(KPMG Peat Marwick LLP letterhead)
November 29, 1995
Board of Directors
Triad Bank
113 North Greene Street
Greensboro, North Carolina 27401
Board of Directors
United Carolina Bancshares Corporation
127 West Webster Street
Whiteville, North Carolina 28472
Gentlemen:
You have requested our opinion as to the federal and North Carolina
income tax consequences resulting from a plan pursuant to which Triad
Bank ("Triad") will be merged with and into United Carolina Bank
("UCB"), a wholly-owned subsidiary of United Carolina Bancshares
Corporation ("Bancshares"), whereupon the separate existence of Triad
will cease (the "Merger"). Pursuant to the Merger, the shareholders of
Triad will receive newly issued shares of Bancshares common stock
("Bancshares Stock") in exchange for their Triad common stock ("Triad
Stock").
You have submitted for our consideration certain representations as to
the proposed transaction, a copy of the Agreement and Plan of
Reorganization and Merger dated as of October 19, 1995 (the "Agreement")
and a copy of the Form S-4 Registration Statement to be filed with the
Securities and Exchange Commission on or about November 30, 1995. We
have not reviewed the legal documents necessary to effectuate the steps
to be undertaken and we assume that all steps will be effectuated under
state and federal law and will be consistent with the legal
documentation and with the list of steps submitted to us.
(KPMG Peat Marwick LLP logo)
Board of Directors
November 29, 1995
Page 2
Facts
Bancshares is a North Carolina business corporation which is registered
with the Federal Reserve as a bank holding company and is headquartered
in Whiteville, North Carolina. Bancshares' authorized capital stock
consists of two classes, represented by 40,000,000 shares of common
stock, $4.00 par value, of which 14,768,740 shares were issued and
outstanding at September 30, 1995 and 2,000,000 shares of preferred
stock, $10.00 par value, of which there were no shares issued and
outstanding at September 30, 1995. Common shareholders are entitled to
one vote for each share of stock held. UCB, a North Carolina
corporation, is a wholly-owned commercial bank subsidiary of Bancshares.
Triad is a North Carolina commercial bank. Its authorized capital stock
consists of 4,000,000 shares of common stock, $2.50 par value, of which
1,818,623 shares were issued and outstanding at September 30, 1995.
For valid business purposes, pursuant to the Agreement, Triad will be
merged with and into UCB, with UCB as the surviving entity. Upon
consummation of the Merger, each share of Triad Stock (excluding any
shares held by dissenting shareholders) will be converted into 0.569444
shares, subject to adjustment as described below, of Bancshares Stock
(the "Exchange Rate"). If the average closing price of Bancshares Stock
on the Nasdaq National Market for the 30 consecutive trading days
immediately preceding the date of the Special Meeting, as defined in the
Agreement (the "30-Day Average"), is greater than $40.39 per share, then
the Exchange Rate will be adjusted to equal the ratio (rounded to six
decimal places) produced by dividing $23.00 by the 30-Day Average, and
if the 30-Day Average is less than $31.61 per share, then the Exchange
Rate will be adjusted to equal the ratio (rounded to six decimal places)
produced by dividing $18.00 by the 30-Day Average. However, Bancshares
may terminate the Agreement (unless Bancshares has agreed to be
acquired) if the 30-Day Average exceeds $43.20 and Triad may terminate
the Agreement if the 30-Day Average is less than $28.80. If there is a
change in the number of outstanding shares of Bancshares Stock or Triad
Stock prior to the Effective Time, as defined in the Agreement, as a
result of a stock dividend, stock split, reclassification or other
subdivision or combination of outstanding shares, then an appropriate
and proportionate adjustment will be made in the Exchange Rate as
necessary to eliminate any dilutive or antidilutive effect of such
change in outstanding shares. Management of Bancshares and Triad
currently are not aware of any change (completed or proposed) in the
outstanding shares of Bancshares Stock or Triad Stock such as would
result in an adjustment in the Exchange Rate.
At the Effective Time, all rights with respect to then outstanding
options held by certain employees and directors of Triad to purchase
shares of Triad Stock ("Triad Options"), whether or not then
exercisable, will be converted into (at the Exchange Rate) and will
become rights with respect to Bancshares Stock (the "Option
Conversion"), and Bancshares will assume Triad's obligations with
respect to each such Triad Option in accordance with the terms of the
applicable stock option plan and agreement under which such Triad Option
was granted.
