeding charging improper personal benefit
to such person (whether or not involving action in an official capacity)
in which such person was adjudged liable on the basis that personal
benefit was improperly received.
MANDATORY INDEMNIFICATION. Unless limited by the corporation's
charter, Chapter 55 requires a corporation to indemnify a director or
officer of the corporation who is wholly successful, on the merits or
otherwise, in the defense of any proceeding to which such person was a
party because he or she is or was a director or officer of the
corporation against reasonable expenses incurred in connection with the
proceeding.
ADVANCE FOR EXPENSES. Expenses incurred by a director, officer,
employee or agent of the corporation in defending a proceeding may be
paid by the corporation in advance of the final disposition of the
proceeding as authorized by the board of directors in the specific case,
or as authorized by the charter or bylaws or by any applicable
resolution or contract, upon receipt of an undertaking by or on behalf
of such person to repay amounts advanced unless it ultimately is
determined that such person is entitled to be indemnified by the
corporation against such expenses.
COURT-ORDERED INDEMNIFICATION. Unless otherwise provided in the
corporation's charter, a director or officer of the corporation who is a
party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent jurisdiction.
On receipt of an application, the court, after giving any notice the
court deems necessary, may order indemnification if it determines either
(i) that the director or officer is
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entitled to mandatory indemnification as described above, in which case
the court also will order the corporation to pay the reasonable expenses
incurred to obtain the court-ordered indemnification, or (ii) that the
director or officer is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not such person
met the requisite standard of conduct or was adjudged liable to the
corporation in connection with a proceeding by or in the right of the
corporation or on the basis that personal benefit was improperly
received in connection with any other proceeding so charging (but if
adjudged so liable, indemnification is limited to reasonable expenses
incurred).
PARTIES ENTITLED TO INDEMNIFICATION. Chapter 55 defines
"director" to include ex-directors and the estate or personal
representative of a director. Unless its charter provides otherwise, a
corporation may indemnify and advance expenses to an officer, employee
or agent of the corporation to the same extent as to a director and also
may indemnify and advance expenses to an officer, employee or agent who
is not a director to the extent, consistent with public policy, as may
be provided in its charter or bylaws, by general or specific action of
its board of directors, or by contract.
INDEMNIFICATION BY BANCSHARES AND ALLIED. The Bylaws of
BancShares and Allied each provide for indemnification of its respective
directors and officers to the fullest extent permitted by law.
INDEMNIFICATION UNDER THE SECURITIES ACT. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling of BancShares or
Allied, BancShares and Allied have been informed that, in the opinion of
the Commission, such indemnification is against public policy expressed
in the Securities Act and is, therefore, unenforceable.
OPINIONS
The validity of the issuance of the BancShares Common Stock
will be passed upon by Ward and Smith, P.A., Raleigh, North Carolina.
Mr. John A. J. Ward and Mr. David L. Ward, Jr., shareholders of Ward and
Smith, P.A., have a direct interest in BancShares stemming from
ownership of its common stock. David L. Ward, Jr. also serves on the
Board of Directors of BancShares. Poyner & Spruill, L.L.P., Rocky Mount,
North Carolina has served as counsel to Allied in connection with the
Merger and will pass upon certain matters on behalf of Allied.
The federal and North Carolina income tax consequences of the
Merger have been passed upon by KPMG Peat Marwick LLP, Raleigh, North
Carolina.
EXPERTS
The consolidated financial statements of First Citizens
BancShares, Inc. and subsidiaries as of December 31, 1994 and 1993 and
for each of the years in the three-year period ended December 31, 1994,
have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The consolidated statements of financial condition of Allied
Bank Capital, Inc. as of December 31, 1994 and 1993, and the
consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the two years in the period ended December 31,
1994 and for the three month period ended December 31, 1992 incorporated
by reference in this registration statement, have been incorporated
herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts
in accounting and auditing.
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The consolidated financial statements of Allied for the
one-year period ended September 30, 1992, incorporated by reference in
this Prospectus/Proxy Statement have been audited by Deloitte & Touche,
LLP, independent auditors, as stated in their report incorporated by
reference herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and
auditing.
PROPOSALS OF SHAREHOLDERS
If the Merger is not consummated for any reason, Allied expects
to hold its 1996 annual meeting of shareholders in April 1996. In such
event, any proposal of a shareholder that is intended to be presented at
the 1996 annual meeting of shareholders must be received by Allied at
its main office in Sanford, North Carolina no later than November 10,
1995 in order that any such proposal be timely received for inclusion in
the proxy statement and appointment of proxy to be issued in connection
with such meeting.
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APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
<PAGE>
AGREEMENT AND PLAN
OF REORGANIZATION AND MERGER
BY AND BETWEEN
ALLIED BANK CAPITAL, INC.
AND
FIRST CITIZENS BANCSHARES, INC.
AUGUST 7, 1995
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND BETWEEN
ALLIED BANK CAPITAL, INC.
AND
FIRST CITIZENS BANCSHARES, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
(hereinafter called "Agreement") is entered into as of the 7th day
of August, 1995, by and between ALLIED BANK CAPITAL, INC.
("Allied") and FIRST CITIZENS BANCSHARES, INC. ("BancShares").
WHEREAS, Allied is a North Carolina business
corporation with its principal office and place of business located in
Sanford, North Carolina; and,
WHEREAS, Allied is the sole shareholder of Peoples
Savings Bank, Inc., SSB, a North Carolina savings bank with its
principal office and place of business located in Wilmington, North
Carolina ("Peoples") and Summit Savings Bank, Inc., SSB, a North
Carolina savings bank with its principal office and place of business
located in Sanford, North Carolina ("Summit") (such subsidiary
corporations being sometimes referred to herein collectively as the
"Subsidiaries"); and,
WHEREAS, BancShares is a Delaware business corporation
with its principal office and place of business located in Raleigh,
North Carolina; and,
WHEREAS, BancShares is the sole shareholder of
First-Citizens Bank & Trust Company, a North Carolina banking
corporation with its principal office and place of business located in
Raleigh, North Carolina ("FCB"); and,
WHEREAS, BancShares and Allied have agreed that it is
in their mutual best interests and in the best interests of their
respective shareholders for Allied to be merged with and into BancShares
(the "Merger") with the effect that each of the outstanding shares of
Allied's $0.50 par value common stock ("Allied Stock") will be converted
into newly issued shares of BancShares' $1.00 par value Class A common
stock ("BancShares Stock") or the right to receive cash or a debenture
as described in Paragraph 1.5.a. below, all in the manner and upon the
terms and conditions contained in this Agreement; and,
WHEREAS, to effectuate the foregoing, BancShares and
Allied desire to adopt this Agreement as a plan of reorganization in
accordance with the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended; and,
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WHEREAS, Allied's Board of Directors has approved this
Agreement and will recommend to Allied's shareholders that they approve
the transactions described herein; and,
WHEREAS, BancShares' Board of Directors has approved
this Agreement and the transactions described herein, including the
issuance by BancShares of shares of its common stock to Allied's
shareholders to effectuate such transactions.
NOW, THEREFORE, in consideration of the premises, the
mutual benefits to be derived from this Agreement, and of the
representations, warranties, conditions, covenants and promises herein
contained, and subject to the terms and conditions hereof, Allied and
BancShares hereby adopt and make this Agreement and mutually agree as
follows:
ARTICLE I. PLAN OF MERGER
1.1. NAMES OF MERGING CORPORATIONS. The names of the
business corporations proposed to be merged are ALLIED BANK CAPITAL,
INC. ("Allied") and FIRST CITIZENS BANCSHARES, INC. ("BancShares").
1.2. NATURE OF TRANSACTION. Subject to the provisions of
this Agreement, at the "Effective Time" (as defined in Paragraph 1.8.
below), Allied shall be merged into and with BancShares (the "Merger").
1.3. EFFECT OF MERGER; SURVIVING CORPORATION. At the Effective
Time and by reason of the Merger, the separate corporate existence of
Allied shall cease while the corporate existence of BancShares as the
surviving corporation in the Merger shall continue with all of its
purposes, objects, rights, privileges, powers and franchises, all of
which shall be unaffected and unimpaired by the Merger. The duration of
the corporate existence of BancShares, as the surviving corporation,
shall be perpetual and unlimited.
1.4. ASSETS AND LIABILITIES OF ALLIED. At the Effective Time
and by reason of the Merger, and in accordance with applicable law, all
of the property, assets and rights of every kind and character of Allied
(including without limitation all real, personal or mixed property, all
issued and outstanding shares of capital stock of Peoples and Summit,
all debts due on whatever account, all other choses in action and every
other interest of or belonging to or due to Allied, whether tangible or
intangible) shall be transferred to and vest in BancShares, and
BancShares shall succeed to all the rights, privileges, immunities,
powers, purposes and franchises of a public or private nature of Allied,
all without any conveyance, assignment or further act or deed; and,
BancShares shall become responsible for all of the liabilities, duties
and obligations of every kind, nature and description of Allied as of
the Effective Time. Immediately following the Merger, Peoples and Summit
shall exist as wholly-owned subsidiaries of BancShares.
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1.5. CONVERSION AND EXCHANGE OF STOCK.
A. CONVERSION OF ALLIED STOCK. Except as otherwise
provided herein, at the Effective Time all rights of Allied's
shareholders with respect to all then outstanding shares of Allied Stock
shall cease to exist and the holders of shares of Allied Stock shall
cease to be, and shall have no further rights as, shareholders of
Allied. As consideration for and to effectuate the Merger (and except as
otherwise provided herein), each such outstanding share of Allied Stock
(other than shares held by Allied, BancShares or any of their subsidiary
corporations or as to which "Dissenters Rights" (as defined in Paragraph
1.5.h. below) are properly exercised as described in Paragraph 1.5.h.
below) shall be converted, without any action on the part of the holder
of such share, BancShares or Allied, into (I) a number of shares of
BancShares Stock equal to the "Exchange Ratio" (as defined below), (II)
the right to receive cash in an amount equal to the "Cash Factor" (as
defined below), or (III) the right to receive one or more "Debentures"
(as defined below) in an aggregate principal amount equal to the "Cash
Factor". Except as otherwise provided herein, the form of consideration
into which each individual shareholder's shares of Allied Stock will be
converted will be determined in the manner described in Paragraphs
1.5.b. and 1.5.c. below.
The "Cash Factor" shall be $25.25 per share of Allied
Stock. The "Exchange Ratio" shall be .531 of a share of BancShares Stock
for each share of Allied Stock. However, notwithstanding anything
contained herein to the contrary, (I) in the event the "Average Closing
Price" (as defined below) is less than $45.13 per share, then the
Exchange Ratio shall be adjusted by multiplying the Exchange Ratio by a
factor equal to $45.13 divided by the Average Closing Price, and (II) in
the event the "Average Closing Price" is greater than $49.88 per share,
then the Exchange Ratio shall be adjusted by multiplying the Exchange
Ratio by a factor equal to $49.88 divided by the Average Closing Price.
In any such event the adjusted Exchange Ratio shall be a number
calculated as described above and rounded to three decimal places.
"Average Closing Price" shall mean the average of the reported daily
closing prices of BancShares Stock on the Nasdaq National Market during
the period of ten consecutive trading days ending on the business day
immediately preceding the date of the special meeting of shareholders of
Allied called (as provided in Paragraph 6.1.a. below) for the purpose of
approving this Agreement and the Merger.
Notwithstanding anything contained herein to the
contrary, if during the period commencing on the date of this Agreement
and ending at the Effective Time Allied declares or pays cash dividends
in an aggregate amount in excess of $.12 per share per calendar quarter
or makes any other distributions on Allied Stock (collectively, the
"Cash Distributions"), then, for purposes of this Agreement, the Cash
Factor and the Exchange Ratio shall be reduced by the per share amount
of any such Cash Distributions.
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A "Debenture" shall be an unsecured, subordinated
debenture of FCB having a maturity of three, five or ten years from the
Effective Time and substantially in the form attached hereto as Schedule
A. Each Debenture shall bear interest on its principal amount from the
Effective Time to maturity at a rate of 7.00% for three-year Debentures,
7.25% for five-year Debentures, and 7.50% for ten-year Debentures.
Interest shall be payable semi-annually on each March 1 and September 1.
The principal amount of each Debenture shall be a whole dollar amount,
and, whenever the aggregate cash value to be represented by a Debenture
would be other than a whole dollar amount, the amount of the Debenture
shall be rounded upwards to the next whole dollar.
b. ELECTION OF CONSIDERATION. By written notice to
BancShares in the manner described below, Allied's shareholders
individually may elect the form of consideration (shares of BancShares
Stock, the right to receive cash, or the right to receive a Debenture)
into which all their respective shares of Allied Stock will be converted
at the Effective Time as provided in Paragraph 1.5.a. above (and, in the
case of Debentures, Allied's shareholders may select the maturity or
maturities of the Debenture(s) to be received). Within ten days
following approval of this Agreement and the Merger by Allied's
shareholders, Allied will mail written instructions to each of its
shareholders regarding the making of an election, together with a form
(a "Notice of Election") which each shareholder shall be required to use
for purposes of such election. Allied's instructions shall specify a
date by which a shareholder's election must be made (the "Election
Date", which shall be set by BancShares but which, in no event, shall be
less than 15 or more than 30 days following the date the above
instructions and form are first distributed to Allied's shareholders).
The above instructions and Notice of Election distributed to Allied's
shareholders shall be provided by and in a form satisfactory to
BancShares.
In order to make an effective election, a shareholder
must deliver to BancShares a properly completed Notice of Election on or
before the close of its business on the Election Date and in accordance
with BancShares' instructions. Each shareholder may elect only one form
of consideration as to all shares of Allied Stock held by the
shareholder. Any shareholder who does not make an election or whose
Notice of Election is not timely received by BancShares or otherwise is
not made in accordance with BancShares' instructions will be deemed to
have elected that all shares of the shareholder's Allied Stock be
converted into the right to receive cash.
c. LIMIT ON ELECTION; PRORATION OF CASH,
DEBENTURES AND BANCSHARES STOCK. Notwithstanding anything contained
herein to the contrary, in no event shall shares of BancShares Stock be
issued (whether pursuant to shareholders' elections or proration) for
more
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than 55% or for less than 40% of the total outstanding shares of Allied
Stock.
(i) In the event the aggregate number of
shares of Allied Stock held by Allied's shareholders who have
effectively elected as provided above to receive shares of BancShares
Stock is more than 55% of the total outstanding shares of Allied Stock,
then, in the case of those shareholders who effectively have elected
(and who are deemed to have elected) to receive BancShares Stock,
BancShares will reduce on a pro rata basis the numbers of shares of
Allied Stock held by such shareholders for which BancShares Stock will
be issued such that the aggregate number of shares of Allied Stock for
which BancShares Stock will be issued is not more than 55% of the total
outstanding shares of Allied Stock; and, the number of remaining shares
held by each such shareholder for which BancShares Stock will be not be
issued will be converted into either cash or a Debenture (having a term
of five years) as provided in Paragraph 1.5.a. above, at the option of
the affected shareholder; and/or,
(ii) In the event the aggregate number of
shares of Allied Stock held by Allied's shareholders who have
effectively elected (and who are deemed to have elected) as provided
above to receive BancShares Stock and/or who have properly exercised
their Dissenters Rights is less than 40% of the total outstanding shares
of Allied Stock, then, in the case of those shareholders who effectively
have elected to receive Debentures, BancShares will reduce on a pro rata
basis the numbers of shares of Allied Stock held by such shareholders to
be converted into Debentures such that the aggregate number of shares of
Allied Stock to be converted into BancShares Stock is not less than 40%
of the total outstanding shares of Allied Stock; provided, further, that
if after such proration of Allied Stock the aggregate number of shares
of Allied Stock held by Allied's shareholders who have effectively
elected as provided above (or who have been deemed to have elected) to
receive BancShares Stock is less than 40% of the total outstanding
shares of Allied Stock, then, in the case of those shareholders who
effectively have elected (and who are deemed to have elected) to receive
cash, BancShares will reduce on a pro rata basis the number of shares of
Allied Stock held by such shareholders to be converted into cash such
that the aggregate number of shares of Allied Stock to be converted into
BancShares Stock is not less than 40% of the outstanding shares of
Allied Stock; and, the number of remaining shares held by each such
shareholder which will not be converted into cash or Debentures,
respectively, will be converted into the right to receive BancShares
Stock as provided in Paragraphs 1.5.a. and 1.5.b. above.
d. EXCHANGE AND PAYMENT PROCEDURES. Following the
Effective Time, certificates representing shares of Allied Stock
outstanding at the Effective Time (herein sometimes referred to as
"Allied Certificates") shall evidence only the right of the registered
holder thereof to receive, and may be exchanged for, (I) the form of
consideration into which each individual shareholder's shares of Allied
Stock have been converted as determined based on
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that shareholder's election and in the manner described in Paragraphs
1.5.b. and 1.5.c. above, or (II) in the case of shareholders who
properly have exercised Dissenters Rights, cash in an amount determined
as provided in Paragraph 1.5.h. below.
At the Effective Time, BancShares shall issue and
deliver, or cause to be issued and delivered, to FCB, in its capacity as
the transfer agent of BancShares Stock (the "Transfer Agent"), cash,
certificates representing whole shares of BancShares Stock, and
Debentures, into which outstanding shares of Allied Stock have been
converted as provided above. As promptly as practicable following the
Effective Time, BancShares shall send or cause to be sent to each former
shareholder of Allied of record immediately prior to the Effective Time
written instructions and transmittal materials (a "Transmittal Letter")
for use in surrendering Allied Certificates to the Transfer Agent. Upon
the proper surrender and delivery to the Transfer Agent (in accordance
with BancShares' above instructions, and accompanied by a properly
completed Transmittal Letter) by a former shareholder of Allied of his
or her Allied Certificate(s), and in exchange therefor, the Transfer
Agent shall as soon as practicable, (I) in the case of a shareholder
whose Allied Stock has been converted into BancShares Stock or a
Debenture, issue, register and deliver to the shareholder a certificate
evidencing the number of shares of BancShares Stock, or a Debenture in
the aggregate principal amount, to which the shareholder is entitled
pursuant to Paragraph 1.5.a. above, and/or (II) in the case of a
shareholder whose Allied Stock has been converted into the right to
receive cash, issue and deliver to the shareholder a check in the amount
of cash to which the shareholder is entitled pursuant to Paragraph
1.5.a. above.
Following the Effective Time there shall be no further
transfers of Allied Stock on the stock transfer books of Allied or the
registration of any transfer of an Allied Certificate by any holder
thereof, and the surrender of each Allied Certificate as provided herein
must be made by or on behalf of its holder of record at the Effective
Time.
e. ANTIDILUTIVE ADJUSTMENTS. If, following the date of
this Agreement, BancShares shall change the number of outstanding shares
of BancShares Stock as a result of a dividend payable in shares of
BancShares Stock, a stock split, a reclassification or other subdivision
or combination of outstanding shares, and if the record date of such
event occurs prior to the Effective Time, then an appropriate and
proportionate adjustment will be made to increase the number of shares
of BancShares Stock to be issued in exchange for each of the shares of
Allied Stock.
f. TREATMENT OF FRACTIONAL SHARES. No scrip or
certificates representing fractional shares of BancShares Stock will be
issued to any former shareholder of Allied, and, except as provided
below, no such shareholder will have any right to vote or receive any
dividend or other distribution on, or any other right with respect to,
any fraction of a share of BancShares Stock resulting from the above
exchange. In the event the exchange of
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shares results in the creation of fractional shares, in lieu of the
issuance of fractional shares of BancShares Stock, BancShares will
deliver cash to the Transfer Agent in an amount equal to the aggregate
of all fractional shares multiplied by the Average Closing Price, and in
such event the Transfer Agent shall divide such cash among and remit it
(without interest) to the former shareholders of Allied in accordance
with their respective interests.
g. SURRENDER OF CERTIFICATES. Subject to Paragraph
1.5.i. below, no BancShares Stock certificate or cash shall be delivered
to any former shareholder of Allied unless and until such shareholder
shall have properly surrendered to the Transfer Agent the Allied
Certificate(s) formerly representing his or her shares of Allied Stock,
together with a properly completed Transmittal Letter in such form as
shall be provided to the shareholder by BancShares for that purpose.
Further, until such Allied Certificate(s) are so surrendered, no
dividend or other distribution payable to holders of record of
BancShares Stock as of any date subsequent to the Effective Time shall
be delivered to the holder of such Allied Certificate(s). However,
subject to prior escheatment under applicable law, upon the proper
surrender of such Allied Certificate(s) the Transfer Agent shall pay to
the registered holder of the shares of BancShares Stock represented by
such Allied Certificate(s) the amount of any such cash, dividends or
distributions which have accrued but remain unpaid with respect to such
shares. Neither Allied, BancShares nor the Transfer Agent shall have any
obligation to pay any interest on any such cash, dividends or
distributions for any period prior to such payment.
h. DISSENTERS. Any shareholder of Allied who properly
exercises the right of dissent and appraisal with respect to the Merger
as provided in Section 55-13-02 of the North Carolina General Statutes
("Dissenters Rights") shall be entitled to receive payment of the fair
value of his or her shares of Allied Stock in the manner and pursuant to
the procedures provided therein. Shares of Allied Stock held by persons
who exercise Dissenters Rights shall not be converted into BancShares
Stock or the right to receive cash or Debentures in the manner provided
in Paragraph 1.5.a. above. However, if any shareholder of Allied who
exercises Dissenters Rights shall fail to perfect his or her right to
receive cash as provided above, or effectively shall waive or lose such
right, then each of his or her shares of Allied Stock, at BancShares'
sole option, shall be deemed to have been converted into BancShares
Stock or the right to receive cash or Debentures as of the Effective
Time as provided in Paragraph 1.5.a. above.
i. LOST CERTIFICATES. Any shareholder of Allied whose
certificate evidencing shares of Allied Stock has been lost, destroyed,
stolen or otherwise is missing shall be entitled to receive a
certificate representing the shares of BancShares Stock to which he or
she is entitled in accordance with and upon compliance with conditions
imposed by the Transfer Agent or BancShares (including without
limitation a requirement that the shareholder provide a lost instruments
indemnity or surety bond in
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form, substance and amount satisfactory to the Transfer Agent and
BancShares).
j. OUTSTANDING BANCSHARES STOCK. The status of
the shares of BancShares Stock which are outstanding immediately prior
to the Effective Time shall not be affected by the Merger.
1.6. TREATMENT OF ALLIED STOCK OPTIONS. Allied shall trigger or
cause to be triggered at the Effective Time and for the benefit of
participating employees or directors, as the case may be, the limited
stock appreciation rights provided under the terms of the 1992 Incentive
Stock Option Plan, as amended, the 1993 Nonstatutory Stock Option Plan
for Independent Directors, and the 1992 Nonstatutory Stock Option Plan
for Independent Directors, with respect to any options under such plans
which are outstanding and unexercised at the Effective Time (and which
options shall be limited to not more than 563,164 shares of Allied
Stock). The fair market value of each share of Allied Stock for purposes
of determining the value of such rights shall be equal to the Cash
Factor pursuant to Section 1.5 of this Agreement. Allied shall deliver
payment to option holders on account of the exercise of limited stock
appreciation rights immediately prior to the Effective Time.
