June 25, 1999
Board of Directors
Stone Street Bancorp, Inc.
232 South Main Street
Mocksville, North Carolina 27028
Board of Directors
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27701
Gentlemen:
You have requested the opinion of KPMG LLP ("KPMG") regarding certain federal
and North Carolina income tax consequences resulting from certain proposed
transactions. In the first proposed transaction, CCBFC, Inc. ("CCBFC"), a
wholly-owned subsidiary of CCB Financial Corporation ("CCB") established solely
to effect the acquisition of Stone Street Bancorp, Inc. ("Stone Street") by CCB,
will merge with and into Stone Street (the "Merger"). Pursuant to the Merger,
the separate existence of CCBFC will cease, and each outstanding share of Stone
Street Common Stock will be converted into newly issued shares of CCB Common
Stock, each with an attached right to purchase shares of CCB preferred stock.
Alternatively, each shareholder of Stone Street may elect to receive a specified
amount of cash in lieu of CCB Common Stock for each (but not less than all) of
his or her shares of Stone Street Common Stock. In the second proposed
transaction, occurring immediately following the Merger, Stone Street will merge
with and into CCB (the "Second Merger"). The separate existence of Stone Street
will cease, and each outstanding share of Stone Street will be constructively
exchanged for shares of CCB Common Stock. In the third proposed transaction, and
immediately following the Second Merger, Stone Street Bank & Trust, a
wholly-owned North Carolina savings bank subsidiary of Stone Street ("SSB
Bank"), will merge with and into CCB Bank, a wholly-owned commercial bank
subsidiary of CCB, whereupon the separate existence of SSB Bank will cease (the
"Bank Merger").
You have submitted for our consideration:
o certain representations as to the proposed transaction;
o a copy of the Amended and Restated Agreement of Combination, dated as of
June 22, , 1999, and the related Plan of Merger (collectively, the "Merger
Agreement"); and,
o a copy of the Form S-4 Registration Statement filed with the Securities and
Exchange Commission ("SEC") on or about June 25, 1999.
Board of Directors
June 25, 1999
Page 2
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
description of the steps submitted to us.
FACTS AND REPRESENTATIONS
CCB is a registered bank holding company organized under the laws of the State
of North Carolina. CCB's authorized capital stock consists of two classes. It
has100,000,000 shares of Common Stock, $5.00 par value, of which 39,900,867
shares were issued and outstanding at May 31, 1999 (the "CCB Common Stock"). It
also has 10,000,000 shares of Serial Preferred Stock, no par value per share,
none of which are issued and outstanding at May 31, 1999. CCBFC, a North
Carolina corporation, has been formed as a wholly-owned subsidiary of CCB.
CCBFC's sole purpose is to facilitate the combination of CCB and Stone Street.
CCB Bank, a North Carolina corporation, is a wholly-owned commercial bank
subsidiary of CCB.
Pursuant to a plan (the "Rights Plan") evidenced by a Rights Agreement amended
and restated as of October 1, 1998, one CCB Right, as defined in the Rights
Plan, was distributed during 1990 to CCB's shareholders for each share of CCB
Stock. The CCB Rights expire on October 1, 2008 unless extended, and may be
redeemed by CCB at any time prior to an acquisition by a person or group of 15%
(or 10% in certain circumstances) or more of the outstanding CCB Stock, at a
price of $.01 per CCB Right. The objective of the Rights Plan is to discourage a
third party attempt to acquire control of CCB without approval of its Board of
Directors. The Rights Agreement provides that the CCB Rights are not to
interfere with any merger or business combination approved by the Board of
Directors and shareholders.
Stone Street is a registered bank holding company organized under the laws of
the State of North Carolina. Its authorized capital stock consists of two
classes. It has 20,000,000 shares of Common Stock, no par value per share, of
which 1,638,452 shares were issued and outstanding at May 31, 1999 (the "Stone
Street Common Stock") It also has 5,000,000 shares of Preferred Stock, no par
value per share, none of which were issued and outstanding at May 31, 1999. SSB
Bank, a North Carolina corporation, is a wholly-owned stock savings bank
subsidiary of Stone Street.