(KPMG Peat Marwick LLP logo)
Board of Directors
November 29, 1995
Page 3
Under North Carolina law, shareholders of Triad will have dissenters'
rights in connection with the Merger. Shareholders who properly exercise
their dissenters' rights will be entitled to receive the fair value of
their shares from Triad in accordance with Sections 55-13-01 through
55-13-31 of the North Carolina General Statutes. A record holder of
Triad's Stock may assert dissenters' rights as to fewer than all shares
registered in his or her name only if he or she dissents with respect to
all shares beneficially owned by any one person and notifies Triad in
writing of the name and address of each person on whose behalf he or she
asserts dissenters' rights.
No fractional shares of Bancshares Stock will be issued in connection
with the Merger. In the event that the Merger results in the creation
of fractional shares, in lieu of the issuance of fractional shares of
Bancshares Stock, Bancshares will deliver cash to its transfer agent in
an amount equal to the aggregate market value of all such fractional
shares. The transfer agent will subsequently divide such cash among and
remit it, without interest, to the former shareholders of Triad in
accordance with their respective interests.
The Merger is subject to the receipt of regulatory approval from
appropriate parties, including the North Carolina Commissioner of Banks,
the North Carolina State Banking Commission and the Federal Deposit
Insurance Corporation.
In addition to the foregoing statement of facts, the following
representations have been made:
(a) The fair market value of Bancshares Stock received by the
shareholders of Triad will be approximately equal to the fair
market value of Triad Stock surrendered in the exchange.
(b) There is no plan or intention by the shareholders of
Triad to sell, exchange or otherwise dispose of any of the
Bancshares Stock received in the Merger.
(c) UCB will acquire at least 90% of the fair market value of
the net assets and at least 70% of the fair market value of the
gross assets held by Triad immediately prior to the Merger. For
purposes of this representation, amounts paid by Triad to
dissenters, amounts used by Triad to pay its reorganization
expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Triad immediately preceding the
Merger will be included as assets of Triad held immediately prior
to the Merger.
(d) Prior to the Merger, Bancshares will be in control of UCB
within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code").
(e) Following the Merger, UCB will not issue additional
shares of its stock that would result in Bancshares losing control
of UCB within the meaning of Section 368(c).
(KPMG Peat Marwick LLP logo)
Board of Directors
November 29, 1995
Page 4
(f) Bancshares has no plan or intention to reacquire any of
its stock issued in the Merger.
(g) Bancshares has no plan or intention to liquidate UCB; to
merge UCB with and into another corporation; to sell or otherwise
dispose of the stock of UCB; or to cause UCB to sell or otherwise
dispose of any of the assets of Triad acquired in the Merger,
except for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C).
(h) The liabilities of Triad assumed by UCB and the
liabilities to which the transferred assets of Triad are subject
were incurred by Triad in the ordinary course of its business.
(i) Following the Merger, UCB will continue the historical
business of Triad or use a significant portion of the historic
business assets of Triad in a business.
(j) Bancshares, UCB, Triad and the shareholders of Triad will
pay their respective expenses, if any, incurred in connection with
the Merger.
(k) There is no intercorporate indebtedness existing between
Bancshares or UCB and Triad that was issued, acquired, or will be
settled at a discount.
(l) No two parties to the transaction are investment
companies as defined in Section 368(a)(2)(F)(iii) and (iv).
(m) The fair market value of the assets of Triad transferred
to UCB will equal or exceed the sum of the liabilities assumed by
UCB, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(n) Triad is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
(o) The payment of cash in lieu of fractional shares of
Bancshares Stock is not separately bargained for consideration,
rather it is merely to save the expense and inconvenience of
issuing and transferring fractional share interests. The total
cash consideration in lieu of fractional shares will be less than
one percent of the total consideration paid in the transaction and
no Triad shareholder who elects to exchange his or her Triad Stock
for Bancshares Stock will receive cash for more than one share of
Bancshares Stock.
(KPMG Peat Marwick LLP logo)
Board of Directors
November 29, 1995
Page 5
(p) None of the compensation received by any
shareholder-employees of Triad will be separate consideration for,
or allocable to, any of their shares of Triad Stock; none of the
shares of Bancshares Stock received by any shareholder-employee of
Triad will be separate consideration for, or allocable to, any
employment agreement; and the compensation to be paid to any
shareholder-employees of Triad will be for services actually
rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
(q) No stock of UCB will be issued in the Merger.