Notwithstanding the foregoing, Allied shall not be permitted to trigger
or cause to be triggered any limited stock appreciation rights with
respect to options that are not outstanding and unexercised as of the
date of this Agreement or which have been granted to employees or
directors not in employment of or service with Allied or the
Subsidiaries at the Effective Time. It is agreed that such cash payments
shall not be considered Cash Distributions.
1.7. CERTIFICATE OF INCORPORATION, BYLAWS AND MANAGEMENT. The
Certificate of Incorporation and Bylaws of BancShares in effect at the
Effective Time shall be the Certificate of Incorporation and Bylaws of
BancShares as the surviving corporation. The officers and directors of
BancShares in office at the Effective Time shall continue to hold such
offices until removed as provided by law or until the election or
appointment of their respective successors.
1.8. CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of BancShares in Raleigh, North Carolina, or at such other place
as BancShares shall designate, on a date mutually agreeable to Allied
and BancShares (the "Closing Date") after the expiration of any and all
required waiting periods following the effective date of required
approvals of the Merger by governmental or regulatory authorities (but
in no event more than 60 days following the expiration of all such
required waiting periods). At the Closing, BancShares and Allied shall
take such actions (including without limitation the delivery of certain
closing documents and the execution of a Certificate of Merger under
Delaware law) as are required herein and as otherwise shall be required
by law to consummate the Merger and cause it to become effective.
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<PAGE>
Subject to the terms and conditions set forth herein (including
without limitation the receipt of all required approvals of governmental
and regulatory authorities), the Merger shall become effective on the
date and at the time (the "Effective Time") specified in the Certificate
of Merger filed with the appropriate governmental body in accordance
with law; provided, however, that the Effective Time shall in no event
be more than ten days following the Closing Date.
1.9. NO APPROVAL OF MERGER BY SHAREHOLDERS OF BANCSHARES. As
BancShares is a Delaware corporation no approval of the shareholders of
BancShares is required, pursuant to Sections 251(f) and 252(e) of the
Delaware General Corporation Law, in as much as (i) this Agreement does
not amend in any respect the Certificate of Incorporation of BancShares,
(ii) each share of BancShares Stock and each share of BancShares Class B
common stock outstanding immediately prior to the Effective Time is to
be an identical outstanding share of BancShares after the Effective
Time, and (iii) the authorized unissued shares of BancShares Stock to be
issued under the Plan of Merger contained in this Agreement do not
exceed 20% of the shares of BancShares Stock outstanding immediately
prior to the Effective Time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF ALLIED
Except as otherwise specifically provided herein or as
"Previously Disclosed" to BancShares, Allied hereby makes the following
representations and warranties to BancShares. ("Previously Disclosed"
shall mean, as to Allied, the disclosure of information in a letter
delivered by Allied to BancShares specifically referring to this
Agreement and arranged in paragraphs corresponding to the Sections,
subsections and items of this Agreement applicable thereto, and which
letter has been delivered prior to the execution of this Agreement.
Information shall be deemed Previously Disclosed for the purpose of a
given Paragraph, subparagraph or item of this Agreement only to the
extent a specific reference thereto is made in connection with
disclosure of such information at the time of such delivery.)
2.1. ORGANIZATION; STANDING; POWER. Allied, Peoples and Summit
each (I) is duly organized and incorporated, validly existing and in
good standing (as a business corporation or a savings bank,
respectively) under the laws of the State of North Carolina; (II) has
all requisite power and authority (corporate and other) to own, lease
and operate its properties and to carry on its business as now is being
conducted; (III) is duly qualified to do business and is in good
standing in each other jurisdiction in which the character of the
properties owned, leased or operated by it therein or in which the
transaction of its business makes such qualification necessary, except
where failure so to qualify would not have a material adverse effect on
Allied; and, (IV) is not transacting business or operating any
properties owned or leased by it in violation of any provision of
federal, state or local law or any rule or regulation promulgated
thereunder, which violation would have a material adverse effect on
Allied.
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2.2. CAPITAL STOCK. Allied's authorized capital stock consists
of 5,000,000 shares of preferred stock, $1.00 par value per share, none
of which are issued and outstanding, and 20,000,000 shares of common
stock, $0.50 par value per share of which 2,258,194 shares are issued
and outstanding and constitute Allied's only outstanding securities.
Peoples' authorized capital stock consists of 10,000
shares of common stock, $1.00 par value ("Peoples Stock"), of which 100
shares are issued and outstanding and constitute Peoples' only
outstanding securities. All outstanding shares of Peoples Stock are
owned beneficially and of record by Allied.
Summit's authorized capital stock consists of
5,000,000 shares of preferred stock, none of which is issued and
outstanding, and 20,000,000 shares of common stock, no par value per
share ("Summit Stock"), of which 100 shares are issued and outstanding
and constitute Summit's only outstanding securities. All outstanding
shares of Summit Stock are owned beneficially and of record by Allied.
Each outstanding share of Allied Stock, Peoples Stock
and Summit Stock (I) has been duly authorized and is validly issued and
outstanding, and is fully paid and nonassessable, and (II) has been
issued in compliance with applicable requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and (III) has not been issued in
violation of the preemptive rights of any shareholder. The Allied Stock
has been registered with the Securities and Exchange Commission ("SEC")
under the Securities Exchange Act of 1934, as amended (the "1934 Act").
The Peoples Stock and the Summit Stock is not subject to the
registration and reporting requirements of the 1934 Act.
2.3. PRINCIPAL SHAREHOLDERS. No person or entity is known to
Allied to beneficially own, directly or indirectly, more than 5% of the
outstanding shares of Allied Stock.
2.4. SUBSIDIARIES. Peoples and Summit are Allied's only direct
subsidiaries (the "Subsidiaries"). The Subsidiaries have no direct
subsidiaries. Except for equity issues reflected in Allied's or a
Subsidiary's investment portfolio, Allied and the Subsidiaries do not
own any stock or other equity interest in any other corporation, service
corporation, joint venture, partnership or other entity.
2.5. CONVERTIBLE SECURITIES, OPTIONS, ETC. Allied and the
Subsidiaries do not have any outstanding (I) securities or other
obligations (including debentures or other debt instruments) which are
convertible into shares of Allied Stock, Peoples Stock or Summit Stock
or any other securities of Allied, Peoples or Summit, (II) options,
warrants, rights, calls or other commitments of any nature which entitle
any person to receive or acquire any shares of Allied Stock, Peoples
Stock
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or Summit Stock or any other securities of Allied, Peoples or Summit, or
(III) plan, agreement or other arrangement pursuant to which shares of
Allied Stock, Peoples Stock or Summit Stock or any other securities of
Allied, Peoples or Summit or options, warrants, rights, calls or other
commitments of any nature pertaining thereto, have been or may be
issued.
2.6. AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement
has been duly and validly approved by Allied's Board of Directors.
Subject only to approval of this Agreement by the shareholders of Allied
in the manner required by law (as contemplated by Paragraph 6.1.a.
below), (I) Allied has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations and agreements and
carry out the transactions described herein, (II) all corporate
proceedings and approvals required to authorize Allied to enter into
this Agreement and to perform its obligations and agreements and carry
out the transactions described herein have been duly and properly
completed or obtained, and (III) this Agreement constitutes the valid
and binding agreement of Allied enforceable in accordance with its terms
(except to the extent enforceability may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from
time to time in effect which affect creditors' rights generally, (B)
legal and equitable limitations on the availability of injunctive
relief, specific performance and other equitable remedies, and (C)
general principles of equity and applicable laws or court decisions
limiting the enforceability of indemnification provisions).
2.7. VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR
WAIVERS. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor compliance by
Allied with any of its obligations or agreements contained herein, will:
(I) conflict with or result in a breach of the terms and conditions of,
or constitute a default or violation under any provision of, the
Articles or Certificate of Incorporation or Bylaws, of Allied or either
of the Subsidiaries, or any material contract, agreement, lease,
mortgage, note, bond, indenture, license, or obligation or understanding
(oral or written) to which Allied or either of the Subsidiaries is bound
or by which any of them or its business, capital stock or any of its
properties or assets may be affected; (II) result in the creation or
imposition of any lien, claim, interest, charge, restriction or
encumbrance upon any of the properties or assets of Allied or either of
the Subsidiaries; (III) violate any applicable federal or state statute,
law, rule or regulation, or any judgment, order, writ, injunction or
decree of any court, administrative or regulatory agency or governmental
body; (IV) result in the acceleration of any obligation or indebtedness
of Allied or either of the Subsidiaries; or, (V) interfere with or
otherwise adversely affect the ability of Allied or either of the
Subsidiaries to carry on its business as presently conducted, or
interfere with or otherwise adversely affect the ability of either
BancShares or FCB to carry on such business after the Effective Time.
No consents, approvals or waivers are required to be obtained
from any person or entity in connection with Allied's execution and
delivery of this Agreement, or the performance of its obligations or
agreements or the consummation of the transactions
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described herein, except for required approvals of Allied's shareholders
as described in Paragraph 7.1.c. below and of governmental or regulatory
authorities as described in Paragraph 7.1.a. below.
2.8. ALLIED BOOKS AND RECORDS. Allied's and the Subsidiaries'
books of account and business records have been maintained in
substantial compliance with all applicable legal and accounting
requirements and in accordance with good business practices, and such
books and records are complete and reflect accurately in all material
respects Allied's and the Subsidiaries' respective items of income and
expense and all of their respective assets, liabilities and
stockholders' equity. The respective minute books of Allied and the
Subsidiaries accurately reflect in all material respects the corporate
actions which their respective shareholders and board of directors, and
all committees thereof, have taken during the time periods covered by
such minute books. All such minute books have been or will be made
available to BancShares and its representatives.
2.9. ALLIED REPORTS. Since January 1, 1990, Allied and the
Subsidiaries each has filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto,
that were required to be filed with (I) the Board of Governors of the
Federal Reserve System (the "FRB"), (II) the Federal Deposit Insurance
Corporation (the "FDIC"), (III) the Office of Thrift Supervision
("OTS"), (IV) the Administrator of the North Carolina Savings
Institutions Division (the "Administrator"), (V) the SEC (including all
reports required to be filed under the 1934 Act), or (VI) any other
governmental or regulatory authorities having jurisdiction over Allied
or the Subsidiaries, but not including Internal Revenue Service,
Department of Labor, or Pension Benefit Guarantee Corporation filings
that relate to tax or Employee Retirement Income Security Act of 1974
matters covered by Paragraph 2.11. and 2.25. below. All such reports,
registrations and statements filed by Allied or the Subsidiaries with
the FRB, the FDIC, the OTS, the Administrator, the SEC or other such
regulatory authority are collectively referred to herein as the "Allied
Reports." As of their respective dates, the Allied Reports complied in
all material respects with all the statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they were
filed and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading; and, none of Allied or the
Subsidiaries has been notified that any such Allied Reports were
deficient in any material respect as to form or content. Following the
date of this Agreement, Allied shall deliver to BancShares, simultaneous
with the filing thereof, a copy of each report, registration, statement
or other regulatory filing made by Allied, or the Subsidiaries with the
FRB, the FDIC, the OTS, the Administrator, the SEC or any other
regulatory authority.
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2.10. ALLIED FINANCIAL STATEMENTS. Allied has delivered to
BancShares a copy of (I) its audited consolidated balance sheets as of
December 31, 1993 and December 31, 1994, and its consolidated statements
of operations, changes in stockholders' equity and cash flows for the
years ended December 31, 1992, December 31, 1993 and December 31, 1994,
together with notes thereto (collectively, the "Allied Financial
Statements"), and (II) its unaudited consolidated balance sheet as of
June 30, 1995 and its statement of operations for the six months ended
June 30, 1995 (the "Allied Interim Financial Statements"); and,
following the date of this Agreement, Allied promptly will deliver to
BancShares all other annual or interim financial statements prepared by
or for Allied or the Subsidiaries. The Allied Financial Statements and
the Allied Interim Financial Statements (including any related notes and
schedules thereto) (I) are in accordance with Allied's books and
records, and (II) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated and present fairly Allied's consolidated financial
condition, assets and liabilities, results of operations, changes in
stockholders' equity and changes in cash flows as of the dates indicated
and for the periods specified therein. The Allied Financial Statements
have been audited by Coopers & Lybrand L.L.P., Allied's independent
certified public accountants.
2.11. TAX RETURNS AND OTHER TAX MATTERS. (I) Allied and each of
the Subsidiaries have timely filed or caused to be filed all federal,
state and local income tax returns and reports which are required by law
to have been filed, and, to the best knowledge and belief of management
of Allied, all such returns and reports were true, correct and complete
and contained all material information required to be contained therein;
(II) all federal, state and local income, profits, franchise, sales,
use, occupation, property, excise, withholding, employment and other
taxes (including interest and penalties), charges and assessments which
have become due from or been assessed or levied against Allied or either
of the Subsidiaries or their respective properties have been fully paid
or, if not yet due, a reserve or accrual which is adequate in all
material respects for the payment of all such taxes to be paid and the
obligation for such unpaid taxes is reflected on the Allied Financial
Statements; (III) the income, profits, franchise, sales, use,
occupation, property, excise, withholding, employment and other tax
returns and reports of Allied and the Subsidiaries have not been subject
to audit by the Internal Revenue Service (the "IRS") or the Department
of Tax and Revenue of the State of North Carolina in the last ten years
and neither Allied nor either of the Subsidiaries has received any
indication of the pendency of any audit or examination in connection
with any such tax return or report and have no knowledge that any such
return or report is subject to adjustment; and (IV) neither Allied nor
the Subsidiaries has executed any waiver or extended the statute of
limitations (or been asked to execute a waiver or extend a statute of
limitation) with respect to any tax year, the audit of any such tax
return or report or the assessment or collection of any tax.
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2.12. ABSENCE OF MATERIAL ADVERSE CHANGES OR CERTAIN OTHER
EVENTS.
(i) Since December 31, 1994, Allied
and the Subsidiaries have conducted their respective businesses only in
the ordinary course, and there has been no material adverse change, and
there has occurred no event or development and there currently exists no
condition or circumstance which, with the lapse of time or otherwise,
may or could cause, create or result in a material adverse change, in or
affecting the financial condition of Allied or either of the
Subsidiaries or in their results of operations, prospects, business,
assets, loan portfolio, investments, properties or operations.
(ii) Since December 31, 1994, and other
than in the ordinary course of its business, neither Allied nor either
of the Subsidiaries has incurred any material liability or engaged in
any material transaction or entered into any material agreement,
increased the salaries, compensation or general benefits payable to its
employees, suffered any loss, destruction or damage to any of its
properties or assets, or made a material acquisition or disposition of
any assets or entered into any material contract or lease.
2.13. ABSENCE OF UNDISCLOSED LIABILITIES. Allied and the
Subsidiaries do not have any liabilities or obligations, whether known
or unknown, matured or unmatured, accrued, absolute, contingent or
otherwise, whether due or to become due (including without limitation
tax liabilities or unfunded liabilities under employee benefit plans or
arrangements), other than (I) those reflected in the Allied Financial
Statements or the Allied Interim Financial Statements, or (II)
obligations or liabilities incurred in the ordinary course of their
business since June 30, 1995 and which are not, individually or in the
aggregate, material to Allied or the Subsidiaries.
2.14. COMPLIANCE WITH EXISTING OBLIGATIONS. Allied and the
Subsidiaries each has performed in all material respects all obligations
required to be performed by it under, and it is not in default in any
respect under, or in violation in any respect of, the terms and
conditions of its respective Articles or Certificate of Incorporation or
Bylaws, and/or any contract, agreement, lease, mortgage, note, bond,
indenture, license, obligation, understanding or other undertaking
(whether oral or written) to which it is bound or by which its business,
capital stock or any property or asset may be affected.
2.15. LITIGATION AND COMPLIANCE WITH LAW.
(a) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to the best
knowledge and belief of management of Allied and the Subsidiaries, any
facts or circumstances which reasonably could result in such), including
without limitation any such action by any governmental or regulatory
authority, which currently exist or are ongoing, pending or, to the best
knowledge and belief of
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management of Allied and the Subsidiaries, threatened, contemplated or
probable of assertion, against, relating to or otherwise affecting
Allied or the Subsidiaries or any of their properties, assets or
employees which, if determined adversely, could result in liability on
the part of Allied or either of the Subsidiaries for, or subject Allied
or either of the Subsidiaries to, monetary damages, fines or penalties
or an injunction, or which could have a material adverse effect on the
financial condition, results of operations, prospects, business, assets,
loan portfolio, investments, properties or operations of Allied or
either of the Subsidiaries or on the ability of Allied to consummate the
Merger.
(b) Allied and the Subsidiaries have all licenses,
permits, orders, authorizations or approvals ("Permits") of any federal,
state, local or foreign governmental or regulatory body that are
material to or necessary for the conduct of their business or to own,
lease and operate their properties; all such Permits are in full force
and effect; no violations are or have been recorded in respect of any
such Permits; and no proceeding is pending or, to the best knowledge of
management of Allied and the Subsidiaries, threatened or probable of
assertion to suspend, cancel, revoke or limit any Permit.
(b) Neither Allied nor either of the Subsidiaries is
subject to any supervisory agreement, enforcement order, writ,
injunction, capital directive, supervisory directive, memorandum of
understanding or other similar agreement, order, directive, memorandum
or consent of, with or issued by any regulatory or other governmental
authority (including without limitation the FRB, the FDIC or the
Administrator) relating to its financial condition, directors or
officers, employees, operations, capital, regulatory compliance or
otherwise; there are no judgments, orders, stipulations, injunctions,
decrees or awards against Allied or either of the Subsidiaries which in
any manner limit, restrict, regulate, enjoin or prohibit any present or
past business or practice of Allied or the Subsidiaries; and, neither
Allied nor either of the Subsidiaries has been advised and has no reason
to believe that any regulatory or other governmental authority or any
court is contemplating, threatening or requesting the issuance of any
such agreement, order, injunction, directive, memorandum, judgment,
stipulation, decree or award.
(d) Neither Allied nor either of the Subsidiaries is
in violation or default in any material respect under, and has complied
in all material respects with, all laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions or decrees of any court or
federal, state, municipal or other governmental or regulatory authority
having jurisdiction or authority over it or its business operations,
properties or assets (including without limitation all provisions of
North Carolina law relating to usury, the Consumer Credit Protection
Act, and all other laws and regulations applicable to extensions of
credit by the Subsidiaries) and, to the knowledge of Allied and the
Subsidiaries, there is no basis for any claim by any person or
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authority for compensation, reimbursement or damages or otherwise for
any violation of any of the foregoing.
2.16. REAL PROPERTIES. Allied has Previously Disclosed to
BancShares a listing of all real property owned or leased by Allied or
either of the Subsidiaries (including the Subsidiaries' banking
facilities and all other real estate or foreclosed properties, including
improvements, thereon owned by the Subsidiaries) (the "Real Property")
and all leases pertaining to any such Real Property to which Allied or
either of the Subsidiaries is a party (the "Real Property Leases"). With
respect to all Real Property owned by Allied or either of the
Subsidiaries, Allied or the Subsidiary has good and marketable fee
simple title to such Real Property and owns the same free and clear of
all mortgages, liens, leases, encumbrances, title defects and exceptions
to title other than (I) the lien of current taxes not yet due and
payable, and (II) such imperfections of title and restrictions,
covenants and easements (including utility easements) which do not
materially affect the value of the Real Property and which do not and
will not materially detract from, interfere with or restrict the present
or future use of the properties subject thereto or affected thereby.
With respect to each Real Property Lease (I) such lease is valid and
enforceable in accordance with its terms, (II) there currently exists no
circumstance or condition which constitutes an event of default by
Allied or either of the Subsidiaries (as lessor or lessee) or its
respective lessor or which, with the passage of time or the giving of
required notices will or could constitute such an event of default, and
(III) subject to any required consent of Allied or the Subsidiary's
lessor, each such Real Property Lease may be assigned to BancShares and
the execution and delivery of this Agreement does not constitute an
event of default thereunder.
To the best of the knowledge and belief of management
of Allied and the Subsidiaries, the Real Property (excluding other real
estate owned) complies in all material respects with all applicable
federal, state and local laws, regulations, ordinances or orders of any
governmental authority, including those relating to zoning, building and
use permits, and the Real Property (excluding other real estate owned)
may be used under applicable zoning ordinances for commercial banking
facilities as a matter of right rather than as a conditional or
nonconforming use.
All improvements and fixtures included in or on the
Real Property are in good condition and repair, ordinary wear and tear
excepted, and there does not exist any condition which interferes (or
will interfere after the Merger) with BancShares use or affects the
economic value thereof.
2.17. LOANS, ACCOUNTS, NOTES AND OTHER RECEIVABLES.
(a) All loans, accounts, notes and other
receivables reflected as assets on Allied's and the Subsidiaries' books
and records (A) have resulted from bona fide business transactions in
the ordinary course of the Subsidiaries' operations, (b) in all material
respects were made in accordance with the Subsidiaries' standard loan
policies and procedures, and (c) are owned by the
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Subsidiaries free and clear of all liens, encumbrances, assignments,
participation or repurchase agreements or other exceptions to title or
to the ownership or collection rights of any other person or entity.
(b) All records of the Subsidiaries regarding all
outstanding loans, accounts, notes and other receivables, and all other
real estate owned, are accurate in all material respects, and, with
respect to each loan which the Subsidiaries' loan documentation
indicates is secured by any real or personal property or property rights
("Loan Collateral"), such loan is secured by valid, perfected and
enforceable liens on all such Loan Collateral having the priority
described in the Subsidiaries' records of such loan.
(c) To the best knowledge of management of Allied and
the Subsidiaries, each loan reflected as an asset on Allied's and the
Subsidiaries' books, and each guaranty therefor, is the legal, valid and
binding obligation of the obligor or guarantor thereon, and no defense,
offset or counterclaim has been asserted with respect to any such loan
or guaranty.
(d) Allied has Previously Disclosed to BancShares (I)
a written listing of each loan, extension of credit or other asset of
the Subsidiaries which, as of June 30, 1995, is classified by the FRB,
the FDIC, the Administrator or by either of the Subsidiaries as "Loss,"
"Doubtful," "Substandard" or "Special Mention" (or otherwise by words of
similar import), or which either of the Subsidiaries has designated as a
special asset or for special handling or placed on any "watch list"
because of concerns regarding the ultimate collectibility or
deteriorating condition of such asset or any obligor or Loan Collateral
therefor, and (II) a written listing of each loan or extension of credit
of either of the Subsidiaries which, as of June 30, 1995, was past due
more than 60 days as to the payment of principal and/or interest, or as
to which any obligor thereon (including the borrower or any guarantor)
otherwise was in default, is the subject of a proceeding in bankruptcy
or otherwise has indicated any inability or intention not to repay such
loan or extension of credit. Each such listing is accurate and complete
as of the date indicated.