For valid corporate business purposes, pursuant to the Merger Agreement and on
the "Effective Time", CCBFC will merge with and into Stone Street, with Stone
Street as the surviving entity. In the Merger, each share of Stone Street Common
Stock (excluding shares held by Stone Street or its subsidiaries other than as a
fiduciary or as security for debts previously contracted) will be exchanged for,
a fraction of a share of CCB Common Stock (the "Exchange Ratio"). The Exchange
Ratio will be computed as follows: (a) if the CCB Common Stock price for the ten
(10) trading days ending on the last trading day prior to the Closing Date is
equal to or more than $44.52 but equal to or less than $60.24, such percent
shall equal $21.37 divided by the average closing price for a CCB Common Stock
share on the New York Stock Exchange ("NYSE"); (b) if the CCB Common Stock price
for such ten (10) trading days is less than $44.52, such percent shall be .48;
and (c) if the CCB Common Stock price for such ten (10) trading days is more
than $60.24, such percent shall be .3548. Each share of CCB Common Stock issued
will
Board of Directors
June 25, 1999
Page 3
include a CCB Right. As used herein, the term CCB Common Stock will refer to the
common stock of CCB, inclusive of the CCB Right.
The Merger Agreement also provides that each Stone Street shareholder may elect
to receive cash in lieu of CCB Common Stock for each (but not less than all) of
his or her shares of Stone Street Common Stock. The amount of cash that will be
paid for a share of Stone Street Common Stock will be calculated in the same way
as the Exchange Ratio described above. The Merger Agreement limits the number of
shares that will be acquired for cash to a maximum of eighteen (18) percent of
the outstanding Stone Street Common Stock shares. If more than eighteen percent
of Stone Street's outstanding shares are tendered for cash, CCB shall be
required to accept for conversion to cash (x) all shares of Stone Street Common
Stock tendered for cash by the Stone Street Employee Stock Ownership Plan and
(y) only a percentage of shares of each other electing Stone Street shareholder
such that no more than eighteen percent of the total shares will be converted to
cash. .
No fractional shares of CCB Common Stock will be issued in connection with the
Merger. Instead, each Stone Street shareholder who otherwise would be entitled
to receive a fraction of a share of CCB Common Stock shall receive cash (without
interest) in an amount equal to that fraction multiplied by the "Market Value"
of one whole share of CCB Common Stock at the Effective Time. Market Value shall
be equal to the closing price of CCB Common Stock on the NYSE on the last
trading day preceding the Effective Time. No Stone Street shareholder will be
entitled to any dividend or other distribution or any voting or other rights as
a shareholder with respect to any fractional share of CCB Common Stock.
The Merger has been approved by the Boards of Directors of CCB and Stone Street
and is subject to the receipt of regulatory approval from appropriate parties,
including the North Carolina Commissioner of Banks (the "Commissioner"), the
North Carolina State Banking Commission (the "Banking Commission"), the Board of
Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation ("FDIC"). The Bank Merger is subject to the approval of the FDIC,
the Commissioner, the Banking Commission, and the North Carolina Administrator
of Savings Institutions (the "Administrator").
On April 27, 1999, CCB's Board of Directors approved the extension, through
December 31, 1999, to repurchase up to 1,000,000 shares of CCB's Common Stock
and additional repurchases needed to retire any shares of CCB's Common Stock and
additional repurchases needed to fulfill CCB's obligations with respect to the
exercise of options and awards of restricted stock or for other corporate
purposes. From January 1, 1999, through May 31, 1999, CCB repurchased and
retired 504,000 shares at an average cost of $54.69 per share. As of May 31,
1999, approximately 321,000 shares remained to be repurchased under this
authorization. CCB's Board of Directors also approved additional repurchases
needed to retire any shares issued in connection with the acquisition. It is
expected that CCB will repurchase and retire a number of shares of CCB Common
Stock approximately equal to the number of shares of Common Stock issued in the
Merger.
