[Stone Street Bank logo here] [CCB Financial Corporation logo here]
ACQUISITION PROPOSAL
YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Stone Street Bancorp, Inc. ("Stone Street") and
CCB Financial Corporation ("CCB") have agreed that CCB will acquire Stone
Street by exchanging shares of CCB Common Stock and/or cash for all outstanding
Stone Street Common Stock. The agreement limits the number of shares that will
be acquired for cash to a maximum of 18% of the outstanding Stone Street
shares.
The approval of Stone Street's shareholders is necessary to complete the
acquisition. We are sending you this Proxy Statement - Prospectus to ask you to
vote in favor of the merger of a CCB subsidiary and Stone Street at a special
meeting of Stone Street's shareholders. The acquisition transactions following
that merger do not require a vote of shareholders.
Stone Street's shareholders who elect to receive CCB Common Stock in the
acquisition will receive for each of their Stone Street shares the fraction of
a share of CCB Common Stock equal to $21.37 divided by the average of the
closing market price for CCB Common Stock on the New York Stock Exchange over
the ten trading days ending the day before the acquisition is completed so long
as that average is $44.52 or more but not more than $60.24. This average for
the ten trading days ended July 21, 1999 was $51.34. On this basis, if the
acquisition had closed on July 22, 1999, each share of Stone Street Common
Stock would have been converted into .4162 of a share of CCB Common Stock and
would have had a closing market value that day of $21.41. If the ten-day
closing average is less than $44.52, each share of Stone Street Common Stock
will be converted into .48 of a share of CCB Common Stock. If the ten-day
closing average is more than $60.24, each share of Stone Street Common Stock
will be converted into .3548 of a share of CCB Common Stock. All outstanding
shares of CCB Common Stock, including those to be issued in the acquisition,
have a preferred stock purchase right attached that is not exercisable except
in certain circumstances.
Stone Street Shareholders may elect to receive cash rather than CCB Common
Stock but CCB is not obligated to accept for conversion to cash more than 18%
of all outstanding Stone Street shares. The amount of cash that will be paid
for a share of Stone Street Common Stock will be calculated the same way as the
share exchange ratio described above. If the average closing price for CCB
Common Stock over the ten days ending the day before the acquisition is
completed is $44.52 or more, but not more than $60.24, each Stone Street share
tendered for cash will be purchased for an amount equal to $21.37 divided by
CCB's ten-day average closing price, with the resulting fraction being
multiplied by that ten-day average closing price. Using the $51.34 average
closing price for the ten days ended on July 21, 1999, this cash amount would
have been $21.37. If the ten-day average closing price of CCB Common Stock is
less than $44.52, each Stone Street share tendered for cash will be purchased
for an amount equal to .48 times CCB's ten-day average closing price. If the
ten-day average closing price is more than $60.24, each share will be purchased
for .3548 times the ten-day average closing price.
Based upon the number of Stone Street shares outstanding and CCB's $51.34
ten-day average closing price as of July 21, 1999, if the acquisition had been
completed on July 22, 1999 and no Stone Street shareholder elected to receive
cash, CCB would have issued 681,923 shares of its Common Stock to complete the
acquisition.
Whether or not you plan to attend the Stone Street special shareholders'
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you sign, date and mail your proxy card without indicating how
you want to vote, we will vote your proxy in favor of the acquisition of Stone
Street by CCB. By signing and returning the proxy, you also authorize us to
vote in our discretion on any other matters, such as procedural motions, that
may come up at the meeting.
THE DATE, TIME AND PLACE OF THE STONE STREET SPECIAL SHAREHOLDERS' MEETING IS:
SEPTEMBER 21, 1999
5:00 P.M., EASTERN DAYLIGHT SAVINGS TIME
DAVIE COUNTY PUBLIC LIBRARY
371 NORTH MAIN STREET
MOCKSVILLE, NORTH CAROLINA
This Proxy Statement - Prospectus provides you with detailed information
about the acquisition of Stone Street by CCB. We encourage you to read the
entire document carefully.
THE BOARD OF DIRECTORS OF STONE STREET BANCORP, INC. UNANIMOUSLY RECOMMENDS A
VOTE FOR THE PROPOSAL TO APPROVE THE MERGER TRANSACTION DESCRIBED IN THIS
DOCUMENT.
J. CHARLES DUNN
PRESIDENT
STONE STREET BANCORP, INC.
MOCKSVILLE, NORTH CAROLINA
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROXY STATEMENT - PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF THE
PARTIES, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
Proxy Statement - Prospectus dated August 2, 1999
and first mailed to shareholders on August 2, 1999
TABLE OF CONTENTS
PAGE
-----
RECENT DEVELOPMENTS ...................................................... 15
GENERAL INFORMATION ...................................................... 15
The Special Meeting ..................................................... 15
Record Date; Voting Rights .............................................. 15
STONE STREET BANCORP'S MERGER INTO CCB FINANCIAL CORPORATION ............. 16
Amendment of Merger Agreement ........................................... 16
General; Exchange Ratio ................................................. 17
Treatment of Fractional Shares .......................................... 17
Background of and Reasons for the Merger ................................ 18
Recommendation of the Stone Street Board ................................ 20
Opinion of Stone Street's Financial Advisor ............................. 21
Effective Time of the Merger ............................................ 23
Cash Election Form ...................................................... 23
Distribution of Consideration ........................................... 24
Required Shareholder Approval ........................................... 25
Regulatory Approvals .................................................... 25
Conditions to Completion of the Merger .................................. 26
Waiver, Amendment and Termination ....................................... 27
Wrongful Termination, Liability for Breach and Termination Fee .......... 28
Environment Provisions of Merger Agreement .............................. 28
Conduct of Business Pending the Acquisition ............................. 28
Dividends ............................................................... 30
Management and Operations After the Acquisition ......................... 30
Effect on Certain Employees and Benefit Plans ........................... 30
Interests of Certain Persons With Respect to the Acquisition ............ 32
Federal Income Tax Consequences of the Acquisition ...................... 35
Absence of Dissenters' Rights ........................................... 37
Accounting Treatment .................................................... 37
New York Stock Exchange Listing ......................................... 37
Dividend Reinvestment and Stock Purchase Plan ........................... 37
Restrictions on Resale of CCB Common Stock by Affiliates ................ 37
Expenses ................................................................ 38
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION ....................... 39
PRO FORMA CAPITALIZATION ................................................. 43
MARKET PRICE AND DIVIDEND INFORMATION REGARDING
CCB STOCK AND STONE STREET STOCK ........................................ 44
CCB FINANCIAL CORPORATION ................................................ 44
General ................................................................. 44
Subsidiaries ............................................................ 45
Beneficial Ownership of CCB Common Stock ................................ 45
Management and Additional Information ................................... 47
STONE STREET BANCORP, INC. ............................................... 48
General ................................................................. 48
Subsidiaries ............................................................ 48
Beneficial Ownership of Stone Street Common Stock ....................... 48
Management and Additional Information ................................... 50
CERTAIN REGULATORY CONSIDERATIONS ........................................ 50
CAPITAL STOCK OF CCB AND STONE STREET .................................... 56
INDEMNIFICATION .......................................................... 63
PAGE
-----
LEGAL MATTERS ....................................................... 65
EXPERTS ............................................................. 65
FORWARD LOOKING STATEMENTS .......................................... 65
OTHER MATTERS ....................................................... 66
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS ............................ 66
WHERE YOU CAN GET MORE INFORMATION .................................. 66
INFORMATION INCORPORATED BY REFERENCE ............................... 67
APPENDIX A -- Amended and Restated Agreement of Combination ......... A-1
APPENDIX B -- Opinion of Orr Management Company ..................... B-1
SUMMARY
THIS SUMMARY HIGHLIGHTS THE MATERIAL TERMS OF THIS PROXY STATEMENT -
PROSPECTUS. TO UNDERSTAND THE ACQUISITION OF STONE STREET BANCORP, INC. BY CCB
FINANCIAL CORPORATION FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE ACQUISITION TRANSACTIONS, YOU SHOULD READ THIS ENTIRE DOCUMENT,
AND THE DOCUMENTS WE REFER TO, CAREFULLY. SEE "WHERE YOU CAN GET MORE
INFORMATION" (PAGE 66) AND "INFORMATION INCORPORATED BY REFERENCE" (PAGE 67).
STONE STREET WILL MERGE INTO CCB (PAGE 17)
Under the merger agreement among Stone Street, its banking subsidiary, Stone
Street Bank and Trust ("SSB Bank"), CCB and two of CCB's subsidiaries, CCBFC,
Inc. ("CCBFC") and Central Carolina Bank and Trust Company ("CCB Bank"), CCBFC
will merge into Stone Street and Stone Street will then immediately merge into
CCB. As a result of the first merger, all of Stone Street's outstanding shares
will be converted into shares of CCB Common Stock and/or cash. A copy of the
merger agreement is attached as Appendix A to this Proxy Statement -
Prospectus.
After Stone Street is merged into CCB, SSB Bank will merge into CCB Bank. As a
result, SSB Bank branches will continue to operate as branches of CCB Bank.
ELECTION TO RECEIVE STOCK OR CASH (PAGES 23 AND 24)
If the acquisition of Stone Street by CCB is completed, Stone Street
shareholders will be entitled to receive CCB Common Stock or cash for their
Stone Street shares depending on certain elections they are required to make.
Included with this Proxy Statement - Prospectus is a Cash Election Form. By
completing and returning this Form by the date it specifies, you or the nominee
or other fiduciary holding your shares on your behalf may elect to receive
EITHER CCB Common Stock OR cash for all your Stone Street shares. If you or
your nominee or other fiduciary acting on your behalf do not return a Cash
Election Form as specified, you will receive CCB Common Stock for your Stone
Street shares.
Under the merger agreement, CCB is obligated to pay cash only for up to 18% of
the Stone Street Common Stock. If Stone Street shareholders elect to receive
cash for more than 18% of all Stone Street shares, CCB will pay cash for all of
the shares tendered by SSB Bank's Employee Stock Ownership Plan (expected to be
146,004 shares or approximately 9% of Stone Street's outstanding stock) and for
a proportionate amount of all other shares tendered for cash. For example, if
at the time of the completion of the acquisition, 18% of Stone Street Common
Stock is 300,000 shares and shareholders tender 400,000 shares for cash, CCB
will pay cash for the 146,004 shares tendered for cash by the Employee Stock
Ownership Plan and for approximately 61% of all other shares tendered for cash.
The remaining 39% of such other shares will be converted into shares of CCB
Common Stock.
CALCULATION OF HOW MANY CCB SHARES WILL BE RECEIVED (PAGE 17)
If CCB's acquisition of Stone Street is completed, Stone Street shareholders
receiving shares of CCB Common Stock will receive a fraction of a CCB share for
each Stone Street share. If the average of the closing market price for CCB
Common Stock on the New York Stock Exchange over the ten trading days ending
the day before the acquisition is completed is $44.52 or more but not more than
$60.24, each Stone Street share will be converted into the fraction of a CCB
share equal to $21.37 divided by that ten-day closing average. The ten-day
average ended July 21, 1999 was $51.34. If the acquisition had closed on July
22, 1999, each Stone Street share would have been converted into .4162 of a
share of CCB Common Stock having a value of $21.41 (based on CCB's closing
market price of $51.4375 on that date).
If CCB's ten-day average closing price ending the day before the acquisition is
completed is less than $44.52, each Stone Street share converted into CCB
Common Stock will be converted into .48 of a CCB share. If that ten-day average
is more than $60.24, each Stone Street share to be converted into CCB Common
Stock will be converted into .3548 of a CCB share.
Because the closing market price of CCB Common Stock fluctuates, you will not
know when you elect to receive CCB stock for your Stone Street shares or
1
when you vote on the acquisition what the shares of CCB will be worth when
issued in the acquisition.
The table below illustrates how many shares of CCB Common Stock would be issued
in the acquisition to you if you elect to receive stock assuming ten-day
average closing prices of $44, $52 and $61 and assuming you tender the number
of shares shown:
WHOLE SHARES OF
CCB COMMON STOCK
SHARES OF TO BE RECEIVED IF TEN-DAY
STONE STREET AVERAGE CLOSING PRICE OF
- ---------------- ------------------------------
$44 $52 $61
-------- -------- --------
100 ............ 48 41 35
500 ............ 240 205 177
1,000 .......... 480 411 354
10,000 ......... 4,800 4,110 3,548
Under the merger agreement, CCB will not issue fractions of a share of its
stock resulting from the conversion of Stone Street stock but will pay cash in
lieu of those fractional shares. (See Pages 17 and 18).
PREFERRED STOCK PURCHASE RIGHTS WILL BE "ATTACHED" TO THE CCB SHARES (PAGES 57
AND 58)
Each share of CCB Common Stock outstanding has "attached" a preferred stock
purchase right. These rights may be exercised only in certain circumstances
involving an attempted "change of control" of CCB. These circumstances do not
now exist. Each CCB share issued to Stone Street shareholders will have such an
attached right.
CALCULATION OF HOW MUCH CASH WILL BE RECEIVED (PAGE 17)
If CCB's acquisition of Stone Street is completed, Stone Street shareholders
who elect to receive cash for their shares will be paid an amount calculated
the same way as the exchange ratio for the conversion of Stone Street shares
into CCB shares. If the closing price average of CCB Common Stock for the ten
days ended the day before the acquisition occurs is $44.52 or more, but not
more than $60.24, each Stone Street share tendered for cash will be purchased
for an amount equal to $21.37 divided by the ten-day average, with the
resulting fraction being multiplied by that ten-day average.
If CCB's ten-day average closing price is less than $44.52, each Stone Street
share tendered for cash will be purchased for an amount equal to .48 times the
ten-day average. If CCB's ten-day average is more than $60.24, each Stone
Street share tendered for cash will be purchased for an amount equal to .3548
times the ten-day average.
Because the closing market price of CCB Common Stock fluctuates, you will not
know when you elect to receive cash for your Stone Street shares or when you
vote on the acquisition how much cash will be paid for those shares. The table
below illustrates how much cash would be paid in the acquisition for each Stone
Street share tendered for cash assuming ten-day average closing prices of $44,
$52 and $61 for CCB Common Stock.
CASH PER STONE STREET SHARE
IF TEN-DAY AVERAGE CLOSING PRICE OF
- -----------------------------------------
$44 $52 $61
- ------------- ----------- -----------
$ 21.12 $ 21.37 $ 21.64
FEDERAL INCOME TAX CONSEQUENCES (PAGES 35 TO 37)
We have structured the acquisition transactions so that Stone Street, SSB Bank,
CCB, CCBFC and CCB Bank will not recognize any gain or loss for federal income
tax purposes. Stone Street and CCB need not complete the acquisition unless
they receive an opinion of KPMG LLP, CCB's tax advisors, that Stone Street's
shareholders will not recognize any gain or loss for federal income tax
purposes as a result of the conversion of their Stone Street shares into shares
of CCB Common Stock. This opinion will not be binding on the Internal Revenue
Service.
Stone Street shareholders who receive cash for fractional shares of CCB Common
Stock or who receive cash rather than CCB shares for their Stone Street stock
will recognize gain or loss for federal income tax purposes.
SINCE TAX MATTERS CAN BE COMPLICATED, AND TAX RESULTS MAY VARY AMONG
SHAREHOLDERS, WE URGE YOU TO CONTACT YOUR OWN TAX ADVISORS TO UNDERSTAND FULLY
HOW THE ACQUISITION TRANSACTIONS WILL AFFECT YOU.
BOARD RECOMMENDS SHAREHOLDER APPROVAL (PAGE 20)
Stone Street's Board of Directors believes that CCB's proposed acquisition is
in your best interests and unanimously recommends that you vote "FOR" approval
of the merger of CCBFC into Stone Street. This is the only one of the
acquisition transactions on which your vote is required.
2
Approval of the acquisition transactions by CCB's shareholders are not required
by applicable law. The Boards of Directors of CCB, CCBFC and CCB Bank have
approved the transactions.
EXCHANGE RATIO FAIR TO SHAREHOLDERS ACCORDING TO STONE STREET'S FINANCIAL
ADVISOR (PAGES 21 AND 22)
In deciding to approve CCB's acquisition of Stone Street, the Board of Stone
Street considered an opinion from its financial advisor as to the fairness of
the range of exchange ratios and cash payment amounts from a financial point of
view. The written form of this opinion from Orr Management Company is attached
as Appendix B to this Proxy Statement - Prospectus.
In connection with delivering this opinion, our financial advisor performed a
variety of analyses, including the following:
o An analysis of Stone Street's and CCB's pro forma contributions to the
combined entity;
o An analysis of the projected impact of the acquisition upon the
earnings and dividends per converted Stone Street share;
o A comparison of the discounted present value of the projected value in
five years of a share of Stone Street Common Stock and the assumed
present value of the equivalent portion of a share of CCB Common Stock
resulting from the acquisition; and
o An analysis of comparable bank acquisition transactions.
STONE STREET SPECIAL MEETING (PAGES 15 AND 16)
We will hold our special meeting of shareholders to vote on the merger of Stone
Street and CCBFC at 5:00 p.m. on Tuesday, September 21, 1999, at the Davie
County Public Library, 371 North Main Street, Mocksville, North Carolina. You
will only be asked to vote on the first merger of CCBFC into Stone Street. The
subsequent mergers of Stone Street into CCB and SSB Bank into CCB Bank do not
require the approval of Stone Street's shareholders.
THE COMPANIES (PAGES 44 TO 50)
STONE STREET BANCORP, INC.
232 SOUTH MAIN STREET
MOCKSVILLE, NORTH CAROLINA 27028
(336) 751-5936
Stone Street is a North Carolina corporation headquartered in Mocksville, North
Carolina. It was organized in 1996 to serve as the holding company for SSB Bank
(then known as Mocksville Savings Bank, S.S.B.) in connection with SSB Bank's
conversion from the mutual to the stock form of ownership. SSB Bank operates
its main office in Mocksville and a branch office in Advance, North Carolina.
SSB Bank is in the process of constructing an additional branch office in
Mocksville.
CCB FINANCIAL CORPORATION
111 CORCORAN STREET
DURHAM, NORTH CAROLINA 27702
(919) 683-7777
CCB is a North Carolina corporation headquartered in Durham, North Carolina.
Through CCB Bank, it operates 164 branches and has 165 ATM's in North Carolina
which are located predominantly along I-85 and I-40 from Raleigh, through
Greensboro and Winston-Salem, to Charlotte. CCB also owns American Federal
Bank, F.S.B., a federal savings bank headquartered in Greenville, South
Carolina. American Federal operates 39 branches and 51 ATM's in the
northwestern and central regions of South Carolina.
Through CCB Bank, American Federal and other subsidiaries, CCB offers an array
of financial products such as banking, investment, insurance and trust
services.
AGREEMENT GOVERNING THE ACQUISITION IS ATTACHED
We have attached the merger agreement among Stone Street, SSB Bank, CCB, CCBFC
and CCB Bank as Appendix A at the back of this Proxy Statement - Prospectus. We
encourage you to read the agreement as it is the legal document that governs
the acquisition transactions.
MAJORITY VOTE REQUIRED TO APPROVE THE ACQUISITION (PAGE 15)
Approval of Stone Street's merger with CCB's subsidiary, CCBFC, requires the
affirmative vote of the holders of at least a majority of the outstanding
3
shares of Stone Street Common Stock. Your failure to vote will have the effect
of a vote against approval of this merger. The remaining acquisition
transactions do not require a vote of Stone Street's shareholders.
CCB's shareholders are not required to approve the merger or the other
acquisition transactions.
Directors and executive officers of Stone Street own or have the sole or shared
power to vote about 20.76% of the shares that may be cast at the Stone Street
meeting, and we expect them to vote in favor of the merger of CCBFC and Stone
Street.
Brokers who hold Stone Street shares as nominees, or in "street name", will not
have authority to vote such shares on the merger unless they receive
instructions from the shareholders whose accounts they hold.
EXPECTED DATE OF COMPLETION (PAGE 23)
If we receive the approval of Stone Street's shareholders, we currently expect
to complete the acquisition transactions on October 1, 1999. Although we
believe that CCB and Stone Street will receive all required approvals of
regulatory authorities prior to that date, it is possible that the completion
of the acquisition will have to be deferred to later in 1999 if the receipt of
any required approval is delayed.
REGULATORY APPROVALS REQUIRED (PAGES 25 AND 26)
The acquisition transactions may not be completed without prior approval of
certain federal and state banking regulators. Applications have been filed for
all required approvals. It is expected that the last of these approvals will be
received by September 23, 1999. CCB and Stone Street are not aware of any
reason why any such approval will not be received.
RECORD DATE FOR SPECIAL MEETING IS JULY 21, 1999
If you owned shares of Stone Street at the close of business on July 21, 1999,
you may vote on the matters to be considered at the Stone Street special
shareholders' meeting.
On July 21, 1999, there were 1,638,452 shares of Stone Street Common Stock
outstanding. You will have one vote at the meeting for each Stone Street share
you owned on that date.
INTERESTS OF MANAGEMENT IN THE ACQUISITION TRANSACTIONS (PAGES 32 AND 33)
Members of Stone Street's Board of Directors and management have interests in
the acquisition transactions in addition to their interests as shareholders of
Stone Street generally.
Among the matters for you to consider is the agreement between CCB and J.
Charles Dunn, currently the President and Chief Executive Officer of Stone
Street and SSB Bank, for CCB Bank to employ Mr. Dunn. Mr. Dunn's current
employment agreement will be amended and restated upon completion of the
acquisition. The amended and restated agreement between Mr. Dunn and CCB Bank
will provide that he will be the Mocksville City Executive of CCB Bank, will
receive a minimum annual base salary of $122,935, will be employed for an
annually renewing three year term and will have the right to participate in
bonus, benefit and other plans of CCB or CCB Bank on the same terms as other
CCB Bank officers of similar rank.
CCB Bank has also agreed that each director of SSB Bank at the time of the
completion of the acquisition transactions will serve as a member of CCB Bank's
Mocksville Advisory Board for at least two years and will receive an annual
advisory director's fee equal to the director's fee currently being paid by SSB
Bank.
You should also consider the effect of the acquisition transaction upon the
rights of certain directors and officers of Stone Street to receive full
ownership of shares of Stone Street Common Stock granted to them under SSB
Bank's Management Recognition Plan. Under this Plan the participants became
entitled to receive dividends on their shares from the time of grant forward
but full beneficial ownership vested in the participants over a term of five
years. As of May 31, 1999, 60% of each participant's shares were vested and
could be sold or otherwise transferred by the participant.