(e) The Subsidiaries' reserve for possible loan losses
(the "Loan Loss Reserve") has been established in conformity with GAAP,
sound banking practices and all applicable requirements, rules and
policies of the FRB, the FDIC and the Administrator and, in the best
judgment of management of Allied and the Subsidiaries, is reasonable in
view of the size and character of the Subsidiaries' loan portfolios,
current economic conditions and other relevant factors, and is adequate
to provide for losses relating to or the risk of loss inherent in the
Subsidiaries' loan portfolios and other real estate owned.
2.18. SECURITIES PORTFOLIO AND INVESTMENTS. All
securities owned by Allied and the Subsidiaries (whether owned of
record or beneficially) are held free and clear of all mortgages,
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liens, pledges, encumbrances or any other restriction or rights of any
other person or entity, whether contractual or statutory, which would
materially impair the ability of Allied or either of the Subsidiaries to
dispose freely of any such security and/or otherwise to realize the
benefits of ownership thereof at any time. There are no voting trusts or
other agreements or undertakings to which Allied or either of the
Subsidiaries is a party with respect to the voting of any such
securities. With respect to all "repurchase agreements" to which either
of the Subsidiaries has "purchased" securities under agreement to
resell, such Subsidiary has a valid, perfected first lien or security
interest in the government securities or other collateral securing the
repurchase agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt owed to
the Subsidiary which is secured by such collateral.
Except for fluctuations in the market values of United States
Treasury and agency or municipal securities, since June 30, 1995, there
has been no significant deterioration or material adverse change in the
quality, or any material decrease in the value, of Allied's or the
Subsidiaries' securities portfolios as a whole.
2.19. PERSONAL PROPERTY AND OTHER ASSETS. All assets of Allied
and the Subsidiaries (including without limitation all banking
equipment, data processing equipment, vehicles, and all other personal
property located in any office of or used by Allied or either of the
Subsidiaries in the operation of its business) are owned by Allied or
either of the Subsidiaries free and clear of all liens, encumbrances,
leases, title defects or exceptions to title. All of Allied's or either
of the Subsidiaries' personal property material to its business is in
good operating condition and repair, ordinary wear and tear excepted.
2.20. PATENTS AND TRADEMARKS. Allied and each of the
Subsidiaries own, possess or have the right to use any and all patents,
licenses, trademarks, trade names, copyrights, trade secrets and
proprietary and other confidential information necessary to conduct
their business as now conducted; and, neither Allied nor either of the
Subsidiaries has violated, and currently is not in conflict with, any
patent, license, trademark, trade name, copyright or proprietary right
of any other person or entity.
2.21. ENVIRONMENTAL MATTERS.
(a) Allied has Previously Disclosed to BancShares
copies of all written reports, correspondence, notices or other
materials, if any, in its possession pertaining to environmental surveys
or assessments of the Real Property or any of the Subsidiaries' Loan
Collateral and any improvements thereon, or to any violation of
"Environmental Laws" (as defined below) on, affecting or otherwise
involving the Real Property, any Loan Collateral or otherwise involving
Allied or either of the Subsidiaries.
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(b) There has been no presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, emission,
discharge, release, threatened release, control, removal, clean-up or
remediation of any "Hazardous Substances" (as defined below) by any
person prior to the date hereof on, from or relating to the Real
Property or, to the best of the knowledge and belief of management of
Allied and the Subsidiaries, the Loan Collateral, which constitutes a
violation of any Environmental Laws.
(c) Neither Allied nor either of the Subsidiaries has
violated any federal, state or local law, rule, regulation, order,
permit or other requirement relating to health, safety or the
environment or imposing liability, responsibility or standards of
conduct applicable to environmental conditions (all such laws, rules,
regulations, orders and other requirements being herein collectively
referred to as "Environmental Laws"), and there has been no violation of
any Environmental Laws (including, to the best of the knowledge and
belief of management of Allied and the Subsidiaries, any violation with
respect to or relating to any Loan Collateral) by any other person or
entity for whose liability or obligation with respect to any particular
matter or violation Allied or either of the Subsidiaries is or may be
responsible or liable.
(d) Neither Allied nor either of the Subsidiaries is
subject to any claims, demands, causes of action, suits, proceedings,
losses, damages, penalties, liabilities, obligations, costs or expenses
of any kind and nature which arise out of, under or in connection with,
or which result from or are based upon the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, emission,
discharge, release, threatened release, control, removal, clean-up or
remediation of any Hazardous Substances on, from or relating to the Real
Property or, to the best of the knowledge and belief of management of
Allied and the Subsidiaries, any Loan Collateral by any person or
entity.
(e) No facts, events or conditions relating to the
Real Property or, to the best knowledge of management of Allied and the
Subsidiaries, any Loan Collateral, or the operations of Allied or the
Subsidiaries at any of their office locations, will prevent, hinder or
limit continued compliance with Environmental Laws, or give rise to any
investigatory, emergency removal, remedial or corrective actions,
obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental Laws.
For purposes of this Agreement,
"Environmental Laws" shall include:
(i) all federal, state and local
statutes, regulations, ordinances, orders, decrees, and similar
provisions having the force or effect of law,
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(ii) all contractual agreements, and
(iii) all common law,
concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without
limitation all standards of conduct and bases of obligations relating to
the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, reporting, testing,
processing, discharge, release, threatened release, control, emergency
removal, clean-up or remediation of any Hazardous Substances (including
without limitation the Comprehensive Environmental Response,
Compensation and Liability Act, the Superfund Amendment and
Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Clean Water Act, the Clean Air Act,
the Toxic Substances Control Act, any "Superfund" or "Superlien" law,
the Americans with Disabilities Act, and the Occupational Safety and
Health Act), as such may now or at any time hereafter be defined or in
effect.
For purposes of this Agreement, "Hazardous
Substances" shall include hazardous, toxic or otherwise regulated
materials, substances or wastes; chemical substances or mixtures;
pesticides; pollutants; contaminants; toxic chemicals; oil or other
petroleum products, byproducts, or constituents (including but not
limited to crude oil, diesel oil, fuel oil, gasoline, lubrication oil,
oil refuse, oil mixed with other waste, oil sludge, and all other liquid
hydrocarbons regardless of specific gravity); asbestos or asbestos
containing material; flammable explosives; polychlorinated biphenyls
("PCBs") or any material containing PCBs; radioactive materials;
biological micro organisms, viruses, fungi, spores; environmental
tobacco smoke; radon or radon gas; formaldehyde or any material
containing formaldehyde; fumigants; any material or substance comprising
or contributing to conditions known as "sick building syndrome,"
"building-related illness" or similar conditions or exposures; and/or
any hazardous, toxic, regulated or dangerous waste, substance or
material defined as such by the United States Environmental Protection
Agency or any other federal, state or local governmental agency or
political subdivision thereof, or for the purpose of or by any
Environmental Laws, as now or at any time hereafter may be in effect.
2.22. ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS. (i) All
negotiations relative to this Agreement and the transactions described
herein have been carried on by Allied directly with BancShares; (ii) no
person or firm has been retained by or has acted on behalf of, pursuant
to any agreement, arrangement or understanding with, or under the
authority of, Allied or its Board of Directors, as a broker, finder or
agent or has performed similar functions or otherwise is or may be
entitled to receive or claim a brokerage fee or other commission in
connection with or as a result of the transactions described herein;
and, (iii) Allied has not agreed to pay any brokerage fee or other
commission to any person
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or entity in connection with or as a result of the transactions
described herein.
2.23. MATERIAL CONTRACTS. Other than a benefit plan or
employment agreement Previously Disclosed to BancShares pursuant to
Paragraph 2.25. below, neither Allied nor either of the Subsidiaries is
a party to or bound by any agreement (i) involving money or other
property in an amount or with a value in excess of $50,000, (ii) which
is not to be performed in full prior to December 31, 1995, (iii) which
calls for the provision of goods or services to Allied or either of the
Subsidiaries and cannot be terminated without material penalty upon
written notice to the other party thereto, (iv) which is material to
Allied or either of the Subsidiaries and was not entered into in the
ordinary course of business, (v) which involves hedging, options or any
similar trading activity, or interest rate exchanges or swaps, (vi)
which commits Allied or either of the Subsidiaries to extend any loan or
credit (with the exception of letters of credit, lines of credit and
loan commitments extended in the ordinary course of the Subsidiaries'
business), (vii) which involves the purchase or sale of any assets of
Allied or either of the Subsidiaries, or the purchase, sale, issuance,
redemption or transfer of any capital stock or other securities of
Allied or either of the Subsidiaries, or (viii) with any director,
officer or principal shareholder of Allied or the Subsidiaries
(including without limitation any consulting agreement, but not
including any agreement relating to loans or other banking services
which were made in the ordinary course of the Subsidiaries' business and
on substantially the same terms and conditions as were prevailing at
that time for similar agreements with unrelated persons).
Neither Allied nor either of the Subsidiaries is in
default in any material respect, and there has not occurred any event
which with the lapse of time or giving of notice or both would
constitute such a default, under any contract, lease, insurance policy,
commitment or arrangement to which it is a party or by which it or its
property is or may be bound or affected or under which it or its
property receives benefits, where the consequences of such default would
have a material adverse effect on the financial condition, results of
operations, prospects, business, assets, loan portfolio, investments,
properties or operations of Allied or either of the Subsidiaries.
2.24. EMPLOYMENT MATTERS; EMPLOYEE RELATIONS.
Allied and each of the Subsidiaries (i) has paid in full to or accrued
on behalf of all its respective directors, officers and employees all
wages, salaries, commissions, bonuses, fees and other direct
compensation for all labor or services rendered, including all wages,
salaries, commissions, bonuses, fees and other direct compensation for
all labor or services performed by them to the date of this Agreement
and all vacation pay, sick pay, severance pay and other amounts promised
to the extent required by law or Allied's or the Subsidiaries' existing
policies or practices, and (ii) is in material compliance with all
applicable federal, state and local laws, statutes, rules and
regulations with regard to
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employment and employment practices, terms and conditions, and wages and
hours and other compensation matters; and, no person has, to the
knowledge of management of Allied or the Subsidiaries, asserted that
Allied or the Subsidiaries is liable in any amount for any arrearages in
wages or employment taxes or for any penalties for failure to comply
with any of the foregoing.
There is no action, suit or proceeding by any
person pending or, to the best knowledge of management of Allied or the
Subsidiaries, threatened, against Allied or the Subsidiaries (or any of
their respective employees), involving employment discrimination, sexual
harassment, wrongful discharge or similar claims.
Neither Allied nor the Subsidiaries is a
party to or bound by any collective bargaining agreement with any of its
employees, any labor union or any other collective bargaining unit or
organization. There is no pending or threatened labor dispute, work
stoppage or strike involving Allied or the Subsidiaries and any of its
employees, or any pending or threatened proceeding in which it is
asserted that Allied or the Subsidiaries has committed an unfair labor
practice; and, neither Allied nor the Subsidiaries is aware of any
activity involving it or any of its employees seeking to certify a
collective bargaining unit or engaging in any other labor organization
activity.
2.25. EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFIT PLANS.
(a) Allied has Previously Disclosed to BancShares a
true and complete list of all bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock and stock option plans;
all employment and severance contracts; all medical, dental, health, and
life insurance plans; all vacation, sickness and other leave plans,
disability and death benefit plans; and all other employee benefit
plans, contracts, or arrangements maintained or contributed to by Allied
or either of the Subsidiaries for the benefit of any employees, former
employees, directors, former directors or any of their beneficiaries
(collectively, the "Plans"). True and complete copies of all Plans,
including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto,
previously have been supplied to BancShares. Neither Allied nor either
of the Subsidiaries maintains, sponsors, contributes to or otherwise
participates in any "Employee Benefit Plan" within the meaning of ss.
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any "Multiemployer Plan" within the meaning of ss. 3(37) of
ERISA, or any "Multiple Employer Welfare Arrangement" within the meaning
of ss. 3(40) of ERISA. Each Plan which is an "employee pension benefit
plan" within the meaning of ss. 3(2) of ERISA and which is intended to
be qualified under ss. 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") has received or applied for a favorable
determination letter from the IRS and neither Allied nor either of the
Subsidiaries is aware of any circumstances reasonably likely to
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result in the revocation or denial of any such favorable determination
letter. All reports and returns with respect to the Plans (and any Plans
previously maintained by Allied or either of the Subsidiaries) required
to be filed with any governmental department, agency, service or other
authority, including without limitation Internal Revenue Service Form
5500 (Annual Report), have been properly and timely filed.
(b) All "Employee Benefit Plans" maintained by or
otherwise covering employees or former employees of Allied or the
Subsidiaries, to the extent subject to ERISA, currently are, and at all
times have been, in compliance with all material provisions and
requirements of ERISA. There is no pending or threatened litigation
relating to any Plan or any such Plan previously maintained by Allied or
either of the Subsidiaries. Neither Allied nor either of the
Subsidiaries has engaged in a transaction with respect to any Plan that
could subject Allied or either of the Subsidiaries to a tax or penalty
imposed by either ss. 4975 of the Code or ss. 502(i) of ERISA.
(c) Allied has delivered to BancShares a true, correct
and complete copy (including copies of all amendments thereto) of each
retirement plan of the Subsidiaries which is intended to be a plan
qualified under Section 401(a) of the Code (collectively, the
"Retirement Plans"), together with true, correct and complete copies of
the summary plan descriptions relating to the Retirement Plans, the most
recent determination letters received from the IRS regarding the
Retirement Plans, and the most recent Annual Reports (Form 5500 series)
and related schedules, if any, for the Retirement Plans.
The Retirement Plans are qualified under the
provisions of ss. 401(a) of the Code, the trusts under the Retirement
Plans are exempt trusts under ss. 501(a) of the Code, and determination
letters have been issued or applied for with respect to the Retirement
Plans to said effect, including determination letters covering the
current terms and provisions of the Retirement Plans. There are no
issues relating to said qualification or exemption of the Retirement
Plans currently pending before the IRS, the United States Department of
Labor, the Pension Benefit Guaranty Corporation or any court. The
Retirement Plans and the administration thereof meet (and have met since
the establishment of the Retirement Plans) all of the applicable
requirements of ERISA, the Code and all other laws, rules and
regulations applicable to the Retirement Plans and do not violate (and
since the establishment of the Retirement Plans have not violated) any
of the applicable provisions of ERISA, the Code and such other laws,
rules and regulations. Without limiting the generality of the foregoing,
all reports and returns with respect to the Retirement Plans required to
be filed with any governmental department, agency, service or other
authority have been properly and timely filed. There are no issues or
disputes with respect to the Retirement Plans or the administration
thereof currently existing between Allied, the Subsidiaries, or any
trustee or other fiduciary thereunder, and any governmental agency, any
current or former
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employee of Allied or either of the Subsidiaries or beneficiary of any
such employee or any other person or entity. No "reportable event"
within the meaning of ss. 4043(b) of ERISA has occurred at any time with
respect to the Retirement Plans. Notwithstanding the foregoing, Peoples
maintains a defined benefit pension plan and a 401(k) profit sharing
plan which are multiple employer plans as described in Section 413(c) of
the Code, and neither Allied nor its Subsidiaries is making any warranty
or representation concerning whether the plans of the other adopting
employers (not affiliated with Allied) of said multiple employer plans
are qualified, and any breach of any warranty or representation made in
this subparagraph which is solely a result of an issue, action,
deficiency or violation with respect to such other plan or plans of such
other (non-affiliated) employers shall not be considered a breach of
this subparagraph (c).
(d) No liability under subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by Allied or either of the
Subsidiaries with respect to the Retirement Plans or with respect to any
other ongoing, frozen or terminated defined benefit pension plan
currently or formerly maintained by Allied or either of the
Subsidiaries. Neither Allied nor either of the Subsidiaries presently
contributes to a "Multiemployer Plan" or has contributed to such a plan
within the five calendar years since December 31, 1989. All
contributions required to be made pursuant to the terms of each of the
Plans (including without limitation the Retirement Plans and any other
"pension plan" (as defined in ss. 3(2) of ERISA, provided such plan is
intended to qualify under the provisions of Section 401(a) of the Code)
maintained by Allied or either of the Subsidiaries) have been timely
made. Neither the Retirement Plans nor any other "pension plan"
maintained by Allied or either of the Subsidiaries have an "accumulated
funding deficiency" (whether or not waived) within the meaning of ss.
412 of the Code or ss. 302 of ERISA. Neither Allied nor either of the
Subsidiaries has provided, and is not required to provide, security to
any "pension plan" or to any "Single Employer Plan" pursuant to ss.
401(a)(29) of the Code. Under the Retirement Plans and any other
"pension plan" maintained by Allied or either of the Subsidiaries as of
the last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit
liabilities," within the meaning of ss. 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the
plan's most recent actuarial valuation) did not exceed the then current
value of the assets of such plan, and there has been no material change
in the financial condition of any such plan since the last day of the
most recent plan year.
(e) There are no restrictions on the rights of Allied
or either of the Subsidiaries to amend or terminate any Plan without
incurring any liability thereunder. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will (except as otherwise specifically provided herein) (i)
result in any payment to any person (including without limitation any
severance compensation or payment, unemployment compensation, "golden
parachute" or "change in control" payment, or
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otherwise) becoming due under any plan or agreement to any director,
officer, employee or consultant, (ii) increase any benefits otherwise
payable under any plan or agreement, or (iii) result in any acceleration
of the time of payment or vesting of any such benefit.
2.26. INSURANCE. Allied and the Subsidiaries have in effect a
"banker's blanket bond" and such other policies of general liability,
casualty, directors and officers liability, employee fidelity, errors
and omissions and other property and liability insurance as has been
Previously Disclosed to BancShares (the "Policies"). The Policies
provide coverage in such amounts and against such liabilities,
casualties, losses or risks as is customary or reasonable for entities
engaged in the businesses of Allied or either of the Subsidiaries or as
is required by applicable law or regulation; and, in the reasonable
opinion of management of Allied and the Subsidiaries, the insurance
coverage provided under the Policies is considered reasonable and
adequate in all respects for Allied and the Subsidiaries. Each of the
Policies is in full force and effect and is valid and enforceable in
accordance with its terms, and is underwritten by an insurer of
recognized financial responsibility and which is qualified to transact
business in North Carolina; and, Allied and the Subsidiaries have taken
all requisite actions (including the giving of required notices) under
each such Policy in order to preserve all rights thereunder with respect
to all matters. Neither Allied nor the Subsidiaries is in default under
the provisions of, has received notice of cancellation or nonrenewal of
or any premium increase on, or has any knowledge of any failure to pay
any premium on or any inaccuracy in any application for any Policy.
There are no pending claims with respect to any Policy, and neither
Allied nor the Subsidiaries has knowledge of any facts or of the
occurrence of any event that is reasonably likely to form the basis for
any such claim.
2.27. INSURANCE OF DEPOSITS. All deposits of each of the
Subsidiaries are insured by the Savings Association Insurance Fund of
the FDIC to the maximum extent permitted by law, all deposit insurance
premiums due from the Subsidiaries to the FDIC have been paid in full in
a timely fashion, and, to the best of the knowledge and belief of Allied
and the Subsidiaries' executive officers, no proceedings have been
commenced or are contemplated by the FDIC or otherwise to terminate such
insurance.
2.28. AFFILIATES. Allied has Previously Disclosed to BancShares
a listing of those persons deemed by Allied and its counsel as of the
date of this Agreement to be "Affiliates" of Allied as that term is
defined in Rule 405 promulgated under the 1933 Act, including persons,
trust, estates or other entities related to persons deemed to be
Affiliates of Allied.
2.29. OBSTACLES TO REGULATORY APPROVAL OR TAX TREATMENT. To
the best of the knowledge and belief of management of Allied and the
Subsidiaries, there exists no fact or condition (including the
Subsidiaries' record of compliance with the Community Reinvestment
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<PAGE>
Act) relating to Allied or either of the Subsidiaries that may
reasonably be expected to (i) prevent or materially impede or delay
BancShares or Allied from obtaining the regulatory approvals required in
order to consummate transactions described herein, or (ii) prevent the
Merger from qualifying to be a tax-free reorganization under Section
368(a)(1)(A) of the Code; and, if any such fact or condition becomes
known to Allied or the Subsidiaries, Allied shall promptly (and in any
event within three days after obtaining such knowledge) communicate such
fact or condition to the Vice Chairman of BancShares.
2.30. DISCLOSURE. To the best of the knowledge and belief of
management of Allied and the Subsidiaries, no written statement,
certificate, schedule, list or other written information furnished by or
on behalf of Allied or either of the Subsidiaries at any time to
BancShares in connection with this Agreement (including without
limitation the statements contained herein), when considered as a whole,
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under
which they were made, not misleading. Each document delivered or to be
delivered by Allied or either of the Subsidiaries to BancShares is or
will be a true and complete copy of such document, unmodified except by
another document delivered thereby.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BANCSHARES
Except as otherwise specifically described herein or as
"Previously Disclosed" to Allied, BancShares hereby makes the following
representations and warranties to Allied. ("Previously Disclosed" shall
mean, as to BancShares, the disclosure of information in a letter
delivered by BancShares to Allied specifically referring to this
Agreement and arranged in paragraphs corresponding to the Sections,
subsections and items of this Agreement applicable thereto, and which
letter has been delivered prior to the execution of this Agreement.
Information shall be deemed Previously Disclosed for the purpose of a
given Paragraph, subparagraph or item of this Agreement only to the
extent a specific reference thereto is made in connection with
disclosure of such information at the time of such delivery.)
3.1. ORGANIZATION; STANDING; POWER. BancShares (i) is duly
organized and incorporated, validly existing and in good standing (as a
business corporation) under the laws of Delaware, (ii) has all requisite
power and authority (corporate and other) to own its respective
properties and conduct its business as now being conducted, (iii) is
duly qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned or leased by
it therein or in which the transaction of its business makes such
qualification necessary, except where failure so to qualify would not
have a material adverse effect on BancShares and its subsidiaries
considered as one enterprise, and (iv) is not transacting business, or
operating any
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<PAGE>
properties owned or leased by it, in violation of any provision of
federal or state law or any rule or regulation promulgated thereunder,
which violation would have a material adverse effect on BancShares and
its subsidiaries considered as one enterprise.