Board of Directors
June 25, 1999
Page 4
In addition to the foregoing statement of facts, the following representations
have been made by CCB and/or Stone Street, as applicable, to KPMG in connection
with the Merger. KPMG has not independently verified the completeness and
accuracy of any of the following representations. KPMG is relying on these
representations in rendering the opinion contained herein.
With respect to the Merger:
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(a) The fair market value of the CCB Common Stock received by each
shareholder of Stone Street will be approximately equal to the fair
market value of the Stone Street Common Stock surrendered in the
exchange.
(b) There is not now, and at the time the proposed transactions become
effective will not be, any plan or intention on the part of the
shareholders of Stone Street to sell, exchange, or otherwise dispose of a
number of shares of CCB Common Stock received in the Merger to CCB or a
related person (as defined below) that would reduce the Stone Street
shareholders' ownership of CCB Common Stock received in the Merger to a
number of shares having a value, at the Effective Time, of less than 50
percent of the value of all of the Stone Street shares outstanding
immediately preceding the Effective Time. For purposes of this
representation, Stone Street shares and CCB Common Stock held by the
Stone Street shareholders and sold, redeemed or otherwise disposed of
prior or subsequent to the Merger to CCB or a related person in
connection with any overall plan of which the Merger is a part and the
amount of any extraordinary distribution made with respect to Stone
Street shares have been considered in making this representation.
Further, it is understood that a disposition of shares includes a
disposition of shares in any manner (including by gift) and to any
transferees (including related persons). A person is related to CCB if,
immediately before or immediately after the sale, exchange, or
disposition, it is a member of the same affiliated group of CCB or if its
purchase of stock of CCB would be treated as a redemption of CCB stock
under SECTION 304(A)(2).
(c) Affiliates of Stone Street, determined under Rule 145(c) as defined in
Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended, have no
plan or intent to sell or otherwise dispose of the CCB Common Stock to be
received in the Merger that will reduce total Stone Street shareholders'
ownership to a number of shares having, in the aggregate, a value at the
time of the merger of less than eighty (80) percent of the total fair
market value of the Stone Street Common Stock outstanding immediately
prior to the Merger.
(d) Following the Merger, Stone Street will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair
market value of CCBFC's net assets and at least 70 percent of the fair
market value of CCBFC's gross assets held immediately prior to the
Merger. For purposes of this representation, amounts used by Stone Street
or CCBFC to pay its reorganization expenses, all redemptions and
Board of Directors
June 25, 1999
Page 5
distributions (except for regular, normal dividends) made by Stone Street
or CCBFC immediately preceding, or as part of a plan that includes, the
Merger will be included as assets of Stone Street or CCBFC, respectively.
(e) Prior to the Merger, CCB will be in control of CCBFC within the meaning
of SECTION 368(C) of the Internal Revenue Code of 1986, as amended (the
"Code").
(f) Following the Merger, Stone Street will not issue additional shares of
its stock that would result in CCB losing control of Stone Street within
the meaning of SECTION 368(C).
(g) Neither CCB nor a CCB affiliate has a plan or intention to specifically
reacquire any of the CCB Common Stock issued in the Merger. CCB intends
to reacquire its stock under the terms of its stock repurchase program
which was an ongoing stock repurchase program begun independent of the
proposed transactions.
(h) Following the Second Merger, CCB will continue the historical business of
Stone Street or use a significant portion of the historic business assets
of Stone Street in a business.
(i) CCBFC will have no liabilities assumed by Stone Street, and will not
transfer to Stone Street any assets subject to liabilities, in the
Merger.
(j) CCB, CCBFC, Stone Street, and the shareholders of Stone Street will pay
their respective expenses, if any, incurred in connection with the Merger
and the Second Merger.