Under the Plan and the merger agreement, all vested shares may be exchanged for
cash or CCB Common Stock. All unvested shares may be exchanged only for CCB
shares. The Plan provides, however, that in the event a participant ceases to
be a director or employee of SSB Bank because of a "change of control" of Stone
Street or SSB Bank, all of the participant's unvested shares immediately vest.
4
Accordingly, each participant who ceases to be an employee of CCB Bank upon the
consummation of or after the acquisition and each director of Stone Street
(none of whom will continue as directors of CCB Bank will become immediately
vested in all shares awarded to him or her under this Plan.
CONDITIONS TO THE ACQUISITION TRANSACTIONS (PAGES 26 AND 27)
The completion of CCB's acquisition of Stone Street depends upon a number of
conditions, including the following:
o the approval of Stone Street's shareholders of the merger of CCBFC
into Stone Street;
o receipt of all required regulatory approvals;
o receipt of the opinion of CCB's tax advisors as to the tax
consequences of the acquisition transactions to the parties and Stone
Street's shareholders;
o the absence of any legal proceeding seeking to enjoin or prohibit the
acquisition; and
o receipt of the fairness opinion of Stone Street's financial advisor.
TERMINATION OF THE MERGER AGREEMENT (PAGE 27)
Either Stone Street or CCB may terminate the merger agreement and abandon the
acquisition if any of the following occurs:
o if the acquisition transactions are not completed by December 31,
1999;
o if any required regulatory approval is not received; or
o if the other party does not satisfy its obligations under the merger
agreement.
CONSEQUENCES OF CERTAIN TERMINATIONS OF THE MERGER AGREEMENT (PAGE 28)
If Stone Street or CCB wrongfully terminates the merger agreement or commits a
willful or grossly negligent breach that results in termination of the merger
agreement, it must pay the costs incurred by the other party in attempting to
complete the acquisition, plus $250,000. Additionally, if the merger agreement
is terminated because Stone Street enters into a letter of intent or agreement
to be acquired by another company or, if within twelve months after the merger
agreement is terminated, Stone Street enters into such a letter of intent or
agreement, Stone Street must pay $1,225,500 to CCB.
PURCHASE ACCOUNTING METHOD TO BE USED (PAGE 37)
CCB will use the purchase method of accounting for the acquisition. Under this
method, CCB will record as goodwill the excess of the total consideration it
pays for Stone Street's outstanding shares over the aggregate fair value of
Stone Street's consolidated net assets and will amortize this goodwill as
expense over a period of approximately 15 years. Because of the relative sizes
of CCB and Stone Street, it is not expected that the use of purchase accounting
will have any material impact upon CCB's post-acquisition results of
operations.
DISSENTERS' RIGHTS (PAGE 37)
Because the shares of Stone Street Common Stock are listed on the American
Stock Exchange, you do not have the right to dissent from the merger and
receive a cash payment for the "fair value" of your Stone Street shares.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 44)
Shares of CCB Common Stock are listed on the New York Stock Exchange under the
symbol "CCB" and shares of Stone Street are listed on the American Stock
Exchange under the symbol "SSM". On April 12, 1999, the last full trading day
prior to the public announcement of the proposed acquisition, CCB Common Stock
closed at $54.125 per share and Stone Street Common Stock closed at $12.875 per
share. On July 22, 1999, CCB's stock closed at $51.4375 per share and the per
share closing price for Stone Street stock was $20.375.
The following table describes the closing price of a CCB share on the New York
Stock Exchange and the closing price of a Stone Street share on the American
Stock Exchange on April 12, 1999, and the equivalent pro forma market value of
a Stone Street share on that date assuming the acquisition transactions were
completed on that date, were accounted for as a purchase and all Stone Street
shares were converted into CCB shares at a .3993 exchange ratio (the exchange
ratio resulting from
5
CCB's average closing price over the ten-day trading ending on April 9, 1999):
CCB Common Stock .................... $ 54.125
Stone Street Common Stock ........... $ 12.875
Equivalent pro forma market value per
Stone Street share ............... $ 21.612
OPERATIONS AFTER THE ACQUISITION TRANSACTION (PAGE 30)
Following the completion of the acquisition transactions, Stone Street and SSB
Bank will no longer exist. SSB Bank's offices will operate as branch offices of
CCB Bank.
MATERIAL DIFFERENCES IN SHAREHOLDER RIGHTS (PAGES 56 TO 63)
As a shareholder of CCB, you would have different rights than you do as a Stone
Street shareholder. One such difference is that each share of CCB Common Stock
has attached a right to purchase, in certain circumstances which do not now
exist, .01 of a share of CCB preferred stock. These purchase rights are
intended to discourage an uninvited or unfriendly attempt to acquire control of
CCB.
EXCHANGE OF STOCK CERTIFICATES (PAGE 24)
Certificates representing shares of Stone Street Common Stock will not
automatically represent shares of CCB Common Stock. Also, payments for Stone
Street shares tendered for cash will not automatically be made upon completion
of the acquisition. You will need to deliver your certificates to the Registrar
and Transfer Company, acting as the Exchange Agent for the Merger, who will
distribute (depending on the election you make) CCB stock certificates or cash
after the acquisition is completed. After the date the acquisition is
completed, we will mail you information and transmittal materials for your use.
6
SELECTED HISTORICAL FINANCIAL DATA
THIS SECTION PRESENTS SELECTED HISTORICAL FINANCIAL DATA OF CCB AND STONE
STREET. YOU SHOULD READ CAREFULLY THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF CCB AND STONE
STREET, INCLUDING THE NOTES TO THOSE CONSOLIDATED FINANCIAL STATEMENTS, THAT
ARE INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT - PROSPECTUS. (SEE PAGE
67). THE SELECTED DATA IN THIS SECTION ARE NOT INTENDED TO REPLACE THE
CONSOLIDATED FINANCIAL STATEMENTS.
SELECTED FINANCIAL DATA OF CCB
CCB derived the selected financial data as of the five-year period ended
December 31, 1998 from its audited consolidated financial statements including
the three-year period ended December 31, 1998 incorporated by reference into
this Proxy Statement - Prospectus. Those financial statements were audited by
KPMG LLP, independent auditors. The selected financial data as of and for the
three month periods ended March 31, 1999 and 1998 are derived from CCB's
unaudited consolidated financial statements for those quarters incorporated
into this Proxy Statement - Prospectus by reference. (See Page 67). CCB's
management believes that the unaudited historical consolidated financial
statements contain all adjustments needed to present fairly the information
included in those statements, and that the adjustments made consist only of
normal recurring adjustments.
7
CCB
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED MARCH 31,
----------------------------
1999 1998
-------------- -------------
SUMMARY OF OPERATIONS
Interest income ............................ $ 142,941 141,637
Interest expense ........................... 62,115 62,968
---------- -------
Net interest income ........................ 80,826 78,669
Provision for loan and lease losses ........ 1,811 3,140
---------- -------
Net interest income after provision ........ 79,015 75,529
Other income (1) ........................... 31,952 24,115
Net investment securities gains
(losses) ................................. 121 622
Other expenses (2) ......................... 59,222 54,092
---------- -------
Income before income taxes and
extraordinary item ....................... 51,866 46,174
Income taxes (3) ........................... 18,113 16,890
---------- -------
Income before extraordinary item ........... 33,753 29,284
Extraordinary item (4) ..................... -- --
---------- -------
Net income ................................. $ 33,753 29,284
========== =======
PER SHARE (5)
Income before extraordinary item:
Basic ..................................... $ .84 .70
Diluted ................................... .83 .70
Net income:
Basic ..................................... .84 .70
Diluted ................................... .83 .70
Cash dividends ............................. .26 .235
Book value ................................. 17.21 16.53
Average shares outstanding (000's):
Basic ..................................... 40,237 41,538
Diluted ................................... 40,655 42,116
AVERAGE BALANCES
Assets ..................................... $7,675,964 7,164,451
Loans and lease financing .................. 5,424,018 5,132,578
Earning assets ............................. 7,289,921 6,792,470
Deposits ................................... 6,428,018 6,000,239
Interest-bearing liabilities ............... 6,059,683 5,665,912
Shareholders' equity ....................... 689,301 682,784
SELECTED PERIOD END ASSETS AND
LIABILITIES
Assets ..................................... $7,803,425 7,344,061
Loans and lease financing .................. 5,406,258 5,157,079
Reserve for loan and lease losses .......... 72,093 68,403
Deposits ................................... 6,548,183 6,133,375
Shareholders' equity ....................... 689,233 682,518
RATIOS
Income before extraordinary item to:
Average assets ............................ 1.78% 1.66
Average shareholders' equity .............. 19.86 17.39
Net income to:
Average assets ............................ 1.78 1.66
Average shareholders' equity .............. 19.86 17.39
Net interest margin, taxable
equivalent ................................ 4.69 4.79
Net loan and lease losses to average
loans and lease financing
(annualized) .............................. .22 .18
Dividend payout ratio ...................... 30.95 33.57
Average equity to assets ratio ............. 8.98 9.53
YEARS ENDED DECEMBER 31
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- ------------
SUMMARY OF OPERATIONS
Interest income ............................ 577,307 550,463 512,575 492,409 401,588
Interest expense ........................... 254,562 250,099 237,572 234,880 168,483
------- ------- ------- ------- --------
Net interest income ........................ 322,745 300,364 275,003 257,529 233,105
Provision for loan and lease losses ........ 15,884 16,376 17,361 11,007 10,761
------- ------- ------- ------- --------
Net interest income after provision ........ 306,861 283,988 257,642 246,522 222,344
Other income (1) ........................... 111,022 92,919 84,767 67,001 58,128
Net investment securities gains
(losses) ................................. 2,178 480 (2,161) (816) 357
Other expenses (2) ......................... 230,217 226,198 209,833 198,207 180,963
------- ------- ------- ------- --------
Income before income taxes and
extraordinary item ....................... 189,844 151,189 130,415 114,500 99,866
Income taxes (3) ........................... 68,632 55,765 43,589 37,356 38,421
------- ------- ------- ------- --------
Income before extraordinary item ........... 121,212 95,424 86,826 77,144 61,445
Extraordinary item (4) ..................... -- -- -- (1,709) --
------- ------- ------- ------- --------
Net income ................................. 121,212 95,424 86,826 75,435 61,445
======= ======= ======= ======= ========
PER SHARE (5)
Income before extraordinary item:
Basic ..................................... 2.96 2.31 2.11 1.90 1.50
Diluted ................................... 2.93 2.28 2.08 1.85 1.47
Net income:
Basic ..................................... 2.96 2.31 2.11 1.86 1.50
Diluted ................................... 2.93 2.28 2.08 1.81 1.47
Cash dividends ............................. .99 .89 .80 .72 .66
Book value ................................. 17.05 16.40 14.82 13.66 11.69
Average shares outstanding (000's):
Basic ..................................... 40,898 41,438 41,107 40,589 40,874
Diluted ................................... 41,409 41,947 41,815 41,800 41,959
AVERAGE BALANCES
Assets ..................................... 7,332,506 6,943,989 6,570,573 6,218,290 5,575,057
Loans and lease financing .................. 5,276,042 4,877,187 4,464,026 4,113,207 3,569,065
Earning assets ............................. 6,975,753 6,594,704 6,216,419 5,850,981 5,230,756
Deposits ................................... 6,141,074 5,800,128 5,449,912 5,153,952 4,581,111
Interest-bearing liabilities ............... 5,780,005 5,495,194 5,242,467 5,047,523 4,496,256
Shareholders' equity ....................... 678,264 638,988 574,759 511,031 478,314
SELECTED PERIOD END ASSETS AND
LIABILITIES
Assets ..................................... 7,740,353 7,138,528 6,880,205 6,589,762 6,065,652
Loans and lease financing .................. 5,487,337 5,093,569 4,745,663 4,267,175 3,952,160
Reserve for loan and lease losses .......... 73,182 67,594 61,257 55,114 50,902
Deposits ................................... 6,459,764 5,984,597 5,741,454 5,421,376 4,980,250
Shareholders' equity ....................... 687,894 681,360 611,449 556,917 472,091
RATIOS
Income before extraordinary item to:
Average assets ............................ 1.65 1.37 1.32 1.24 1.10
Average shareholders' equity .............. 17.87 14.93 15.11 15.10 12.85
Net income to:
Average assets ............................ 1.65 1.37 1.32 1.21 1.10
Average shareholders' equity .............. 17.87 14.93 15.11 14.76 12.85
Net interest margin, taxable
equivalent ................................ 4.75 4.70 4.56 4.56 4.61
Net loan and lease losses to average
loans and lease financing
(annualized) .............................. .20 .21 .25 .17 .16
Dividend payout ratio ...................... 33.45 38.53 37.91 38.71 44.00
Average equity to assets ratio ............. 9.25 9.20 8.75 8.22 8.58
8
- --------
(1) Other income in 1997 includes $2.3 million of gain ($1.4 million after-tax)
on the sale of a subsidiary acquired through merger which increased
diluted net income per share by $.03.
(2) Other expenses include merger-related expense of $17.9 million in 1997,
$10.3 million in 1995 and $1.1 million in 1994. Other expenses also
include the levy in 1996 of a $12.9 million special assessment by the
Federal Deposit Insurance Corporation ("FDIC") to recapitalize the Savings
Association Insurance Fund ("SAIF"). The after-tax effect of the
aforementioned non-recurring expense items was to decrease diluted net
income per share by $.31 in 1997, $.19 per share in 1996, $.17 per share
in 1995 and $.02 per share in 1994.
(3) During 1996, a tax benefit of $1.6 million ($.04 per diluted share) was
recorded for forgiveness of the recapture of tax bad debt reserves of a
former savings bank subsidiary. During 1994, a one-time charge of
approximately $5.6 million ($.13 per diluted share) of deferred tax
liabilities were recorded in anticipation of the merger of three savings
bank subsidiaries into a commercial bank subsidiary.
(4) The extraordinary item resulted from a prepayment penalty on the early
extinguishment of debt.
(5) Amounts for March 31, 1998 and prior years have been restated to give
effect to the two-for-one stock split effected in the form of a 100% stock
dividend paid October 1, 1998.
9
SELECTED FINANCIAL DATA OF STONE STREET
Stone Street derived the selected financial data as of and for the
five-year period ended December 31, 1998 from its audited consolidated
financial statements for those years incorporated by reference into this Proxy
Statement - Prospectus. Those financial statements were audited by Weir Smith
Jones Miller and Elliott, independent auditors. The selected financial data as
of and for the three month periods ended March 31, 1999 and 1998 are derived
from Stone Street's unaudited consolidated financial statements for those
quarters incorporated into this Proxy Statement - Prospectus by reference. (See
Page 67). Stone Street's management believes that the unaudited historical
financial statements contain all adjustments needed to present fairly the
information included in those statements, and that the adjustments made consist
only of normal recurring adjustments.
10
STONE STREET
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED MARCH 31,
------------------------
1999 1998
------------ -----------
SUMMARY OF OPERATIONS
Interest income .................................. $ 2,438 2,189
Interest expense ................................. 1,192 951
-------- -----
Net interest income .............................. 1,246 1,238
Provision for loan and lease losses .............. 45 30
-------- -----
Net interest income after provision .............. 1,201 1,208
Other income ..................................... 47 34
Other expenses (1) ............................... 556 493
-------- -----
Income before income taxes ....................... 692 749
Income taxes ..................................... 265 286
-------- -----
Net income ....................................... $ 427 463
======== =====
PER SHARE (2)
Net income:
Basic ........................................... $ .26 .25
Diluted ......................................... .26 .25
Cash dividends (3) ............................... .1175 .115
Book value ....................................... 17.11 16.37
Average shares outstanding (000's):
Basic (4) ....................................... 1,650 1,889
Diluted (4) ..................................... 1,650 1,889
AVERAGE BALANCES
Assets ........................................... $127,683 109,518
Loans and lease financing ........................ 102,895 94,344
Earning assets ................................... 124,210 105,300
Deposits ......................................... 72,410 67,365
Interest-bearing liabilities ..................... 97,083 75,610
Stockholders' equity ............................. 28,161 31,025
SELECTED PERIOD END ASSETS AND LIABILITIES
Assets ........................................... $128,067 110,898
Loans and lease financing ........................ 103,939 96,322
Reserve for loan and lease losses ................ 795 600
Deposits ......................................... 72,991 67,756
Stockholders' equity ............................. 28,027 31,062
RATIOS
Net income to:
Average assets .................................. 1.36 1.71
Average shareholders' equity .................... 6.15 6.05
Net interest margin, taxable equivalent .......... 4.11 4.68
Net loan and lease losses to average loans and
lease financing (annualized) .................... -- --
Dividend payout ratio (2) ........................ 45.19 46.00
Average equity to assets ratio ................... 22.06 28.33
YEARS ENDED DECEMBER 31
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
SUMMARY OF OPERATIONS
Interest income .................................. 9,268 8,353 8,008 6,602 5,996
Interest expense ................................. 4,270 3,491 3,610 3,607 2,862
----- ----- ----- ----- -----
Net interest income .............................. 4,998 4,862 4,398 2,995 3,134
Provision for loan and lease losses .............. 180 60 50 350 26
----- ----- ----- ----- -----
Net interest income after provision .............. 4,818 4,802 4,348 2,645 3,108
Other income ..................................... 163 145 114 127 111
Other expenses (1) ............................... 2,428 2,514 2,123 1,605 1,495
----- ----- ----- ----- -----
Income before income taxes ....................... 2,553 2,433 2,339 1,167 1,724
Income taxes ..................................... 945 901 858 430 617
----- ----- ----- ----- -----
Net income ....................................... 1,608 1,532 1,481 737 1,107
===== ===== ===== ===== =====
PER SHARE (2)
Net income:
Basic ........................................... .89 .82 .82 n/a n/a
Diluted ......................................... .89 .82 .82 n/a n/a
Cash dividends (3) ............................... .46 4.45 .44 n/a n/a
Book value ....................................... 16.83 16.37 20.48 n/a n/a
Average shares outstanding (000's):
Basic (4) ....................................... 1,814 1,872 1,825 n/a n/a
Diluted (4) ..................................... 1,814 1,872 1,825 n/a n/a
AVERAGE BALANCES
Assets ........................................... 117,567 105,617 103,874 83,921 78,890
Loans and lease financing ........................ 98,675 87,489 78,797 78,797 70,397
Earning assets ................................... 111,633 101,909 102,336 83,058 76,125
Deposits ......................................... 68,600 66,520 68,684 70,541 66,713
Interest-bearing liabilities ..................... 83,734 69,308 68,767 70,541 66,713
Stockholders' equity ............................. 32,368 33,869 33,115 12,283 11,317
SELECTED PERIOD END ASSETS AND LIABILITIES
Assets ........................................... 127,273 108,092 105,807 87,751 81,560
Loans and lease financing ........................ 103,299 93,537 83,503 75,558 66,088
Reserve for loan and lease losses ................ 750 570 511 462 115
Deposits ......................................... 73,176 66,973 66,564 73,035 69,140
Stockholders' equity ............................. 28,490 31,076 37,368 12,562 11,729
RATIOS
Net income to:
Average assets .................................. 1.37 1.45 1.43 .88 1.40
Average shareholders' equity .................... 4.97 4.52 4.48 6.00 9.78
Net interest margin, taxable equivalent .......... 4.48 4.77 4.32 3.62 4.12
Net loan and lease losses to average loans and
lease financing (annualized) .................... -- -- -- -- --
Dividend payout ratio (2) ........................ 51.12 55.22 54.32 n/a n/a
Average equity to assets ratio ................... 27.53 32.07 31.88 14.64 14.34
- --------
(1) Other expenses include the levy in 1996 of a $456,000 special assessment by
the FDIC to recapitalize the SAIF.
(2) Stone Street converted from a mutual to a stock savings bank in 1996.
(3) Includes a $4.00 special return of capital dividend paid on July 11, 1997.
(4) Average shares outstanding for 1996 was computed as if the 1,825,000 shares
issued on March 29, 1996 had been outstanding on January 1, 1996.
11
CCB AND STONE STREET UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined selected financial information below
provides you with financial information about CCB and Stone Street on a
combined basis. Such pro forma information has been prepared assuming (i) the
Merger is approved by Stone Street's shareholders and 82% of Stone Street's
outstanding shares are exchanged for shares of CCB Common Stock with the
remainder being tendered for cash payment; (ii) a .411 Exchange Ratio; (iii)
CCB's repurchase of shares of its Common Shares issued in the acquisition (see
"Recent Developments" on page 15); (iv) Stone Street's ESOP will be terminated
immediately prior to the Effective Time through cash-outs or rollover into
other qualified benefit plans; (v) Stone Street's MRP shares are all 100%
vested at the Effective Time; and (vi) consummation of the acquisition on a
purchase accounting basis as if the acquisition had occurred on January 1, 1998
only. This information should be read in conjunction with the historical
financial statements of CCB and Stone Street, including the respective notes
thereto, and the documents incorporated by reference in this Proxy Statement -
Prospectus. (See Page 67). The .411 Exchange Ratio used in the pro forma
information is computed by dividing $21.37 by an estimated $52.00 closing price
of CCB Common Stock. The actual Exchange Ratio will depend upon the ten-day
average closing price (which will not be known until shortly before the
Effective Time) and may be higher or lower than $52.00. The pro forma
information will be different if the ten-day average closing price results in
an Exchange Ratio different from .411. Since purchase accounting does not
require restatement of results for prior periods following consummation of the
acquisition, consummation of the acquisition will not affect CCB's historical
results for the periods indicated. Pro forma financial information is intended
to show how the acquisition might have affected historical financial statements
if the acquisition had been consummated at an earlier time. The pro forma
combined selected financial information does not purport to be indicative of
the results that actually would have been realized had the acquisition taken
place at the beginning of the applicable periods indicated, nor is it
indicative of the combined financial position or results of operations for any
future periods. (See "Accounting Treatment" page 37).
The pro forma combined financial information data do not reflect any cost
savings from operating efficiencies which may be achieved in connection with
the acquisition. CCB forecasts that cost savings of approximately $1.2 million
may occur. Such forecast is based on numerous variables and assumptions which
are inherently uncertain and which may not be within CCB's control, including
general economic, competitive and regulatory conditions. As a result, the
amount of possible cost savings, if any, may be less than that estimated above.