3.2. CAPITAL STOCK. BancShares' authorized capital stock
consists of 11,000,000 shares of BancShares Stock and 2,000,000 shares
of $1.00 par value per share Class B common stock. As of July 31, 1995,
an aggregate of 8,927,406 shares of BancShares Stock had been issued and
were outstanding, and 1,769,251 shares of Class B common stock had been
issued and were outstanding. BancShares' outstanding capital stock has
been duly authorized and validly issued, and is fully paid and
nonassessable, and the shares of BancShares Stock issued to Allied's
shareholders pursuant to this Agreement, when issued as described
herein, will be duly authorized, validly issued, fully paid and
nonassessable.
3.3. CONVERTIBLE SECURITIES, OPTIONS, ETC. Except as Previously
Disclosed to Allied, BancShares has no outstanding (i) securities or
other obligations (including debentures or other debt instruments) which
are convertible into shares of BancShares Stock or any other securities
of BancShares, (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person to receive or acquire
any shares of BancShares Stock or any other securities of Bancshares, or
(iii) plan, agreement or other arrangement pursuant to which shares of
BancShares Stock or any other securities of BancShares, or options,
warrants, rights, calls or other commitments of any nature pertaining
thereto, have been or may be issued.
3.4. AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement
has been duly and validly approved by BancShares' Board of Directors.
(i) BancShares has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations and agreements and
carry out the transactions described herein, (ii) all corporate
proceedings required to be taken to authorize BancShares to enter into
this Agreement and to perform its respective obligations and agreements
and carry out the transactions described herein have been duly and
properly taken, and (iii) this Agreement constitutes the valid and
binding agreement of BancShares enforceable in accordance with its terms
(except to the extent enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from
time to time in effect which affect creditors' rights generally, (v)
legal and equitable limitations on the availability of injunctive
relief, specific performance and other equitable remedies, and (c)
general principles of equity and applicable laws or court decisions
limiting the enforceability of indemnification provisions).
3.5. VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS
OR WAIVERS. Except where the same would not have a material adverse
effect on BancShares and its subsidiaries considered as one enterprise,
neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor
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<PAGE>
compliance by BancShares with any of its obligations or agreements
contained herein, will: (i) conflict with or result in a breach of the
terms and conditions of, or constitute a default or violation under any
provision of, BancShares' Certificate of Incorporation or Bylaws, or any
contract, agreement, lease, mortgage, note, bond, indenture, license, or
obligation or understanding (oral or written) to which BancShares is
bound or by which it, its business, capital stock or any of its
respective properties or assets may be affected; (ii) result in the
creation or imposition of any lien, claim, interest, charge, restriction
or encumbrance upon any of BancShares' properties or assets; (iii)
violate any applicable federal or state statute, law, rule or
regulation, or any order, writ, injunction or decree of any court,
administrative or regulatory agency or governmental body; (iv) result in
the acceleration of any obligation or indebtedness of BancShares; or,
(v) interfere with or otherwise adversely affect BancShares' ability to
carry on its business as presently conducted.
No consents, approvals or waivers are required to be
obtained from any person or entity in connection with BancShares'
execution and delivery of this Agreement, or the performance of its
obligations or agreements or the consummation of the transactions
described herein, except for required approvals of governmental or
regulatory authorities described in Paragraph 7.1.a. below.
3.6. BANCSHARES REPORTS. Since January 1, 1990, and where the
failure to file has had or could have a material and adverse effect on
BancShares and its subsidiaries considered as one enterprise, BancShares
and its consolidated subsidiaries have filed all reports, registrations
and statements, together with any amendments that were required to be
made with respect thereto, that were required to be filed with (i the
SEC, (iithe FRB, (iii) the FDIC, (iv) the North Carolina Commissioner of
Banks (the "North Carolina Commissioner"), and (v) any other
governmental or regulatory authorities having jurisdiction over
BancShares or its subsidiaries. All such reports and statements filed
with the SEC, the FRB, the FDIC, the North Carolina Commissioner or
other such regulatory authority are collectively referred to herein as
the "BancShares Reports." As of their respective dates, the BancShares
Reports complied in all material respects with all the statutes, rules
and regulations enforced or promulgated by the regulatory authority with
which they were filed and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading; and,
BancShares has not been notified that any such BancShares Reports were
deficient in any material respect as to form or content. Following the
date of this Agreement, BancShares shall deliver to Allied upon its
request a copy of any report, registration, statement or other
regulatory filing made by BancShares or any of BancShares' subsidiaries
with the SEC, the FRB, the FDIC, the North Carolina Commissioner or any
other such regulatory authority.
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<PAGE>
3.7. BANCSHARES FINANCIAL STATEMENTS. BancShares has delivered
to Allied a copy of (i) BancShares' audited consolidated balance sheets
as of December 31, 1993 and December 31, 1994, and its consolidated
statements of income, changes in shareholders' equity, and cash flows
for the years ended December 31, 1992, December 31, 1993 and December
31, 1994 (the "BancShares Financial Statements"), and (ii) BancShares'
unaudited consolidated balance sheet as of June 30, 1995 and its
consolidated statement of operations for the six months ended June 30,
1995 (the "BancShares Interim Financial Statements"). The BancShares
Financial Statements and the BancShares Interim Financial Statements
were prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated, the BancShares Financial Statements
have been audited and certified by BancShares' independent accountants,
KPMG Peat Marwick, and the BancShares Financial Statements and the
BancShares Interim Financial Statements present fairly BancShares'
consolidated financial condition, assets and liabilities, results of
operations, changes in shareholders' equity and changes in cash flows as
of the dates and for the periods specified therein.
3.8. ABSENCE OF MATERIAL ADVERSE CHANGES. Since December 31,
1994, there has been no material adverse change, and there has occurred
no event or development and there currently exists no condition or
circumstance which, with the lapse of time or otherwise, may or could
cause, create or result in a material adverse change, in or affecting
BancShares' consolidated financial condition or results of operations,
or in its prospects, business, assets, loan portfolio, investments,
properties or operations.
3.9. ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS. (i) All
negotiations relative to this Agreement and the transactions described
herein have been carried on by BancShares directly with Allied; (ii) no
person or firm has been retained by or has acted on behalf of, pursuant
to any agreement, arrangement or understanding with, or under the
authority of, BancShares or its Board of Directors, as a broker, finder
or agent or has performed similar functions or otherwise is or may be
entitled to receive or claim a brokerage fee or other commission in
connection with or as a result of the transactions described herein;
and, (iii) BancShares has not agreed to pay any brokerage fee or other
commission to any person or entity in connection with or as a result of
the transactions described herein.
3.10. OBSTACLES TO REGULATORY APPROVAL OR TAX TREATMENT. To the
best of the knowledge and belief of the executive officers of
BancShares, no fact or condition (including FCB's record of compliance
with the Community Reinvestment Act) relating to BancShares exists that
may reasonably be expected to (i) prevent or materially impede or delay
BancShares or Allied from obtaining the regulatory approvals required in
order to consummate transactions described herein, or (ii) prevent the
Merger from qualifying to be a tax-free reorganization under Section
368(a)(1)(A) of the Code; and, if any such fact or condition becomes
known to the executive officers of BancShares, BancShares promptly (and
in any event
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within three days after obtaining such knowledge) shall communicate such
fact or condition to the President of Allied.
3.11. DISCLOSURE. To the best of the knowledge and belief of
BancShares, no written statement, certificate, schedule, list or written
information furnished by or on behalf of BancShares at any time to
Allied in connection with this Agreement (including without limitation
the statements contained herein), when considered as a whole, contains
or will contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were
made, not misleading. Each document delivered or to be delivered by
BancShares to Allied is or will be a true and complete copy of such
document, unmodified except by another document delivered by BancShares.
3.12. TAX RETURNS AND OTHER TAX MATTERS. (i) BancShares and
each of its subsidiaries have timely filed or caused to be filed all
federal, state and local income tax returns and reports which are
required by law to have been filed, and, to the best knowledge and
belief of management of BancShares, all such returns and reports were
true, correct and complete and contained all material information
required to be contained therein; (ii) all federal, state and local
income, profits, franchise, sales, use, occupation, property, excise,
withholding, employment and other taxes (including interest and
penalties), charges and assessments which have become due from or been
assessed or levied against BancShares or any of its subsidiaries or
their respective properties have been fully paid or, if not yet due, a
reserve or accrual which is adequate in all material respects for the
payment of all such taxes to be paid and the obligation for such unpaid
taxes is reflected on the BancShares Financial Statements; (iii) the tax
returns and reports of BancShares and its subsidiaries have not been
subject to audit by the IRS or the Department of Tax and Revenue of the
State of North Carolina in the last ten years and neither BancShares nor
any of its subsidiaries has received any indication of the pendency of
any audit or examination in connection with any tax return or report and
have no knowledge that any such return or report is subject to
adjustment; and (iv) neither BancShares nor any of its subsidiaries has
executed any waiver or extended the statute of limitations (or been
asked to execute a waiver or extend a statute of limitation) with
respect to any tax year, the audit of any tax return or report or the
assessment or collection of any tax.
3.13. LITIGATION AND COMPLIANCE WITH LAW.
(a) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to the best
knowledge and belief of management of BancShares, any facts or
circumstances which reasonably could result in such), including without
limitation any such action by any governmental or regulatory authority,
which currently exist or are ongoing, pending or, to the best knowledge
and belief of management of BancShares, threatened, contemplated or
probable of assertion, against,
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<PAGE>
relating to or otherwise affecting BancShares or its subsidiaries or any
of their properties, assets or employees which, if determined adversely,
could result in liability on the part of BancShares or any of its
subsidiaries for, or subject BancShares or any of its subsidiaries to,
monetary damages, fines or penalties or an injunction, or which could
have a material adverse effect on the financial condition, results of
operations, prospects, business, assets, loan portfolio, investments,
properties or operations of BancShares on a consolidate basis or on the
ability of BancShares to consummate the Merger.
(b) BancShares and its subsidiaries have all Permits
of any federal, state, local or foreign governmental or regulatory body
that are material to or necessary for the conduct of their business or
to own, lease and operate their properties; all such Permits are in full
force and effect; no violations are or have been recorded in respect of
any such Permits; and no proceeding is pending or, to the best knowledge
of management of BancShares, threatened or probable of assertion to
suspend, cancel, revoke or limit any Permit.
(c) Neither BancShares nor any of its subsidiaries is
subject to any supervisory agreement, enforcement order, writ,
injunction, capital directive, supervisory directive, memorandum of
understanding or other similar agreement, order, directive, memorandum
or consent of, with or issued by any regulatory or other governmental
authority (including without limitation the FRB, the FDIC or the North
Carolina Commissioner) relating to its financial condition, directors or
officers, employees, operations, capital, regulatory compliance or
otherwise; there are no judgments, orders, stipulations, injunctions,
decrees or awards against BancShares or any of its subsidiaries which in
any manner limit, restrict, regulate, enjoin or prohibit any present or
past business or practice of BancShares or its subsidiaries; and,
neither BancShares nor any of its subsidiaries has been advised and has
no reason to believe that any regulatory or other governmental authority
or any court is contemplating, threatening or requesting the issuance of
any such agreement, order, injunction, directive, memorandum, judgment,
stipulation, decree or award.
(d) Neither BancShares nor any of its subsidiaries is
in violation or default in any material respect under, and has complied
in all material respects with, all laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions or decrees of any court or
federal, state, municipal or other governmental or regulatory authority
having jurisdiction or authority over it or its business operations,
properties or assets (including without limitation all provisions of
North Carolina law relating to usury, the Consumer Credit Protection
Act, and all other laws and regulations applicable to extensions of
credit by its subsidiaries) and, to the knowledge of BancShares, there
is no basis for any claim by any person or authority for compensation,
reimbursement or damages or otherwise for any violation of any of the
foregoing.
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3.14. EMPLOYEE BENEFIT PLANS.
(a) Each plan maintained for the benefit of employees
of Bancshares or FCB which is an "employee pension benefit plan" within
the meaning of ss. 3(2) of ERISA and which is intended to be qualified
under ss. 401(a) of the Code has received a favorable determination
letter from the IRS and neither BancShares nor FCB is aware of any
circumstances reasonably likely to result in the revocation or denial of
any such favorable determination letter. All reports and returns with
respect to any "employee benefit plans", within the meaning of Section
3(3) of ERISA, of BancShares or FCB (and any such plans previously
maintained by BancShares or its subsidiaries) required to be filed with
any governmental department, agency, service or other authority,
including without limitation Internal Revenue Service Form 5500 (Annual
Report), have been properly and timely filed.
(b) All "Employee Benefit Plans" maintained by or
otherwise covering employees or former employees of BancShares or its
subsidiaries, to the extent subject to ERISA, currently are, and at all
times have been, in compliance with all material provisions and
requirements of ERISA. There is no pending or threatened litigation
relating to any Plan maintained by BancShares or any of its subsidiaries
and any such plan previously maintained by BancShares or any of its
subsidiaries. Neither BancShares nor any of its subsidiaries have
engaged in a transaction with respect to any such plan that could
subject BancShares or any of its subsidiaries to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA.
(c) The FCB retirement plan and any other "employee
pension benefit plans" intended to be qualified under Section 401(a) of
the Code which are maintained by Bancshares or its subsidiaries ("FCB
Retirement Plans") are qualified under the provisions of ss. 401(a) of
the Code, the trusts under the FCB Retirement Plans are exempt trusts
under ss. 501(a) of the Code, and determination letters have been issued
with respect to the FCB Retirement Plans to said effect, including
determination letters covering the current terms and provisions of the
FCB Retirement Plans. There are no issues relating to said qualification
or exemption of the FCB Retirement Plans currently pending before the
IRS, the United States Department of Labor, the Pension Benefit Guaranty
Corporation or any court. The FCB Retirement Plans and the
administration thereof meet (and has met since the establishment of the
FCB Retirement Plans) all of the applicable requirements of ERISA, the
Code and all other laws, rules and regulations applicable to the FCB
Retirement Plans and does not violate (and since the establishment of
the FCB Retirement Plans has not violated) any of the applicable
provisions of ERISA, the Code and such other laws, rules and
regulations. Without limiting the generality of the foregoing, all
reports and returns with respect to the FCB Retirement Plans required to
be filed with any governmental department, agency, service or other
authority have been properly and timely filed. There are no issues or
disputes with respect to the FCB Retirement Plans or the administration
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thereof currently existing between BancShares, its subsidiaries, or any
trustee or other fiduciary thereunder, and any governmental agency, any
current or former employee of BancShares or any of its subsidiaries or
beneficiary of any such employee or any other person or entity. No
"reportable event" within the meaning of ss. 4043(b) of ERISA has
occurred at any time with respect to the FCB Retirement Plans.
(d) All contributions required to be made pursuant to
the terms of each of the plans (including without limitation the FCB
Retirement Plans and any other "pension plan" (as defined in ss. 3(2) of
ERISA) maintained by BancShares or any of it subsidiaries) have been
timely made. Neither the FCB Retirement Plans nor any other "pension
plan" maintained by BancShares or any of its subsidiaries have an
"accumulated funding deficiency" (whether or not waived) within the
meaning of ss. 412 of the Code or ss. 302 of ERISA. Neither BancShares
nor any of its subsidiaries has provided, and is not required to
provide, security to any "pension plan" or to any "Single Employer Plan"
pursuant to ss. 401(a)(29) of the Code. Under the FCB Retirement Plans
and any other "pension plan" maintained by BancShares or any of its
subsidiaries as of the last day of the most recent plan year ended prior
to the date hereof, the actuarially determined present value of all
"benefit liabilities," within the meaning of ss. 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions contained in
the plan's most recent actuarial valuation) did not exceed the then
current value of the assets of such plan, and there has been no material
change in the financial condition of any such plan since the last day of
the most recent plan year. No liability under subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by BancShares or any
of its subsidiaries with respect to any such plan or with respect to any
other ongoing, frozen or terminated defined benefit pension plan.
Neither BancShares nor any of its subsidiaries presently contributes to
a "Multiemployer Plan" or has contributed to such a plan since December
31, 1989.
3.15. INSURANCE. BancShares and its subsidiaries have
in effect a "banker's blanket bond" and such other policies of general
liability, casualty, directors and officers liability, employee
fidelity, errors and omissions and other property and liability
insurance (the "FCB Policies"). The FCB Policies provide coverage in
such amounts and against such liabilities, casualties, losses or risks
as is customary or reasonable for entities engaged in the businesses of
BancShares or any of its subsidiaries or as is required by applicable
law or regulation; and, in the reasonable opinion of management of
BancShares, the insurance coverage provided under the FCB Policies is
considered reasonable and adequate in all respects for BancShares and
its subsidiaries. Each of the FCB Policies is in full force and effect
and is valid and enforceable in accordance with its terms, and is
underwritten by an insurer of recognized financial responsibility and
which is qualified to transact business in the applicable jurisdiction;
and, BancShares and its subsidiaries have taken all requisite actions
(including the giving of required notices) under each such FCB Policy in
order to preserve all rights thereunder with respect to
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all matters. Neither BancShares nor its subsidiaries is in default
under the provisions of, has received notice of cancellation or
nonrenewal of or any premium increase on, or has any knowledge of any
failure to pay any premium on or any inaccuracy in any application for
any FCB Policy. There are no pending claims with respect to any FCB
Policy, and neither BancShares nor any of its subsidiaries has knowledge
of any facts or of the occurrence of any event that is reasonably likely
to form the basis for any such claim.
3.16. BANCSHARES BOOKS AND RECORDS. BancShares' and
its subsidiaries' books of account and business records have been
maintained in substantial compliance with all applicable legal and
accounting requirements and in accordance with good business practices,
and such books and records are complete and reflect accurately in all
material respects BancShares' and its subsidiaries' respective items of
income and expense and all of their respective assets, liabilities and
stockholders' equity. The respective minute books of BancShares and its
subsidiaries accurately reflect in all material respects the corporate
actions which their respective shareholders and board of directors, and
all committees thereof, have taken during the time periods covered by
such minute books. All such minute books have been or will be made
available to Allied and its representatives.
3.17. NO SHAREHOLDER APPROVAL. As BancShares is a
Delaware corporation no approval of the shareholders of BancShares is
required, pursuant to Sections 251(f) and 252(e) of the Delaware General
Corporation Law, in as much as (i) this Agreement does not amend in any
respect the Certificate of Incorporation of BancShares, (ii) each share
of BancShares Stock and each share of BancShares Class B common stock
outstanding immediately prior to the Effective Time is to be an
identical outstanding share of BancShares after the Effective Time, and
(iii) the authorized unissued shares of BancShares Stock to be issued
under the Plan of Merger contained in this Agreement do not exceed 20%
of the shares of BancShares Stock outstanding immediately prior to the
Effective Time.
ARTICLE IV. COVENANTS OF ALLIED
4.1. AFFIRMATIVE COVENANTS OF ALLIED. Allied hereby
covenants and agrees as follows with BancShares:
a. "AFFILIATES" OF ALLIED. Allied will cause
each Affiliate Previously Disclosed to BancShares to execute and deliver
to BancShares prior to the Closing a written agreement (the "Affiliates'
Agreement") relating to restrictions on shares of BancShares Stock to be
received by such Affiliates pursuant to this Agreement and which
Affiliates' Agreement shall be in form and content reasonably
satisfactory to BancShares and substantially in the form attached as
Schedule B to this Agreement. Certificates for the shares of BancShares
Stock issued to Affiliates of Allied
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shall bear a restrictive legend (substantially in the form as shall be
set forth in the Affiliates' Agreement) with respect to the restrictions
applicable to such shares.
b. CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME.
While the parties recognize that the operation of Allied until the
Effective Time is the responsibility of Allied and its Board of
Directors and officers, Allied agrees that, between the date of this
Agreement and the Effective Time, Allied will carry on its business, in
and only in the regular and usual course in substantially the same
manner as such business heretofore was conducted, and, to the extent
consistent with such business and within its ability to do so, Allied
agrees that it and, where applicable, each of the Subsidiaries, will:
(i) preserve intact their present
business organization, keep available their present officers and
employees, and preserve their relationships with customers, depositors,
creditors, correspondents, suppliers, and others having business
relationships with them;
(ii) maintain all of their properties
and equipment in customary repair, order and condition, ordinary wear
and tear excepted;
(iii) maintain their books of account
and records in the usual, regular and ordinary manner in accordance with
sound business practices applied on a consistent basis;
(iv) comply with all laws, rules and
regulations applicable to them, their properties, assets or employees
and to the conduct of their business;
(v) not change their existing loan
underwriting guidelines, policies or procedures except as may be
required by law;
(vi) continue to maintain in force
insurance such as is described in Paragraph 2.26. above; not modify any
bonds or policies of insurance in effect as of the date hereof unless
the same, as modified, provides substantially equivalent coverage; and,
not cancel, allow to be terminated or, to the extent available, fail to
renew, any such bond or policy of insurance unless the same is replaced
with a bond or policy providing substantially equivalent coverage; and,
(vii) promptly provide to BancShares
such information about Allied and each of the Subsidiaries and their
financial condition, results of operations, prospects, businesses,
assets, loan portfolio, investments, properties or operations, as
BancShares reasonably shall request.
c. PERIODIC INFORMATION REGARDING LOANS. Each
new extension of credit by either of the Subsidiaries in excess of
$100,000 (excluding single-family residential mortgage loans
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originated to secondary market specifications) will be submitted to
BancShares within 10 business days after the Subsidiary's issuance of a
commitment on such loan.
Additionally, Allied agrees to make available and
provide to BancShares the following information with respect to each of
the Subsidiaries' loans and other extensions of credit (such assets
herein referred to as "Loans") as of July 31, 1995 and as of the end of
each month thereafter until the Effective Time, such information for
each month to be in form and substance as is usual and customary in the
conduct of the Subsidiary's business and to be furnished within 25 days
of the end of each month ending after the date hereof, except as
otherwise provided:
(i) a list of Loans past due for 60 days or more
as to principal or interest;
(ii) within 25 days after each fiscal quarter end,
an analysis of the Loan Loss Reserve and
management's assessment of the adequacy of
the Loan Loss Reserve, which analysis and
assessment shall include a list of all
classified or "watch list" Loans, along with
the outstanding balance and amount
specifically allocated to the Loan Loss
Reserve for each such classified or
"watch list" Loan;
(iii) a list of Loans in nonaccrual status;
(iv) a list of all Loans over $50,000 without
principal reduction for a period of longer
than one year;
(v) a list of all foreclosed real property or
other real estate owned and all repossessed
personal property;
(vi) a list of reworked or restructured Loans over
$50,000 and still outstanding, including
original terms, restructured terms and status;
and
(vii) a list of any actual or threatened
litigation by or against each of the
Subsidiaries pertaining to any Loans or
credits, which list shall contain a
description of circumstances surrounding
such litigation, its present status and
management's evaluation of such litigation.
d. NOTICE OF CERTAIN CHANGES OR EVENTS.