(k) There is no intercorporate indebtedness existing between CCB and Stone
Street, CCBFC and Stone Street or a CCB affiliate and Stone Street that
was issued, acquired, or will be settled at a discount.
(l) In the Merger, shares of Stone Street Common Stock representing control
of Stone Street, as defined in SECTION 368(C) will be exchanged solely
for voting stock of CCB. For purposes of this representation, shares of
Stone Street Common Stock exchanged for cash or other property
originating with CCB will be treated as outstanding Stone Street Common
Stock on the date of the Merger.
(m) At the time of the Merger, Stone Street will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Stone Street that, if
exercised or converted, would affect CCB's acquisition or retention of
control of Stone Street, as defined in SECTION 368(C).
(n) CCB, nor any of its affiliates, does not beneficially own, nor has it
beneficially owned during the past five years, any shares of Stone Street
Common Stock. Furthermore, CCB, nor any of its affiliates, does not
expect to beneficially own, at the time of the Merger, any shares of the
stock of Stone Street. One or more CCB affiliates is a legal custodial
owner of .2 percent of the cumulative
Board of Directors
June 25, 1999
Page 6
outstanding shares of Stone Street Common Stock. That stock will be
exchanged for CCB Common Stock, cash, or combination thereof consistent
with the exchange agreement described above as part of the Merger.
(o) No two parties to the transaction are investment companies as defined in
SECTION 368(A)(2)(F)(III) AND (IV).
(p) On the date of the Merger, the fair market value of the assets of Stone
Street will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
(q) Stone Street is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of SECTION 368(A)(3)(A).
(r) The payment of cash in lieu of fractional shares of CCB Common Stock is
not separately bargained for consideration. Rather, the purpose of the
payment is merely to save the expense and inconvenience to CCB of issuing
and transferring fractional share interests. The total cash consideration
in lieu of fractional shares will be less than one (1) percent of the
total consideration paid in the Merger and no Stone Street shareholder
will receive cash for more than .9999 of a share of CCB Common Stock.
(s) None of the compensation received by any shareholder-employees of Stone
Street or SSB Bank will be separate consideration for, or allocable to,
any of their shares of Stone Street Common Stock; none of the shares of
CCB Common Stock received by any shareholder-employee of Stone Street or
SSB Bank will be separate consideration for, or allocable to, any
employment agreement; and the compensation to be paid to any
shareholder-employees of Stone Street or SSB Bank will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
(t) The CCB Rights cannot be traded separately and are not divisible from the
CCB Common Stock prior to the occurrence of certain triggering events
specified in the Rights Plan. At the time the CCB Common Stock is issued
to the Stone Street shareholders in the Merger, the likelihood that the
CCB Rights would, at any time, be exercised will be both remote and
uncertain.
With respect to the Second Merger:
- ----------------------------------
(u) In the Second Merger, Stone Street will merge with and into CCB. At the
time of the Second Merger, CCB will be the sole shareholder of Stone
Street. As the sole shareholder, CCB will be indifferent whether it
receives actual shares of its own Common Stock in exchange for its stock
in Stone Street and as a result of the Second Merger. For this reason,
CCB will not actually issue its Common Stock in consideration for the
assets of Stone Street in the Second Merger, such an issuance being a
meaningless gesture. Each of CCB and Stone Street agree that the fair
market
Board of Directors
June 25, 1999
Page 7
value of the CCB Common Stock constructively received by CCB will be
approximately equal to the fair market value of Stone Street Common Stock
surrendered in the Second Merger.
(v) There is no plan or intention by CCB to sell, exchange or otherwise
dispose of any of the CCB Common Stock constructively received in the
Second Merger.
(w) CCB has no plan or intention to reacquire any of its Common stock
constructively issued in the Second Merger.
(x) CCB has no plan or intention to sell or otherwise dispose of any of the
assets of Stone Street acquired in the Second Merger, except for its
intent to permit the Bank Merger to occur, for dispositions made in the
ordinary course of business, or transfers described in SECTION
368(A)(2)(C).