Opinion
FEDERAL INCOME TAX CONSEQUENCES
Based solely on the above facts and representations, it is our opinion
that:
1) Provided that the merger of Triad with and into UCB, as
contemplated by the Agreement, qualifies as a statutory merger
under North Carolina law, the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Code.
2) Each of Triad, UCB and Bancshares will be a party to the
reorganization within the meaning of Section 368(b).
3) No gain or loss will be recognized by Triad upon the transfer of
its assets, subject to its liabilities, to UCB in the Merger.
Sections 357(a) and 361(a).
4) No gain or loss will be recognized by UCB or Bancshares upon the
receipt of the assets of Triad, *subject to Triad's liabilities in
the Merger. Rev. Rul. 57-278, 1957-1 C.B. 124.
5) The basis of the assets of Triad in the hands of UCB will be the
same as the basis of such assets in the hands of Triad immediately
prior to the Merger. Section 362(b).
6) The holding period of the assets of Triad in the hands of UCB will
include the period during which such assets were held by Triad
immediately prior to the Merger. Section 1223(2).
7) No gain or loss will be recognized by the shareholders of Triad
upon receipt of Bancshares Stock (including any fractional share
interests to which they may be entitled) solely in exchange for
their holdings of Triad Stock. Section 354(a)(1).
(KPMG Peat Marwick LLP logo)
Board of Directors
November 29, 1995
Page 6
8) The basis of the Bancshares Stock to be received by the shareholders
of Triad (and any fractional share interests to which they may be
entitled) will be the same as the basis in Triad Stock surrendered in
the exchange. Section 358(a)(1).
9) The holding period of the Bancshares Stock received by the
shareholders of Triad (and any fractional share interests to which
they may be entitled) will include the holding period of Triad
Stock prior to the exchange, provided that Triad Stock is held as
a capital asset in the hands of the shareholders of Triad on the
date of the exchange. Section 1223(1).
10. The tax attributes enumerated in Section 381(c), including any
earnings and profits or a deficit of earnings and profits, will be
taken into account by UCB following the Merger.
11. The payment of cash in lieu of fractional share interests of Bancshares
Stock will be treated as if the fractional shares of Bancshares Stock
were distributed as part of the exchange to Triad shareholders and
then redeemed by Bancshares. The cash payments will be treated as
having been received as distributions in full payment for the
stock redeemed as provided in Section 302(a) of the Code. Rev.
Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B.
574.
12. Where a Triad shareholder receives cash by exercising statutory
dissenter's rights, such cash will be treated as having been received
by the shareholder as a distribution in redemption of his or her Triad
Stock subject to the provisions and limitations of Section 302 of the
Code.
NORTH CAROLINA INCOME TAX CONSEQUENCES
It is our opinion that the State of North Carolina will, for North
Carolina income tax purposes, treat the Merger in an identical manner as
it is treated by the Internal Revenue Service for federal income tax
purposes. N.C.G.S. 105-130.2, 105-130.3, 105-130.5, 105-134.1,
105-134.2, 105-134.5, 105-134.6, 105-134.7 and 105-228.23.
THE OPTION CONVERSION
Nothing in the foregoing opinion is to be construed either explicitly or
implicitly as opining on the federal or North Carolina income tax
consequences to the Triad option holders of the Option Conversion.
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(KPMG Peat Marwick LLP logo)
Board of Directors
November 29, 1995
Page 7
The opinions expressed above are rendered only with respect to the
specific matters discussed herein, and we express no opinion with
respect to any other federal or state income tax or legal aspect of the
offering. If any of the above-stated facts, circumstances, or
assumptions are not entirely complete or accurate, it is imperative that
we be informed immediately, as the inaccuracy or incompleteness could
have a material effect on our conclusions. In rendering our opinion, we
are relying upon the relevant provisions of the Internal Revenue Code of
1986, as amended, the regulations thereunder, and judicial and
administrative interpretations thereof, which are subject to change or
modification by subsequent legislative, regulatory, administrative, or
judicial decisions. Any such changes could also have an effect on the
validity of our opinion. We assume no duty to inform you of any changes
in our opinion due to any change in law or fact that may subsequently
occur or come to our attention.
Sincerely,
KPMG Peat Marwick LLP
/s/ Sheldon M. Fox
Sheldon M. Fox, Partner