Following the execution of this Agreement and up to the Effective Time,
Allied promptly will notify BancShares in writing of and provide to it
such information as it shall request regarding (i) any material
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adverse change in its consolidated financial condition, consolidated
results of operations, prospects, business, assets, loan portfolio,
investments, properties or operations, or of the actual or prospective
occurrence of any condition or event which, with the lapse of time or
otherwise, may or could cause, create or result in any such material
adverse change, or of (II) the actual or prospective existence or
occurrence of any condition or event which, with the lapse of time or
otherwise, has caused or may or could cause any statement,
representation or warranty of Allied herein to be or become inaccurate,
misleading or incomplete, or which has resulted or may or could cause,
create or result in the breach or violation of any of Allied's covenants
or agreements contained herein or in the failure of any of the
conditions described in Paragraphs 7.1. or 7.3. below.
e. ACCRUALS FOR LOAN LOSS RESERVE AND EXPENSES. Allied
will cooperate with BancShares and, not later than the Effective Time,
Allied will make such appropriate accounting entries in its books and
records and take such other actions as BancShares shall, in its sole
discretion, deem to be necessary or desirable in anticipation of the
Merger, including without limitation additional provisions to each of
the Subsidiaries' Loan Loss Reserve or accruals or the creation of
reserves for employee benefit and Merger-related expenses. Any such
accounting entries which are requested by BancShares and not in the
usual course of business for Allied or the Subsidiaries, shall not be
counted towards calculation of net earnings for purposes of the Peoples
Savings Bank MBO program.
f. CONSENTS TO ASSIGNMENT OF LEASES. Allied will use
its best efforts to obtain all required consents of its lessors to the
assignment to BancShares of Allied's rights and obligations under any
personal property leases, each of which consents shall be in such form
as shall be specified by BancShares.
g. RATIFICATION OF AGREEMENT BY BOARD OF
DIRECTORS. Management of Allied will submit this Agreement to its Board
of Directors for ratification and approval at its next regularly
scheduled meeting following the date hereof.
h. FURTHER ACTION; INSTRUMENTS OF TRANSFER.
Allied covenants and agrees with BancShares that it (I) will use its
best efforts in good faith to take or cause to be taken all action
required of it or the Subsidiaries hereunder as promptly as practicable
so as to permit the consummation of the transactions described herein at
the earliest possible date, (II) shall perform all acts and execute and
deliver to BancShares all documents or instruments required herein or as
otherwise shall be reasonably necessary or useful to or requested of
Allied in consummating such transactions, and, (III) will cooperate with
BancShares in every way in carrying out, and will pursue diligently the
expeditious completion of, such transactions.
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i. PERIODIC REPORTS. Until the Effective Time,
Allied will provide BancShares with an income statement and a statement
of condition for each Subsidiary within 25 days after month end.
4.2. NEGATIVE COVENANTS OF ALLIED. Allied hereby covenants and
agrees that, between the date hereof and the Effective Time, neither
Allied nor either of the Subsidiaries will do any of the following
things or take any of the following actions without the prior written
consent and authorization of the Vice Chairman of BancShares.
a. AMENDMENTS TO ARTICLES OF INCORPORATION OR
BYLAWS. Neither Allied nor either of the Subsidiaries will amend its
Articles or Certificate of Incorporation or Bylaws.
b. CHANGE IN CAPITAL STOCK. Neither Allied nor either
of the Subsidiaries will (i) make any change in its authorized capital
stock, or create any other or additional authorized capital stock or
other securities, or (ii) issue, sell, purchase, redeem, retire,
reclassify, combine or split any shares of its capital stock or other
securities (including securities convertible into capital stock), or
enter into any agreement or understanding with respect to any such
action.
c. OPTIONS, WARRANTS AND RIGHTS. Neither Allied nor
either of the Subsidiaries will grant or issue any options, warrants,
calls, puts or other rights of any kind relating to the purchase,
redemption or conversion of shares of its capital stock or any other
securities (including securities convertible into capital stock) or
enter into any agreement or understanding with respect to any such
action.
d. DIVIDENDS. Neither Allied nor either of the
Subsidiaries will declare or pay any dividends on the outstanding shares
of capital stock or make any other distributions on or in respect of any
shares of its capital stock or otherwise to its shareholders except as
may be allowed pursuant to Paragraph 1.5.a. above.
e. EMPLOYMENT, BENEFIT OR RETIREMENT AGREEMENTS OR
PLANS. Except as required by law, neither Allied nor either of the
Subsidiaries will (i) enter into or become bound by any oral or written
contract, agreement or commitment for the employment or compensation of
any director, officer, employee or consultant which is not immediately
terminable by Allied or either of the Subsidiaries without cost or other
liability on no more than 30 days' notice; (ii) adopt, enter into or
become bound by any new or additional profit-sharing, bonus, incentive,
change in control or "golden parachute," stock option, stock purchase,
pension, retirement, insurance (hospitalization, life or other), paid
leave (sick leave, vacation leave or other) or similar contract,
agreement, commitment, understanding, plan or arrangement (whether
formal or informal) with respect to or which provides for benefits for
any of its current or former directors, officers, employees or
consultants; or (iii) enter into or become bound by any contract
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with or commitment to any labor or trade union or association or any
collective bargaining group.
f. INCREASE IN COMPENSATION. With the exception of
reasonable and customary increases in annual salary and annual officer
and employee bonuses based on fiscal year 1995 based on merit and
effected at such times and in such manner and amounts as shall be
consistent with their past compensation policies and practices, neither
Allied nor either of the Subsidiaries will increase the compensation or
benefits of, or pay any bonus or other special or additional
compensation to, any of its directors, officers, employees or
consultants; provided, however, that all bonuses for fiscal year 1995
paid under the Summit Savings Bank, Inc., SSB bonus program shall not
exceed $100,000.
Notwithstanding the foregoing, BancShares
agrees that the Peoples Savings Bank MBO program shall continue for
calendar year 1995 as currently written, but under no circumstances
shall the amount paid under the 1995 MBO program exceed $100,000.
Notwithstanding the foregoing, BancShares
agrees that for purposes of Summit's Independent Directors Retirement
Plan and Peoples' Independent Director Retirement Plan (collectively the
"Directors Retirement Plans"), at the Effective Time, all "Participants"
in the Director Retirement Plans will be entitled to 100% of their
respective "Retirement Fees" at their respective "Termination Dates".
BancShares also agrees to allow the Summit Directors Retirement Plan to
be amended at or prior to the Effective Time, to increase the
"Retirement Fee" from $12,000 to $14,400, with a further cost of living
increase in such amount every two years thereafter based upon the
percentage increase in the Consumer Price Index.
g. ACCOUNTING PRACTICES. Neither Allied nor either of
the Subsidiaries will make any changes in its accounting methods,
practices or procedures or in depreciation or amortization policies,
schedules or rates heretofore applied (except as required by GAAP or
governmental regulations).
h. ACQUISITIONS; ADDITIONAL BRANCH OFFICES.
Neither Allied nor either of the Subsidiaries will directly or
indirectly (I) acquire or merge with, or acquire any branch or all or
any significant part of the assets of, any other person or entity, (II)
open any new branch office, or (III) enter into or become bound by any
contract, agreement, commitment or letter of intent relating to, or
otherwise take or agree to take any action in furtherance of, any such
transaction or the opening of a new branch office.
i. CHANGES IN BUSINESS PRACTICES. Except as may be
required by the FRB, the FDIC, the Administrator or any other
governmental or other regulatory agency or as shall be required by
applicable law, regulation or this Agreement, neither Allied nor either
of the Subsidiaries will (i) change in any material respect the nature
of its business or the manner in which it conducts its
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business, (ii) discontinue any material portion or line of its business,
or (iii) change in any material respect its lending, investment,
asset-liability management or other material banking or business
policies (except to the extent required by Paragraphs 4.1.b. and 4.1.e.
above).
J. EXCLUSIVE MERGER AGREEMENT. Neither Allied nor
either of the Subsidiaries will, directly or indirectly, through any
person (i) encourage, solicit or attempt to initiate or procure
discussions, negotiations or offers with or from any person or entity
(other than BancShares) relating to a merger or other acquisition of
Allied or the purchase or acquisition of any Allied Stock, any Peoples
Stock or any Summit Stock, any branch office of either of the
Subsidiaries or all or any significant part of Allied's or either of the
Subsidiaries' assets; or provide assistance to any person in connection
with any such offer; (ii) except to the extent required by law, disclose
to any person or entity any information not customarily disclosed to the
public concerning Allied or either of the Subsidiaries or their
respective business, or afford to any other person or entity access to
its properties, facilities, books or records; (iii) sell or transfer any
branch office of either of the Subsidiaries or all or any significant
part of Allied's or either of the Subsidiaries' assets to any other
person or entity; or (iv) enter into or become bound by any contract,
agreement, commitment or letter of intent relating to, or otherwise take
or agree to take any action in furtherance of, any such transaction.
k. ACQUISITION OR DISPOSITION OF ASSETS.
Neither Allied nor either of the Subsidiaries will:
(i) Sell or lease (as lessor),
or enter into or become bound by any contract, agreement, option or
commitment relating to the sale, lease (as lessor) or other disposition
of any real estate; or sell or lease (as lessor), or enter into or
become bound by any contract, agreement, option or commitment relating
to the sale, lease (as lessor) or other disposition of any equipment or
any other fixed or capital asset (other than real estate) having a book
value or a fair market value, whichever is greater, of more than $50,000
for any individual item or asset, or more than $100,000 in the aggregate
for all such items or assets;
(ii) Purchase or lease (as
lessee), or enter into or become bound by any contract, agreement,
option or commitment relating to the purchase, lease (as lessee) or
other acquisition of any real property; or purchase or lease (as
lessee), or enter into or become bound by any contract, agreement,
option or commitment relating to the purchase, lease (as lessee) or
other acquisition of any equipment or any other fixed assets (other than
real estate) having a purchase price, or involving aggregate lease
payments, in excess of $50,000 for any individual item or asset, or more
than $100,000 in the aggregate for all such items or assets;
(iii) Enter into any purchase
commitment for supplies or services which calls for prices of goods or
fees for
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services materially higher than current market prices or fees or which
obligates Allied or either of the Subsidiaries for a period longer than
12 months;
(iv) Except in the ordinary
course of its business consistent with its past practices, sell,
purchase or repurchase, or enter into or become bound by any contract,
agreement, option or commitment to sell, purchase or repurchase, any
loan or other receivable or any participation in any loan or other
receivable; or
(v) Sell or dispose of, or enter into or become
bound by any contract, agreement, option or commitment relating to the
sale or other disposition of, any other asset (whether tangible or
intangible, and including without limitation any trade name, trademark,
copyright, service mark or intellectual property right or license); or
assign its right to or otherwise give any other person its permission or
consent to use or do business under corporate name of Allied or either
of the Subsidiaries or any name similar thereto; or release, transfer or
waive any license or right granted to it by any other person to use any
trademark, trade name, copyright, service mark or intellectual property
right.
l. DEBT; LIABILITIES. Except in the ordinary course of
its business consistent with its past practices, neither Allied nor
either of the Subsidiaries will (i) enter into or become bound by any
promissory note, loan agreement or other agreement or arrangement
pertaining to its borrowing of money, (ii) assume, guarantee, endorse or
otherwise become responsible or liable for any obligation of any other
person or entity, or (iii) incur any other liability or obligation
(absolute or contingent).
m. LIENS; ENCUMBRANCES. Neither Allied nor either of
the Subsidiaries will mortgage, pledge or subject any of its assets to,
or permit any of its assets to become or (with the exception of those
liens and encumbrances specifically described in the Allied Disclosure
Statement) remain subject to, any lien or any other encumbrance (other
than in the ordinary course of business consistent with its past
practices in connection with securing of public funds deposits,
repurchase agreements or other similar operating matters).
n. WAIVER OF RIGHTS. Waive, release or compromise any
material rights in its favor (except in the ordinary course of business)
except in good faith for fair value in money or money's worth, nor
waive, release or compromise any rights against or with respect to any
of its officers, directors or shareholders or members of families of
officers, directors or shareholders.
o. OTHER CONTRACTS. Enter into or become bound
by any contracts, agreements, commitments or understandings (other than
those described elsewhere in this Paragraph 4.2.) (i) for or with
respect to any charitable contributions; (ii) with any governmental or
regulatory agency or authority; (iii) pursuant to which Allied, or
either of the Subsidiaries would assume, guarantee, endorse or
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otherwise become liable for the debt, liability or obligation of any
other person or entity; (iv) which is entered into other than in the
ordinary course of its business; or (v) which, in the case of any one
contract, agreement, commitment or understanding and whether or not in
the ordinary course of its business, would obligate or commit Allied or
either of the Subsidiaries to make expenditures of more than $10,000
(other than contracts, agreements, commitments or understandings entered
into in the ordinary course of either of the Subsidiaries' lending
operations).
p. DEPOSIT LIABILITIES. Allied and the Subsidiaries
shall not make any change in their current deposit policies, including
pricing and acceptance, and shall not take any actions designed to
materially decrease the aggregate level of deposits as of the date of
this Agreement.
ARTICLE V. COVENANTS OF BANCSHARES
BancShares hereby covenants and agrees as follows with Allied:
5.1. RATIFICATION OF AGREEMENT BY BOARD OF DIRECTORS.
Management of BancShares will submit this Agreement to its Board of
Directors for ratification and approval at its next regularly
scheduled meeting following the date hereof.
5.2. NASDAQ NOTIFICATION OF LISTING OF ADDITIONAL SHARES OF
BANCSHARES STOCK. As soon as possible after the Effective Time,
BancShares shall file with Nasdaq such notifications and other materials
(and shall pay such fees) as shall be required for the listing on the
Nasdaq National Market of the shares of BancShares Stock to be issued to
Allied's shareholders.
5.3. EMPLOYEES; SEVERANCE PAYMENTS; EMPLOYEE BENEFITS.
a. EMPLOYMENT OF ALLIED EMPLOYEES. Provided they
remain employed by Allied or one of its Subsidiaries at the Effective
Time, BancShares will attempt in good faith, but shall have no
obligation, to locate suitable positions with FCB for and to offer
employment with FCB to, all employees of Allied and its Subsidiaries.
Any employment so offered by BancShares to an employee of Allied or one
of its Subsidiaries shall be in such a position, at such location within
FCB's state-wide branch system, and for such rate of compensation as
BancShares or FCB shall determine in its sole discretion. Each such
person's employment shall be on an "at-will" basis, and nothing in this
Agreement shall be deemed to constitute an employment agreement with any
such person or to obligate BancShares or FCB to employ any such person
for any specific period of time or in any specific position or to
restrict BancShares' or FCB's right to terminate the employment of any
such person at any time and for any reason satisfactory to it.
b. SEVERANCE COMPENSATION.
Allied will be permitted to pay severance compensation to any employee
of Allied or one of the Subsidiaries at the Effective Time who is not
offered employment by BancShares or FCB. The amount of such compensation
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shall be equal to the amount of such employee's accrued but unused
vacation leave, plus an amount equal to (i) three month's salary or
normal wages (at the person's then current salary or wage rate) in the
case of employees who have total continuous, full years of service with
Allied or the Subsidiaries of less than 5 years, or (ii) four month's
salary or wages (at the person's then current salary or wage rate) in
the case of employees who have total continuous, full years of service
with Allied or the Subsidiaries of 5 years or more. Notwithstanding
anything contained herein to the contrary, no payment of severance
compensation pursuant to this Paragraph 5.3.b. shall be made to any
person who does not remain an employee of Allied or one of the
Subsidiaries at the Effective Time. Any payment of severance
compensation shall be made by Allied or the Subsidiaries at the
Effective Time. No severance compensation shall be paid pursuant to this
Paragraph 5.3.b. to any employee of Allied or either Subsidiary who is
party to a written employment or change-in-control agreement with Allied
or either Subsidiary.
c. EMPLOYEE BENEFITS. Except as
otherwise provided herein, any employee of Allied or the Subsidiaries
who becomes an employee of FCB at the Effective Time (a "New Employee")
shall become entitled to receive all employee benefits and to
participate in all benefit plans provided by BancShares or FCB on the
same basis and subject to the same eligibility and vesting requirements,
and to the same conditions, restrictions and limitations, as generally
are in effect and applicable to other newly hired employees of
BancShares or FCB. However, each New Employee shall be given credit for
his or her full years of service with Allied and the Subsidiaries for
purposes of (i) entitlement to vacation and sick leave and for
participation in all FCB welfare, insurance and other fringe benefit
plans, and (ii) eligibility for participation and vesting in BancShares'
Section 401(k) savings plan and in its defined benefit pension plan (the
"Pension Plan"); provided, however, that in no event shall any New
Employee be entitled to or be given credit for past service with Allied
or the Subsidiaries for purposes of the calculation or determination of
benefits under the Pension Plan. For purposes of FCB's health insurance
coverage, New Employees will be able to participate without regard to
pre-existing condition requirements under FCB's health insurance plan,
to the extent any such condition at the Effective Time would have been
covered under the health insurance plans of Allied or the Subsidiaries.
BancShares will grant to each New Employee a
pro rata amount of sick leave and vacation leave, in accordance with
BancShares standard leave policies, for the period between the Effective
Time and the end of the calendar year during which the Effective Time
occurs. Each New Employee will be permitted to carry over accrued and
unused sick leave and vacation leave to the extent such carryover would
be consistent with and would not exceed limitations imposed by
BancShares' leave policies.
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d. TREATMENT OF ALLIED COMPENSATION AND
BENEFIT PLANS AND AGREEMENTS. BancShares agrees to assume the existing
obligations of Allied related to any deferred directors' fee plans, with
pro rata adjustment to be made for the cessation or adjustment of
amounts deferred by each individual director, if applicable, as allowed
under the plan.
BancShares agrees to assume the existing
obligations of the Directors Retirement Plans. BancShares agrees that
all directors currently participating in the Directors Retirement Plans
will be fully vested at the Effective Time regardless of years of
service.
BancShares will not assume the 1994 Allied
Bank Capital, Inc. Management Recognition Plan and, therefore, at the
Effective Time, such plan will cease to exist.
BancShares agrees to assume at the Effective
Time, as successor plan sponsor, the existing qualified defined
contribution plans of the Subsidiaries and to merge such plans (or cause
such plans to be merged) with the qualified defined contribution plan
maintained for employees of BancShares and/or FCB, and to fully vest
affected participants thereunder, in accordance with applicable
provisions of the Code and ERISA. In vesting affected participants,
BancShares shall at a minimum treat as fully vested any participant who
was employed by Allied or either of the Subsidiaries at the Effective
Time. In the alternative, BancShares agrees to permit Allied or the
Subsidiaries to terminate such plans prior to the Effective Time, and in
such event BancShares agrees to complete the process of terminating such
plans in accordance with applicable provisions of ERISA and the Code. In
either event, BancShares further agrees to assume or to cause FCB and/or
its employees to assume as of the Effective Time any and all
administrative and fiduciary duties with respect to the day-to-day
operation of such plans, including the duties of trustee.
BancShares agrees to assume at the Effective Time, as
successor plan sponsor, the existing qualified defined benefit plans of
the Subsidiaries, and to provide for the prompt termination of such
plans in "Standard Terminations" in accordance with the provisions of
Section 4041 of ERISA and the applicable provisions of the Code. Allied
and the Subsidiaries agree that the will take such actions in advance of
the Effective Time as may be necessary to cease benefit accruals as of
the Effective Time and BancShares agrees that if Allied and the
Subsidiaries establish a proposed date of termination for the plans,
whether such date is before or after the Effective Time, BancShares will
use its best efforts to make certain that all applicable filings with
the IRS and the Pension Benefit Guaranty Corporation ("PBGC") are made
on a timely basis so as to preserve the effectiveness of such
termination date. BancShares agrees that following its assumption of the
plans and in the course of administering the plan terminations, it will
not amend either plan to permit a reversion of assets to BancShares or
FCB or any other "employer", and that it
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will retain for purposes of distributing assets upon plan termination
the interest rate and mortality assumptions provided by Section
417(e)(3)(B) of the Code and applicable regulations of the PBGC.
BancShares further agrees to assume or to cause FCB and/or its employees
to assume as of the Effective Time any and all administrative and
fiduciary duties with respect to the day-to-day operation of such plans,
including the duties of trustee.
At the Effective Time, all New Employees will
have the option of participating in FCB's health and dental programs.
The cost of such health insurance shall be equal to the cost for any FCB
employee. In addition, all New Employees shall have access to all
benefits applicable to a new FCB employee at the identical cost. Any
non-retained employee shall be allowed to participate in the FCB Health
and Dental Plan through the exercise of his or her respective COBRA
rights, and for COBRA purposes the FCB Health and Dental Plan shall be
considered a successor plan to the health care plans for Allied and the
Subsidiaries so that any "qualified beneficiaries" within the meaning of
Section 4980 of the Code with respect to the plans of Allied and the
Subsidiaries shall be treated as a "qualified beneficiary" under the FCB
Health and Dental Plan.
FCB shall provide appropriate training and
educational opportunities to all New Employees in order to provide such
employees a reasonable opportunity to assimilate with the operations of
FCB.
BancShares agrees to honor and assume
Allied's obligation pursuant to the Supplemental Income Agreement by and
between Allied and A. Harold Ausley dated November 1, 1989. Termination
of employment pursuant to Mr. Ausley's existing employment agreement
with Summit shall be considered to be equivalent to termination for
reason other than death or attainment of age 65 under Paragraph 4 of the
Supplemental Income Agreement.
BancShares agrees to honor and assume
Allied's obligation pursuant to the Supplemental Income Agreement by and
between Allied and Del F. Jones dated August 1, 1990. Termination of
employment pursuant to Mr. Jones' existing employment agreement with
Summit shall be considered to be equivalent to termination for reason
other than death or attainment of age 65 under Paragraph 4 of the
Supplemental Income Agreement.
BancShares acknowledges the existence of the
Executive Bonus Plan of Allied for the benefit of A. Harold Ausley and
Del F. Jones which consists of whole life insurance policies with base
amounts of $100,000 and $50,000, respectively. The cash value and death
benefits pursuant to such policies are owned by Mr. Ausley and Mr.
Jones, but the annual premiums are paid by Allied on behalf of Mr.
Ausley and Mr. Jones. BancShares agrees that any further premium
payments on such policies will cease as of the Effective Time, thereby
giving Mr. Ausley and Mr. Jones the option of either cashing out the
policies or continuing payment as they individually deem appropriate.
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e. MODIFICATION OR REDUCTION IN
PAYMENTS. BancShares agrees to allow Allied and the Subsidiaries to
amend paragraph 10(g) of each of the existing employment agreements with
A. Harold Ausley, Donald F. Pelling and Del F. Jones to eliminate the
provisions requiring modification or reduction in payments under certain
circumstances in the event such modification or reduction would exceed
in value the excise taxes the officer otherwise would be required to pay
under Section 4999 of the Code absent such modification or reduction.