12
CCB FINANCIAL CORPORATION PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
1999 (A) 1998 (B)
----------------- -------------
SUMMARY OF OPERATIONS
Interest income ............................................................ $ 144,961 584,571
Interest expense ........................................................... 63,307 258,832
---------- -------
Net interest income ........................................................ 81,654 325,739
Provision for loan and lease losses ........................................ 1,856 16,064
---------- -------
Net interest income after provision ........................................ 79,798 309,675
Other income ............................................................... 31,999 111,185
Net investment securities gains (losses) ................................... 121 2,178
Other expenses ............................................................. 59,924 233,274
---------- -------
Income before income taxes ................................................. 51,994 189,764
Income taxes ............................................................... 18,211 68,775
---------- -------
Net income ................................................................. $ 33,783 120,989
========== =======
PER SHARE
Net income:
Basic ..................................................................... $ .84 2.96
Diluted ................................................................... .83 2.92
Cash dividends (1) ......................................................... .26 .99
Book value ................................................................. 17.21 17.05
Average shares outstanding (000's):
Basic ..................................................................... 40,237 40,898
Diluted ................................................................... 40,655 41,409
AVERAGE BALANCES
Assets ..................................................................... $7,803,647 7,450,073
Loans and lease financing .................................................. 5,526,913 5,374,717
Earning assets ............................................................. 7,414,131 7,087,386
Deposits ................................................................... 6,500,428 6,209,674
Interest-bearing liabilities ............................................... 6,156,766 5,863,739
Shareholders' equity ....................................................... 689,301 678,264
SELECTED PERIOD END BALANCES
Assets ..................................................................... $7,903,465 7,839,136
Loans and lease financing .................................................. 5,510,197 5,590,636
Reserve for loan and lease losses .......................................... 72,888 73,932
Deposits ................................................................... 6,621,174 6,532,940
Shareholders' equity ....................................................... 689,233 687,894
RATIOS
Net income to:
Average assets ............................................................ 1.76 1.62
Average shareholders' equity .............................................. 19.88 17.84
Net interest margin, taxable equivalent .................................... 4.71 4.75
Net loan and lease losses to average loans and lease financing (annualized) .21 .19
Dividend payout ratio (1) .................................................. 30.95 33.45
- --------
(a) Pro forma assumptions include (i) the .411 Exchange Ratio; (ii) the
issuance of 552,191 shares of CCB Common Stock; (iii) the repurchase by
CCB of an equivalent number of shares in the open market at a cost of
approximately $28.7 million; (iv) a cost of funds rate of 4.85%; and (v)
15-year straight-line life related to goodwill of $8.7 million to be
recorded in accordance with purchase accounting.
(b) Pro forma assumptions include (i) the .411 Exchange Ratio; (ii) the
issuance of 570,356 shares of CCB Common Stock; (iii) the repurchase by
CCB of an equivalent number of shares in the open market at a cost of
approximately $29.7 million; (iv) a cost of funds rate of 5.54%; and (v)
15-year straight-line life related to goodwill of $9.4 million to be
recorded in accordance with purchase accounting.
(1) CCB pro forma combined dividends per share represent historical dividends
per share paid by CCB.
13
UNAUDITED COMPARATIVE PER SHARE DATA
The selected comparative per share data below provides you with
information about the value of your Stone Street shares prior to the
acquisition as opposed to the value of your shares after CCB's acquisition of
Stone Street is finalized. You can use this comparative information to help
evaluate, from a financial perspective, whether to vote in favor of the merger.
You should also consider the other factors discussed in this Proxy Statement -
Prospectus, including the long-term prospects associated with CCB and Stone
Street as a merged company as opposed to Stone Street's ability to
independently maintain its competitiveness in its market.
The proposed acquisition transactions will be accounted for as a purchase,
and the pro forma data are derived in accordance with such method. The pro
forma data are presented assuming that 18% of Stone Street's shares are
purchased for cash and using exchange ratios based on ten-day average closing
prices for CCB Common Stock of less than $44.52 (.48), of $52.00 (.411) and of
more than $60.24 (.3548). The pro forma data also assumes that (i) CCB will
repurchase and retire the equivalent number of shares of CCB Common Stock
issued in the acquisition; (ii) Store Street's ESOP will be terminated
immediately prior to the, Effective Time through cash-outs or rollover into
other qualified benefit plans; and (iii) Stone Street's MRP shares are all 100%
vested at the Effective Time. The unaudited pro forma combined financial data
are not necessarily indicative of the operating results that would have been
achieved had the acquisition been in effect as of the beginning of each of the
periods presented and should not be construed as representative of future
operations.
The Stone Street equivalent per share amounts are computed by multiplying
the combined amounts by the applicable assumed exchange ratios so that the per
share amounts equate to the respective values for one share of Stone Street
Common Stock. The periods presented for CCB and Stone Street are the three
months period ended March 31, 1999 and the year ended December 31, 1998. You
should not rely on the equivalent pro forma information as necessarily
indicative of historical results had CCB and Stone Street been combined or of
future results CCB will have after the acquisition occurs. Also, you should not
rely on the three-month information as indicative of results for the entire
year. The data presented have been derived from the historical consolidated
financial statements, and the related notes, of CCB and Stone Street,
incorporated by reference into this Proxy Statement - Prospectus, and in
conjunction with the unaudited pro forma combined condensed financial
information, including the related notes, included elsewhere in this Proxy
Statement - Prospectus. (See Page 67).
HISTORICAL PER COMBINED PRO
SHARE DATA FORMA PER SHARE
------------------------ --------------------------------
CCB STONE STREET .48 .411 .3548
--------- -------------- ---------- ---------- ----------
At March 31, 1999
Net income, basic (2) ....................... $ .84 .26 .84 .84 .84
Net income, diluted (3) ..................... .83 .26 .83 .83 .83
Cash dividend per Common Share (4) .......... .26 .1175 .26 .26 .26
Book value per Common Share (5) (6) ......... 17.21 17.11 17.21 17.21 17.21
At December 31, 1998
Net income, basic (2) ....................... 2.96 .89 2.96 2.96 2.96
Net income, diluted (3) ..................... 2.93 .89 2.92 2.92 2.92
Cash dividend per Common Share (4) .......... .99 .46 .99 .99 .99
Book value per Common Share (5) (6) ......... 17.05 16.83 17.05 17.05 17.05
STONE STREET
EQUIVALENT PRO FORMA
PER SHARE DATA(1)
-----------------------------
.48 .411 .3548
--------- --------- ---------
At March 31, 1999
Net income, basic (2) ....................... .40 .35 .30
Net income, diluted (3) ..................... .40 .34 .29
Cash dividend per Common Share (4) .......... .12 .11 .09
Book value per Common Share (5) (6) ......... 8.26 7.07 6.11
At December 31, 1998
Net income, basic (2) ....................... 1.42 1.22 1.05
Net income, diluted (3) ..................... 1.40 1.20 1.04
Cash dividend per Common Share (4) .......... .48 .41 .35
Book value per Common Share (5) (6) ......... 8.18 7.01 6.05
- --------
(1) Stone Street pro forma equivalent per share amounts are computed by
multiplying the CCB pro forma combined amounts by an Exchange Ratio of
.411 and assuming 82% of the Stone Street shares are exchanged for CCB
shares and that CCB repurchases and retires an equivalent number of shares
of CCB Common Stock.
(2) The pro forma combined net income per basic common share is based on the
combined historical net income of CCB and Stone Street divided by the
weighted average pro forma combined basic common shares of CCB.
(3) The pro forma combined net income per diluted share is based on the
combined historical net income of CCB and Stone Street divided by the
weighted average pro forma combined diluted common shares of CCB.
(4) CCB pro forma combined dividends per share represent historical dividends
per share paid by CCB.
14
(5) CCB and Stone Street historical book values per share are computed using
period end shares outstanding and do not include common share equivalents.
(6) The pro forma combined book values per share of CCB Common Stock are based
upon the pro forma total common equity of CCB divided by total pro forma
shares of CCB stock, assuming conversion of Stone Street's shares at a
.411 Exchange Ratio and that CCB repurchases and retires an equivalent
number of shares of CCB Common Stock.
RECENT DEVELOPMENTS
On April 27, 1999, CCB's Board of Directors approved the extension,
through December 31, 1999, of its previously announced program to repurchase up
to 1,000,000 shares of CCB Common Stock and to make additional repurchases as
needed to retire any shares issued for the exercise of options, 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 also approved additional
repurchases needed to retire any shares issued in connection with CCB's
acquisition of Stone Street.
GENERAL INFORMATION
This Proxy Statement - Prospectus is being furnished to you in connection
with the solicitation by the Board of Directors of Stone Street Bancorp, Inc.
("Stone Street") of proxies for use at a special meeting of Stone Street's
shareholders (the "Special Meeting"). The purpose of the Special Meeting is to
consider and vote on the approval of the Amended and Restated Agreement of
Combination, dated as of June 22, 1999, and the related Plan of Merger
(collectively, the "Merger Agreement"), pursuant to which CCBFC, Inc.
("CCBFC"), a subsidiary of CCB Financial Corporation ("CCB"), will be merged
into Stone Street (the "Merger"), Stone Street will then be merged into CCB
(the "Second Merger"), and Stone Street Bank and Trust, Stone Street's savings
bank subsidiary ("SSB Bank"), will be merged into Central Carolina Bank and
Trust Company, a North Carolina bank subsidiary of CCB ("CCB Bank") (the "Bank
Merger").
The principal executive offices of Stone Street are located at 232 South
Main Street, Mocksville, North Carolina 27028, and its telephone number is
(336) 751-5936.
This Proxy Statement - Prospectus is first being mailed to Stone Street's
shareholders on or about August 2, 1999.
THE SPECIAL MEETING. The Special Meeting of Stone Street's shareholders
will be held at 5:00 o'clock, p.m., eastern daylight savings time, on Tuesday,
September 21, 1999, at the Davie County Public Library, 371 North Main Street,
Mocksville, North Carolina.
RECORD DATE; VOTING RIGHTS. Stone Street shareholders of record at the
close of business on July 21, 1999 ("Record Date") are entitled to vote at the
Special Meeting and at any reconvening of the meeting after adjournment. As of
the Record Date, there were 1,638,452 shares of Stone Street Common Stock
outstanding and entitled to vote held of record by 659 persons. Each share
entitles the holder to one vote on each matter submitted to a vote at the
Special Meeting. Under Stone Street's Bylaws, a majority of the shares entitled
to be cast at the Special Meeting, represented in person or by proxy, will
constitute a quorum for the conduct of business at the meeting.
The affirmative vote of the holders of the majority of the issued and
outstanding shares of Stone Street Common Stock (819,227 shares) on the Record
Date is required by the North Carolina Business Corporation Act ("NCBCA") to
approve the Merger pursuant to the Merger Agreement. Abstentions, broker
non-votes and other shares not voted in the affirmative will have the same
effect as votes against the Merger Agreement. Approval of the Second Merger and
the Bank Merger by Stone Street's shareholders is not required under the NCBCA.
Additionally, under the NCBCA, CCB shareholder approval of the Merger, the
Second Merger and the Bank Merger is not required.
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As of May 31, 1999, the executive officers and directors of Stone Street,
together with their affiliates, beneficially owned, directly or indirectly, or
were otherwise entitled to vote, a total of 340,129 Stone Street shares
(excluding 84,401 shares subject to the outstanding vested stock options). This
amount equals approximately 20.76% of all shares of Stone Street Common Stock
outstanding and entitled to vote on that date. Non-employee directors
beneficially own or are otherwise entitled to vote 277,844 (16.96%) and
executive officers beneficially own or are otherwise entitled to vote 62,285
(3.80%) of these shares.
SOLICITATION, REVOCATION AND USE OF PROXIES. A PROXY CARD IS ENCLOSED FOR
YOUR USE. YOU ARE SOLICITED ON BEHALF OF STONE STREET'S BOARD OF DIRECTORS TO
COMPLETE, DATE, SIGN, AND RETURN THE PROXY CARD IN THE ACCOMPANYING,
POSTAGE-PREPAID ENVELOPE.
You have three choices of how to vote. By checking the appropriate box on
the proxy card you may:
o vote "FOR" the Merger Agreement;
o vote "AGAINST" the Merger Agreement; or
o "ABSTAIN" from voting "for" or "against".
Because we need a majority of all outstanding Stone Street shares to vote
FOR the Merger Agreement, if you neither submit a proxy nor vote in person at
the Special Meeting, you will, in effect, have voted AGAINST the Merger
Agreement and Stone Street's acquisition by CCB. In addition, if you submit a
proxy card in which you abstain from voting, that will also be, in effect, a
vote AGAINST the proposal, although your shares will be counted toward the
required quorum for the Special Meeting.
You may revoke your proxy before it is voted at the Special Meeting by
delivering a written notice of revocation to the Secretary of Stone Street,
Sandra M. Hadley, 232 South Main Street, Mocksville, North Carolina 27028, by
submitting a subsequently dated proxy, or by attending the Special Meeting and
withdrawing the proxy. Each unrevoked proxy card properly executed and received
prior to the close of the Special Meeting will be voted as indicated on the
proxy. Where specific instructions are not given, the proxy will be voted "FOR"
the Merger Agreement and the acquisition of Stone Street by CCB. We are not
aware of any other business to be acted upon at the Special Meeting. By
completing and returning the proxy card, you will have granted the proxyholders
discretionary authority to vote on any other matter that may properly come
before Special Meeting in accordance with their best judgment.
The expense of preparing, printing and mailing this Proxy Statement -
Prospectus will be shared by Stone Street and CCB. In addition to the use of
mails, proxies may be solicited personally or by telephone by regular employees
of Stone Street without additional compensation. Stone Street will reimburse
banks, brokers and other custodians, nominees and fiduciaries for their cost in
sending the proxy materials to the beneficial owners of Stone Street Common
Stock.
STONE STREET BANCORP'S MERGER
INTO CCB FINANCIAL CORPORATION
THE FOLLOWING INFORMATION DESCRIBES MATERIAL ASPECTS OF THE PROPOSED
TRANSACTIONS IN WHICH CCB FINANCIAL CORPORATION WOULD ACQUIRE STONE STREET
BANCORP, INC. AND THE CONVERSION OF STONE STREET COMMON STOCK INTO CCB COMMON
STOCK AND/OR CASH UNDER THE MERGER AGREEMENT. THE MERGER AGREEMENT IS ATTACHED
AS APPENDIX A, AND YOU ARE ENCOURAGED TO READ IT IN ITS ENTIRETY.
AMENDMENT OF MERGER AGREEMENT
The Merger Agreement was initially executed as of April 13, 1999. The
Boards of Directors of the parties subsequently agreed to amend and restate the
Merger Agreement in the form attached as Appendix A
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to this Proxy Statement - Prospectus to reduce the number of Stone Street
shares that may be tendered for cash from 20% to 18% of Stone Street's total
outstanding stock, to clarify the procedures for making cash elections, to
provide for the priority of the Employee Stock Ownership Plan of SSB Bank in
the cash election process, and to make certain other changes in the procedures
for completing the acquisition transactions. Neither Board of Directors
believes that such amendments have any effect upon their conclusions described
below in "Background of and Reasons for the Merger" and "Recommendation of the
Stone Street Board".
GENERAL; EXCHANGE RATIO
The Merger Agreement provides for the Merger of CCBFC, a subsidiary of
CCB, into Stone Street to be followed immediately by the Second Merger of Stone
Street into CCB. Immediately thereafter, SSB Bank will be merged into CCB Bank
in the Bank Merger. At the time the Merger becomes effective, each share of
Stone Street Common Stock (excluding shares held by Stone Street, CCB or their
subsidiaries other than as a fiduciary or as security for debts previously
contracted) will be converted into the right to receive EITHER a fraction of a
share of CCB Common Stock (and the same fraction of an attached preferred stock
purchase right (a "CCB Right")) OR an amount of cash calculated under the
exchange ratio specified in the Merger Agreement (the "Exchange Ratio"). So
long as that ten-day closing price is $44.52 or more, but not more than $60.24,
each Stone Street share will be converted into that portion of a share of CCB
Common Stock (and an attached CCB Right) equal to $21.37 divided by the average
closing price for a CCB share on the New York Stock Exchange ("NYSE") over the
ten trading days ending on the last trading day before the Merger is completed.
Because the Exchange Ratio is based on this ten-day average closing price, the
exact portion of a share or amount of cash you would receive will not be
determinable until the day the Merger occurs. The Merger Agreement provides,
however, that each Stone Street share will be converted into no less than .3548
and no more than .48 of a CCB share (and the portion of a CCB Right). It also
provides that the payment to a Stone Street shareholder who elects to receive
cash rather than CCB stock for a Stone Street share will receive no less than
.3548 and no more than .48 times the ten-day average closing price used to
calculate the Exchange Ratio. CCB will not be obligated and does not intend to
purchase more than 18% of Stone Street's outstanding shares for cash.
Additionally, a Stone Street shareholder may NOT elect to receive CCB shares
for some of their Stone Street shares and cash for other of their Stone Street
shares. You should obtain information on the trading value of CCB shares and
Stone Street shares that is more recent than that provided in this Proxy
Statement - Prospectus.
The Merger Agreement also provides that at the time the Merger becomes
effective, all outstanding options to acquire Stone Street Common Stock ("Stone
Street Options") under Stone Street's Stock Option Plan ("Stone Street Option
Plan"), whether or not then exercisable, will be converted into (at the
Exchange Ratio discussed above) and will become options to acquire shares of
CCB Common Stock (with attached CCB Rights). CCB will assume Stone Street's
obligations with respect to each Stone Street Option under the terms of the
Stone Street Option Plan and the related option agreement.
As of the Record Date, Stone Street had 1,638,452 shares of its Common
Stock outstanding. Assuming no Stone Street shares are tendered for cash, CCB
will issue from 581,322 to 768,456 shares of its Common Stock in exchange for
Stone Street's outstanding stock.
TREATMENT OF FRACTIONAL SHARES
No fraction of a share of CCB Common Stock (or any fraction of a CCB
Right) will be issued in connection with the Merger. Each Stone Street
shareholder who otherwise would be entitled to receive a fraction of a share of
CCB stock upon the conversion of that shareholder's share of Stone Street
Common Stock at the time the Merger is effective will receive, in lieu thereof,
cash (without interest) in an amount equal to that fraction multiplied by the
"market value" of one whole share of CCB Common Stock as of the time the Merger
is effective (or in the case of a Stone Street Option, on the date of
exercise). "Market value" means the closing price of CCB Common Stock on the
NYSE on the last trading date preceding the completion of the Merger (or, in
the case of a Stone Street Option, the date of exercise). No Stone Street
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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.
BACKGROUND OF AND REASONS FOR THE MERGER
STONE STREET.
Stone Street's Board of Directors held a special planning meeting on
January 3, 1999. At that meeting the Board considered a broad range of possible
strategies for enhancing shareholder value. Among other things, the Board
discussed opportunities to deploy capital, growth opportunities, SSB Bank's
management and staff resources, and management succession. In the course of the
meeting, the directors questioned whether Stone Street should also inform
itself about the possibility that it might combine with or be acquired by
another company, as an alternative to other strategies. After discussion, the
Board decided that Stone Street should seek the advice of an independent
financial advisor while continuing to pursue strategies as an independent
company.
As the Board instructed, J. Charles Dunn, President of Stone Street and
SSB Bank, consulted Orr Management Company ("Orr Management"). Orr Management
made a detailed presentation to Mr. Dunn regarding its qualifications and
various strategic issues.
On January 23rd, representatives of Orr Management met with the Board of
Directors and presented an overview of the North Carolina financial services
industry, including the current operating environment and trends, general
trends affecting acquisition pricing for community banks and thrifts, Orr
Management's analysis of potential acquirers, a projected acquisition valuation
range for Stone Street's shares, and an assessment of Stone Street and its
prospects. Following this meeting, the Board directed management to engage Orr
Management to provide financial advice to Stone Street and to explore possible
strategies.
Orr Management compiled information about Stone Street and prepared an
offering package to be distributed to companies that it identified. Orr
Management then contacted all companies that it believed might have an interest
in combining with or acquiring Stone Street. After discussions with twelve
companies, offering packages were delivered to ten companies.
After it was determined that all companies that might be interested in
acquiring Stone Street had been contacted and encouraged to submit proposals,
the Board of Directors met to review the proposals received in a meeting held
on March 3, 1999. On that occasion, legal counsel met with the Board and
advised the directors respecting legal, regulatory and fiduciary obligations of
directors in connection with strategic transactions such as mergers and
acquisitions.
At the March 3rd meeting, Orr Management advised the Board that the
banking industry is in the process of consolidation, that in its view the
prices that acquirers are willing to pay for savings institutions are trending
downward and that the prices that acquirers are willing to pay for small,
highly capitalized companies are also trending downward. Orr Management then
advised the Board that it had received two proposals and that CCB's proposal
was the more favorable one to Stone Street's shareholders both in amount and
because CCB was willing to exchange CCB shares for Stone Street shares. Orr
Management then provided the Board with a summary of the key provisions of
CCB's proposal and other relevant information, including:
o the financial terms of CCB's proposal ;
o the fact that Stone Street shareholders could elect to convert their
shares into CCB shares in a tax-free exchange;
o a comparison of CCB's proposed terms with comparable recent
transactions;
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o information about CCB's business, financial condition, results of
operations and prospects;
o the fact that the proposed exchange ratio would be based on a price that
was lower than Orr Management's initial estimate of value provided to the
Board at the January 23rd meeting; and
o its conclusion that the proposed terms were fair to Stone Street's
shareholders from a financial point of view.
Of the two proposals received, the CCB proposal was the higher and better
offer in the opinion of Orr Management. Although the price received was below
the range of values that it had first suggested, Orr Management concluded that
CCB's proposal was the outcome of an auction process in which all potential
bidders had been encouraged to participate. Orr Management advised the Board
that the proposal was the best offer obtainable in the marketplace and that it
represented a fair proposal to Stone Street and its shareholders.
The Board and Orr Management reviewed Stone Street's prospects if it
elected to remain an independent company. This included consideration of the
competitive environment, economic conditions, and the North Carolina and the
national economies and the banking and financial services sectors. With
assistance from Orr Management, the Board of Directors evaluated these
financial and market considerations in order to determine whether to recommend
to the shareholders that Stone Street should agree to be acquired by CCB.