(y) The liabilities of Stone Street assumed by CCB Bank and the liabilities
to which the transferred assets of Stone Street are subject were incurred
by Stone Street in the ordinary course of business.
(z) Following the Second Merger, CCB will continue the historical business of
Stone Street or use a significant portion of the historic business assets
of Stone Street in a business.
(aa) CCB and Stone Street will pay their respective expenses, if any, incurred
in connection with the Second Merger.
(bb) There is no intercorporate indebtedness existing between CCB and Stone
Street that was issued, acquired, or will be settled at a discount.
(cc) No two parties to the Second Merger are investment companies as defined
in SECTION 368(A)(2)(F)(III) AND (IV).
(dd) On the date of the Second Merger, the fair market value of the assets of
Stone Street transferred to CCB will equal or exceed the sum of the
liabilities assumed by CCB, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(ee) Neither CCB nor Stone Street is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of SECTION 368(A)(3)(A).
(ff) The total adjusted basis of the assets of Stone Street transferred to CCB
will equal or exceed the sum of the liabilities assumed by CCB, plus the
amount of liabilities, if any, to which the transferred assets are
subject.
(gg) The Second Merger will qualify as a statutory merger under North Carolina
law.
Board of Directors
June 25, 1999
Page 8
(hh) If Stone Street had not merged with CCBFC in the Merger but had instead
merged directly with and into CCB, then such merger would have qualified
as a statutory merger under North Carolina law. Although CCB intends to
effect the Second Merger, it is and will be under no binding commitment
to effect the Second Merger. Instead, its impetus and incentive for
effecting the Second Merger is due to practical business concerns of
achieving operational and organizational efficiencies consistent with its
business purpose for acquiring Stone Street and SSB Bank.
With respect to the Bank Merger:
(ii) In the Bank Merger, SSB Bank will merge with and into CCB Bank. At the
time of the Bank Merger, CCB will be the sole shareholder of both SSB
Bank and CCB Bank. As the sole shareholder, CCB will be indifferent
whether it receives actual shares of CCB Bank Common Stock in exchange
for its stock in Stone Street and as a result of the Bank Merger. For
this reason, CCB Bank will not actually issue its Common Stock in
consideration for the assets of SSB Bank in the Bank Merger, such an
issuance being a meaningless gesture. Each of CCB, CCB Bank, and SSB Bank
agree that the fair market value of the CCB Common Stock constructively
received by CCB will be approximately equal to the fair market value of
SSB Bank Common Stock surrendered in the Second Merger.
(jj) There is no plan or intention by CCB to sell, exchange or otherwise
dispose of any of the CCB Bank Common Stock constructively received in
the Bank Merger.
(kk) CCB Bank has no plan or intention to reacquire any of its Common stock
constructively issued in the Bank Merger.
(ll) CCB Bank has no plan or intention to sell or otherwise dispose of any of
the assets of SSB Bank acquired in the Bank Merger, except for
dispositions made in the ordinary course of business or transfers
described in SECTION 368(A)(2)(C).
(mm) The liabilities of SSB Bank assumed by CCB Bank and the liabilities to
which the transferred assets of SSB Bank are subject were incurred by SSB
Bank in the ordinary course of business.
(nn) Following the Bank Merger, CCB Bank will continue the historical business
of SSB Bank or use a significant portion of the historic business assets
of SSB Bank in a business.
(oo) CCB Bank and SSB Bank will pay their respective expenses, if any,
incurred in connection with the Bank Merger.
(pp) There is no intercorporate indebtedness existing between CCB Bank and SSB
Bank that was issued, acquired, or will be settled at a discount.
Board of Directors
June 25, 1999
Page 9
(qq) No two parties to the Bank Merger are investment companies as defined in
SECTION 368(A)(2)(F)(III) AND (IV).