5.4. BOARD OF DIRECTORS.
a. APPOINTMENT OF DIRECTOR. Following
the Effective Time, BancShares' Board of Directors will appoint one
member of Allied's Board of Directors (who will be selected solely by
BancShares) to serve as a director of BancShares until the next meeting
of shareholders at which members of BancShares' Board of Directors are
elected. Thereafter, such person shall be nominated and recommended for
election as a director of BancShares for a one-year term at such meeting
of BancShares' shareholders and at each of the next three consecutive
meetings at which directors are elected. During the period he serves as
a BancShares director, BancShares' Board of Directors also shall appoint
such person to serve as a director of FCB. Such person's continued
service as a director of BancShares and FCB shall be subject to
customary regulatory approvals, his qualification to serve as a director
under applicable banking regulations and BancShares' and FCB's bylaws,
and, in the case of BancShares, to election by BancShares' shareholders.
For his services as a director of
BancShares and FCB, the person appointed as described above, provided he
remains a director of BancShares and FCB and further provided he not be
serving as a director or advisory director of another financial
institution or financial institution holding company, shall be
compensated until the end of such person's fourth elected one-year term
as a director of BancShares at the rates in effect on March 31, 1995 for
directors of Allied and the Subsidiaries. Thereafter, if such person
continues to serve as a director of BancShares and/or FCB, he shall be
compensated in accordance with BancShares' and FCB's then current fee
schedule.
b. LOCAL ADVISORY BOARD. Each of the
members of Allied's Board of Directors at the Effective Time (other than
the director who is elected to BancShares' Board as provided above and
directors who do not desire to serve as such, and excluding A. Harold
Ausley and Donald F. Pelling), and each of Royce N. Angel and R. Allen
Rippy, shall be appointed to serve for a term of four years following
the Effective Time as a member of a local advisory board for one of
FCB's banking offices in the former geographic market of one of the
Subsidiaries. Each person so appointed, shall diligently discharge his
duties as an advisory board member and promote in good faith BancShares'
and FCB's best interests. For their services as advisory board members,
each person so appointed, provided he remains a director of the advisory
board and provided
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further he not be serving as a director or advisory director of another
financial institution or financial institution holding company, shall be
compensated at the rate in effect on March 31, 1995 for directors of
Allied and the Subsidiaries. Following his fourth year of service, each
such person's continued service as an advisory director will be at FCB's
pleasure and will be subject to FCB's normal policies and procedures
regarding the appointment and service of advisory directors, and each
such person who continues to serve as an advisory direct will receive
fees for such service in accordance with FCB's then current schedule of
advisory board fees.
5.5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
After the Effective Time, without releasing any insurance carrier and
after exhaustion of all applicable director and liability insurance
coverage for Allied or the Subsidiaries and their respective directors
and officers, BancShares shall indemnify, hold harmless and defend the
directors and officers of Allied and the Subsidiaries in office at the
Effective Time, to the same extent as it indemnifies its own directors
and officers, from and against any and all claims, disputes, demands,
causes of action, suits, proceedings, losses, damages, liabilities,
obligations, cost and expenses of every kind and nature including
without limitation reasonable attorneys fees and legal costs and
expenses therewith whether known or unknown and whether now existing or
hereafter arising which may be threatened against, incurred, undertaken,
received or paid by such persons in connection with or which arise out
of or result from or are based upon any action or failure to act by such
person in the ordinary scope of his duties as a director or officer of
Allied or the Subsidiaries through the Effective Time; provided,
however, that BancShares shall not be obligated to indemnify such person
for (I) any act not available for statutory or permissible
indemnification under Delaware or North Carolina law, (II) any act of
self-dealing in violation of federal or state law, (III) any act or
omission which is ultimately determined to have constituted a breach of
any implied or actual duty of fair dealing in connection with a lending
obligation (such claims being commonly referred to as lender liability
claims), (IV) any penalty, decree, order, finding or other action
imposed or taken by any regulatory authority, (V) any violation or
alleged violation of any federal or state law, rule, regulation, order,
decree or policy applicable to banks and bank holding companies, (VI)
any violation or alleged violation of federal or state securities laws,
or (VII) any claim of sexual or other unlawful harassment, or any form
of employment discrimination prohibited by federal or state law.
The indemnification provided by this Paragraph 5.5.e.
is the sole indemnification provided by BancShares to the directors and
officers of Allied and the Subsidiaries for service in such positions up
to and through the Effective Time.
This Paragraph 5.5.e. is intended to create personal
rights in the directors and officers of Allied and the Subsidiaries, who
shall be deemed to be third-party beneficiaries
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hereof. Notwithstanding any other provision of this Agreement, at the
Effective Time, the indemnification rights provided herein shall not be
extinguished but shall instead survive.
ARTICLE VI. MUTUAL AGREEMENTS
6.1. SHAREHOLDERS MEETING; REGISTRATION STATEMENT; PROXY
STATEMENT/PROSPECTUS.
A. MEETING OF SHAREHOLDERS. Allied shall cause a
special meeting of its shareholders (the "Shareholders Meeting") to be
duly called and held as soon as practicable (but in no event less than
20 business days following the mailing to Allied's shareholders of the
"Proxy Statement/Prospectus" described below) for the purpose of
Allied's shareholders voting on the approval of the Merger and the
ratification and adoption of this Agreement. In connection with the call
and conduct of and all other matters relating to the Shareholders
Meeting (including the solicitation of proxies), Allied fully comply
with all provisions of applicable law and regulations and with its
Articles or Certificate of Incorporation and Bylaws.
B. PREPARATION AND DISTRIBUTION OF PROXY STATEMENT/
PROSPECTUS. BancShares and Allied jointly shall prepare a "Proxy
Statement/Prospectus" for distribution to Allied's shareholders as the
proxy statement relating to Allied's solicitation of proxies for use at
the Shareholders Meeting and as BancShares' prospectus relating to the
offer and distribution of BancShares Stock as described herein. The
Proxy Statement/Prospectus shall be in such form and shall contain or be
accompanied by such information regarding the Shareholders Meeting, this
Agreement, the parties hereto, the Merger and other transactions
described herein as is required by applicable law and regulations and
otherwise as shall be agreed upon by BancShares and Allied. BancShares
shall include the Proxy Statement/Prospectus as the prospectus in its
"Registration Statement" described below; and, BancShares and Allied
shall cooperate with each other in good faith and shall use their best
efforts to cause the Proxy Statement/Prospectus to comply with any
comments of the SEC thereon.
Allied will mail the Proxy Statement/Prospectus to its
shareholders not less than 20 business days prior to the scheduled date
of the Shareholders Meeting; provided, however, that no such materials
shall be mailed to Allied's shareholders unless and until BancShares
shall have determined to its own satisfaction that the conditions
specified in Paragraph 7.3.d. below have been satisfied and shall have
approved such mailing.
c. REGISTRATION STATEMENT AND "BLUE SKY" APPROVALS.
As soon as practicable following the execution of this Agreement,
BancShares shall prepare and file with the SEC a registration statement
on Form S-4 (or on such other form as BancShares shall determine to be
appropriate) (the "Registration Statement") covering the BancShares
Stock to be issued to shareholders of
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Allied pursuant to this Agreement. Additionally, BancShares shall take
all such other actions, if any, as shall be required by applicable state
securities or "blue sky" laws (i) to cause the BancShares Stock to be
issued upon consummation of the Merger, and at the time of the issuance
thereof, to be duly qualified or registered (unless exempt) under such
laws, (ii) to cause all conditions to any exemptions from qualification
or registration under such laws to have been satisfied, and (iii) to
obtain any and all required approvals or consents to the issuance of
such stock.
BancShares shall deliver to Allied and its counsel a
preliminary draft of the Registration Statement and the Proxy
Statement/Prospectus not later than 30 days after the date of this
Agreement.
d. RECOMMENDATION OF ALLIED'S BOARD OF DIRECTORS.
Unless due to a material change in circumstances or for any other reason
Allied's Board of Directors reasonably believes that such a
recommendation would violate the directors' duties or obligations as
such to Allied or to its shareholders, Allied's Board of Directors shall
recommend to and actively encourage Allied's shareholders that they vote
their shares of Allied Stock at the Shareholders Meeting to ratify and
approve this Agreement and the Merger, and the Proxy
Statement/Prospectus mailed to Allied's shareholders will so indicate
and state that Allied's Board of Directors considers the Merger to be
advisable and in the best interests of Allied and its shareholders.
e. INFORMATION FOR PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT. BancShares and Allied each agrees to promptly
respond, and to use its best efforts to cause its directors, officers,
accountants and affiliates to promptly respond, to requests by any other
such party and its counsel for information for inclusion in the various
applications for regulatory approvals and in the Proxy
Statement/Prospectus. BancShares and Allied each hereby covenants with
the other that none of the information provided by it for inclusion in
the Proxy Statement/Prospectus will, at the time of its mailing to
Allied's shareholders, contain any untrue statement of a material fact
or omit any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading; and, at all
times following such mailing up to and including the Effective Time,
none of such information contained in the Proxy Statement/ Prospectus,
as it may be amended or supplemented, will contain any untrue statement
of a material fact or omit any material fact required to be stated
therein or necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not
misleading.
6.2. REGULATORY APPROVALS. Within 60 days after the date of
this Agreement, BancShares and Allied each shall prepare and file, or
cause to be prepared and filed, all applications for regulatory
approvals and actions as may be required of them, respectively, by
applicable law and regulations with respect to the transactions
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described herein (including applications to the FRB, the FDIC and the
North Carolina Commissioner and to any other applicable federal or state
banking, securities or other regulatory authority). Each such party
shall use their respective best efforts in good faith to obtain all
necessary regulatory approvals required for consummation of the
transactions described herein. Each such party shall cooperate with each
other party in the preparation of all applications to regulatory
authorities and, upon request, promptly shall furnish all documents,
information, financial statements or other material that may be required
by any other party to complete any such application; and, before the
filing therefor, each party to this Agreement shall have the right to
review and comment on the form and content of any such application to be
filed by any other party. Should the appearance of any of the officers,
directors, employees or counsel of any of the parties hereto be
requested by any other party or by any governmental agency at any
hearing in connection with any such application, such party shall
promptly use its best efforts to arrange for such appearance.
6.3. ACCESS. Following the date of this Agreement and to and
including the Effective Time, Allied shall provide BancShares and its
employees, accountants, counsel or other representatives, access to all
its books, records, files and other information (whether maintained
electronically or otherwise), to all its properties and facilities, and
to all its employees, accountants, counsel and consultants as BancShares
shall, in its sole discretion, consider to be necessary or appropriate;
provided, however, that any investigation or reviews conducted by
BancShares shall be performed in such a manner as will not interfere
unreasonably with Allied's or the Subsidiaries' normal operations or
with their relationship with their customers or employees, and shall be
conducted in accordance with procedures established by the parties
having due regard for the foregoing.
6.4. COSTS. Subject to the provisions of Paragraph 8.3. below,
and whether or not this Agreement shall be terminated or the Merger
shall be consummated, BancShares and Allied each shall pay its own
legal, accounting and financial advisory fees and all its other costs
and expenses incurred or to be incurred in connection with the execution
and performance of its obligations under this Agreement or otherwise in
connection with this Agreement and the transactions described herein
(including without limitation all accounting fees, legal fees, filing
fees, printing costs, travel expenses, and, in the case of Allied, all
fees owed to Legg Mason Wood Walker, Incorporated ("Legg Mason") and to
Friedman, Billings, Ramsey & Co., Inc. ("FBR") and the cost of Allied's
"Fairness Opinions" described in Paragraph 7.1.d. below. However,
subject to the provisions of Paragraph 8.3. below, all costs incurred in
connection with the preparation, printing and mailing of the Proxy
Statement/Prospectus, including but not limited to printing and postage
expenses, shall be deemed to be incurred and shall be paid fifty percent
(50%) by Allied and fifty percent (50%) by BancShares but shall not
exceed $20,000 for Allied.
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6.5. ANNOUNCEMENTS. Allied and BancShares each agrees that no
person other than the parties to this Agreement is authorized to make
any public announcements or statements about this Agreement or any of
the transactions described herein, and that, without the prior review
and consent of the others (which consent shall not unreasonably be
denied or delayed), no party hereto may make any public announcement,
statement or disclosure as to the terms and conditions of this Agreement
or the transactions described herein, except for such disclosures as may
be required incidental to obtaining the prior approval of any regulatory
agency or official to the consummation of the transactions described
herein. However, notwithstanding anything contained herein to the
contrary, prior review and consent shall not be required if in the good
faith opinion of counsel to BancShares any such disclosure by BancShares
is required by law or otherwise is prudent.
6.6. CONFIDENTIALITY. BancShares and Allied each agrees that it
shall treat as confidential and not disclose to any unauthorized person
any documents or other information obtained from or learned about the
other during the course of the negotiation of this Agreement and the
carrying out of the events and transactions described herein (including
any information obtained during the course of any due diligence
investigation or review provided for herein or otherwise) and which
documents or other information relates in any way to the business,
operations, personnel, customers or financial condition of such other
party; and, that it will not use any such documents or other information
for any purpose except for the purposes for which such documents and
information were provided to it and in furtherance of the transactions
described herein. However, the above obligations of confidentiality
shall not prohibit the disclosure of any such document or information by
any party to this Agreement to the extent (i) such document or
information is then available generally to the public or is already
known to the person or entity to whom disclosure is proposed to be made
(other than through the previous actions of such party in violation of
this Paragraph 6.6), (ii) such document or information was available to
the disclosing party on a nonconfidential basis prior to the same being
obtained pursuant to this Agreement, (iii) disclosure is required by
subpoena or order of a court or regulatory authority of competent
jurisdiction, or by the SEC or other regulatory authorities in
connection with the transactions described herein, or (iv) to the extent
that, in the reasonable opinion of legal counsel to such party,
disclosure otherwise is required by law.
In the event this Agreement is terminated for any
reason, then each of the parties hereto immediately shall return to the
other party all copies of any and all documents or other written
materials or information (including computer generated and stored data)
of or relating to such other party which were obtained from them during
the course of the negotiation of this Agreement and the carrying out of
the events and transactions described herein (whether during the course
of any due diligence investigation or review provided for herein or
otherwise) and which documents or
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other information relates in any way to the business, operations,
personnel, customers or financial condition of such other party.
The parties' obligations of confidentiality under this
Paragraph 6.6 shall survive and remain in effect following any
termination of this Agreement.
6.7. ENVIRONMENTAL STUDIES. At its option, BancShares may
cause to be conducted Phase I environmental assessments of the Real
Property, the real estate subject to any Real Property Lease, or the
Loan Collateral, or any portion thereof, together with such other
studies, testing and intrusive sampling and analyses as BancShares shall
deem necessary or desirable (collectively, the "Environmental Survey");
provided, however, that the Environmental Survey, as much as possible,
shall be performed in such a manner as will not interfere unreasonably
with Allied's or the Subsidiaries' normal operations. BancShares shall
attempt in good faith to complete all such Phase I environmental
assessments within sixty (60) days following the date of this Agreement
and thereafter to conduct and complete any such additional studies,
testing, sampling and analyses as promptly as practicable. Subject to
the provisions of Paragraph 8.3. below, the costs of the Environmental
Survey shall be paid by BancShares. If (i) the final results of any
Environmental Survey (or any related analytical data) reflect that there
likely has been any discharge, disposal, release or emission by any
person of any Hazardous Substance on, from or relating to any of the
Real Property, real estate subject to a Real Property Lease or Loan
Collateral at any time prior to the Effective Time, or that any action
has been taken or not taken, or a condition or event likely has occurred
or exists, with respect to any of the Real Property, real estate subject
to a Real Property Lease or Loan Collateral which constitutes or would
constitute a violation of any Environmental Laws, and if, (ii) based on
the advice of its legal counsel or other consultants, BancShares
believes that Allied or either of the Subsidiaries, or, following the
Merger, BancShares or FCB, could become responsible for the remediation
of such discharge, disposal, release or emission or for other corrective
action with respect to any such violation, or that Allied or either of
the Subsidiaries, or, following the Merger, BancShares or FCB, could
become liable for monetary damages (including without limitation any
civil or criminal penalties or assessments) resulting therefrom (or
that, in the case of any of the Loan Collateral, Allied or either of the
Subsidiaries, or, following the Merger, BancShares or FCB, could incur
any such liability if it acquired title to such Loan Collateral), and
if, (iii) based on the advice of their legal counsel or other
consultants, BancShares believes the amount of expenses or liability
which either of them could incur or for which either of them could
become responsible or liable on account of any and all such remediation,
corrective action or monetary damages at any time or over any period of
time could equal or exceed an aggregate of $250,000 over any period of
time, then BancShares shall give Allied prompt written notice thereof
(together with all information in its possession relating thereto) and,
at BancShares' sole option and discretion, at any time thereafter and up
to the Effective Time, it may terminate this
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Agreement without further obligation or liability to Allied or its
shareholders.
6.8. TAX-FREE REORGANIZATION. BancShares and Allied each
undertakes and agrees to use its best efforts to cause the Merger to
qualify as a tax-free "reorganization" within the meaning of Section
368(a)(1)(A) of the Code and that it shall not intentionally take any
action that would cause the Merger to fail to so qualify.
6.9. TRANSITION TEAM. BancShares and Allied shall create a
transition team comprised of staff and representatives of Allied and the
Subsidiaries and staff and representatives of BancShares and FCB (the
"Transition Team"). The purpose of the Transition Team shall be to
provide detailed guidance to BancShares in fulfilling and consummating
the Merger, to maintain open lines of communication between the
Subsidiaries and FCB, and to handle customer inquiries regarding the
Merger. A member of the Transition Team who is a representative of FCB
shall be on site on a daily basis at the Subsidiaries' main offices in
Sanford and Wilmington to serve as a liaison between FCB and the
Subsidiaries until the Effective Time, provided, however, that the
representative shall not interfere unreasonably with the Subsidiaries'
normal operations. The Transition Team shall meet at and operate out of
the Subsidiaries' offices as necessary until the Effective Time. Members
of the Transition Team shall receive no compensation for such service.
ARTICLE VII. CONDITIONS PRECEDENT TO MERGER
7.1. CONDITIONS TO ALL PARTIES' OBLIGATIONS. Notwithstanding
any other provision of this Agreement to the contrary, the obligations
of each of the parties to this Agreement to consummate the transactions
described herein shall be conditioned upon the satisfaction of each of
the following conditions precedent on or prior to the Closing Date:
a. APPROVAL BY GOVERNMENTAL OR REGULATORY AUTHORITIES;
NO DISADVANTAGEOUS CONDITIONS. (i) The Merger and other transactions
described herein shall have been approved, to the extent required by
law, by the FRB, the FDIC and the North Carolina Commissioner, and by
all other governmental or regulatory agencies or authorities having
jurisdiction over such transactions, (ii) no governmental or regulatory
agency or authority shall have withdrawn its approval of such
transactions or imposed any condition on such transactions or
conditioned its approval thereof, which condition is reasonably deemed
by BancShares to be materially disadvantageous or burdensome or to so
adversely impact the economic or business benefits of this Agreement to
BancShares as to render it inadvisable for it to consummate the Merger;
(iii) the 15-day or 30-day waiting period, as applicable, required
following necessary approvals by the FRB and the FDIC for review of the
transactions described herein by the United States Department of Justice
shall have expired, and, in connection with such review, no objection to
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the Merger shall have been raised; and (IV) all other consents,
approvals and permissions, and the satisfaction of all of the
requirements prescribed by law or regulation, necessary to the carrying
out of the transactions contemplated herein shall have been procured.
b. ADVERSE PROCEEDINGS, INJUNCTION, ETC. There shall
not be (I) any order, decree or injunction of any court or agency of
competent jurisdiction which enjoins or prohibits the Merger or any of
the other transactions described herein or any of the parties hereto
from consummating any such transaction, (ii) any pending or threatened
investigation of the Merger or any of such other transactions by the
United States Department of Justice, or any actual or threatened
litigation under federal antitrust laws relating to the Merger or any
other such transaction, (iii) any suit, action or proceeding by any
person (including any governmental, administrative or regulatory
agency), pending or threatened before any court or governmental agency
in which it is sought to restrain or prohibit Allied or BancShares from
consummating the Merger or carrying out any of the terms or provisions
of this Agreement, or (iv) any other suit, claim, action or proceeding
pending or threatened against Allied or BancShares or any of their
respective officers or directors which shall reasonably be considered by
Allied or BancShares to be materially burdensome in relation to the
proposed Merger or materially adverse in relation to the financial
condition, results of operations, prospects, businesses, assets, loan
portfolio, investments, properties or operations of either such
corporation, and which has not been dismissed, terminated or resolved to
the satisfaction of all parties hereto within 90 days of the institution
or threat thereof.
c. APPROVAL BY BOARDS OF DIRECTORS AND SHAREHOLDERS.
The Boards of Directors of Allied and BancShares shall have duly
approved, adopted and ratified this Agreement by appropriate
resolutions, and the shareholders of Allied shall have duly approved,
ratified and adopted this Agreement at the Shareholders Meeting, all to
the extent required by and in accordance with the provisions of this
Agreement, applicable law, and applicable provisions of their respective
Articles or Certificate of Incorporation and ByLaws.
d. FAIRNESS OPINIONS. Allied shall have received from
each of its financial advisors, Legg Mason and FBR, a written opinion
(collectively, the "Fairness Opinions"), dated as of a date prior to the
mailing of the Proxy Statement/Prospectus to Allied's shareholders in
connection with the Shareholders Meeting, to the effect that the
consideration to be received by Allied's shareholders in the Merger is
fair, from a financial point of view, to Allied and its shareholders;
and, Legg Mason and FBR each shall have delivered a letter to Allied,
dated as of a date within ten business days preceding the Closing Date,
to the effect that it remains its opinion that the terms of the Merger
are fair, from a financial point of view, to Allied and its
shareholders.
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e. TAX OPINION. BancShares and Allied shall have
received an opinion of KPMG Peat Marwick LLP, in form and substance
satisfactory to them, substantially to the effect that: (i) for federal
income tax purposes, consummation of the Merger will constitute a
"reorganization" as defined in ss. 368(a)(1)(A) of the Code; (ii) no
taxable gain will be recognized by a shareholder of Allied upon such
shareholder's receipt of solely BancShares Stock in exchange for his or
her Allied Stock; (iii) dividend income or gain, if any, will be
recognized by a shareholder of Allied who receives BancShares Stock and
either cash or Debentures in exchange for his or her Allied Stock
pursuant to Paragraph 1.5.b. above, limited to an amount not in excess
of the amount of cash or the fair market value of Debentures received;
(iv) the basis of the BancShares Stock received by the shareholder in
the Merger will have the same basis as his or her Allied Stock
surrendered in exchange therefor decreased by the amount of cash or the
fair market value of Debentures received, if any, and increased by the
amount of dividend income or gain recognized, if any, in the exchange;
(v) if Allied Stock is a capital asset in the hands of the shareholder
at the Effective Time, then the holding period of the BancShares Stock
received by the shareholder in the Merger will include the holding
period of Allied Stock surrendered in exchange therefor; (vi) cash or
Debentures received by a shareholder who receives solely cash or
Debentures pursuant to Paragraph 1.5.a. above will be treated as a
distribution in redemption of his or her Allied Stock subject to the
limitations of Section 302 of the Code; and (Vii) a shareholder who
receives cash in lieu of a fractional share of BancShares Stock will
recognize gain or loss equal to any difference between the amount of
cash received and the shareholder's basis in the fractional share
interest. In rendering its opinion, KPMG Peat Marwick LLP may rely on
representations contained in certificates of officers of BancShares and
Allied.
f. NASDAQ LISTING. Bancshares shall have
satisfied all requirements for the shares of Bancshares Stock to be
issued to the shareholders of Allied in connection with the Merger to be
listed on the Nasdaq National Market as of the Effective Time.
g. NO TERMINATION OR ABANDONMENT. This
Agreement shall not have been terminated or abandoned by any party
hereto.