At a meeting on April 8, 1999, the Board reviewed its prior considerations
and concluded that the terms of the initial Merger Agreement, including the
purchase price, were the result of arm's-length negotiations and that entering
into the initial Merger Agreement was in the best interests of Stone Street and
its shareholders. The Board's conclusion was based on the directors'
consideration of the following factors:
o the financial terms of the initial Merger Agreement;
o a comparison of the terms of the initial Merger Agreement with comparable
transactions in North Carolina and elsewhere;
o information concerning the business, financial condition, results of
operations and prospects of Stone Street and CCB;
o competitive factors and trends toward consolidation in the banking
industry;
o the Board's review with its legal and financial advisors, of the
provisions of the initial Merger Agreement, including the expected
tax-free exchange treatment of shareholders electing to receive CCB
shares;
o Orr Management's opinion that the consideration to be received under the
initial Merger Agreement is fair from a financial point of view to the
holders of Stone Street's Common Stock;
o alternatives to acquisition, including continued operation as an
independent company, in light of the economic conditions and prospects of
Stone Street and North and South Carolina's banking markets and the
competitive environment and the economy generally; and
o the value to be received by holders of Stone Street shares in relation to
the historical trading prices, book value and earnings per share of Stone
Street Common Stock.
The Board of Directors also considered provisions made for benefits to
employees, management and members of the Board. The Board concluded that those
terms were fair and reasonable.
While Stone Street's directors individually considered the foregoing and
other factors, the Board did not collectively assign any specific or relative
weights to the factors considered and did not make any determination with
respect to any individual factor. The Board collectively made its determination
with respect
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to the initial Merger Agreement based on the unanimous conclusion reached by
its members, in light of the factors that each of them considered appropriate,
that the initial Merger Agreement is in the best interests of Stone Street's
shareholders.
CCB.
CCB's Board of Directors has developed a long-range strategic plan to
increase shareholder value that includes expanding CCB's geographic markets and
increasing its presence in its existing markets. The Board's view is that
although growth through new branch offices and other means are viable
strategies to be pursued, acquisitions of profitable, well-managed financial
institutions are the most effective means for expanding CCB's markets and
market presence. For the reasons discussed below, CCB's Board has concluded
that the acquisition of Stone Street fits into the Board's long-range plan for
enhancing shareholder value through growth.
In reaching its conclusion that the acquisition transactions are fair to,
and in the best interests, of CCB's shareholders, the Board of CCB consulted
with legal, financial and accounting advisors, as well as CCB's management, and
considered without assigning any relative or specific weights, a number of
factors, including the following:
o the information presented to the directors by CCB's management concerning
the business, operations, earnings and financial condition of Stone
Street, including the composition of its earning assets portfolio;
o the pro forma and prospective financial impact of the acquisition upon
CCB;
o the assumptions and methodologies used in setting the exchange ratio and
cash payment range and the other financial terms of the Merger Agreement;
o the likelihood of the acquisition being approved by applicable regulators
without undue conditions or delay;
o the enhanced opportunities for competitiveness and growth that the
acquisition may make possible in the market in which Stone Street
operates;
o the location of Stone Street within the Interstate 85/Interstate 40 urban
corridor of North Carolina and South Carolina which is the area in which
CCB's branch network is concentrated;
o the expectation that the acquisition will be tax-free for federal income
tax purposes; and
o the current and prospective economic and competitive environments facing
financial institutions, including CCB.
RECOMMENDATION OF THE STONE STREET BOARD
The Board of Directors of Stone Street has unanimously adopted the Merger
Agreement, and believes that the acquisition of Stone Street by CCB is fair to,
and in the best interests of, Stone Street and its shareholders. Stone Street's
Board of Directors, therefore, unanimously recommend that you vote "FOR"
approval of the Merger Agreement. In making its recommendation, the Board has
considered, among other things, the opinion of Orr Management that the Merger
is fair to Stone Street's shareholders from a financial point of view. See
"Opinion of Stone Street's Financial Advisor" immediately below.
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OPINION OF STONE STREET'S FINANCIAL ADVISOR
On February 1, 1999, Stone Street retained Orr Management to render to its
Board of Directors a written opinion to Stone Street's shareholders as to the
fairness, from a financial point of view, of the terms of any acquisition
proposal the Board considered. No limitations were imposed by Stone Street upon
Orr Management with respect to rendering its opinion.
The full text of Orr Management's written opinion, dated as of June 22,
1999, is attached as Appendix B hereto and should be read in its entirety with
respect to the procedures followed, assumptions made, matters considered and
the qualifications and limitations on the review undertaken by Orr Management
in connection with its opinion. Orr Management's opinion does not constitute a
recommendation to any Stone Street shareholder as to how you should vote at the
Special Meeting.
Stone Street selected Orr Management as its investment banker on the basis
of Orr Management's expertise in merger and acquisition advisory services. Orr
Management is an investment banking firm whose principals have over 75 years of
combined banking experience and have been involved in over 40 bank-related
mergers and acquisitions.
In arriving at its opinion, Orr Management reviewed, among other things:
(i) the initial and the current Merger Agreement; (ii) certain publicly
available information concerning Stone Street and CCB, including their
respective Annual Reports on Form 10-K for each of the years in the three year
period ended December 31, 1998 and their respective Quarterly Reports on Form
10-Q for the quarter ended March 31, 1999; (iii) certain available financial
forecasts concerning the business and operations of Stone Street and CCB; and
(iv) certain publicly available information with respect to other companies
that Orr Management believes to be comparable in certain respects to Stone
Street and CCB and the trading markets for such other companies' securities.
In its review and analysis, Orr Management assumed and relied upon the
accuracy and completeness of all of the financial and other information
provided to it or that was publicly available, and did not attempt to
independently verify nor assume responsibility for verifying any such
information. With respect to the financial forecasts it reviewed, Orr
Management assumed that they had been reasonably prepared on bases reflecting
the best currently available estimates and judgments of Stone Street or CCB, as
applicable. Orr Management expresses no opinion with respect to such forecasts
or the assumptions on which they are based. Orr Management has not made or
obtained or assumed any responsibility for making or obtaining any independent
evaluations or appraisals of any of the assets (including properties and
facilities) or liabilities of Stone Street or CCB.
The following summary of the analyses made and matters considered by Orr
Management in arriving at its opinion does not purport to be a complete
description of those analyses or matters. You should review its written
opinion, attached as Appendix B, for a fuller understanding of the opinion.
In addressing the fairness, from a financial point of view, of the
consideration to be issued by CCB to Stone Street's shareholders, Orr
Management addressed various matters relating to the Merger, including: (i) how
the Merger compares to similar bank transactions; (ii) the financial impact of
the Merger on the shareholders of Stone Street; and (iii) whether CCB's
operations and market value are of similar value to other acquirors in similar
transactions. To address the impact of the Merger transaction, Orr Management
reviewed analyses of recently announced bank acquisitions, Stone Street's
contribution to CCB after Stone Street's combination with CCB, its analysis of
shareholders' claims on the combined entity, a present value analysis of Stone
Street's Common Stock on a stand-alone basis, and CCB's operations and stock
value compared to its peers. In summary, Orr Management reached the conclusions
that the terms of the Merger are comparable to similar bank transactions, the
financial impact of the Merger on the shareholders of Stone Street is positive
and fair, and CCB's operations and stock value are well within the range of
comparable acquirors in the industry.
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Orr Management employed a variety of methodologies in its analyses,
including analyses of the financial impact of the Merger based on a pro forma
contribution analysis, a shareholders' claims analysis, and a discounted
dividend analysis. The pro forma contribution analysis looked at the financial
impact of the Merger on certain balance sheet and income statement items. Such
analysis included calculations, among others, that showed the percentage
contributions of Stone Street and CCB to the total equity capital of the
combined entity would be 3.91% and 96.09%, respectively; and the percent of
contribution to market capitalization at June 1, 1999, would be 1.50% by Stone
Street and 98.50% by CCB.
SHAREHOLDERS' CLAIMS ANALYSIS. In its shareholders' claims analysis, Orr
Management calculated an earnings per share claims analysis (including a 50%
savings factor). It concluded that the Merger would result in an increase of
50.56% in the earnings per share (basic) per Stone Street share. In Orr
Management's dividend claims analysis conducted as part of its shareholders'
claims analysis, it concluded that, based on CCB's annualized first quarter
1999 dividend of $.26 per share of CCB Common Stock, the equivalent dividend
per share (basic) for each share of Stone Street would increase by 12.77% at
the highest Exchange Ratio value ($60.24), and would decrease by 4.26% at the
lowest Exchange Ratio value ($44.52).
DISCOUNTED DIVIDENDS ANALYSIS. Orr Management's discounted divided
analysis compared Stone Street's current stock value per share to the value of
the portion of a share of CCB Common Stock into which such Stone Street share
would be converted in the Merger. The five-year financial projections and
assumptions on which this analysis was based were supplied by Stone Street. Orr
Management discounted Stone Street's projected dividends at rates of 12%, 14%,
and 16% and assumed a take out value of Stone Street stock at the end of year
five based on price-to-earnings multiples of 16, 18, and 20. The discounted
values ranged from a low of $14.31 per share to a high of $20.08 per share of
Stone Street Common Stock. The analysis revealed that the assumed value per
share of Stone Street Common Stock in the Merger ($21.37) is higher than the
projected value to be achieved from holding the shares of Stone Street Common
Stock through the end of the analysis period.
COMPARABLE BANK TRANSACTIONS ANALYSIS. Orr Management reviewed 15
comparable bank transactions involving sellers with assets of less than $500
million announced during the period of July 1994 through December 1998. It
considered the prices paid in these transactions as a multiple of book values
and earnings and reviewed other data in connection with these transactions,
including the amount of total assets, the return on average assets and the
return on average equity of the acquired institutions. Orr Management then
compared this data to that of Stone Street and the value to be received by
Stone Street's shareholders in the Merger.
These comparable bank transactions showed a range of transaction values as
multiples of book value per share from a low of 1.02 times to a high of 2.34
times and an average of 1.60 times. The range of transaction values as
multiples of earnings per share revealed a low of 10.9 times to a high of 38.1
times and an average of 23.9 times. The acquisition multiple of Stone Street's
1999 year-end projected book value under the terms of the Merger Agreement was
1.23 times and the multiple of 1999 projected earnings per share was 20.1
times.
No company or transaction used in the above analyses as a comparison is
identical to Stone Street or CCB. Accordingly, an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial growth and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies to which they are being compared. Mathematical analysis in and of
itself does not necessarily provide meaningful intercompany comparisons.
Orr Management will receive a fee of approximately $400,000 in connection
with the acquisition transactions. The payment of this fee is contingent upon
consummation of the acquisition. Stone Street has also agreed to reimburse
legal and other reasonable expenses and to indemnify Orr Management and its
affiliates, directors, agents, employees and controlling persons in connection
with certain matters related to rendering its opinion, including certain
liabilities under securities laws.
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EFFECTIVE TIME OF THE MERGER
Subject to the conditions to Stone Street's and CCB's obligations to
complete the acquisition, the Merger will become complete and effective at the
time established in Articles of Merger accepted for filing by the North
Carolina Secretary of State (the "Effective Time"). The Second Merger and the
Bank Merger will occur immediately thereafter.
We cannot assure you that all necessary shareholder and regulatory
approvals can be obtained or that all conditions to the acquisition can or will
be satisfied. Stone Street and CCB anticipate that all conditions will be
satisfied and all necessary approvals will be received so that the Merger and
the other acquisition transactions can be completed on or about October 1,
1999.
The Board of Directors of either Stone Street or CCB generally may
terminate the Merger Agreement if the Merger does not occur on or before
December 31, 1999, unless extended by the written agreement of the parties to
the Merger Agreement.
CASH ELECTION FORM
Accompanying this Proxy Statement - Prospectus is a Cash Election Form for
your use if you desire to receive cash for your shares of Stone Street Common
Stock rather than CCB Common Stock. You may NOT elect to receive cash for less
than all of the shares of Stone Street Common Stock you hold of record
immediately prior to the Effective Time. If you own Stone Street shares at that
time that are held of record for your benefit by a nominee (e.g. held in
"street name") or other fiduciary, you may instruct the nominee or other
fiduciary to elect to receive cash for all such Stone Street shares. An
Instruction Form for this purpose also accompanies this Proxy Statement -
Prospectus. IF YOU DO NOT DESIRE TO RECEIVE CASH FOR YOUR STONE STREET SHARES,
YOU SHOULD NOT RETURN A CASH ELECTION FORM OR DELIVER AN INSTRUCTION FORM TO
THE NOMINEE OR OTHER FIDUCIARY HOLDING YOUR SHARES. IF A CASH ELECTION FORM IS
NOT RETURNED AS SPECIFIED WITH RESPECT TO YOUR STONE STREET COMMON STOCK, YOU
WILL RECEIVE CCB COMMON STOCK FOR YOUR STONE STREET SHARES.
If you desire to receive cash consideration in the Merger, you should (or
you should instruct the nominee or other fiduciary holding Stone Street shares
on your behalf to):
o Complete each applicable item in the Form;
o Sign and date the Form; and
o Return the Form to Registrar and Transfer Company, as Exchange Agent for
the Merger, at the address shown on the Form before the required return
date.
By completing, executing and returning a Cash Election Form in a timely
manner, upon CCB's acceptance of your returned Form, you (or your nominee or
other fiduciary acting on your behalf) will have entered into a binding and
irrevocable agreement to tender the shares of Stone Street Common Stock
specified in the Form to CCB for cash and not CCB shares. Should you (or a
nominee or other fiduciary acting on your behalf) later deliver a Transmittal
Letter (as defined in "Distribution of Consideration" immediately below) that
is in conflict with the Cash Election Form you or such nominee or other
fiduciary delivered, the Cash Election Form will take precedence and be
controlling as to the shares specified in that Form.
CCB is not obligated and does not intend to purchase for cash more than
18% of Stone Street's Common Stock outstanding as of the Effective Time. If
more than 18% of Stone Street's outstanding shares (anticipated to be 294,921
shares as of the Effective Time) are tendered for cash, CCB will purchase all
of the shares tendered for cash by SSB Bank's Employee Stock Ownership Plan
(expected to be 146,004 shares or approximately 9% of Stone Street's total
shares) and a proportionate amount of the remaining shares tendered. For
example, if 18% of Stone Street's stock outstanding at the Effective Time
equals 300,000 shares and
23
400,000 shares are tendered for cash, CCB will pay cash for the 146,004 shares
tendered for cash by the Employee Stock Ownership Plan and for approximately
61% of all other shares tendered for cash. The remaining 39% of such other
shares will be converted into shares of CCB Common Stock.
The completion and return of a Cash Election Form by you or a nominee or
other fiduciary acting on your behalf is not a decision by you on how you will
vote on the Merger Agreement and a returned Cash Election Form does not
constitute a proxy. Whether or not you or a nominee or other fiduciary acting
on your behalf complete and timely return a Cash Election Form, you may vote
FOR, AGAINST or ABSTAIN from voting on the Merger Agreement.
Your receipt of cash for a Stone Street share in the Merger may subject
you to different federal income tax consequences than would occur if the share
were exchanged for a portion of a share of CCB Common Stock. See "Federal
Income Tax Consequences of the Acquisition" (Pages 35 to 37).
DISTRIBUTION OF CONSIDERATION
As soon as reasonably practicable after the Effective Time, CCB will cause
Registrar and Transfer Company, as the Exchange Agent for the Merger, to mail
to each holder of record of Stone Street shares immediately prior to the
Effective Time (each, a "Record Holder") written instructions and transmittal
materials (collectively, the "Transmittal Letter") for use in surrendering
certificates representing shares of Stone Street Common Stock outstanding at
the Effective Time to the Exchange Agent.
YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES UNTIL YOU RECEIVE THE
TRANSMITTAL LETTER.
Upon the surrender to the Exchange Agent of certificates for Stone Street
Common Stock, together with a properly completed Transmittal Letter, CCB will
issue and the Exchange Agent will mail to each Record Holder the certificates
for shares of CCB Common Stock or the cash payment to which the Record Holder
is entitled. CCB will not be obligated to deliver the consideration to which a
Record Holder is entitled as a result of the Merger until the Record Holder
surrenders such Record Holder's certificates for Stone Street Common Stock
together with a properly completed Transmittal Letter. If a dividend or
distribution is declared by CCB on its Common Stock as of a record date that is
at or after the Effective Time, the declaration will include dividends or other
distributions on shares of CCB Common Stock issuable pursuant to the Merger
Agreement. No dividend or other distribution payable after the Effective Time
with respect to CCB Common Stock will be paid to any Record Holder of any
unsurrendered certificates for Stone Street shares until the Record Holder
properly surrenders those certificates. When such certificates are properly
surrendered, a certificate for the CCB shares, together with all undelivered
dividends or other distribution, if any (without interest), or the cash payment
distributable with respect to such Stone Street certificate will be delivered
and paid.
In the event any certificate for Stone Street shares outstanding at the
Effective Time has been lost, stolen or destroyed or is otherwise missing, the
Exchange Agent will deliver for such Stone Street certificate the cash payment
or a certificate representing the CCB Common Stock to which the Record Holder
is entitled in accordance with and upon compliance with the conditions imposed
by the Exchange Agent or CCB pursuant to applicable North Carolina law. These
conditions will include, without limitation, a requirement that the Record
Holder provide a lost instrument indemnity or surety bond in form, substance
and amount satisfactory to the Exchange Agent and CCB.
At the Effective Time, the stock transfer books of Stone Street will be
closed to the Record Holders, and no transfer of Stone Street shares by them
will thereafter be made or recognized.
24
REQUIRED SHAREHOLDER APPROVAL
The Merger pursuant to the Merger Agreement must be approved by Stone
Street's shareholders. The NCBCA does not require approval of the Second Merger
or the Bank Merger by the current Stone Street shareholders or the approval of
any of the acquisition transactions by CCB's shareholders. Under the NCBCA, an
affirmative vote at the Special Meeting of the holders of a majority of the
shares of Stone Street Common Stock outstanding on the Record Date is required
to approve the Merger Agreement. The Merger Agreement provides that such
approval is a condition to the completion of the acquisition.
REGULATORY APPROVALS
The acquisition transactions may not be completed in the absence of
required regulatory approvals. Applications for the approvals described below
have been submitted to the Federal Deposit Insurance Corporation ("FDIC"), the
North Carolina Banking Commission (the "Banking Commission"), and the North
Carolina Administrator of Savings Institutions (the "Administrator"). CCB and
Stone Street are not aware of any reason why these approvals will not be
received. The approvals of the FDIC and the Administrator are expected to be
received in August, 1999, and the Banking Commission's approval is expected by
September 23, 1999. Receipt of those approvals by those times will permit the
Merger and other acquisition transactions to be completed on October 1, 1999.
The Merger and Second Merger are subject to prior approval by the Board of
Governors of the Federal Reserve Board ("Federal Reserve"). As permitted by
federal law, CCB requested that the Federal Reserve waive primary jurisdiction
over the approval of these transactions and allow the FDIC, which otherwise
would have considered only the Bank Merger, to take primary federal
jurisdiction over the acquisition transactions as a whole. The Federal Reserve
granted such waiver.
The acquisition transactions are subject to approval by the FDIC. In
evaluating these transactions, the FDIC is required to take into consideration,
among other factors, the financial and managerial resources and future
prospects of CCB and its financial institution subsidiaries following the
completion of the acquisition and the convenience and needs of the communities
to be served. Applicable federal law prohibit the FDIC from approving the
acquisition if:
o it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking
in any part of the United States; or
o its effect in any section of the country may be to substantially lessen
or tend to create a monopoly, or it would in any other manner result in a
restraint of trade, unless the FDIC finds that the anti-competitive
effects of the Merger are clearly outweighed by the public interest and
the probable effect of the acquisition in meeting the conveniences and
needs of the communities served.
In addition, the FDIC must take into account the record of performance of SSB
Bank and CCB's financial institution subsidiaries in meeting the credit needs
of the entire communities, including low- and moderate-income neighborhoods,
they serve.
The acquisition transactions may not be completed until the 30th day
(which we anticipate the FDIC will reduce, in accordance with federal law, to
the 15th day) following the date of the FDIC's approval. The waiting period
affords the United States Department of Justice an opportunity to challenge the
acquisition on antitrust grounds. We do not believe that the acquisition raises
any substantial antitrust concerns.
The Bank Merger is also subject to the approvals of the Banking Commission
and the Administrator under applicable North Carolina law. Applications were
filed with both these regulators. The approval of the Administrator is expected
to be received in August, 1999. It is expected that the Banking Commission's
approval will be received by September 23, 1999.
25
We are not aware of any regulatory or other governmental approvals or
action required to complete CCB's acquisition of Stone Street except those
described in this Proxy Statement - Prospectus. Should any other approval or
action be required, it is presently contemplated that such approval or action
will be sought.
The receipt of all required regulatory approvals is a condition to CCB's
and Stone Street's obligations to complete the acquisition. Further, under the
Merger Agreement, any regulatory approval that imposes any condition or
requirement which would so substantially and adversely impact the economic and
business benefits of the acquisition to CCB or Stone Street as to render the
completion of the acquisition inadvisable in the judgment of the Board of
Directors of CCB or Stone Street could necessitate an amendment to the Merger
Agreement and a resolicitation of your approval or could result in a
termination of the Merger Agreement.
CONDITIONS TO COMPLETION OF THE MERGER
The completion of the Merger and the other acquisition transactions is
subject to various conditions set forth in the Merger Agreement, including:
o approval of the Merger Agreement by the shareholders of Stone Street;
o receipt of all regulatory approvals required for the completion of the
Merger, the Second Merger and the Bank Merger;
o the registration statement with respect to the offering of the CCB Common
Stock and attached CCB Rights to be issued to Stone Street's shareholders
being declared effective under the Securities Act of 1933, as amended (the
"1933 Act");
o the absence of any legal proceeding enjoining or prohibiting the
acquisition, that would have a material adverse effect on Stone Street or
CCB, that seeks to restrain or prohibit the acquisition or that seeks
substantial monetary relief from one or more of the parties;
o approval of the CCB Common Stock to be issued in the Merger for listing
on the NYSE;
o receipt by each of Stone Street and CCB from the legal counsel of the
other of written legal opinions addressing such legal matters as it may
reasonably request;
o receipt by Stone Street and CCB of an opinion of KPMG LLP, tax advisors
to CCB, of a written opinion to the effect that the acquisition
transactions will qualify as a tax-free reorganization under the Internal
Revenue Code;
o the satisfaction by each of Stone Street and CCB of all its agreements
and covenants under the Merger Agreement;
o receipt by Stone Street of a written opinion of Orr Management as to the
fairness of the Merger to Stone Street's shareholders from a financial
point of view;
o receipt by CCB of an agreement from each affiliate of Stone Street
regarding post-Merger transactions by the affiliate in CCB shares;
o the accuracy, as of the date of the Merger Agreement and as of the
Effective Time, of the representations and warranties of Stone Street and
CCB in the Merger Agreement; and
o satisfaction of certain other conditions such as the delivery of various
certifications by executive officers of Stone Street and CCB.