(rr) On the date of the Bank Merger, the fair market value of the assets of
SSB Bank transferred to CCB Bank will equal or exceed the sum of the
liabilities assumed by CCB Bank, plus the amount of liabilities, if any,
to which the transferred assets are subject.
(ss) Neither CCB Bank nor SSB Bank is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of SECTION 368(A)(3)(A).
(tt) The total adjusted basis of the assets of SSB Bank transferred to CCB
Bank will equal or exceed the sum of the liabilities assumed by CCB Bank,
plus the amount of liabilities, if any, to which the transferred assets
are subject.
(uu) The Bank Merger will qualify as a statutory merger under North Carolina
law.
With respect to the stock repurchase program:
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(vv) There is a corporate business purpose for the stock repurchases.
(ww) The stock to be repurchased will be widely held.
(xx) The stock repurchases will be made in the open market and, to the best of
the knowledge of CCB and Stone Street will not be made from (1) directors
or officers, or (2) any beneficial shareholder owning one (1) percent or
more of the outstanding stock of CCB or Stone Street.
(yy) There is no plan or intention that the aggregate amount of stock
repurchased will equal or exceed twenty (20) percent of the outstanding
stock of CCB.
OPINION
Based solely on the above FACTS AND REPRESENTATIONS and subject to the SCOPE OF
THE OPINION below, it is the opinion of KPMG that:
Federal Income Tax Consequences:
(1) The Merger and Second Merger will constitute one or more tax-free
reorganizations within the meaning of SECTION 368(A)(1)(A) AND SECTION
368(A)(2)(E). See also REV. PROC. 91-63, 1991-2 C.B. 865.
(2) Stone Street, CCBFC, and CCB will each be a party to the reorganization
within the meaning of SECTION 368(B).
Board of Directors
June 25, 1999
Page 10
(3) No gain or loss will be recognized by CCB, Stone Street or CCBFC as
transferees of assets of a party to the reorganization in the Merger or
the Second Merger in exchange for stock. SECTION 1032; TREAS. REG.
SECTION 1.1032-2.
(4) No gain or loss will be recognized by a shareholder of Stone Street upon
the receipt of solely CCB Common Stock (including any fractional share
interests) in exchange for his or her shares of Stone Street Common
Stock. SECTION 354(A)(1). Gain, if any, will be recognized by a Stone
Street shareholder who receives CCB Common Stock and cash in exchange for
his or her Stone Street Common Stock pursuant to the Merger. Such gain
will be limited to an amount not in excess of the amount of cash
received. SECTION 356(A). If the exchange has the effect of the
distribution of a dividend (determined with the application of SECTION
318(A)), then the amount of gain recognized that is not in excess of the
shareholder's ratable amount of undistributed earnings and profits will
be treated as a dividend. SECTION 356(A)(2). The determination of whether
the exchange has the effect of the distribution of a dividend will be
made in accordance with the principles set forth in COMMISSIONER V.
CLARK, 489 U.S. 726 (1989). REV. RUL. 93-61, 1993-30 I.R.B. 10. Loss, if
any, will not be recognized by a shareholder who receives CCB Common
Stock and cash in exchange for his or her Stone Street Common Stock
pursuant to the Merger. SECTION 356(C). No shareholder will recognize
gain on the receipt of CCB Rights, nor will his or her receipt of the CCB
Rights constitute a receipt or exchange of stock or property giving rise
to the realization of gross income by CCB, Stone Street, or the Stone
Street shareholder. REV. RUL. 90-11, 1990-1 C.B. 10.
(5) The basis of a share of CCB Common Stock received by a shareholder of
Stone Street (including any fractional share interests) will be the same
as the basis in the Stone Street Common Stock surrendered in the exchange
therefor. SECTION 358(A)(1).
(6) The holding period of a share of CCB Common Stock received by the
shareholder of Stone Street (including any fractional share interests)
will include the shareholder's holding period of the Stone Street Common
Stock surrendered in exchange therefor, provided that the Stone Street
Common Stock is held as a capital asset in the hands of the shareholder
of Stone Street on the date of the Merger. SECTION 1223(1).