7.2. ADDITIONAL CONDITIONS TO ALLIED'S OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary,
Allied's separate obligation to consummate the transactions described
herein shall be conditioned upon the satisfaction of each of the
following conditions precedent on or prior to the Closing Date:
a. MATERIAL ADVERSE CHANGE. There shall not have been
any material adverse change in the consolidated financial condition,
results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations of BancShares and its consolidated
subsidiaries considered as one enterprise and there shall not have
occurred any event or development and there shall not exist any
condition or circumstance which, with the lapse
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of time or otherwise, may or could cause, create or result in any such
material adverse change.
b. COMPLIANCE WITH LAWS. BancShares shall have
complied in all material respects with all federal and state laws and
regulations applicable to the transactions described herein and where
the violation of or failure to comply with any such law or regulation
could or may have a material adverse effect on the consolidated
financial condition, results of operations, prospects, businesses,
assets, loan portfolio, investments, properties or operations of
BancShares and its consolidated subsidiaries considered as one
enterprise.
c. BANCSHARES' REPRESENTATIONS AND WARRANTIES AND
PERFORMANCE OF AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived in
writing by Allied as provided in Paragraph 10.2. below, each of the
representations and warranties of BancShares contained in this Agreement
shall have been true and correct as of the date hereof and shall remain
true and correct on and as of the Effective Time with the same force and
effect as though made on and as of such date, except (I) for changes
which are not, in the aggregate, material and adverse to the
consolidated financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or
operations of BancShares and its consolidated subsidiaries considered as
one enterprise, and (II) as otherwise contemplated by this Agreement;
and BancShares shall have performed in all material respects all of its
obligations, covenants and agreements hereunder to be performed by it on
or before the Closing Date.
Allied shall have received a certificate dated as of
the Closing Date and executed by BancShares and its Vice Chairman and
Chief Financial Officer to the foregoing effect and as to such other
matters as may be reasonably requested by Allied.
d. LEGAL OPINION OF BANCSHARES' COUNSEL. Allied shall
have received from Ward and Smith, P.A., counsel for BancShares, a
written opinion dated as of the Closing Date and substantially in the
form of Schedule C attached hereto or otherwise in form and substance
reasonably satisfactory to Allied.
e. OTHER DOCUMENTS AND INFORMATION FROM BANCSHARES.
BancShares shall have provided to Allied correct and complete copies of
its Bylaws, Certificate of Incorporation and board resolutions (all
certified by its Secretary), together with certificates of the
incumbency of its officers and such other closing documents and
information as may be reasonably requested by Allied or its counsel.
f. CERTIFICATE OF MERGER; OTHER ACTIONS. A
Certificate of Merger in the form described in Paragraph 1.8. above
shall have been duly executed and delivered by BancShares as provided in
that Paragraph.
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g. ACCEPTANCE BY ALLIED'S COUNSEL. The form and
substance of all legal matters described herein or related to the
transactions contemplated herein shall be reasonably acceptable to
Allied's legal counsel.
7.3. ADDITIONAL CONDITIONS TO BANCSHARES' OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary,
BancShares' obligations to consummate the transactions described herein
shall be conditioned upon the satisfaction of each of the following
conditions precedent on or prior to the Closing Date:
a. MATERIAL ADVERSE CHANGE. There shall not have
occurred any material adverse change in the consolidated financial
condition, results of operations, prospects, businesses, assets, loan
portfolio, investments, properties or operations of Allied and there
shall not have occurred any event or development and there shall not
exist any condition or circumstance which, with the lapse of time or
otherwise, may or could cause, create or result in any such material
adverse change.
b. COMPLIANCE WITH LAWS. Allied shall have complied in
all material respects with all federal and state laws and regulations
applicable to the transactions described herein and where the violation
of or failure to comply with any such law or regulation could or may
have a material adverse effect on the consolidated financial condition,
results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations of BancShares or Allied.
c. ALLIED'S REPRESENTATIONS AND WARRANTIES AND
PERFORMANCE OF AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived in
writing by BancShares as provided in Paragraph 10.2. below, each of the
representations and warranties of Allied contained in this Agreement
shall have been true and correct as of the date hereof and shall remain
true and correct at and as of the Effective Time with the same force and
effect as though made on and as of such date, except (I) for changes
which are not, in the aggregate, material and adverse to the
consolidated financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or
operations of Allied and the Subsidiaries considered as one enterprise,
and (II) as otherwise contemplated by this Agreement; and Allied shall
have performed in all material respects all its obligations, covenants
and agreements hereunder to be performed by it on or before the Closing
Date.
BancShares shall have received a certificate dated as
of the Closing Date and executed by Allied and its President and Chief
Financial Officer to the foregoing effect and as to such other matters
as may be reasonably requested by BancShares.
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d. EFFECTIVENESS OF REGISTRATION STATEMENT; COMPLIANCE
WITH SECURITIES AND OTHER "BLUE SKY" REQUIREMENTS. The Registration
Statement shall be effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC. BancShares shall have taken all such
other actions, if any, as it shall consider to be required by applicable
state securities laws (I) to cause the BancShares Stock to be issued
upon consummation of the Merger and at the time of the issuance thereof,
to be duly qualified or registered (unless exempt) under such laws, (II)
to cause all conditions to any exemptions from qualification or
registration under such laws to have been satisfied, and (III) to obtain
any and all required approvals or consents with respect to the issuance
of such stock, and any such required approvals or consents shall have
been obtained and shall remain in effect.
e. AGREEMENTS FROM ALLIED AFFILIATES. BancShares shall
have received the written Affiliates' Agreements in form and content
satisfactory to BancShares and signed by all persons Previously
Disclosed to BancShares or who otherwise are deemed by BancShares or its
counsel to be Affiliates of Allied as provided in Paragraph 4.1.a.
above.
f. LEGAL OPINION OF ALLIED'S COUNSEL. BancShares shall
have received from Poyner & Spruill L.L.P., counsel to Allied, a written
opinion, dated as of the Closing Date and substantially in the form of
Schedule D attached hereto or otherwise in form and substance reasonably
satisfactory to BancShares.
g. OTHER DOCUMENTS AND INFORMATION FROM ALLIED. Allied
shall have provided to BancShares correct and complete copies of
Allied's Articles of Incorporation, Bylaws and board and shareholder
resolutions (all certified by Allied's Secretary), together with
certificates of the incumbency of Allied's officers and such other
closing documents and information as may be reasonably requested by
BancShares or its counsel.
h. CONSENTS TO ASSIGNMENT OF PROPERTY LEASES. Allied
shall have obtained all required consents to the assignment to
BancShares of its rights and obligations under any personal property
lease material to the business of Allied or either of the Subsidiaries
and any Real Property Lease, and such consents shall be in such form and
substance as shall be satisfactory to BancShares; and, each of the
lessors of Allied and the Subsidiaries shall have confirmed in writing
that neither Allied nor either of the Subsidiaries is in default under
the terms and conditions of any personal property lease or any Real
Property Lease.
i. CERTIFICATE OF MERGER; OTHER ACTIONS. A
Certificate of Merger in the form described in Paragraph 1.8. above
shall have been duly executed and delivered by Allied as provided in
that Paragraph.
j. ACCEPTANCE BY BANCSHARES' COUNSEL. The form
and substance of all legal matters described herein or related to the
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transactions contemplated herein shall be reasonably acceptable to
BancShares' legal counsel.
ARTICLE VIII. TERMINATION; BREACH; REMEDIES
8.1. MUTUAL TERMINATION. At any time prior to the Effective
Time (and whether before or after approval hereof by the shareholders of
Allied), this Agreement may be terminated by the mutual agreement of
BancShares and Allied. Upon any such mutual termination, all obligations
of Allied and BancShares hereunder shall terminate and each party shall
pay costs and expenses as provided in Paragraph 6.4. above.
8.2. UNILATERAL TERMINATION. This Agreement may be terminated
by either BancShares or Allied (whether before or after approval hereof
by Allied's shareholders) upon written notice to the other parties and
under the circumstances described below.
a. TERMINATION BY BANCSHARES. This Agreement
may be terminated by BancShares by action of its Board of Directors or
Executive Committee:
(i) if any of the conditions to
the obligations of BancShares (as set forth in Paragraph 7.1. or 7.3.
above) shall not have been satisfied or effectively waived in writing by
BancShares by March 31, 1996 (except to the extent that the failure of
such condition to be satisfied has been caused by the failure of
BancShares to satisfy any of its obligations, covenants or agreements
contained herein);
(ii) if Allied shall have violated or
failed to fully perform any of its obligations, covenants or agreements
contained in Article IV or Article VI herein in any material respect;
(iii) if BancShares determines at
any time that any of Allied's representations or warranties contained in
Article II above or in any other certificate or writing delivered
pursuant to this Agreement shall have been false or misleading in any
material respect when made, or that there has occurred any event or
development or that there exists any condition or circumstance which has
caused or, with the lapse of time or otherwise, may or could cause any
such representations or warranties to become false or misleading in any
material respect;
(iv) if, notwithstanding
BancShares' satisfaction of its obligations under Paragraphs 6.1.b.,
6.1.c. and 6.1.e. above, Allied's shareholders do not ratify and approve
this Agreement and approve the Merger at the Shareholders Meeting;
(v) if the Merger shall not have
become effective on or before March 31, 1996, unless such date is
extended as evidenced by the written mutual agreement of the parties
hereto; provided, however, that in the event there is a delay of not
more than 30 days caused by circumstances beyond the control of the
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parties hereto, the parties hereto agree that the dates set forth in
this Paragraph 8.2.a. shall be extended by mutual agreement for up to an
additional 60 days;
(vi) if the average of the reported
closing prices of BancShares Stock on the Nasdaq National Market for the
10 consecutive trading days ending 30 days prior to the date of the
Special Meeting is less than $42.00; or,
(VII) under the circumstances
described in Paragraph 6.7. above.
However, before BancShares may terminate this
Agreement for any of the reasons specified above in (i), (ii) or (iii)
of this Paragraph 8.2.a., it shall give written notice to Allied as
provided herein stating its intent to terminate and a description of the
specific breach, default, violation or other condition giving rise to
its right to so terminate, and, such termination by BancShares shall not
become effective if, within 30 days following the giving of such notice,
Allied shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of BancShares. In the event
Allied cannot or does not cure such breach, default or violation or
satisfy such condition to the reasonable satisfaction of BancShares
within such 30-day period, BancShares shall have 30 days to notify
Allied of its intention to terminate this Agreement. A failure to so
notify Allied will be deemed to be a waiver by BancShares of the breach,
default or violation pursuant to Paragraph 10.2. below.
b. TERMINATION BY ALLIED. This Agreement may be
terminated by Allied:
(i) if any of the conditions of
the obligations of Allied (as set forth in Paragraph 7.1. or 7.2. above)
shall not have been satisfied or effectively waived in writing by Allied
by March 31, 1996 (except to the extent that the failure of such
condition to be satisfied has been caused by the failure of Allied to
satisfy any of its obligations, covenants or agreements contained
herein);
(ii) if BancShares shall have
violated or failed to fully perform any of its obligations, covenants or
agreements contained in Article V or Article VI herein in any material
respect;
(iii) if Allied determines that
any of BancShares' representations and warranties contained in Article
III herein or in any other certificate or writing delivered pursuant to
this Agreement shall have been false or misleading in any material
respect when made, or that there has occurred any event or development
or that there exists any condition or circumstance which has caused or,
with the lapse of time or otherwise, may or could cause any such
representations or warranties to become false or misleading in any
material respect;
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(iv) if, subject to Allied's
satisfaction of its obligations contained in Paragraphs 6.1.a., 6.1.b.,
6.1.d. and 6.1.e above, its shareholders do not ratify and approve this
Agreement and approve the Merger at the Shareholders Meeting; or,
(v) if the Merger shall not have
become effective on or before March 31, 1996, unless such date is
extended as evidenced by the written mutual agreement of the parties
hereto; provided, however, that in the event there is a delay of not
more than 30 days caused by circumstances beyond the control of the
parties hereto, the parties hereto agree that the dates set forth in
this Paragraph 8.2.a. shall be extended by mutual agreement for up to an
additional 60 days.
However, before Allied may terminate this Agreement
for any of the reasons specified above in clause (i), (ii) or (iii) of
this Paragraph 8.2.b., it shall give written notice to BancShares as
provided herein stating its intent to terminate and a description of the
specific breach, default, violation or other condition giving rise to
its right to so terminate, and, such termination by Allied shall not
become effective if, within 30 days following the giving of such notice,
BancShares shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of Allied. In the event
BancShares cannot or does not cure such breach, default or violation or
satisfy such condition to the reasonable satisfaction of Allied within
such 30-day period, Allied shall have 30 days to notify BancShares of
its intention to terminate this Agreement. A failure to so notify
BancShares will be deemed to be a waiver by Allied of the breach,
default or violation pursuant to Paragraph 10.2. below.
8.3. BREACH; REMEDIES. Except as otherwise provided below, in
the event of a breach by Allied of any of its representations or
warranties contained in Article II of this Agreement or in any other
certificate or writing delivered pursuant to this Agreement, or in the
event of its failure to perform or violation of any of its obligations,
agreements or covenants contained in Articles IV or VI of this
Agreement, then BancShares' sole right and remedy shall be to terminate
this Agreement prior to the Effective Time as provided in Paragraph 8.2.
above, or, in the case of a failure to perform or violation of any
obligations, agreements or covenants, to seek specific performance
thereof.
Likewise, and except as otherwise provided below, in
the event of a breach by BancShares of any of its representations or
warranties contained in Article III of this Agreement, or in the event
of its failure to perform or violation of any of its obligations,
agreements or covenants contained in Articles V or VI of this Agreement,
then Allied's sole right and remedy shall be to terminate this Agreement
prior to the Effective Time as provided in Paragraph 8.2. above, or, in
the case of a failure to perform or violation of any obligations,
agreements or covenants, to seek specific performance thereof.
Notwithstanding anything contained herein to the
contrary, if either party to this Agreement breaches this Agreement
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by willfully or intentionally failing to perform or violating any of its
obligations, agreements or covenants contained in Articles IV, V or VI
of this Agreement, such party shall be obligated to pay all expenses of
the other party described in Paragraph 6.4, together with other damages
recoverable at law or in equity.
ARTICLE IX. INDEMNIFICATION
9.1. AGREEMENT TO INDEMNIFY. Allied and BancShares hereby agree
that in the event this Agreement is terminated for any reason and the
Merger is not consummated, then they will indemnify each other as
provided below.
a. BY ALLIED. Allied shall indemnify, hold harmless
and defend BancShares from and against any and all claims, disputes,
demands, causes of action, suits, proceedings, losses, damages,
liabilities, obligations, costs and expenses of every kind and nature,
including without limitation reasonable attorneys' fees and legal costs
and expenses in connection therewith, whether known or unknown, and
whether now existing or hereafter arising, which may be threatened
against, incurred, undertaken, received or paid by BancShares:
(i) in connection with or which
arise out of or result from or are based upon (A) Allied's operations or
business transactions or its relationship with any of its employees, or
(B) Allied's failure to comply with any statute or regulation of any
federal, state or local government or agency (or any political
subdivision thereof) in connection with the transactions described in
this Agreement;
(ii) in connection with or which
arise out of or result from or are based upon any fact, condition or
circumstance that constitutes a breach by Allied of, or any inaccuracy,
incompleteness or inadequacy in, any of its representations or
warranties under or in connection with this Agreement, or any failure of
Allied to perform any of its covenants, agreements or obligations under
or in connection with this Agreement;
(iii) in connection with or which
arise out of or result from or are based upon any information provided
by Allied which is included in the Proxy Statement/Prospectus and which
information causes the Proxy Statement/Prospectus at the time of its
mailing to Allied's shareholders to contain any untrue statement of a
material fact or to omit any material fact required to be stated therein
or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not false or
misleading; and,
(iv) in connection with or which
arise out of or result from or are based upon the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control, removal,
clean-up
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or remediation on, from or relating to the Real Property by Allied or
any other person of any Hazardous Substances, or any action taken or any
event or condition occurring or existing with respect to the Real
Property which constitutes a violation of any Environmental Laws by
Allied or any other person.
b. BY BANCSHARES. BancShares shall indemnify, hold
harmless and defend Allied from and against any and all claims,
disputes, demands, causes of action, suits, proceedings, losses,
damages, liabilities, obligations, costs and expenses of every kind and
nature, including without limitation reasonable attorneys' fees and
legal costs and expenses in connection therewith, whether known or
unknown, and whether now existing or hereafter arising, which may be
threatened against, incurred, undertaken, received or paid by Allied:
(i) in connection with or which
arise out of or result from or are based upon (A) BancShares' operations
or business transactions or its relationship with any of its employees,
or (B) BancShares' failure to comply with any statute or regulation of
any federal, state or local government or agency (or any political
subdivision thereof) in connection with the transactions described in
this Agreement;
(ii) in connection with or which
arise out of or result from or are based upon of any fact, condition or
circumstance that constitutes a breach by BancShares of, or any
inaccuracy, incompleteness or inadequacy in, any of its representations
or warranties under or in connection with this Agreement, or any failure
of BancShares to perform any of its covenants, agreements or obligations
under or in connection with this Agreement; and,
(iii) in connection with or which
arise out of or result from or are based upon any information provided
by it which is included in the Proxy Statement/Prospectus and which
information causes the Proxy Statement/Prospectus at the time of its
mailing to Allied's shareholders to contain any untrue statement of a
material fact or to omit any material fact required to be stated therein
or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not false or
misleading.
9.2. PROCEDURE FOR CLAIMING INDEMNIFICATION.
a. BY BANCSHARES. If any matter subject to
indemnification hereunder arises in the form of a claim against
BancShares, its successors and assigns (collectively, "Indemnitee")
(herein referred to as a "Third Party Claim"), the applicable Indemnitee
promptly shall give notice and details thereof, including copies of all
pleadings and pertinent documents, to Allied. Within 15 days of such
notice, Allied either (i) shall pay the Third Party Claim either in full
or upon agreed compromise or (ii) shall notify the applicable Indemnitee
and BancShares that Allied disputes the Third Party Claim and intends to
defend against it, and thereafter shall so defend and pay any adverse
final
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judgment or award in regard thereto. Such defense shall be controlled
by Allied and the cost of such defense shall be borne by Allied except
that the applicable Indemnitee shall have the right to participate in
such defense at its own expense and provided that Allied shall have no
right in connection with any such defense or the resolution of any such
Third Party Claim to impose any cost, restriction, limitation or
condition of any kind upon any of the parties comprising Indemnitee
hereunder. BancShares agrees that it shall cooperate in all reasonable
respects in the defense of any such Third Party Claim, including making
personnel, books and records relevant to the Third Party Claim available
to Allied without charge therefor except for out-of-pocket expenses. If
Allied fails to take action within 15 days as hereinabove provided or,
having taken such action, thereafter fails diligently to defend and
resolve the Third Party Claim, the parties comprising Indemnitee shall
have the right to pay, compromise or defend the Third Party Claim and to
assert the indemnification provisions hereof. Each of the parties
comprising Indemnitee also shall have the right, exercisable in good
faith, to take such action as may be necessary to avoid a default prior
to the assumption of the defense of the Third Party Claim by Allied.
b. BY ALLIED. If any matter subject to indemnification
hereunder arises in the form of a claim against Allied or its successors
and assigns (herein referred to as a "Third Party Claim"), Allied
promptly shall give notice and details thereof, including copies of all
pleadings and pertinent documents, to BancShares. Within 15 days of such
notice, BancShares either (i) shall pay the Third Party Claim either in
full or upon agreed compromise or (ii) shall notify Allied that
BancShares disputes the Third Party Claim and intends to defend against
it, and thereafter shall so defend and pay any adverse final judgment or
award in regard thereto. Such defense shall be controlled by BancShares
and the cost of such defense shall be borne by BancShares except that
Allied shall have the right to participate in such defense at its own
expense and provided that BancShares shall have no right in connection
with any such defense or the resolution of any such Third Party Claim to
impose any cost, restriction, limitation or condition of any kind upon
Allied. Allied agrees that it shall cooperate in all reasonable respects
in the defense of any such Third Party Claim, including making
personnel, books and records relevant to the Third Party Claim available
to BancShares without charge therefor except for out-of-pocket expenses.
If BancShares fails to take action within 15 days as hereinabove
provided or, having taken such action, thereafter fails diligently to
defend and resolve the Third Party Claim, Allied shall have the right to
pay, compromise or defend the Third Party Claim and to assert the
indemnification provisions hereof. Allied also shall have the right,
exercisable in good faith, to take such action as may be necessary to
avoid a default prior to the assumption of the defense of the Third
Party Claim by BancShares.
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ARTICLE X. MISCELLANEOUS PROVISIONS
10.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES,
INDEMNIFICATION AND OTHER AGREEMENTS.
a. REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS.
None of the representations, warranties or agreements herein shall
survive the effectiveness of the Merger, and no party shall have any
right after the Effective Time to recover damages or any other relief
from any other party to this Agreement by reason of any breach of
representation or warranty, any nonfulfillment or nonperformance of any
agreement contained herein, or otherwise; provided, however, that the
parties' agreements contained in Paragraph 6.6. above, BancShares'
covenants contained in Article V, and BancShares' representation and
warranty contained in Paragraph 3.2 above, shall survive the
effectiveness of the Merger.
b. INDEMNIFICATION. The parties'
indemnification agreements and obligations pursuant to Paragraph 9.1.
above shall become effective only in the event this Agreement is
terminated, and neither of the parties shall have any obligations under
Paragraph 9.1. in the event of or following consummation of the Merger.