We cannot assure you as to when or if all conditions to the completion of
the Merger and the other acquisition transactions can or will be satisfied or
waived by the party entitled to do so. As of the date of this
26
Proxy Statement - Prospectus, CCB has received all required regulatory
approvals other than the approval of the FDIC and the Banking Commission.
Except in limited circumstances, in the event the acquisition is not
completed by December 31, 1999, the Merger Agreement may be terminated and the
acquisition abandoned by the Board of Directors of either Stone Street or CCB.
WAIVER, AMENDMENT AND TERMINATION
To the extent permitted by law, the Merger Agreement may be amended before
or after the special meeting by a written agreement approved by CCB's and Stone
Street's Boards of Directors. No amendment, however, that reduces or modifies
in any material respect the consideration to be received by Stone Street's
shareholders in the Merger may be made without the approval of those
shareholders.
Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party entitled to the benefit of that provision so long as such
waiver would not result in the violation of any law or governmental rule,
regulation or order. No waiver will be effective unless made in writing.
The Merger Agreement may be terminated and the acquisition abandoned at
any time prior to the Effective Time, notwithstanding approval of the Merger by
Stone Street's shareholders, in a number of instances:
o by the mutual consent of the Boards of Directors of CCB and Stone
Street;
o by CCB or Stone Street if any representation or warranty of the other in
the Merger Agreement is inaccurate and such inaccuracy cannot be cured
within 30 days after the terminating party gives notice thereof;
o by CCB or Stone Street if the other materially breaches any of its
covenants or agreements in the Merger Agreement and does not cure such
breach within 30 days after the terminating party gives notice thereof;
o by CCB or Stone Street if a required regulatory approval of any
acquisition transaction is denied by a final nonappealable order or if
such denial is not timely appealed;
o by CCB or Stone Street if any regulatory approval contains any condition
or requirement which would so substantially and adversely impact the
economic or business benefits of the acquisition to CCB or Stone Street,
as applicable, as to cause its Board of Directors to reasonably conclude
that the completion of the acquisition would not be in its and its
shareholders' best interests;
o by CCB or Stone Street if a legal action is filed seeking to restrain any
of the proposed transaction or seeking to obtain material money damages
for the shareholders of CCB or Stone Street (unless the other party wishes
to nonetheless proceed with the acquisition and provides a legal opinion
that the injunctive action would not deprive CCB or Stone Street of the
material benefits of the acquisition or the damages action would not
result in substantial liability for any director of the other party); and
o by CCB or Stone Street if the acquisition is not completed by December 31,
1999.
If the Merger Agreement is terminated and the acquisition abandoned for
one of the above reasons, the Merger Agreement will become void and have no
effect, except that certain of its provisions relating to expenses, liability
for breach, termination fees and confidentiality of information provided by the
parties to each other will survive. A termination arising from an uncured
willful or grossly negligent breach of the Merger Agreement will not relieve
the breaching party from liability from such breach.
27
WRONGFUL TERMINATION, LIABILITY FOR BREACH AND TERMINATION FEE
The Merger Agreement provides that if CCB or Stone Street wrongfully
terminates or commits an uncured willful or grossly negligent breach of the
Merger Agreement, it will pay the other party all of its costs incurred in
negotiating and seeking to complete the acquisition, plus $250,000 in full
compensation of damages incurred as a result of such wrongful termination or
breach. Additionally, if CCB is the wrongfully terminating or breaching party,
it will also pay all of Stone Street's direct costs incurred as a result of
changes in the architectural or construction specifications of the branch
currently under construction by SSB Bank (the "New Branch") that were requested
by CCB in contemplation of the acquisition.
If the Merger Agreement is terminated because Stone Street enters into a
letter of intent or agreement to be acquired by a company other than CCB or if
Stone Street enters into negotiations for such an acquisition and within twelve
months after the termination of the Merger Agreement enters into a letter of
intent or agreement with that company, Stone Street is required under the
Merger Agreement to pay to CCB a termination fee of $1,225,500.
ENVIRONMENTAL PROVISIONS OF MERGER AGREEMENT
The Merger Agreement provides that the consideration to be received by the
Stone Street shareholders in the Merger may be reduced by the total projected
cost of curing all indicated violations of environmental laws by Stone Street
and SSB Bank and related remediation required by those laws in excess of
$150,000, with the total reduction being limited to a maximum of $350,000. The
Merger Agreement also provides that CCB may terminate the Merger Agreement and
abandon the Merger if the total projected costs of such cure and remediation
exceed $500,000.
CCB has reviewed the assets of Stone Street and SSB Bank to determine
whether violations of environmental laws requiring curative action and
remediation are present. No such violations were found and CCB has waived its
rights as described above to reduce the total consideration to be paid to the
Stone Street shareholders and to terminate the Merger Agreement and abandon the
Merger.
CONDUCT OF BUSINESS PENDING THE ACQUISITION
Pursuant to the Merger Agreement, Stone Street generally has agreed that
it will (or, as applicable, it will cause SSB Bank to):
o operate its business in the usual and ordinary course as it operated
during the two years ended April 13, 1999 and in a manner consistent with
its policies and practices during those two years;
o preserve intact its business organization and assets, use reasonable
efforts to retain its key officers and employees, and maintain its rights
and franchises;
o give CCB notice of any event or circumstance of which it is aware that is
reasonably likely to have material adverse effect on its business, assets
or financial results or condition, that would prevent it from performing
its agreements and covenants under the Merger Agreement, or that would
cause or constitute a material breach of the Merger Agreement by it;
o give CCB notice of any litigation or governmental proceeding initiated
against it;
o deliver its monthly financial statements to CCB;
o promptly file all reports required to be filed by it with regulatory and
other governmental authorities and provide copies of those reports to CCB;
28
o use its best efforts to take all actions necessary or desirable to cause
the acquisition to be lawfully completed as soon as reasonably
practicable; and
o consult with CCB prior to making a new loan in excess of 25% of SSB
Bank's legal lending limit or purchasing or selling any assets with cost
or book value in excess of $50,000 (except with respect to the New
Branch).
The Merger Agreement also provides that, prior to the Effective Time,
neither Stone Street nor SSB Bank may, without CCB's consent:
o amend its articles of incorporation, bylaws or other governing
documents;
o incur any additional indebtedness in excess of $100,000 except in the
ordinary cause of business;
o repurchase, exchange, redeem or acquire any Stone Street shares other
than in the ordinary cause of business in connection with its benefit
plans or the SSB Bank Employee Stock Ownership Plan;
o declare or pay any dividend other than its regular quarterly cash
dividend of up to $.1175 per share;
o except pursuant to Stone Street Options outstanding on April 13, 1999,
issue, sell, pledge or agree to issue, sell or pledge any shares of its
Common Stock;
o adjust, split, combine or reclassify any shares of its capital stock;
grant any right to acquire any Stone Street Common Stock; or sell, lease,
mortgage, otherwise dispose or encumber any shares of its capital stock;
o purchase or agree to purchase any securities other than U.S. treasury or
government agency securities, securities on which it forecloses or
securities it receives in a fiduciary capacity;
o increase the compensation or benefits of any of its employees except in
the ordinary cause of business or as required by law; pay any retirement
or pension allowance not required by its benefit plans; make any
severance or termination pay or pay any bonus to any employee except as
required by its written policies or agreements existing on April 13,
1999; enter into any severance agreement with any officer; grant any
increase in fees or compensation to any of its directors; or voluntarily
accelerate the vesting of any of Stone Street Options, any rights under
SSB Bank's Management Recognition Plan or any other rights under any of
its benefit plans;
o enter into or amend any employment agreement that cannot be terminated at
will at or after the Effective Time;
o adopt or amend any of its benefit plans other than as required by or
necessary under applicable law or make any distribution from any benefit
plan except as required by law, the terms of the plan or in the ordinary
course of business;
o make any change in its tax or accounting methods or its systems of
internal accounting controls, except as is necessary to conform to
changes in applicable laws or accounting requirements;
o commence any litigation except in the ordinary course of business or
settle any litigation for material monetary damages or restrictions upon
its operations;
o except in the ordinary course of business, enter into, amend or terminate
any material contract or waive, release, compromise or assign any
material right or claim;
29
o take any action that would materially and adversely affect the parties'
abilities to obtain all required regulatory approvals and all other
consents, approvals and waivers necessary to complete the acquisition; or
o take any action that would materially and adversely affect the ability of
any party to perform its covenants and agreements under the Merger
Agreement.
DIVIDENDS
The Merger Agreement provides that Stone Street may declare and pay
quarterly cash dividends in accordance with its prior practices at a rate not
in excess of $.1175 per share. No such dividend may be declared for the
quarterly period during which the Effective Time occurs unless the
corresponding date for that quarter's dividend, if any, on CCB Common Stock
occurs before the Effective Time. These provisions are intended to ensure that
Stone Street's shareholders will receive only one dividend, whether from CCB or
Stone Street, for the quarter in which the Effective Time occurs.
MANAGEMENT AND OPERATIONS AFTER THE ACQUISITION
Upon completion of the acquisition transactions, Stone Street and SSB Bank
will have been merged into CCB and CCB Bank and will no longer exist as
independent entities. Mr. Dunn, President of Stone Street and SSB Bank, will
become the Mocksville City Executive of CCB Bank as provided in his Amended and
Restated Employment Agreement with CCB that will become effective upon
completion of the acquisition.
After the acquisition, the members of the Board of Directors of SSB Bank
as of the Effective Time will be appointed to CCB Bank's Mocksville Advisory
Board for terms of at least two years. Each will receive an annual advisory
director's fee equal to the fee currently being paid by SSB Bank ($12,000).
EFFECT ON CERTAIN EMPLOYEES AND BENEFIT PLANS
EFFECT ON STONE STREET OPTIONS. At the Effective Time, each Stone Street
Option that is then outstanding, whether or not exercisable, will be converted
into and become a right with respect to CCB Common Stock and attached CCB
Rights, and from and after the Effective Time, CCB will assume each Stone
Street Option in accordance with the Stone Street Option Plan and the stock
option agreement which by it is evidenced:
o CCB and the Compensation Committee of its Board of Directors will be
substituted for Stone Street and the committee of Stone Street's Board
administering the Stone Street Option Plan;
o each Stone Street Option assumed by CCB may be exercised solely for
shares of CCB Common Stock and attached CCB Rights;
o the number of shares of CCB Common Stock and attached CCB Rights subject
to such Stone Street Option will be equal to the number of shares of Stone
Street Common Stock subject to such Stone Street Option immediately prior
to the Effective Time multiplied by the Exchange Ratio and rounded up to
the nearest whole share of CCB Common Stock and attached CCB Right; and
o the per share exercise price under each Stone Street Option will be
adjusted by dividing that per share exercise price by the Exchange Ratio
and rounding down to the nearest cent.
EFFECT ON STONE STREET EMPLOYEES. Provided they remain employed by SSB
Bank at the Effective Time, CCB Bank intends to offer continuing employment to
a substantial portion of SSB Bank's employees. Each such employment of an SSB
Bank employee will be "at-will". Nothing in the Merger Agreement obligates CCB
Bank to offer such employment and no provision of the Merger Agreement should
be deemed to constitute an employment offer or agreement or to restrict CCB
Bank's right to terminate the employment of any SSB Bank employee at any time
or for any reason satisfactory to CCB Bank.
30
EMPLOYEE SEVERANCE. SSB Bank has in effect a Severance Plan under which
each employee whose employment is terminated in connection with the acquisition
will receive two weeks of regular compensation for each year of service, with a
minimum severance payment of four weeks compensation and a maximum of two times
annual compensation.
Allen W. Carter and Marjorie D. Foster, the Senior Vice President and Vice
President and Controller of Stone Street and SSB Bank, are each a party with
SSB Bank to a Severance Agreement providing payments to them if their
employment is terminated in connection with an acquisition of Stone Street. It
is anticipated that Mr. Carter will terminate his employment at the time of the
acquisition. It is also anticipated that Ms. Foster will remain in the employ
of CCB Bank through the end of 1999. They are not entitled to also participate
in SSB Bank's Severance Plan. Under their Severance Agreements, each will
receive an amount equal to two times his or her average taxable annual
compensation from SSB Bank over the five years ended December 31, 1998. On this
basis, Mr. Carter will receive $167,390 upon the closing of the acquisition and
Ms. Foster will receive $124,632 in January 2000.
EMPLOYEE STOCK OWNERSHIP PLAN. The Merger Agreement provides that SSB
Bank's Employee Stock Ownership Plan (the "ESOP") will be terminated
immediately prior to the Effective Time. Upon such termination, each ESOP
participant will become vested as provided by applicable federal laws. At and
after the Effective Time, each participant will have the right or option either
to receive the benefits to which he or she is entitled under the ESOP or to
have such benefits "rolled" into a qualified individual retirement account or
an appropriate CCB benefit plan. Those participants who elect to "roll" into a
CCB benefit plan will enter that plan on the same basis and applying the same
eligibility standards as would apply to CCB's employees as if the participant's
prior service to Stone Street had been performed for CCB for qualification,
participation and vesting, but not for funding, purposes.
EMPLOYEE BENEFITS. All employees of Stone Street and SSB Bank who continue
in the employ of CCB Bank after the acquisition shall be eligible to
participate in the group hospitalization, medical, life, disability and similar
benefit plans or programs of CCB and CCB Bank on the same basis and under the
same terms available to the employees of CCB Bank. The Merger Agreement also
provides that the overall level of benefits offered to the employees of Stone
Street and SSB Bank will be no less than that offered to the employees of CCB
Bank, and that for purposes of eligibility, qualification and vesting (but not
for the purpose of calculating the amount of benefits under any plan or
program), the employees of Stone Street and SSB Bank will receive credit for
their prior periods of service with those companies. Further, CCB will waive
any pre-existing condition limitations for conditions covered under an
applicable Stone Street benefit plan, will honor any deductible and
out-of-pocket expenses of employees of Stone Street and SSB Bank incurred
during 1999 and prior to the Effective Time, and will waive any medical
certification under CCB's group term life plan for such employees up to their
term life insurance coverages under any Stone Street group term life plan
existing at the Effective Time.
All Stone Street employee benefit plans will be reviewed and appropriate
amendments, consolidations or terminations will be made at or after the
Effective Time. In the event any such plan is terminated by CCB or by Stone
Street in connection with the acquisition transactions, its affected
participants will be fully vested as required and in accordance with the
Employees Retirement Income Security Act and the Internal Revenue Code, with
each participant having the right to receive the benefits to which he or she is
entitled as a result of such termination or to have such benefits "rolled" into
a qualified account or a CCB benefit plan, on the same basis and applying the
same eligibility standards as would apply to employees of CCB Bank and as if
such participant's prior service with Stone Street or SSB Bank had been
performed on behalf of CCB Bank with respect to qualification, participation
and vesting, but not for funding purposes.
EMPLOYEE AND DIRECTOR AGREEMENTS. Following the Effective Time, CCB and
CCB Bank will continue to honor, and will assume and perform in accordance with
their terms, all deferred compensation, split dollar insurance, salary
continuation, consulting and other compensation agreements between Stone Street
and SSB Bank and any of their current or former employees, officers, or
directors. The agreements include Retirement
31
Payment Agreements between SSB Bank and the members of its Board of Directors,
a Supplemental Income Agreement between SSB Bank and Mr. Dunn, and a
Supplemental Retirement Plan between SSB Bank and Mr. Dunn (but not Mr. Dunn's
current Employment Agreement which will be amended and restated at the
Effective Time as discussed in the following section).
INTERESTS OF CERTAIN PERSONS WITH RESPECT TO THE ACQUISITION
Certain members of Stone Street's management and Board of Directors have
interests in the acquisition transactions in addition to their interests as
shareholders of Stone Street generally.
EMPLOYMENT OF MR. DUNN. At the Effective Time, Mr. Dunn will enter into an
Amended and Restated Employment Agreement with CCB Bank (the "Amended
Employment Agreement"). Mr. Dunn will serve as the Mocksville City Executive of
CCB Bank. He will receive initially an annual base salary of $122,935 with such
future increases as the CCB Bank Board of Directors may determine.
Additionally, the Amended Employment Agreement will provide that Mr. Dunn:
o will be employed for an annually renewing three-year term (unless either
he or CCB Bank revokes the automatic extension of the term), but in no
event will the term continue after his 66th birthday;
o shall participate in CCB's short-term and long-term incentive plans in a
manner comparable to other CCB Bank executive employees of similar rank;
o will be eligible to participate in all savings, pension and retirement
plans generally available to executive employees of CCB Bank of similar
rank and on a comparable basis;
o will be eligible to participate in all medical, hospitalization,
disability, group life and similar welfare benefits plans to the extent
applicable generally to executive employees of CCB Bank;
o will be entitled to a minimum of 20 paid vacation days per year and the
number of days of paid disability, sick, and leave available under the
policies of CCB Bank;
o will receive reimbursement for all reasonable expenses in accordance with
CCB Bank's policies in effect for its executive employees of similar rank;
and
o will be entitled to fringe benefits made available to CCB Bank's
executive employees of similar rank.
The Amended Employment Agreement will also provide that it may be
terminated by CCB Bank as a result of Mr. Dunn's death or extended disability
or with "cause" (generally, his willful and continued failure to perform his
duties, his engagement in illegal conduct or gross misconduct, or his willful
breach of the Agreement). Mr. Dunn will be able to terminate the Amended
Employment Agreement for "good reason," which generally means:
o the assignment to him of duties or responsibilities inconsistent with his
position as Mocksville City Executive or any other action by CCB Bank
which diminishes his authority, duties, prerogatives or responsibilities
that is not insubstantial or inadvertent and that is not promptly remedied
by CCB Bank;
o any failure by CCB Bank to provide the agreed upon compensation and
benefits that is not insubstantial or inadvertent and that is not promptly
remedied by CCB Bank;
o any requirement by CCB Bank that, without his consent, Mr. Dunn be based
or required to conduct more than 10% of his activities at any location
outside Davie County, North Carolina;
o any wrongful termination of the Amended Employment Agreement by CCB; or
32
o any failure by CCB Bank to cause any successor to it to expressly assume
and agree to perform its obligations under the Amended Employment
Agreement.
In the event that Mr. Dunn's employment is terminated other than by reason
of death, disability or "cause", or he terminates his employment for "good
reason", he would continue to receive his then annual base salary for the
otherwise then remaining term of the Amended Employment Agreement and would be
entitled to continue to participate in CCB Bank's medical, hospitalization,
disability, group life and similar welfare benefit plans. Should Mr. Dunn be
terminated as a result of continued disability he would continue to receive his
then annual base salary for the otherwise then remaining term of the Amended
Employment Agreement, less any disability payments to him from any CCB Bank
disability plan, and would be entitled to continued participation in CCB Bank's
welfare benefit plans.
Under the Amended Employment Agreement, in the event of a "change of
control" of CCB or CCB Bank to which Mr. Dunn does not consent, Mr. Dunn's
employment term will be extended automatically through the third anniversary of
the change of control and his annual base salary will be increased by at least
6% each twelve month period of that extended term.
In addition to the foregoing, the Amended Employment Agreement will
contain certain confidentiality and noncompete provisions which will impact Mr.
Dunn's ability to compete with CCB Bank at any time he is receiving
compensation and benefits from CCB Bank under the Agreement.
MANAGEMENT RECOGNITION PLAN. In connection with the 1996 conversion of SSB
Bank from a mutual to a stock savings bank and the formation of Stone Street,
certain employees and directors of SSB Bank were granted shares of Stone Street
Common Stock under SSB Bank's Management Recognition Plan (the "MRP Plan"). In
March of 1999, certain directors received additional grants of 200 shares.
Participants are entitled to vote and receive all dividends and distributions
with respect to their shares, but are not entitled to sell or otherwise
transfer their shares until they are vested. The MRP Plan provides that these
shares "vest" at a rate of 20% of the participant's total shares on each
anniversary of the date of grant. Under the terms of the MRP Plan and the
Merger, all vested shares may be exchanged for cash or shares of CCB Common
Stock. Unvested shares may be exchanged only for CCB shares. However, because
the Merger constitutes a "change of control" under the MRP Plan, the unvested
shares of all Stone Street directors and of all employees of SSB Bank who do
not continue as employees of CCB Bank will immediately vest at the Effective
Time or the date employment ceases, as applicable. The directors and those
employees whose employment ceases as of the Effective Time may convert each
share granted to them under the MRP Plan into cash or a portion of a share of
CCB Common Stock (and an attached CCB Right) on the same basis as any other
outstanding share of Stone Street Common Stock. The unvested shares of
employees who continue as employees of CCB Bank will not be immediately vested
by reason of the Merger but will continue to vest in annual increments of 20%
(or will vest in whole upon the cessation of their employment). The unvested
shares of these participants will continue to have restrictions on transfer as
provided in the MRP Plan. As of May 31, 1999, there were 41,281 vested shares
and 29,121 unvested shares of Stone Street's Common Stock outstanding under the
MRP Plan.
33
The following table provides information with respect to directors and
executive officers of Stone Street who are participants in the MRP Plan:
NUMBER OF SHARES
THAT WILL VEST UPON TOTAL SHARES
NUMBER OF SHARES THE COMPLETION OF GRANTED UNDER
NAME CURRENTLY VESTED THE MERGER THE MRP PLAN
- ------------------------------- ------------------ --------------------- --------------
Robert B. Hall,
Chairman 1,641 1,297 2,938
William F. Junker,
Vice Chairman 1,641 1,297 2,938
Donald G. Bowles,
Director 1,641 1,297 2,938
Terry L. Bralley,
Director - 0 - 400 400
Vena H. Harris,
Director 1,641(1) 1,097 2,738
Claude R. Horn, Jr.,
Director 1,641 1,297 2,938
George W. Martin,
Director 1,641 1,297 2,938
Ronald H. Vogler,
Director 1,641 1,297 2,938
J. Charles Dunn,
Director and President 10,947 - 0 - 18,249
Allen W. Carter,
Senior Vice President 6,567 4,382 10,949
Marjorie D. Foster,
Vice President and Controller 4,380 2,920(2) 7,300
- --------
(1) Includes 1,094 vested shares held by Mrs. Harris' grandchildren by gift
from her deceased spouse who preceded her as a director.