(7) The payment of cash in lieu of fractional share interests of CCB Common
Stock will be treated as if the fractional share interests of CCB Common
Stock were distributed as part of the Merger to the Stone Street
shareholder and then redeemed by CCB. The cash payments will be treated
as having been received as distributions in full payment for the
fractional share interests redeemed as provided in SECTION 302(A). REV.
RUL. 66-365, 1966-2 C.B. 116 and REV. PROC. 77-41, 1977-2 C.B. 574.
(8) A Stone Street shareholder who receives solely cash for his or her Stone
Street Common Stock, will be treated as having received the cash in
exchange for his or her stock. .
Board of Directors
June 25, 1999
Page 11
(9) The Bank Merger will constitute a reorganization within the meaning of
SECTION 368(A) of the Code.
(10) Each of CCB Bank and SSB Bank will be a party to the reorganization
within the meaning of SECTION 368(B).
(11) No gain or loss will be recognized by SSB Bank upon the transfer of its
assets, subject to its liabilities, to CCB Bank in the Bank Merger.
SECTIONS 357(A) and 361(A).
(12) No gain or loss will be recognized by CCB Bank upon the receipt of the
assets of SSB Bank, subject to its liabilities, in constructive exchange
for its Common Stock, in the Bank Merger. SECTION 1032(A).
(13) The basis of the assets of SSB Bank in the hands of CCB Bank will be the
same, in each instance, as the basis of such assets in the hands of SSB
Bank immediately prior to the Bank Merger. SECTION 362(B).
(14) The holding period of the assets of SSB Bank in the hands of CCB Bank
will include, in each instance, the period during which such assets were
held by SSB Bank immediately prior to the Bank Merger. SECTION 1223(2).
(15) No gain or loss will be recognized by CCB upon the constructive receipt
of CCB Bank Common Stock in exchange for its SSB Bank stock as a result
of the Bank Merger. SECTION 354(A)(1).
(16) For purposes of SECTION 381, CCB Bank will be the acquiring corporation.
TREAS. REG. SECTION 1.381(A)-1(B)(2). Thus, except as otherwise provided
in SECTIONS 382, 383, AND 384, CCB Bank will succeed to and take into
account the items of SSB Bank described in SECTION 381(C). SECTION 381(A)
AND TREAS. REG. SECTION 1.381(A)-1. For example, pursuant to SECTION
381(C)(2) and TREAS. REG. SECTION 1.381(C)(2)-1, CCB Bank will succeed to
and take into account the earnings and profits, or deficit in earnings
and profits, of SSB Bank as of the date of the Bank Merger. Any deficit
in earnings and profits of either SSB Bank or CCB Bank will be used only
to offset earnings and profits accumulated after the effective date of
the Bank Merger.
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, the Second Merger and the Bank Merger in
an identical manner as they are 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.
SCOPE OF THE OPINION
Board of Directors
June 25, 1999
Page 12
The opinion contained herein is based upon the facts and representations set
forth in this letter, as well as the information contained in the Merger
Agreement. If any fact or representation is not entirely complete or accurate,
it is imperative that we be informed immediately in writing because the
incompleteness or inaccuracy could cause us to change our opinion.
The opinion contained herein is rendered only with respect to the enumerated
holdings set forth herein under the heading OPINION, and KPMG expresses no
opinion with respect to any other legal, federal, state, or local tax aspect of
the Merger, Second Merger or the Bank Merger.
The opinion is not binding upon any tax authority or any court and no assurance
can be given that a position contrary to that expressed herein will not be
asserted by a tax authority and ultimately sustained by a court. In rendering
our opinion, we are relying upon the relevant provisions of the Internal Revenue
Code of 1986, as amended, the North Carolina Code, 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, which can be retroactive in effect, 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 changes in law that occur subsequent to
the issuance of this letter.
Sincerely,
KPMG LLP