10.2. WAIVER. Any term or condition of this Agreement may be
waived (except as to matters of regulatory approvals and approvals
required by law), either in whole or in part, at any time by the party
which is, and whose shareholders are, entitled to the benefits thereof;
provided, however, that any such waiver shall be effective only upon a
determination by the waiving party (through action of its Board of
Directors) that such waiver would not adversely affect the interests of
the waiving party or its shareholders; and, provided further, that no
waiver of any term or condition of this Agreement by any party shall be
effective unless such waiver is in writing and signed by the waiving
party or as provided in Paragraphs 8.2.a. and 8.2.b. above, or be
construed to be a waiver of any succeeding breach of the same term or
condition. No failure or delay of any party to exercise any power, or to
insist upon a strict compliance by any other party of any obligation,
and no custom or practice at variance with any terms hereof, shall
constitute a waiver of the right of any party to demand full and
complete compliance with such terms.
10.3. AMENDMENT. This Agreement may be amended, modified or
supplemented at any time or from time to time prior to the Effective
Time, and either before or after its approval by the shareholders of
Allied, by an agreement in writing approved by a majority of the Boards
of Directors of BancShares and Allied executed in the same manner as
this Agreement; provided however, that, except with the further approval
of Allied's shareholders of that change or as otherwise provided herein,
following approval of this Agreement by Allied's shareholders no change
may be made in the Cash Factor or the Exchange Ratio.
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10.4. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered personally or by courier, or mailed by certified mail, return
receipt requested, postage prepaid, and addressed as follows:
a. IF TO ALLIED, TO:
Allied Bank Capital, Inc.
130 North Steele Street
Sanford, North Carolina 27336
Attention: Mr. A. Harold Ausley
President
With copy to: Michael S. Colo, Esq.
Poyner & Spruill L.L.P.
130 South Franklin Street
Rocky Mount, North Carolina 27802
b. IF TO BANCSHARES, TO:
First Citizens BancShares, Inc.
3128 Smoketree Court
Raleigh, North Carolina 27604
Attention: Mr. Kenneth A. Black
Vice President
With copy to: Alexander M. Donaldson, Esq.
Ward and Smith, P.A.
Suite 2400, Two Hannover Square
Fayetteville Street Mall
Raleigh, North Carolina 27601
10.5. FURTHER ASSURANCE. Allied and BancShares each agree to
furnish to the other such further assurances with respect to the matters
contemplated herein and their respective agreements, covenants,
representations and warranties contained herein, including the opinion
of legal counsel, as such other party may reasonably request.
10.6. HEADINGS AND CAPTIONS. Headings and captions of the
sections and paragraphs of this Agreement have been inserted for
convenience of reference only and do not constitute a part hereof.
10.7. ENTIRE AGREEMENT. This Agreement (including all schedules
and exhibits attached hereto and all documents incorporated herein by
reference) contains the entire agreement of the parties with respect to
the transactions described herein and supersedes any and all other oral
or written agreement(s) heretofore made, and there are no
representations or inducements by or to, or any agreements between, any
of the parties hereto other than those contained herein in writing.
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10.8. SEVERABILITY OF PROVISIONS. The invalidity or
unenforceability of any term, phrase, clause, paragraph, restriction,
covenant, agreement or other provision hereof shall in no way affect the
validity or enforceability of any other provision or part hereof.
10.9. ASSIGNMENT. This Agreement may not be
assigned by any party hereto except with the prior written consent of
the other parties hereto.
10.10. COUNTERPARTS. Any number of counterparts of this
Agreement may be signed and delivered, each of which shall be considered
an original and which together shall constitute one agreement.
10.11. GOVERNING LAW. This Agreement is made in and
shall be construed and enforced in accordance with the laws of North
Carolina.
10.12. INSPECTION. Any right of BancShares hereunder to
investigate or inspect the assets, books, records, files and other
information of Allied in no way shall establish any presumption that
BancShares should have conducted any investigation or that such right
has been exercised by BancShares, its agents, representatives or others.
Any investigations or inspections that have been made by BancShares or
its agents, representatives or others prior to the Closing Date shall
not be deemed in any way in derogation or limitation of the covenants,
representations and warranties made by or on behalf of Allied in this
Agreement.
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IN WITNESS WHEREOF, Allied and BancShares each has
caused this Agreement to be executed in its name by its duly authorized
officers and its corporate seal to be affixed hereto as of the date
first above written.
ALLIED BANK CAPITAL, INC.
By: /s/ A. Harold Ausley
A. Harold Ausley
President
ATTEST:
/s/ Del F. Jones
Del F. Jones
Assistant Secretary
[CORPORATE SEAL]
FIRST CITIZENS BANCSHARES, INC.
By: /s/ Kenneth A. Black
Kenneth A. Black
Vice President
ATTEST:
/s/ Edward L. Willingham, IV
Edward L. Willingham, IV
Assistant Secretary
[CORPORATE SEAL]
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SCHEDULES TO AGREEMENT AND PLAN OF
REORGANIZATION AND MERGER
SCHEDULE DESCRIPTION
A Form of FCB Subordinated Debenture
B Form of Affiliate's Letter
C Form of Legal Opinion of Counsel
for BancShares
D Form of Legal Opinion of Counsel
for Allied
Allied Bank Capital, Inc., agrees to furnish supplementally a copy of any
omitted schedule upon request
<PAGE>
APPENDIX II
OPINIONS OF LEGG MASON WOOD WALKER, INCORPORATED AND
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
<PAGE>
October 27, 1995
Board of Directors
Allied Bank Capital, Inc.
130 North Steele Street
Sanford, North Carolina 27330
Gentlemen:
Allied Bank Capital, Inc. ("Allied") and First Citizens BancShares,
Inc. ("BancShares") have entered into an Agreement and Plan of Reorganization
and Merger dated August 7, 1995 (the "Agreement") pursuant to which Allied will
be merged with and into BancShares (the "Merger"). Under the Agreement, each
shareholder of Allied shall have the option, subject to the limitation set forth
below, to receive (a) 100% cash at $25.25 per share for each share of Allied
common stock ("Allied Stock"), (b) 100% Class A common stock ("Common Stock") of
BancShares at an exchange ratio of .531 shares of BancShares Common Stock for
each share of Allied Stock, subject to adjustment if the market value of
BancShares' Common Stock is less than $45.13 per share or greater than $49.88
per share, or (c) 100% unsecured subordinated debentures of First Citizens Bank
& Trust Company, with a principal amount equal to $25.25 multiplied by the
number of Allied shares to be exchanged, the maturity choices and other terms of
which are set forth in the Agreement. In the event, and only in the event, that
the number of Allied shares elected to be exchanged for BancShares Common Stock
is less than 40% or more than 55% of the total number of outstanding shares of
Allied Stock, a pro-ration will be effected so that at least 40% but not more
than 55% of the total consideration is in the form of BancShares Common Stock.
If the number of Allied shares electing to receive BancShares Common Stock
exceeds 55%, then Allied shareholders shall have the option of receiving either
cash or unsecured subordinated debentures to arrive at such 55% ratio. If the
number of Allied shares electing to receive BancShares Common Stock is less than
40%, then common stock will be substituted first for debentures and then, if
necessary, for cash to arrive at such 40% ratio. BancShares also will offer
$25.25 per share for each outstanding granted and unexercised Allied stock
option, with holders of Allied stock options receiving, immediately prior to the
closing of the Merger, a net payment from Allied equal to the difference between
the individual option prices applicable to each option holder and $25.25 per
share. You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Allied of the consideration to be paid to such
shareholders in the Merger.
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Board of Directors
October 27, 1995
Page 2
Legg Mason Wood Walker, Incorporated ("Legg Mason"), as part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, and private placements. Legg Mason is familiar
with Allied, having served as financial advisor and stand-by underwriter to
Allied in connection with its conversion from mutual-to-stock form in 1992 and
in connection with its acquisition of a mutual savings bank in a merger
conversion in 1994. Legg Mason is familiar with BancShares, having served as
financial advisor to BancShares in connection with its proposed acquisition of
another financial institution in 1995. Legg Mason has served as financial
advisor to Allied in connection with the Merger and will receive a fee for its
services which is contingent upon the consummation of the Merger. In the
ordinary course of its securities business, Legg Mason makes a market in the
equity securities of Allied, and trades such securities for the accounts of its
customers, and therefore may from time to time hold a long or short position in
such securities. Legg Mason follows both Allied and BancShares from a research
perspective.
In arriving at its opinion, Legg Mason (i) reviewed the Agreement,
certain publicly available business and financial information for Allied and
BancShares and certain other financial statements, data, reports and analyses
for Allied and BancShares prepared by their respective managements, including
the 1995 budget of Allied and BancShares; (ii) discussed the current operations,
financial condition and prospects of Allied and BancShares with the managements
of Allied and BancShares; (iii) reviewed the reported market prices and
historical trading activity of Allied and BancShares Common Stock and compared
certain financial and stock market information for Allied and BancShares with
similar information for certain other financial institutions, the securities of
which are publicly-traded; (iv) reviewed the financial terms of certain recent
business combinations involving financial institutions that Legg Mason deemed
comparable in whole or in part; and (v) performed such other studies and
analyses as Legg Mason considered appropriate.
Legg Mason relied without independent verification upon the accuracy
and completeness of all the financial and other information reviewed by it for
purposes of its opinion. In that regard, Legg Mason assumed that the financial
forecasts were reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the managements of Allied and BancShares.
Legg Mason did not make or obtain an independent evaluation or appraisal of the
assets or liabilities of Allied or BancShares nor was it furnished with any such
evaluation or appraisal.
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Board of Directors
October 27, 1995
Page 3
Based upon and subject to the foregoing, it is our opinion that as of
the date hereof the consideration to be received by the shareholders of Allied
in the Merger is fair, from a financial point of view, to such shareholders.
Very truly yours,
/s/ LEGG MASON WOOD WALKER, INCORPORATED
LEGG MASON WOOD WALKER, INCORPORATED
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October 27, 1995
Board of Directors
Allied Bank Capital, Inc.
130 North Steele Street
Sanford, NC 27330-3918
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR") provide
you with its opinion as to the fairness from a financial point of view to the
holders of common stock ("Stockholders") of Allied Bank Capital, Inc. ("Allied"
or the "Company") of the Consideration (as hereinafter defined) to be received
by them pursuant to the Agreement and Plan of Reorganization and Merger between
Allied and First Citizens BancShares, Inc. ("First Citizens" or "BancShares"),
dated August 7, 1995 (the "Merger Agreement"), pursuant to which Allied will be
merged with and into BancShares (the "Merger"). The Agreement provides, among
other things, that each issued and outstanding share of common stock of Allied,
par value $1.00 per share, (other than such shares held directly or indirectly
by Allied, BancShares and their respective subsidiaries in a non-fiduciary
capacity by Allied) shall be converted into the right to receive $25.25 per
share subject to certain limitations of either cash, BancShares Class A common
stock, par value $1.00 per share, or unsecured subordinated debentures of
First-Citizens Bank and Trust Company, a wholly owned subsidiary of BancShares
(the "Consideration"). For Stockholders choosing to receive Class A common
stock: the number of shares of BancShares Class A common stock which will be
exchanged for each share of Allied common stock in the Merger will equal 0.531
if the average closing price of BancShares Class A common stock is between
$45.13 and $49.88 for the ten trading days ending the day prior to the
stockholders' meeting of Allied to consider the Merger. In the event the average
closing price is below $45.13 or above $49.88 for the same ten-trading-day
period, the exchange ratio will be adjusted. At least 40% but not more than 55%
of the Consideration will be in the form of BancShares Class A common stock with
the remaining portion of the Consideration consisting of cash or subordinated
debentures. The Merger will be considered at a special meeting of the
stockholders of Allied. The terms of the Merger are more fully set forth in the
Merger Agreement.
In delivering this opinion, FBR, has completed the following tasks:
1. reviewed Allied's Annual Reports to Stockholders and Allied's
Annual Reports on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") for the fiscal years ended
December 31, 1992 through 1994;
2. reviewed BancShares' Annual Reports to Stockholders and
BancShares' Annual Reports on Form 10-K filed with the SEC for the
fiscal years ended December 31, 1992 through 1994;
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Board of Directors
Allied Bank Capital, Inc.
October 27, 1995
Page 2
3. reviewed the Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1995 and June 30, 1995 filed with the SEC by Allied
and BancShares;
4. discussed the historical and current operations, financial condition
and prospects of Allied and BancShares with the managements of Allied
and BancShares;
5. reviewed the reported market prices and trading activity for Allied's
common stock and BancShares Class A common stock and compared them with
those of certain financial institutions (or their holding companies)
that FBR deemed to be reasonably comparable to Allied and BancShares;
6. compared the results of operations and financial condition of Allied
and BancShares with those of certain publicly-traded financial
institutions (or their holding companies) that FBR deemed to be
reasonably comparable to Allied and BancShares;
7. reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions that FBR deemed to be reasonably
comparable;
8. reviewed an executed copy of the Merger Agreement; and
9. performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning Allied and BancShares furnished to it by Allied and BancShares or the
publicly-available financial and other information regarding Allied, BancShares
and other financial institutions (or their holding companies). FBR has assumed
that all such information is accurate and complete. FBR has further relied on
the assurances of management of Allied and BancShares that they are not aware of
any facts that would make such financial or other information relating to such
entities inaccurate or misleading. With respect to financial forecasts for
Allied and BancShares provided to FBR by their respective managements, FBR has
assumed, for purposes of this opinion, that the forecasts have been reasonably
prepared on bases reflecting the best available estimates and judgments of their
respective managements at the time of preparation as to the future financial
performance of Allied and BancShares and that they provide a reasonable basis
upon which FBR can form its opinion. FBR has assumed that there has been no
material change in Allied's or BancShares' assets, financial condition, result
of operations, business or prospects since June 30, 1995. FBR did not undertake
an independent appraisal of the assets or liabilities of Allied or BancShares
nor was FBR furnished with any such appraisals. FBR is not an expert in the
evaluation of allowances for loan losses and did not review any individual
credit files of Allied or BancShares. FBR's conclusions and opinion are
necessarily based upon economic, market and other conditions and
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Board of Directors
Allied Bank Capital, Inc.
October 27, 1995
Page 3
the information made available to FBR as of the date of this
opinion. FBR expresses no opinion on matters of a legal, regulatory, tax or
accounting nature related to the Merger.
FBR, as part of its institutional brokerage, research and investment banking
practice, is regularly engaged in the valuation of securities and the evaluation
of transactions in connection with initial and secondary offerings,
mutual-to-stock conversions of savings institutions, mergers and acquisitions of
commercial banks, savings institutions and savings and loan holding companies,
as well as business valuations for other corporate purposes for financial
institutions and real estate related companies. As specialists in the valuation
of securities of financial institutions, FBR has experience in, and knowledge
of, North Carolina and the surrounding regional markets for thrift and bank
securities and institutions operating in North Carolina and the surrounding
areas.
FBR has acted as a financial advisor to Allied in connection with the
transaction described herein and will receive a fee for services rendered which
is contingent upon the consummation of the Merger. In the ordinary course of
FBR's business, it may effect transactions in the securities of Allied or
BancShares for its own account and/or for the accounts of its customers and,
accordingly, may at any time hold long or short positions in such securities.
From time to time, principals and/or employees of FBR may also have positions in
the securities.
This letter is solely for the information of the Board of Directors of Allied in
its consideration of the Merger Agreement. This letter may not be relied upon by
any other person or used for any other purpose, reproduced, disseminated, quoted
from or referred to without FBR's prior written consent. It is understood that
this letter is directed solely to the Board of Directors of Allied and is not
intended to be, and does not constitute, a recommendation to any Stockholder as
to how such Stockholder should vote with respect to the Merger.
Based upon and subject to the foregoing, as well as any such other matters as we
consider relevant, it is FBR's opinion that the Consideration is fair, from a
financial point of view, to the Stockholders of Allied.
Very truly Yours,
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By: /s/ Emanuel J. Friedman
Emanuel J. Friedman
Chairman
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APPENDIX III
EXCERPT FROM NORTH CAROLINA BUSINESS CORPORATION ACT
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
SS. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the
surviving or acquiring corporation by merger or share
exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under G.S. 55-13-02 and
who exercises that right when and in the manner
required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares,
means the value of the shares immediately before the
effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action
unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of
the corporate action until the date of payment, at a
rate that is fair and equitable under all the
circumstances, giving due consideration to the rate
currently paid by the corporation on its principal
bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation
or the beneficial owner of shares to the extent of the
rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or
by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the
beneficial shareholder.
SS. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a
shareholder is entitled to dissent from, and obtain payment of the fair
value of his shares in the event of, any of the following corporate
actions:
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(1) Consummation of a plan of merger to which the
corporation (other than a parent corporation in a
merger under G.S. 55-11-04) is a party unless (i)
approval by the shareholders of that corporation is
not required under G.S. 55-11-03(g) or (ii) such
shares are then redeemable by the corporation at a
price not greater than the cash to be received in
exchange for such shares;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares
will be acquired, unless such shares are then
redeemable by the corporation at a price not greater
than the cash to be received in exchange for such
shares;
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation
other than as permitted by G.S. 55-12-01, including a
sale in dissolution, but not including a sale pursuant
to court order or a sale pursuant to a plan by which
all or substantially all of the net proceeds of the
sale will be distributed in cash to the shareholders
within one year after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of
a dissenter's shares because it (i) alters or
abolishes a preferential right of the shares; (ii)
creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking
fund for the redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other
securities; (iv) excludes or limits the right of the
shares to vote on any matter, or to cumulate votes;
(v) reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under G.S.
55-6-04; or (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for
his shares under this Article may not challenge the corporate action
creating his entitlement, including without limitation a merger solely
or partly in exchange for cash or other property, unless the action is
unlawful or fraudulent with respect to the shareholder or the
corporation.
SS. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in his name only if he dissents
with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. The rights of a
partial dissenter under this subsection are determined as if the shares
as to which he dissents and his other shares were registered in the
names of different shareholders.
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(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(1) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights;
and
(2) He does so with respect to all shares of which he is
the beneficial shareholder.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
SS. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights
under G.S. 55-13-02 is submitted to a vote at a shareholders' meeting,
the meeting notice must state that shareholders are or may be entitled
to assert dissenters' rights under this Article and be accompanied by a
copy of this Article.
(b) If corporate action creating dissenters' rights under G.S.
55-13-02 is taken without a vote of shareholders, the corporation shall
no later than 10 days thereafter notify in writing all shareholders
entitled to assert dissenters' rights that the action was taken and send
them the dissenters' notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of
this section, such failure shall not invalidate any corporate action
taken; but any shareholder may recover from the corporation any damage
which he suffered from such failure in a civil action brought in his own
name within three years after the taking of the corporate action
creating dissenters' rights under G.S. 55-13-02 unless he voted for such
corporate action.
SS. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights
under G.S. 55-13-02 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must
actually receive, before the vote is taken written
notice of his intent to demand payment for his shares
if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his shares under this
Article.
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SS. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights
under G.S. 55-13-02 is authorized at a shareholders' meeting, the
corporation shall mail by registered or certified mail, return receipt
requested, a written dissenters' notice to all shareholders who
satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days
after the corporate action was taken, and must:
(1) State where the payment demand must be sent and where
and when certificates for certificated shares must be
deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the
payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30
nor more than 60 days after the date the subsection
(a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SS. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S.
55-13-22 must demand payment and deposit his share certificates in
accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a
shareholder until these rights are cancelled or modified by the taking
of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his share under this Article.
SS. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the
proposed corporate action is taken or the restrictions released under
G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until
these rights are cancelled or modified by the taking of the proposed
corporate action.
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SS. 55-13-25. OFFER OF PAYMENT.
(a) As soon as the proposed corporate action is taken, or upon
receipt of a payment demand, the corporation shall offer to pay each
dissenter who complied with G.S. 55-13-23 the amount the corporation
estimates to be the fair value of his shares, plus interest accrued to
the date of payment, and shall pay this amount to each dissenter who
agrees in writing to accept it in full satisfaction of his demand.
(b) The offer of payment must be accompanied by:
(1) The corporation's most recent available balance sheet
as of the end of a fiscal year ending not more than 16
months before the date of offer of payment, an income
statement for that year, a statement of cash flows for
that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under G.S. 55-13-28; and
(5) A copy of this Article.
SS. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within
60 days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action, it
must sent a new dissenters' notice under G.S. 55-13-22 and repeat the
payment demand procedure.
SS. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S
OFFER OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his
own estimate of the fair value of his shares and amount of interest due,
and demand payment of his estimate or reject the corporation's offer
under G.S. 55-13-25 and demand payment of the fair value of his shares
and interest due, if:
(1) The dissenter believes that the amount offered under
G.S. 55-13-25 is less than the fair value of his
shares or that the interest due is incorrectly
calculated;
(2) The corporation fails to make payment to a dissenter
who accepts the corporation's offer under G.S.
55-13-25 within 30 days after the dissenter's
acceptance; or
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(3) The corporation, having failed to take the proposed
action, does not return the deposited certificates or
release the transfer restrictions imposed on
uncertificated shares within 60 days after the date
set for demanding payment.
(b) A dissenter waives his right to demand payment under this
section unless he notifies the corporation of his demand in writing (i)
under subdivision (a)(1) within 30 days after the corporation offered
payment for his shares or (ii) under subdivisions (a)(2) and (a)(3)
within 30 days after the corporation has failed to perform timely. A
dissenter who fails to notify the corporation of his demand under
subsection (a) within such 30-day period shall be deemed to have
withdrawn his dissent and demand for payment.
PART 3. JUDICIAL APPRAISAL OF SHARES.
SS. 55-13-30. COURT ACTION.
(a) If a demand for payment under G.S. 55-13-28 remains
unsettled, the dissenter may commence a proceeding within 60 days after
the date of his payment demand under G.S. 55-13-28 and petition the
court to determine the fair value of the shares and accrued interest.
Upon service upon it of the petition filed with the court, the
corporation shall pay to the dissenter the amount offered by the
corporation under G.S. 55-13-25.
(a1) If the dissenter does not commence the proceeding within
the 60-day period, the dissenter shall have an additional 30 days to
either (i) accept in writing the amount offered by the corporation under
G.S. 55-13-25, upon which the corporation shall pay such amount to the
dissenter in full satisfaction of his demand, or (ii) withdraw his
demand for payment and resume the status of a nondissenting shareholder.
A dissenter who takes no action within such 30-day period shall be
deemed to have withdrawn his dissent and demand for payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters
(whether or not residents of this State) whose demands remain unsettled
parties to the proceeding as in an action against their shares and all
parties must be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as provided by
law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any amendment
to it. The parties are entitled to the same discovery rights as parties
in other civil proceedings. However, in a proceeding by a dissenter in a
public corporation, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled
to judgment for the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation.
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SS. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S.
55-13-30 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the
court, and shall assess the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court finds
equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of G.S.
55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in
favor of either or any other party, if the court finds
that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in
good faith with respect to the rights provided by this
Article.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to these counsel reasonable
fees to be paid out of the amounts awarded the dissenters who were
benefited.
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