(2) Ms. Foster's unvested shares will vest upon her termination of employment
on or about January 3, 2000.
EXECUTIVE OFFICER AND DIRECTOR STOCK OPTIONS. Stone Street has granted
Stone Street Options to its executive officers and directors under the Stone
Street Option Plan. The Merger Agreement provides that CCB will assume any
outstanding option grants, whether vested or unvested, which have been granted
under the Stone Street Option Plan on a basis adjusted to reflect the Exchange
Ratio.
34
The following table sets forth, with respect to (i) certain executive
officers, (ii) all executive officers as a group (the "Executive Officer
Group"), and (iii) the Board of Directors of Stone Street as a group (the
"Director Group"), the number of shares of Stone Street Common Stock covered by
outstanding Stone Street Options held by such persons as of May 31, 1999.
OPTIONS CURRENTLY
VESTED AND EXERCISE PRICE AGGREGATE VALUE
NAME OPTIONS HELD EXERCISABLE PER OPTION OF OPTIONS (1)
- ------------------------------- -------------- ------------------ ---------------- ----------------
J. Charles Dunn,
President and Director 45,626 27,375 $ 21.75 $ - 0 -
Allen W. Carter,
Senior Vice President 27,376 16,425 21.75 - 0 -
Marjorie D. Foster,
Vice President and Controller 18,251 10,950 21.75 - 0 -
Executive Officer
Group (three persons) 91,253 54,750 21.75 - 0 -
Director Group (eight
persons) 51,322 51,323 21.75 - 0 -
- --------
(1) Based on the closing price of a Stone Street share of $20.375 on the
American Stock Exchange on July 22, 1999.
INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, from and
after the Effective Time, CCB will indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of Stone Street
and its subsidiaries from and against all suits, actions, complaints, demands,
costs, fines, losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Time (including the
transactions contemplated by the Merger Agreement) to the full extent then
permitted under applicable law, including provisions relating to advances of
expenses incurred in defense of any such proceeding.
Furthermore, for a period of at least three years after the Effective
Time, CCB will maintain Stone Street's existing directors' and officers'
liability insurance policy (or a substitute policy with coverage terms at least
as favorable as those of Stone Street's liability insurance policy) covering
those persons who were, on the date of the Merger Agreement, covered by Stone
Street's directors' and officers' liability insurance policy; provided,
however, that CCB shall not be obligated to make annual premium payments for
such coverage during such three year period in excess of 150% of the annual
premium payments required under Stone Street's liability insurance policy. If
the amount of premiums necessary to maintain the required coverage after the
Effective Time exceeds this 150% maximum amount, CCB will use reasonable
efforts to maintain the most advantageous coverage for such 150% maximum
amount.
FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION
The following discussion describes certain of the material federal income
tax consequences of the Merger to shareholders of Stone Street. The discussion
is based on current law 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 have retroactive
effect.
This discussion is not a complete description of all tax consequences of
the Merger. It does not address:
o any foreign, state or local tax consequences, except for certain North
Carolina income tax consequences;
o all aspects of federal income taxation that may apply to the Merger; or
35
o income tax considerations that may affect the treatment of a participant
in the Stone Street Option Plan or a Stone Street shareholder who acquired
Stone Street shares pursuant to the Stone Street Option Plan or the MRP
Plan.
In addition, your individual circumstances may affect the tax consequences
of the Merger to you. Therefore, you are urged to consult your own tax advisors
as to the specific tax consequences to you of the Merger and the exchange of
your Stone Street shares for cash or for shares of CCB Common Stock (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).
CCB and Stone Street have received a tax opinion of KPMG LLP, tax advisors
to CCB, which reaches conclusions with respect to the material federal and
North Carolina income tax consequences of the Merger. Where appropriate or
useful, this discussion refers to that tax opinion and particular conclusions
expressed therein. Additionally, the facts and representations upon which that
tax opinion is based are set forth in such tax opinion which is an exhibit to
CCB's Registration Statement (See "Where You Can Get More Information" on page
66) However, the tax opinion represents only KPMG LLP's best judgment as to the
matters expressed therein and has no binding effect on the Internal Revenue
Service (the "IRS") or any official status of any kind. There is no assurance
that the IRS could not successfully contest in the courts an opinion expressed
by KPMG LLP 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 opinions 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 concludes that:
o The Merger will constitute a tax-free reorganization within the meaning
of Section 368(a) of the Code;
o No gain or loss will be recognized by the parties to the Merger
Agreement by reason of the Merger;
o No gain or loss will be recognized by Stone Street's shareholders upon
their receipt solely of CCB Common Stock (including any fractional share
interests) in exchange for their shares of Stone Street Common Stock;
o No gain or loss will be recognized by Stone Street's shareholders upon
their receipt of CCB Rights, nor will such receipt of the CCB Rights
constitute a receipt or exchange of stock or property giving rise to the
realization of gross income by the shareholders;
o Stone Street shareholders who receive solely cash for their Stone Street
Common Stock will be treated as having received the cash in exchange for
their stock;
o Stone Street shareholders who, by reason of more than 18% of Stone Street
Common Stock being tendered for cash, receive both cash and CCB shares
for their Stone Street shares will recognize gain of no more than the
amount of cash received in the form of a distribution of a dividend;
o The tax basis in the CCB shares received by Stone Street shareholders
(including any fractional share interests) will be the same as the tax
basis in the Stone Street Common Stock surrendered in the exchange
therefor;
o The holding periods for the CCB shares received by Stone Street
shareholders (including any fractional share interests) in exchange for
Stone Street Common Stock will include the shareholders' holding periods
of the Stone Street Common Stock surrendered in exchange therefor,
provided that the Stone Street Common Stock was held as a capital asset
at the Effective Time; and
36
o The payment of cash in lieu of fractional share interests of CCB Common
Stock will be treated as if the fractional share interests were
distributed as part of the Merger to the Stone Street shareholders and
then redeemed by CCB, resulting in a capital gain or loss measured by the
difference, if any, between the amount of cash received for such
fractional share and the shareholders' bases in the fractional share.
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.
ABSENCE OF DISSENTERS' RIGHTS
Under the NCBCA, because Stone Street's Common Stock is listed for trading
on the American Stock Exchange ("AMEX"), no Stone Street shareholder is
entitled to dissent from the Merger and demand payment of the "fair value" of
such holder's Stone Street shares.
ACCOUNTING TREATMENT
The acquisition transactions will be accounted for under the "purchase"
method of accounting. That means that under generally accepted accounting
principles, the excess of the value of CCB Common Stock exchanged and cash paid
for the shares of Stone Street Common Stock over the aggregate fair value of
the consolidated net assets of Stone Street will be recorded on CCB's balance
sheet as "goodwill" and Stone Street's consolidated net assets will be recorded
on CCB's balance sheet at their fair values. The recorded goodwill will be
amortized (that is, charged as an expense on CCB's statements of income)
generally over a period of 15 years. Because of the relative sizes of CCB and
Stone Street, CCB does not expect that the amortization of goodwill recognized
in the acquisition will have a material effect on CCB's results of operations.
In accordance with the purchase method of accounting, CCB's financial
statements for periods before consummation of the acquisition transactions will
not be restated to reflect Stone Street's historical financial position or
results of operations. It is expected that CCB will purchase and retire the
number of shares of CCB Common Stock issued in the acquisition. (See "Recent
Developments" on page 15).
NEW YORK STOCK EXCHANGE LISTING
The shares of CCB Common Stock issued to Stone Street shareholders in
exchange for their Stone Street shares will be listed on the NYSE. The listing
of these CCB shares is a condition to the completion of the acquisition by
Stone Street.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
CCB has in effect a Dividend Reinvestment and Stock Purchase Plan pursuant
to which its shareholders may purchase shares of CCB Common Stock through
reinvestment of dividends and optional cash payments. The shares acquired under
the Plan are purchased by a plan administrator in open market transactions
and/or privately negotiated transactions. No newly-issued shares are issued to
Plan participants. After the Effective Time, this Plan will continue in effect
and will be available to Stone Street's former shareholders who have become CCB
shareholders.
RESTRICTIONS ON RESALE OF CCB COMMON STOCK BY AFFILIATES
CCB Common Stock to be issued to Stone Street's shareholders in the Merger
will have been offered and sold pursuant to registration under the Securities
Act of 1933, as amended ("1933 Act"). All of these shares will be freely
transferable by all former Stone Street shareholders who were not "affiliates"
of Stone Street at the time of the Merger. The "affiliates" of Stone Street
will include persons or entities who control, are controlled by or are under
common control with Stone Street. The directors and executive officers of Stone
Street (and any of their relatives or spouses who live in the same house, and
any trust, estate, corporation or
37
other entity in which such a director or officer has a 10% or greater
beneficial or equity interest) and any beneficial or legal owner of 10% or more
of Stone Street's outstanding Common Stock will be deemed affiliates. An
affiliate of Stone Street may not resell or transfer shares of CCB Common Stock
received in the acquisition unless:
o such affiliate's offer and sale of those shares has been registered under
the 1933 Act;
o such affiliate's offer and sale is made in compliance with Rule 145 under
the 1933 Act (which permits limited sales in certain circumstances); or
o another exemption from registration is available.
The Merger Agreement requires Stone Street to use reasonable efforts to
cause each of its affiliates to deliver to CCB, at least 30 days prior to the
date of the Effective Time, a written Affiliate Agreement providing that the
affiliate will not offer, sell, pledge, transfer or otherwise dispose of any
shares of CCB Common Stock except in compliance with the restriction described
above. Stone Street's delivery of these Affiliate Agreements is a condition to
CCB's obligation to complete the acquisition.
EXPENSES
The Merger Agreement provides that Stone Street and CCB will each pay its
own expenses incident to preparing, entering into and carrying out the Merger
Agreement and the transaction contemplated therein, including filing fees,
printing and distribution costs, and consultant, financial advisor, legal,
accounting and investment banking fees and expenses. CCB has paid the filing
fees associated with the Registration Statement (of which this Proxy Statement
- - Prospectus is a part) with the Securities and Exchange Commission and is
bearing the costs of printing this Proxy Statement - Prospectus. In the event
of a termination of the Merger Agreement not resulting from a wrongful or
grossly negligent act or omission by CCB, Stone Street will be obligated to
reimburse CCB for such expenditures.
38
PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION
(UNAUDITED)
The following pro forma combined condensed balance sheet and statements of
income and accompanying notes are presented to give you information about the
impact of the acquisition on CCB's and Stone Street's historical financial
positions and results of operations. The acquisition is reflected in this
information using the purchase method of accounting.
The pro forma earnings shown are not necessarily indicative of actual
results that might have been achieved had the acquisition transactions been
completed at the beginning of the earliest period presented, and may not be
indicative of future results that will be obtained on a combined basis. The pro
forma combined condensed balance sheet reflects estimates of the restructuring
expenses which may be recognized and transaction expenses which will be
incurred. The pro forma combined condensed statements of income do not reflect
any cost savings from operating efficiencies which may be achieved in
connection with the acquisition. CCB forecasts that cost savings of
approximately $1.2 million may occur. Such forecast is based on numerous
variables and assumptions which are inherently uncertain and which may not be
within CCB's control, including general economic, competitive and regulatory
conditions. As a result, the amount of possible cost savings may be less than
that estimated above.
39
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
(UNAUDITED)
CCBF
PRO FORMA PRO FORMA
CCBF STONE STREET ADJUSTMENTS COMBINED
------------- --------------- ----------------- ----------------
(IN THOUSANDS)
ASSETS
Cash and due from banks ......................... $ 268,788 2,815 (1,750)(3) 269,853
Time deposits in other banks .................... 48,328 4,834 -- 53,162
Federal funds sold and other short-term
investments .................................... 468,500 1,622 (6,303)(1) 435,105
(28,714)(5)
Investment securities:
Available for sale ............................. 1,378,658 11,472 -- 1,390,130
Held to maturity ............................... 75,435 1,625 -- 77,060
Loans and lease financing ....................... 5,406,258 103,939 -- 5,510,197
Less reserve for loan and lease losses ......... 72,093 795 -- 72,888
---------- ------- ------- ---------
Net loans and lease financing ................ 5,334,165 103,144 -- 5,437,309
Premises and equipment .......................... 94,301 1,057 -- 95,358
Goodwill ........................................ 25,337 -- 8,740 (2) 34,077
Other assets .................................... 109,913 1,498 -- 111,411
---------- ------- ------- ---------
Total assets ................................ $7,803,425 128,067 (28,027) 7,903,465
========== ======= ======= =========
LIABILITIES
Deposits:
Noninterest-bearing ............................ $ 886,208 -- -- 886,208
Interest-bearing ............................... 5,661,975 72,991 -- 5,734,966
---------- ------- ------- ---------
Total deposits ............................... 6,548,183 72,991 -- 6,621,174
Short-term borrowed funds ....................... 250,308 -- -- 250,308
Long-term debt .................................. 216,595 24,933 -- 241,528
Other liabilities ............................... 99,106 2,116 -- 101,222
---------- ------- ------- ---------
Total liabilities ........................... 7,114,192 100,040 -- 7,214,232
---------- ------- ------- ---------
SHAREHOLDERS' EQUITY
Common stock .................................... 200,290 17,971 (17,971)(2) 200,290
2,761 (1)
(2,761)(5)
Unearned ESOP shares ............................ -- (1,747) 1,747 (2) --
Additional paid-in capital ...................... 57,470 -- 25,953 (1) 57,470
(25,953)(5)
Retained earnings ............................... 422,373 13,100 (13,100)(2) 422,373(4)
Accumulated other comprehensive income .......... 9,100 (53) 53 (2) 9,100
Less: Unearned common stock held by
management recognition plans ................... -- (1,244) 1,244 (2) --
---------- ------- ------- -----------
Total shareholders' equity .................. 689,233 28,027 (28,027) 689,233
---------- ------- ------- -----------
Total liabilities and shareholders'
equity .................................... $7,803,425 128,067 (28,027) 7,903,465
========== ======= ======= ===========
- --------
(1) Based on the Exchange Ratio of .411 for conversion of Stone Street Stock
into CCB stock and assuming 82% of the outstanding Stone Street shares
were exchanged for CCB Common Stock; (ii) Stone Street's ESOP is
terminated immediately prior to the Effective Time through cash-outs or
rollover into other qualified benefit plans; and (iii) Stone Street's MRP
shares are all 100% vested at the Effective Time.
(2) Goodwill is calculated as the excess of the CCB Common Stock issued and
cash paid for Stone Street shares tendered over the aggregate fair value
of Stone Street's consolidated net assets.
(3) Estimated restructuring and transaction expenses for the acquisition.
(4) The pro forma combined retained earnings do not reflect any cost savings
from operating efficiencies which may be achieved or revenue enhancements
which may be realized in connection with the acquisition.
(5) Based on the repurchase and retirement of all shares issued for the Stone
Street acquisition at an average price of $52.00 per share.
40
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
CCB
PRO FORMA
CCB STONE STREET ADJUSTMENTS COMBINED
------------ -------------- --------------- ---------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Total interest income ............................. 142,941 2,438 (418)(1) 144,961
Total interest expense ............................ 62,115 1,192 -- 63,307
------- ----- ---- -------
Net interest income ............................... 80,826 1,246 (418) 81,654
Provision for loan and lease losses ............... 1,811 45 -- 1,856
------- ----- ---- -------
Net interest income after provision ............... 79,015 1,201 (418) 79,798
Other income ...................................... 31,952 47 -- 31,999
Investment securities gains (losses), net ......... 121 -- -- 121
Other operating ................................... 59,222 556 146 (2) 59,924
------- ----- ---- -------
Income before income taxes ........................ 51,866 692 (564) 51,994
Income taxes ...................................... 18,113 265 (167)(3) 18,211
------- ----- ---- -------
Net income ........................................ $ 33,753 427 (397) 33,783
========= ===== ==== =======
Net income per share:
Basic ........................................... $ .84 .26 .84
Diluted ......................................... .83 .26 .83
Weighted average shares outstanding
Basic ........................................... 40,237 1,650 40,237(4)
Diluted ......................................... 40,655 1,650 40,655(4)
- --------
(1) Assumes a federal funds sold rate of 4.85% for funds used to repurchase CCB
shares and for payments for cash tenders of Stone Street shares.
(2) Assumes amortization of goodwill on a 15-year, straight-line basis.
(3) Assumes a 40% tax rate.
(4) Based on the Exchange Ratio of .411 for conversion of Stone Street shares
and assuming (i) the subsequent repurchase and retirement of all CCB
shares issued in the acquisition; (ii) Stone Street's ESOP is terminated
immediately prior to the Effective Time through cash-outs or rollover into
other qualified benefit plans; and (iii) Stone Street's MRP shares are all
100% vested at the Effective Time.
41
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
CCB
PRO FORMA
CCB STONE STREET ADJUSTMENTS COMBINED
------------- -------------- ----------------- ---------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Total interest income ............................. 577,307 9,268 (2,004)(1) 584,571
Total interest expense ............................ 254,562 4,270 -- 258,832
------- ----- ------ -------
Net interest income ............................... 322,745 4,998 (2,004) 325,739
Provision for loan and lease losses ............... 15,884 180 -- 16,064
------- ----- ------ -------
Net interest income after provision ............... 306,861 4,818 (2,004) 309,675
Other income ...................................... 111,022 163 -- 111,185
Investment securities gains (losses), net ......... 2,178 -- -- 2,178
Other operating ................................... 230,217 2,428 629 (2) 233,274
------- ----- ------ -------
Income before income taxes ........................ 189,844 2,553 (2,633) 189,764
Income taxes ...................................... 68,632 945 (802)(3) 68,775
------- ----- ------ -------
Net income ........................................ $ 121,212 1,608 (1,831) 120,989
========= ===== ====== =======
Net income per share:
Basic ........................................... $ 2.96 .89 2.96
Diluted ......................................... 2.93 .89 2.92
Weighted average shares outstanding
Basic ........................................... 40,898 1,814 40,898(4)
Diluted ......................................... 41,409 1,814 41,409(4)
- --------
(1) Assumes a federal funds sold rate of 5.54% for funds used to repurchase CCB
shares and for payments for cash tenders of Stone Street shares.
(2) Assumes amortization of goodwill over a 15-year, straight-line basis.
(3) Assumes a 40% tax rate.
(4) Based on the Exchange Ratio of .411 for conversion of Stone Street Stock
and assuming (i) the subsequent repurchase and retirement of all CCB
shares issued in the acquisition; (ii) Stone Street's ESOP is terminated
immediately prior to the Effective Time through cash-outs or rollover into
other qualified benefit plans; and (iii) Stone Street's MRP shares are all
100% vested at the Effective Time.
42
PRO FORMA CAPITALIZATION
The following table presents the unaudited capitalizations of CCB and
Stone Street at March 31, 1999 and the unaudited pro forma capitalization of
CCB and Stone Street assuming (i) the acquisition had been completed on that
date; (ii) the equivalent number of CCB shares issued in the acquisition had
been repurchased and retired; (iii) Stone Street's ESOP is terminated
immediately prior to the Effective Time through cash-outs or rollover into
other qualified benefit plans; and (iv) Stone Street's MRP shares are all 100%
vested at the Effective Time. This financial information is based on, and
should be read in conjunction with, CCB's and Stone Street's unaudited
financial statements, and the related notes, which are incorporated by
reference in this Proxy Statement - Prospectus. (See Page 67).
PRO FORMA
CCB STONE STREET COMBINED
----------- -------------- ----------
(DOLLARS IN THOUSANDS)
LONG-TERM DEBT
CCB:
Advances from Federal Home Loan Bank with varying maturities to
2014 and with interest rates of up to 8.41%(1) ........................ $183,527 183,527
6 3/4% subordinated notes due 2003 ...................................... 32,985 32,985
Other long-term debt .................................................... 83 83
Stone Street:
Advances from Federal Home Loan Bank with varying maturities to
2008 and with interest rates of up to 6.50%(1) ........................ 24,933 24,933
-------- ------ -------
Total long-term debt .................................................. 216,595 24,933 241,528
-------- ------ -------
SHAREHOLDERS' EQUITY
CCB:
Serial preferred stock. Authorized 10,000,000 shares; none issued ....... -- --
Common stock, $5 par value; 100,000,000 shares authorized;
40,058,092 shares issued and pro forma combined issued (2) ............ 200,290 200,290
Additional paid-in capital .............................................. 57,470 57,470
Retained earnings (3) ................................................... 422,373 422,373
Accumulated other comprehensive income .................................. 9,100 9,100
Stone Street:
Preferred stock, no par value. Authorized 5,000,000 shares; none
issued ................................................................ --
Common stock, no par value; 20,000,000 shares authorized; 1,638,452
shares issued ......................................................... 17,971
Unearned ESOP shares .................................................... (1,747)
Unamortized deferred compensation .......................................
Retained earnings ....................................................... 13,100
Accumulated other comprehensive income .................................. (53)
Unamortized deferred compensation ....................................... (1,244)
-------- ------ -------
Total shareholders' equity ............................................ 689,233 28,027 689,233
-------- ------ -------
Total long-term debt and shareholders' equity ......................... $905,828 52,960 930,761
======== ====== =======
- --------
(1) These obligations are direct obligations of subsidiaries of CCB and Stone
Street, respective, and, as such, constitute claims against such
subsidiaries prior to CCB's and Stone Street's respective equity interest
therein.
(2) Based on the Exchange Ratio of .411 for conversion of Stone Street Stock
into CCB Common Stock and assuming CCB's repurchase and retirement of an
equivalent number of shares.
(3) The pro forma combined retained earnings do not reflect any acquisition
expenses which may be recognized, cost savings from operating efficiences
which may be achieved or revenue enhancements which may be realized in
connection with the acquisition.
43
MARKET PRICE AND DIVIDEND
INFORMATION REGARDING
CCB STOCK AND STONE STREET STOCK
CCB's Common Stock is listed for trading on the NYSE and Stone Street's
Common Stock is listed for trading on the AMEX. The following table provides
you with information about the high and low closing prices on the NYSE and the
AMEX, and the amounts of cash dividends declared, on CCB's and Stone Street's
shares each quarterly period since January 1, 1997:
CCB STOCK STONE STREET STOCK
-------------------------------------- ---------------------------------------
CASH CASH
DIVIDEND DIVIDEND
QUARTERLY PERIOD HIGH LOW DECLARED HIGH LOW DECLARED
- ----------------------------- ----------- ----------- ---------- ----------- ----------- -----------
YEAR ENDING DECEMBER 31, 1999
Third Quarter(1) .......... $ 54.38 $ 49.00 $ .290 $ 20.38 $ 19.94 $ --
Second Quarter ............ 59.13 50.94 .260 20.13 12.88 .1175
First Quarter ............. 58.88 51.50 .260 14.94 13.63 .1175
YEAR ENDED DECEMBER 31, 1998
Fourth Quarter ............ 57.38 43.13 .260 15.38 14.00 .1150
Third Quarter ............. 58.50 46.25 .260 19.75 15.25 .1150
Second Quarter ............ 56.06 51.75 .235 21.00 19.13 .1150
First Quarter ............. 57.00 47.00 .235 22.25 19.75 .1150
YEAR ENDED DECEMBER 31, 1997
Fourth Quarter ............ 55.00 40.57 .235 22.88 19.25 .1125
Third Quarter ............. 41.82 36.69 .235 22.13 20.75 4.1125
Second Quarter ............ 37.00 30.94 .210 27.50 20.94 .1125
First Quarter ............. 35.00 31.88 .210 27.50 20.00 .1125
- --------
(1) Through July 22, 1999.
CCB FINANCIAL CORPORATION
GENERAL
CCB is a North Carolina business corporation organized in 1982 and
registered as a bank holding company with the Federal Reserve under the BHCA
and the bank holding company laws of North Carolina. Its principal business is
providing banking and other financial services through CCB Bank, American
Federal Bank, F.S.B., its federal savings bank subsidiary headquartered in
Greenville, South Carolina ("American Federal"), and CCB - Georgia, a Georgia
special purpose credit card bank headquartered in Columbus, Georgia. CCB's
principal offices are located at 111 Corcoran Street, Durham, North Carolina.
Through its subsidiaries, CCB offers numerous banking services consistent
with the needs and conveniences of the areas that it serves. These services
include accepting time and demand deposits, making secured and unsecured loans,
renting safe deposit boxes, sending and receiving wire transfers, performing
trust functions for corporations, pension trusts, and individuals, and
providing certain insurance and securities brokerage services. In addition, it
provides advisory services to individuals, institutions and corporations
regarding financial and investment matters.
Vigorous competition exists in all major areas where CCB is presently
engaged in business. Its financial institution subsidiaries compete not only
with other major commercial banks, but also with diversified other financial
institutions such as thrift institutions, money market and other mutual funds,
mortgage companies, leasing companies, finance companies and a variety of
financial services and advisory companies. CCB has primarily focused its
business and strategy on meeting this competition and the commercial banking
needs of its retail and commercial customers through its branch network.
44
For additional information about CCB and its business operations, you
should review CCB's Annual Report on Form 10-K for the year ended December 31,
1998 and the other documents incorporated by reference herein under "Where You
Can Get More Information" on page .
SUBSIDIARIES
CCB's wholly-owned subsidiaries include CCB Bank, a North Carolina
commercial bank headquartered in Durham, North Carolina, which operates 164
offices and 165 ATM's primarily in the urban corridor of North Carolina along
Interstates 85 and 40 from Raleigh to Charlotte, North Carolina; American
Federal, which operates 39 offices and 51 ATM's primarily in the northwestern
and central regions of South Carolina; and CCB-Georgia, a Georgia special
purpose credit card bank. Additionally, CCB offers trust, investment,
insurance, securities brokerage and other financial services to individuals,
institutions and businesses through CCB Investment and Insurance Service
Corporation, Salem Trust Company and other direct and indirect subsidiaries.
BENEFICIAL OWNERSHIP OF CCB COMMON STOCK
The following table identifies the only person or entity known to the
management of CCB to own beneficially more than 5% of the outstanding Common
Stock of CCB as of May 31, 1999:
AMOUNT AND NATURE
OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------- ---------------------- -----------
Central Carolina Bank and Trust Company 2,235,890(1) 5.60%
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702-0931
- --------
(1) Shares of CCB beneficially owned by CCB Bank are held through its Trust
Department in various fiduciary capacities. In addition to the shares
reflected above, CCB Bank holds certain other shares of CCB's Common Stock
in various fiduciary capacities as to which it disclaims beneficial
ownership. The aggregate number of such shares includes 2,179,965 shares
over which CCB Bank exercises sole voting power, 55,725 shares over which
it has shared voting power, 1,275,667 shares over which it has sole
investment power, and 384,362 shares over which it has shared investment
power.
The table below describes, as of May 31, 1999, the beneficial ownership of
CCB's Common Stock by its directors and executive officers individually, and by
all directors and executive officers of CCB as a group. No director or
executive officer owned more than one percent of CCB's outstanding shares on
such date. As of May 31, 1999, CCB's directors and executive officers owned
1,087,443 shares, or approximately 2.70%, of its outstanding Common Stock.
45
AMOUNT AND NATURE OF
BENEFICIAL
NAME OWNERSHIP(1)
- ---------------------------------------------------------------------- ---------------------
William L. Abercrombie, Jr. Vice Chairman of the Board ............... 129,984(2)
J. Harper Beall, III, Director ....................................... 63,688(3)
James B. Brame, Jr., Director ........................................ 18,659(4)
Timothy B. Burnett, Director ......................................... 12,553(5)
Blake P. Garrett, Jr., Director ...................................... 94,095(6)
Edward S. Holmes, Director ........................................... 24,591(7)
David B. Jordan, Vice Chairman of the Board .......................... 35,112(8)
C. Dan Joyner, Director .............................................. 45,273(9)
Owen G. Kenan, Director .............................................. 19,100(10)
Eugene J. McDonald, Executive Vice Chairman of the Board ............. 23,467(11)
Bonnie McElveen-Hunter, Director ..................................... 11,134(12)
Hamilton W. McKay, Jr., M.D, Director. ............................... 35,910(13)
George J. Morrow, Director ........................................... 7,594(14)
Eric B. Munson, Director ............................................. 14,009(15)
Ernest C. Roessler, Chairman of the Board ............................ 165,239(16)
Dr. David E. Shi, Director ........................................... 17,883(17)
Jimmy K. Stegall, Director ........................................... 78,383(18)
H. Allen Tate, Jr., Director ......................................... 40,361(19)
James L. Williamson, Director ........................................ 19,763(20)
Dr. Phail Wynn, Jr., Director ........................................ 15,228(21)
J. Scott Edwards, Senior Executive Vice President .................... 117,646(22)
Richard L. Furr, Senior Executive Vice President ..................... 97,771(23)
All directors and executive officers as a group (22 persons) ......... 1,087,443(24)
- --------
(1) Except as otherwise noted, each individual exercises sole voting and
investment power with respect to all shares shown as beneficially owned.
(2) Includes 16,020 shares with respect to which Mr. Abercrombie exercises
shared voting and investment power, 72,081 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only and 14,634 shares held under CCB's 401(k)
Plan as to which he is considered to have sole investment power only.
(3) Includes 21,885 shares with respect to which Mr. Beall exercises shared
voting and investment power and 15,842 shares which he could purchase
under an exercisable option and as to which he is considered to have sole
investment power only. Does not include 4,020 shares held by Mr. Beall's
spouse and children and with respect to which he disclaims any beneficial
ownership.
(4) Includes 9,200 shares which Mr. Brame could purchase under an exercisable
option and as to which he is considered to have sole investment power
only.
(5) Includes 7,200 shares which Mr. Burnett could purchase under an exercisable
option and as to which he is considered to have sole investment power
only.
(6) Includes 47,614 shares with respect to which Mr. Garrett exercises shared
voting and investment power and 13,765 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
(7) Includes 11,200 shares which Mr. Holmes could purchase under an exercisable
option and as to which he is considered to have sole investment power
only. Does not include 43,296 shares held by his spouse and with respect
to which he disclaims any beneficial ownership.
(8) Includes 522 shares with respect to which Mr. Jordan exercises shared
voting and investment power and 3,462 shares under CCB's 401(k) Plan and
15,628 shares which he could purchase under an exercisable option and as
to which he is considered to have sole investment power only.
(9) Includes 2,288 shares with respect to which Mr. Joyner exercises shared
voting and investment power and 16,880 shares which he could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.
46
(10) Includes 7,060 shares with respect to which Mr. Kenan exercises shared
voting and investment power and 11,200 shares which he could purchase
under an exercisable option and as to which he is considered to have sole
investment power only.
(11) Includes 2,028 shares with respect to which Mr. McDonald exercises shared
voting and investment power and 11,200 shares which he could purchase
under an exercisable option and as to which he is considered to have sole
investment power only.
(12) Includes 5,200 shares which Ms. McElveen-Hunter could purchase under an
exercisable option and as to which she is considered to have sole
investment power only.
(13) Includes 1,200 shares which Dr. McKay could purchase under an exercisable
option and as to which he is considered to have sole investment power
only. Does not include 1,558 shares held by his spouse and children with
respect to which he disclaims any beneficial ownership.
(14) Includes 3,200 shares which Mr. Morrow could purchase under an exercisable
option and as to which he is considered to have sole investment power
only.
(15) Includes 11,200 shares which Mr. Munson could purchase under an
exercisable option and as to which he is considered to have sole
investment power only.
(16) Includes 7,000 shares with respect to which Mr. Roessler exercises shared
voting and investment power and 19,091 shares under CCB's 401(k) Plan and
92,986 shares which he could purchase under an exercisable option and as
to which he is considered to have sole investment power only.
(17) Includes 12,880 shares which Dr. Shi could purchase under a presently
exercisable option and as to which he is considered to have sole
investment power only.
(18) Includes 10,904 shares with respect to which Mr. Stegall exercises shared
voting and investment power and 11,200 shares which he could purchase
under an exercisable option and as to which he is considered to have sole
investment power only.
(19) Includes 50 shares with respect to which Mr. Tate exercises shared voting
and investment power and 11,200 shares which he could purchase under an
exercisable option and as to which he is considered to have sole
investment power only. Does not include a total of 3,591 shares held by or
for Mr. Tate's spouse and children and with respect to which he disclaims
any beneficial ownership.
(20) Includes 11,200 shares which Mr. Williamson could purchase under an
exercisable option and as to which he is considered to have sole
investment power only.
(21) Includes 11,200 shares which Dr. Wynn could purchase under an exercisable
option and as to which he is considered to have sole investment power
only.
(22) Includes 24,116 shares under CCB's 401(k) Plan and 41,534 shares with
respect to which Mr. Edwards could purchase under an exercisable option
and as to which he is considered to have sole investment power only.
(23) Includes 11,225 shares with respect to which Mr. Furr exercises shared
voting and investment power and 11,236 shares under CCB's 401(k) Plan and
42,366 shares which he could purchase under an exercisable option and as
to which he is considered to have sole investment power only.
(24) Includes an aggregate of 448,746 shares with respect to which the
directors and listed executive officers exercise sole voting and
investment power, 126,596 shares with respect to which they have shared
voting and investment power, 439,562 shares which such persons could
purchase under exercisable options and as to which they have sole
investment power only and 72,539 shares under CCB's 401(k) Plan as to
which they have sole investment power only.
MANAGEMENT AND ADDITIONAL INFORMATION
Additional information relating to CCB's directors and executive officers,
executive and director compensation and compensation plans, certain
relationships and related transactions and other matters related to CCB is
incorporated by reference or set forth in CCB's Annual Report on Form 10-K for
the year ended December 31, 1998 which is incorporated herein by reference. See
"Information Incorporated by Reference" on page 67. If you desire a copy of
that document, you may contact CCB at its address or phone number listed in
this Proxy Statement - Prospectus under the heading "Where You Can Get More
Information" on page 66.
47
STONE STREET BANCORP, INC.
GENERAL
Stone Street is a North Carolina business corporation formed in 1996 and
is registered with the Federal Reserve under the BHCA as a bank holding
company. It was organized to become the holding company for SSB Bank in
connection with SSB Bank's conversion from a mutual savings bank to a stock
savings bank. Stone Street's principal business is providing banking and
financial services through SSB Bank. Its principal office is located at 232
South Main Street, Mocksville, North Carolina. SSB Bank operates its main
office at that location and a branch in Advance, North Carolina. It is also
currently constructing the New Branch in Mocksville. Regulatory approvals of
the New Branch will not be requested until after the Effective Time.
Through SSB Bank, Stone Street engages primarily in the business in
attracting deposits from the general public and using those deposits to make
mortgage loans secured by real estate. It also makes a limited number of loans
which are not secured by real property, such as loans secured by pledged
deposit accounts and other personal property, mobile home loans and unsecured
loans.
Stone Street faces strong competition in its market both in attractive
deposits and making real estate and other loans. Its most direct competition
for deposits historically has come from other savings institutions, credit
unions and commercial banks, including a substantial number of large financial
institutions operating in its market which have greater financial and marketing
resources available to them. Additional competition for investors' funds arises
from entities offering short-term money market securities and other corporate
and government securities. Stone Street also experiences strong competition for
real estate loans from other savings institution, commercial bank and mortgage
banking companies present in its market. It seeks to meet this competition
primarily through the interest rates and loan fees it charges, the efficiency
and quality of the services it provides and its adherence to market responsive
underwriting procedures.
For additional information about Stone Street and its business operations,
you should review Stone Street's Annual Report on Form 10-K for the year ended
December 31, 1998 and the other documents incorporated by reference herein (see
"Information Incorporated by Reference" on page 67) and the other information
sources discussed under "Where You Can Get More Information" on page 66.
SUBSIDIARIES
Stone Street has one subsidiary, SSB Bank. SSB Bank has one subsidiary,
Stone Street Financial Services, Inc., which offers discount investment
brokerage services to the public.
BENEFICIAL OWNERSHIP OF STONE STREET COMMON STOCK
The following table identifies the only persons or entities known to the
management of Stone Street to own beneficially more than 5% of the outstanding
Common Stock of Stone Street as of May 31, 1999:
AMOUNT AND
NATURE OF PERCENTAGE
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP (1) CLASS (2)
- ------------------------------------------------------------- --------------- -----------
Robert B. Hall, Chairman of the Board of Directors ......... 174,285(3) 10.59%
Ronald H. Vogler, Director ................................. 170,885(3) 10.39
George W. Martin, Director ................................. 172,084(3) 10.46
- --------
(1) Unless otherwise noted, all shares owned directly or indirectly by the
named individuals by their spouses and minor children, or by other entities
controlled by the named individuals.
(2) Based upon a total of 1,638,452 shares of Stone Street Common Stock
outstanding as of May 31, 1999 and the shares outstanding if each director
exercised his currently vested Stone Street Options.
48
(3) Messrs. Hall, Vogler and Martin serve as trustees of the SSB Bank ESOP
which holds 146,004 shares of Common Stock of which 105,975 were
unallocated and 40,029 were allocated at May 31, 1999. They share certain
voting and investment power over such shares. With respect to each trustee,
the number above includes these 146,004 shares, 6,843 shares subject to
Stone Street Options which have vested or are exercisable within 60 days
and 2,938 shares granted under the MRP Plan.
The table below describes, as of May 31, 1999, the beneficial ownership of
Stone Street Common Stock by each member of Stone Street's Board, each of its
executive officers individually, and the directors and executive officers of
Stone Street as a group:
AMOUNT AND
NATURE OF PERCENTAGE
BENEFICIAL OF
NAME OWNERSHIP (1) CLASS
- -------------------------------------------------------------------------- ---------------------- -----------
Robert B. Hall, Chairman of the Board .................................... 174,285(3)(4) 10.59%
William F. Junker, Vice Chairman of the Board ............................ 28,081(4) 1.71
Donald G. Bowles, Director ............................................... 15,781(4) .96
Terry L. Bralley, Director ............................................... 675 .04
Vena H. Harris, Director ................................................. 27,881(5) 1.69
Claude R. Horn, Jr., Director ............................................ 28,081(4) 1.71
George W. Martin, Director ............................................... 172,084(3)(4) 10.48
Ronald H. Vogler, Director ............................................... 170,885(3)(4) 10.39
J. Charles Dunn, Director and President .................................. 73,288(6) 4.40
Allen W. Carter, Senior Vice President ................................... 36,634(7) 2.21
Marjorie D. Foster, Vice President and Controller ........................ 25,698(8) 1.56
All directors and executive officers as a group (eleven persons) ......... 461,365(9) 26.50
- --------
(1) Unless otherwise noted, all shares are owned directly or indirectly by the
named individuals, their spouses and minor children, or other entities
controlled by the named individuals.
(2) Based upon a total of 1,638,452 shares of Stone Street Common Stock
outstanding as of May 31, 1999 and the shares that would be outstanding if
the director or officer exercised his or her vested Stone Street Options.
(3) Messrs. Hall, Vogler and Martin serve as trustees of the Stone Street ESOP
which holds 146,004 shares of Stone Street's Common Stock. They share
certain voting and investment power of these shares.
(4) Includes 2,938 shares granted under the MRP Plan and 6,843 shares subject
to Stone Street Options which have vested or are exercisable within 60
days.
(5) Includes 1,094 shares granted under the MRP Plan and held by Mrs. Harris'
grandchildren.
(6) Includes 27,375 shares underlying Stone Street Options that have vested or
are exercisable within 60 days under the Stone Street Option Plan. Includes
18,249 shares granted under the MRP Plan. The number stated also includes
9,264 shares allocated under the SSB Bank ESOP.
(7) Includes 16,425 shares underlying Stone Street Options that have vested or
are exercisable within 60 days. Includes 10,949 shares granted under the
MRP Plan. The number stated also includes 6,557 shares allocated under the
SSB Bank ESOP.
(8) Includes 10,950 shares underlying Stone Street Options that have vested or
are exercisable within 60 days. Includes 7,300 shares granted under the MRP
Plan. The number stated also includes 4,764 shares allocated under the SSB
Bank ESOP.
(9) The 146,004 shares held by the SSB Bank ESOP for which the trustees,
Messrs. Hall, Vogler and Martin, share voting and investment power have
been included only once in the total number of shares owned beneficially by
the directors and executive officers as a group. Includes 102,651 shares
underlying Stone Street Options that have vested or are exercisable within
60 days, and 57,264 shares granted under the MRP Plan.
49
MANAGEMENT AND ADDITIONAL INFORMATION
Additional information relating to Stone Street's directors and executive
officers, executive and director compensation and compensation plans, certain
relationships and related transactions and other related matters to Stone
Street is incorporated by reference or set forth in Stone Street's Annual
Report on Form 10-K for the year ended December 31, 1998 which is incorporated
herein by reference. See "Information Incorporated by Reference" on page 67. If
you desire a copy of that document, you may contact Stone Street at its address
or phone number listed in this Proxy Statement - Prospectus under the heading
"Where You Can Get More Information" on page 66.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion describes certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to CCB. Although SSB Bank is a
stock savings bank and subject to regulation by the Administrator, the
regulatory framework applicable to Stone Street and SSB Bank is substantially
similar in most material respects to the regulation of CCB, CCB Bank and
American Federal by their primary federal and/or state regulators. For a more
detailed discussion of the regulatory framework applicable to CCB and its
subsidiaries, including CCB Bank, you should review "Supervision and
Regulation" in CCB's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 incorporated herein by reference, and for a more detailed
discussion of the regulatory framework applicable to Stone Street and SSB Bank,
you should review Stone Street's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 incorporated herein by reference. (See "Information
Incorporated by Reference" on page 67.)
GENERAL. CCB is a bank holding company, registered with the Federal
Reserve under the BHCA and with the Bankig Commission under North Carolina law.
As such, CCB and its subsidiaries are subject to the supervision, examination
and reporting requirements of the BHCA and North Carolina law and the
regulations of the Federal Reserve and the Banking Commission and the North
Carolina Commissioner of Banking (the "Commissioner"). As a result of
operations of its subsidiaries in Florida and Virginia, CCB is also subject to
certain provisions of those states' laws.
The BHCA requires CCB to obtain the prior approval of the Federal Reserve
before it may directly or indirectly own or control more than 5% of the voting
shares of or acquire all or substantially all of the assets of a financial
institution and before it may merge or consolidate with another bank holding
company.
The BHCA 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 section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section 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 capital adequacy and CRA are discussed below.
The BHCA, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act"), no longer contains a prohibition on interstate
acquisitions of banks by bank holding companies. CCB and any other bank holding
company located in North Carolina may now acquire a bank located in any other
state, and any bank holding company located outside North Carolina may lawfully
acquire any North Carolina-based bank, regardless of state law to the contrary,
in either case subject to certain deposit-percentage limitations, aging
requirements and other restrictions. The
50
Interstate Banking Act also generally provides that national and
state-chartered banks may branch interstate through acquisitions of banks in
other states, provided, however, that it allowed any state to elect prior to
June 1, 1997, to either "opt in" and accelerate the date after which interstate
branching was permissible or "opt out" and prohibit interstate branching
altogether. North Carolina enacted "opt in" legislation that permits interstate
branching. Because of this action by North Carolina, CCB is currently able to
establish and operate branches in other states that have also enacted "opt in"
legislation.
The BHCA generally prohibits CCB 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 reasonably can 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 in
connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHCA does not place
territorial limitations on permissible bank-related activities of bank holding
companies. 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.
CCB Bank and American Federal, CCB's primary banking subsidiaries, are
members of the FDIC. More than two-thirds of CCB Bank's deposits are insured by
the Bank Insurance Fund ("BIF") of the FDIC. The remainder of its deposits,
which it acquired in prior acquisitions of savings institutions, are insured by
the Savings Institutions Insurance Fund ("SAIF") of the FDIC. American
Federal's deposits are insured by the SAIF. CCB Bank and American Federal are
subject to numerous federal (and, with respect to CCB Bank, state) statutes and
regulations that affect their businesses, activities, and operations. CCB Bank,
as a North Carolina bank that is not a member of the Federal Reserve, is
supervised and examined by the FDIC and the Commissioner. American Federal, as
a federal savings bank, is supervised by the FDIC and the Office of Thrift
Supervision ("OTS"). These agencies, as applicable, regularly examine the
operations of CCB Bank and American Federal and are given authority to approve
or disapprove mergers, consolidations, the establishment of branches and
similar corporate actions. Such agencies also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.
The Interstate Banking Act has increased competition within the markets in
which CCB Bank and American Federal operate. It is anticipated such competition
will continue to increase. The extent of increased competition, however, cannot
be predicted.
COMMUNITY REINVESTMENT ACT. CCB Bank and American Federal are subject to
the provisions of the CRA. Under the terms of 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 agency's assessment of the bank's record is made available to the
public. Further, such assessment is required of any bank which has applied to,
among other things, 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 regulator having primary jurisdiction over the
acquisition will assess the records of each subsidiary bank of the applicant
bank holding company, and such records may be the basis for denying the
application.
51
The current CRA regulations jointly adopted by all federal bank regulatory
agencies employ an evaluation system that rates institutions based on their
actual performance in meeting community credit needs. The evaluation system
used to judge an institution's CRA performance consists of three tests: a
lending test; an investment test; and a service test. Each of these tests is
applied by the institution's federal regulator in an assessment context that
takes into account such factors as demographic data about the community, the
institution's capacity and constraints, the institution's product offerings and
business strategy, and data on the prior performance of the institution and
similarly-situated lenders. The lending test -- the most important of the three
tests for all institutions other than wholesale and limited purpose (E.G.,
credit card) banks -- evaluates an institution's lending activities as
measured by its home mortgage loans, small business and farm loans, community
development loans, and, at the option of the institution, its consumer loans.
The institution's regulator weighs each of these lending categories to reflect
its relative importance to the institution's overall business and, in the case
of community development loans, the characteristics and needs of the
institution's service area and the opportunities available for this type of
lending. Assessment criteria for the lending test include:
o geographic distribution of the institution's lending;
o distribution of the institution's home mortgage and consumer loans among
different economic segments of the community;
o the number and amount of small business and small farm loans made by the
institution;
o the number and amount of community development loans outstanding; and
o the institution's use of innovative or flexible lending practices to meet
the needs of low-to-moderate income individuals and neighborhoods.
At the election of an institution, or if particular circumstances so warrant,
the banking agencies take into account in making their assessments lending by
the institution's affiliates as well as community development loans made by the
lending consortia and other lenders in which the institution has invested. All
financial institutions are required to report data on their small business and
small farm loans as well as their home mortgage loans.
The joint agency CRA regulations provide that an institution evaluated
under a given test receive one of five ratings for that test: outstanding; high
satisfactory; low satisfactory; needs to improve; or substantial non-compliance.
The ratings for each test are then combined to produce an overall composite
rating of either outstanding, satisfactory (including both high and low
satisfactory), needs to improve, or substantial non-compliance. In the case of
a retail-oriented institution, its lending test rating forms the basis for its
composite rating. That rating is then increased by up to two levels in the case
of outstanding or high satisfactory investment performance, increased by one
level in the case of outstanding service and decreased by one level in the case
of substantial non-compliance in service. An institution found to have engaged
in illegal lending discrimination is rebuttably presumed to have a
less-than-satisfactory composite CRA rating. CCB Bank and American Federal have
current CRA ratings of "satisfactory" and "outstanding", respectively. CCB
Bank's rating was received under the predecessor to the current evaluation
system. SSB Bank has a current CRA rating of "satisfactory".
PAYMENT OF DIVIDENDS. CCB is a legal entity separate and distinct from CCB
Bank, American Federal and its other subsidiaries. CCB's sources of cash flow,
including cash flow to pay dividends to its shareholders, are primarily
dividends from CCB Bank and secondarily dividends from American Federal. There
are statutory and regulatory limitations on the payment of dividends by CCB
Bank and American Federal to CCB, as well as by CCB to its shareholders.
Under North Carolina law, CCB Bank may pay cash dividends only out of
undivided profits and only if CCB Bank has surplus of a specified level. Under
federal law, American Federal may pay dividends equal to
52
the greater of (i) 100% of its net income to date during the calendar year plus
the amount that would reduce by one-half its "surplus capital ratio (the excess
of capital over its fully-phased in capital requirements at the beginning of
the calendar year and (ii) 75% of its net income for the previous four
quarters. Furthermore, if, in the opinion of the federal regulatory agencies, a
bank or savings bank under its jurisdiction is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition
of the bank, could include the payment of dividends), such authority may
require, after notice and hearing, that such bank cease and desist from such
practice. The Federal Reserve, the FDIC and the OTS have indicated that paying
dividends that deplete a bank's capital base to an inadequate level would be an
unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Act ("FDICIA"), an insured bank may not pay any dividend if payment
would cause it to become undercapitalized or once it is undercapitalized. See
"Prompt Corrective Action" below. Moreover, the Federal Reserve, the FDIC and
the OTS have issued policy statements which provide that bank holding companies
and insured banks and savings banks should generally only pay dividends out of
current operating earnings.
CAPITAL ADEQUACY. CCB and its banking subsidiaries are required to comply
with federal regulations on capital adequacy. There are two basic measures of
capital adequacy: a risk-based measure and a leverage measure. All applicable
capital standards must be satisfied for an institution to be considered in
compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance sheet items.
The minimum guideline for the ratio (the "Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
At March 31, 1999, CCB's consolidated Total Capital Ratio and its Tier 1
Capital Ratio (I.E., the ratio of Tier 1 Capital to risk-weighted assets) were
13.35% and 11.62%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio") of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3.0% plus an additional cushion of 100 to 200 basis
points. CCB was in compliance with the minimum Leverage Ratio requirement as of
March 31, 1999, with a Leverage Ratio of 8.53%. The guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
CCB's banking subsidiaries are also subject to risk-based and leverage
capital requirements and were in compliance with applicable minimum capital
requirements as of March 31, 1999. Neither CCB nor any of these banking
subsidiaries has been advised by any federal banking agency of any specific
minimum Leverage Ratio requirement applicable to it. The following table sets
forth the regulatory capital positions of CCB and Stone Street on a historical
basis, and of CCB on a pro forma combined basis, as of March 31, 1999.
53
RISK-BASED CAPITAL
-----------------------------------------------
LEVERAGE CAPITAL TIER I TOTAL
------------------------ ---------------------- ----------------------
% OF % OF % OF
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
----------- ---------- --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
CCB
Actual ................................. $652,178 8.53% 652,178 11.62 749,276 13.35
Minimum capital standard ............... 229,360 3.00 224,575 4.00 449,151 8.00
-------- ----- ------- ----- ------- -----
Excess of actual regulatory over minimum
regulatory capital standard ........... $422,818 5.53% 427,603 7.62 300,125 5.35
======== ===== ======= ===== ======= =====
STONE STREET
Actual ................................. $ 27,882 21.81% 27,882 36.36 28,677 37.40
Minimum capital standard ............... 3,836 3.00 3,067 4.00 6,135 8.00
-------- ----- ------- ----- ------- -----
Excess of actual regulatory over minimum
regulatory capital standard ........... $ 24,046 18.81% 24,815 32.36 22,542 29.40
======== ===== ======= ===== ======= =====
CCB PRO FORMA COMBINED
Actual ................................. $643,438 8.28% 643,438 11.31 741,331 13.03
Minimum capital standard ............... 233,196 3.00 227,643 4.00 455,286 8.00
-------- ----- ------- ----- ------- -----
Excess of actual regulatory over minimum
regulatory capital standard ........... $410,242 5.28% 415,795 7.31 286,045 5.03
======== ===== ======= ===== ======= =====
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. (See "Prompt Corrective
Action" below.)
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal banking agencies have, pursuant to FDICIA,
adopted regulations which require regulators to consider interest rate risk
(when the interest rate sensitivity of an institution's assets does not match
the sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. The bank regulatory agencies have
concurrently proposed a methodology for evaluating interest rate risk which
would require banks with excessive interest rate risk exposure to hold
additional amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY BANKS. Under Federal Reserve policy, CCB is expected
to act as a source of financial strength to, and to commit resources to
support, CCB Bank, American Federal and its other banking subsidiaries. This
support could be required at times when, absent such Federal Reserve policy,
CCB may not be inclined to provide it. In addition, any capital loans by a bank
holding company to a subsidiary bank are subordinate in right of payment to
deposits and to certain other indebtedness of the subsidiary bank. In the event
of a bank holding company's bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
the default of a commonly controlled FDIC-insured depository institution or any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally
as the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but it is subordinate to claims
of depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of CCB are subject to these cross-guarantee
54
provisions. As a result, any loss suffered by the FDIC in respect of any of
these subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, if any, and a potential loss of
CCB's investments in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION. FDICIA established a system of prompt corrective
action to resolve the problems of undercapitalized institutions. Under this
system, the federal banking regulators are required to establish five capital
categories ("well-capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized") and to
take certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Under the FDIC rule implementing the prompt corrective action provisions,
a bank that (i) has a Total Capital Ratio of 10.0% or greater, a Tier 1 Capital
Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or greater, and (ii) is
not subject to any written agreement, order, capital directive, or prompt
corrective action directive issued by the FDIC, is deemed to be
"well-capitalized," An institution with a Total Capital Ratio of 8.0% or
greater, a Tier 1 Capital Ratio of 4.0% or greater and a Leverage Ratio of 4.0%
or greater (or 3.0% or greater in the case of an institution rated composite 1
under the CAMEL rating system) is considered to be "adequately capitalized." A
bank that has a Total Capital Ratio of less than 8.0% or a Tier 1 Capital Ratio
of less than 4.0% or a Leverage Ratio of less than 4.0% (or less than 3.0% in
the case of a bank rated composite 1 under the CAMEL rating system) is
considered to be "undercapitalized." A bank that has a Total Capital Ratio of
less than 6.0%, a Tier 1 Capital Ratio of less than 3%, or a Leverage Ratio of
less than 3.0% is considered to be "significantly undercapitalized" and an
institution that has a tangible equity capital to assets ratio equal to or less
than 2.0% is deemed to be "critically undercapitalized." For purposes of the
regulation, the term "tangible equity" includes core capital elements counted
as Tier 1 capital for purposes of the risk-based capital standards plus the
amount of outstanding cumulative perpetual preferred stock (including related
surplus), minus all intangible assets with certain exceptions. A bank 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.
A bank that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meet its capital restoration plan, subject to certain
limitations. The obligation of a controlling bank holding company under FDICIA
to fund a capital restoration plan is limited to the lesser of 5.0% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking agency is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purposes" of FDICIA. At
March 31, 1999, CCB Bank, American Federal and SSB Bank each had the requisite
capital levels to qualify as well-capitalized.
FDIC INSURANCE ASSESSMENTS. CCB Bank and American Federal are subject to
insurance assessments imposed by the FDIC. Approximately two-thirds of CCB
Bank's deposits are insured through the BIF of the FDIC and the remainder are
insured by the SAIF of the FDIC due to deposits acquired through acquisitions
of thrift institutions in prior years which remain insured by the SAIF. All of
American Federal's deposits are SAIF-insured, as are the deposits of SSB Bank.
55
Effective January 1, 1996, the FDIC reduced the BIF assessments, to a
range of 0% to .27% of deposits. The premium reductions did not affect the
deposit premiums paid on SAIF insured deposits. The actual assessment to be
paid by each insured institution is based on the institution's assessment risk
classification, which is determined based on whether the institution is
considered "well capitalized", "adequately capitalized" or "under capitalized",
as such terms have been defined in applicable federal regulations, and whether
the institution is considered by its supervisory agency to be financially sound
or to have supervisory concerns. During 1996, the FDIC imposed a special
assessment on SAIF insured deposits to recapitalize the SAIF. CCB Bank's
special assessment amounted to $7.4 million and American Federal's assessment
amounted to $5.6 million. FDIC insurance premiums for 1998 and 1997 were .0126%
for BIF insured deposits and .0648% for SAIF insured deposits.
On September 30, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (the "Growth Act") was enacted. This legislation
contained a comprehensive approach to recapitalize the SAIF and to assure
payment of the Financing Corporation (the "FICO") obligations. Under the Growth
Act, banks with deposits that are insured under the BIF are required to pay a
portion of the interest due on bonds that were issued by FICO to help shore up
the ailing Federal Savings and Loan Insurance Corporation in 1987. The Growth
Act stipulates that in order to contribute toward the FICO obligations, the BIF
assessment rate must be equal to one-fifth the SAIF assessment rate through
year-end 1999, or until the insurance funds are merged, whichever occurs first.
The amount of FICO debt service to be paid by all BIF-insured institutions is
approximately $0.0126 per $100 of BIF-insured deposits for each year from 1997
through 1999 when the obligation of BIF-insured institutions increases to
approximately $0.0240 per $100 of BIF-insured deposits per year through the
year 2019, subject in all cases to adjustments by the FDIC on a quarterly
basis.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
CAPITAL STOCK OF CCB AND STONE STREET
Your current rights as a shareholder of Stone Street are governed by Stone
Street's Articles of Incorporation ("Charter") and Bylaws, and the NCBCA. Upon
consummation of the Merger, if you become a shareholder of CCB, your rights
will be the same as all other CCB shareholders and will be governed by CCB's
Restated Articles of Incorporation, as amended ("Restated Articles"), and
Bylaws, an Amended and Restated Rights Agreement dated as of October 1, 1998
pertaining to the CCB Rights (the "CCB Rights Agreement"), and the NCBCA.
Certain differences exist between your current rights as a holder of Stone
Street Common Stock and your rights after the Effective Time as a holder of CCB
Common Stock.
THE FOLLOWING IS ONLY A GENERAL SUMMARY OF CERTAIN MATERIAL DIFFERENCES IN
THE RIGHTS OF CCB'S AND STONE STREET'S SHAREHOLDERS AND IS NOT INTENDED TO BE
COMPLETE. YOU SHOULD REVIEW CCB'S RESTATED ARTICLES, STONE STREET'S CHARTER,
CCB'S AND STONE STREET'S RESPECTIVE BYLAWS, AND THE OTHER GOVERNING INSTRUMENTS
OF CCB AND STONE STREET, AND THE NCBCA FOR A MORE COMPLETE DESCRIPTION OF SUCH
DIFFERENCES.
AUTHORIZED CAPITAL STOCK
CCB's authorized capital stock consists of 100,000,000 shares of Common
Stock, $5.00 par value common stock, of which 39,900,867 shares were issued and
outstanding at May 31, 1999, and 10,000,000 shares of serial preferred stock
("Preferred Stock"), none of which were issued and outstanding at that date.
By an amendment to the CCB Restated Articles which may be adopted without
shareholder approval, CCB's Board of Directors may divide shares of the
Preferred Stock into, and issue the same in, one or more classes and in one or
more series within each class, and may determine and fix the designations,
relative rights, preferences and limitations of shares in each such class and
series of the Preferred Stock so established. Subject to the provisions of the
NCBCA and the rules of the NYSE, shares of CCB Common Stock and each
56
such class or series of Preferred Stock may be issued from time to time without
shareholder approval at such times, for such purposes and for such
consideration as CCB's Board of Directors may deem advisable.
For use in connection with the "Rights Plan" (as described below), CCB's
Board of Directors has established a series of Preferred Stock designated as
its Series A Junior Participating Preferred Stock ("Series A Preferred Stock")
consisting of shares and having certain special rights for purposes of
dividends and other distributions, voting, dissolution and liquidation and in
connection with certain mergers of CCB. Although 800,000 shares of CCB
Preferred Stock have been designated as Series A Preferred Stock, none have
been issued.
Stone Street's authorized capital stock consists of 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, and 5,000,000 shares of preferred stock, none of
which were issued and outstanding at that date.
CCB RIGHTS PLAN
The CCB Rights Agreement provides for a plan (the "Rights Plan") pursuant
to which one CCB Right was distributed during 1990 (the year the Rights Plan
was initially adopted) to CCB's shareholders for each of their shares of CCB
Common Stock. Also under the Rights Plan, after the date of the initial
adoption of the Rights Agreement and before the earlier of the "Distribution
Date" (as defined below) or the date of redemption or expiration of the CCB
Rights, each new share of CCB Common Stock issued (including the shares into
which Stone Street Common Stock will be converted in connection with the
Merger) also has attached to it one CCB Right.
The CCB Rights currently are not exercisable, but may become so in the
future on a date (the "Distribution Date") which is the earlier of (i) the
tenth business day following a public announcement that any person or group of
affiliated persons (an "Acquiring Person") have acquired beneficial ownership
of 15% (or 10% in certain circumstances) or more of the outstanding CCB Common
Stock, or (ii) the tenth business day following the date of commencement or the
announcement of an intention to commence, a tender or exchange offer which
would result in an Acquiring Person becoming the beneficial owner of 15% (or
10% in certain circumstances) of CCB's outstanding Common Stock. However, at
the time any person or group becomes an Acquiring Person, all CCB Rights held
by or transferred to such Acquiring Person (or any associate or affiliate of
such Acquiring Person) become void and of no effect.
Until the Distribution Date, each CCB Right is evidenced by the
certificate evidencing the CCB Common Stock to which it relates and may be
transferred only with such CCB Common Stock. The surrender for transfer of any
CCB Common Stock certificate also constitutes the transfer of the attached CCB
Rights. If and only if the Distribution Date should occur, separate
certificates evidencing each CCB Right would be distributed to the record
holders of the CCB Common Stock to which such CCB Rights are attached. Each
such CCB Right could then be exercised to purchase .01 of a share of Series A
Preferred Stock for a price of $187.50 (the "Purchase Price"), as adjusted from
time to time as described in the CCB Rights Agreement. In the alternative (and
subject to certain exceptions), after any person or group becomes an Acquiring
Person and prior to the acquisition by such Acquiring Person of 50% or more of
CCB's outstanding Common Stock, CCB's Board of Directors at its option may
exchange the Rights (other than the Rights of the Acquiring Person), in whole
or part, at an exchange ratio of one share of CCB Common Stock, or .01 of a
share of Series A Preferred Stock, per Right (subject to adjustment).
If CCB is acquired in a merger or other business combination or if 50% of
its consolidated assets or earnings power is sold, proper provision will be
made so that each holder of a CCB Right will thereafter have the right to
receive, upon the exercise thereof and at the then current purchase price of
the CCB Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
purchase price of the CCB Right. In the event that any person or group becomes
an Acquiring Person, proper provision shall be made so that each holder of a
CCB Right, other than
57
CCB Rights beneficially owned by the Acquiring Person (which will be void),
will thereafter have the right to receive upon exercise that number of shares
of CCB Common Stock having a market value of two times the purchase price of
the CCB Right.
The CCB Rights will expire on October 1, 2008 unless extended, and may be
redeemed by CCB at any time prior to the acquisition by a person becoming an
Acquiring Person, at a price of $.01 per CCB Right.
SPECIAL MEETINGS OF SHAREHOLDERS
CCB's Bylaws require that a special meeting of shareholders may be called
by the Chairman, Vice Chairman, President or Board of Directors of CCB or by
any CCB shareholder pursuant to the written request of the holders of at least
10% of all shares of CCB Stock entitled to be voted at such a meeting.
Under Stone Street's Bylaws, a special meeting of Stone Street's
shareholders may be called by Stone Street's Chief Executive Officer,
President, Chairman of the Board, or Board of Directors.
DIRECTORS
NUMBER OF DIRECTORS. Under CCB's Bylaws, its Board of Directors consists
of not less than nine nor more than 23 directors, with the actual number of
directors to be determined by the CCB Board or CCB's shareholders from time to
time at or within the above minimum and maximum numbers. The number of
directors is currently fixed at 20.
Stone Street's Charter provides that the number of directors of Stone
Street shall not be less than five nor more than 15, with the actual number at
or within this range to be determined by Stone Street's Board from time to
time. The number of Stone Street directors is currently fixed at nine.
ELECTION OF DIRECTORS. CCB's directors are divided into three classes,
with each class elected to staggered three-year terms so that the terms of
approximately one-third of CCB's directors expire each year. Under CCB's
Restated Articles and Bylaws, shareholders of CCB have the right to cumulate
their votes in the election of CCB directors; provided, however, under the
NCBCA, because CCB has a class of capital stock registered under the 1934 Act,
so long as such registration remains in effect (I.E., CCB is a "public
corporation") such right is withdrawn.
Under the Stone Street Charter, Stone Street's directors are elected to
staggered three-year terms, and the terms of approximately one-third of the
directors expire each year. Stone Street is also a "public corporation" and
cumulative voting in the election of its directors is not available.
VACANCIES RESULTING FROM INCREASE IN NUMBER. CCB's Bylaws authorize CCB's
Board or its shareholders to appoint new directors to fill vacancies arising by
reason of death, resignation or removal or resulting from an increase (within
the above minimum and maximum numbers) by the Board of Directors in the number
of CCB's directors. Stone Street's Bylaws have substantially the same
provisions.
REMOVAL OF DIRECTORS. CCB's Restated Articles provide that a CCB director
may be removed only for "cause." Cause means (a) the criminal prosecution and
conviction of the director of an act of fraud, embezzlement, theft or personal
dishonesty, (b) prosecution and conviction of the director for a criminal
offense involving dishonesty or breach of trust as described by the FDIA, or
(c) the occurrence of an event causing such director to be "unbondable" under
any of CCB's fidelity bonds or insurance policies covering directors.
Stone Street's Bylaws provide that directors may be removed with or
without cause by the requisite vote of Stone Street's shareholders.
58
RELEASE FROM LIABILITY. CCB's Restated Articles and Stone Street's Charter
provide that to the extent permitted by the NCBCA, their directors are not
personally liable for monetary damages in any action by or in the right of
their corporation or otherwise for breach of their duties as directors.
NOMINATIONS. CCB's Bylaws do not contain specific provisions restricting
or conditioning nominations of directors. CCB's directors need not be North
Carolina residents. Under North Carolina bank law, each director of CCB must
beneficially own unencumbered shares of CCB Common Stock having an aggregate
"book value" of at least $1,000, and at least 75% of the directors of CCB Bank
must be residents of North Carolina.
Stone Street's Bylaws provide that nominations for election as director,
other than those made by Stone Street's Board, must be in a writing delivered
to the Secretary of Stone Street no less than 50 or more than 90 days prior to
the meeting of shareholders at which a vote on such nominees will be taken.
North Carolina savings bank law requires Stone Street's directors to have a
significant ownership interest in Stone Street stock.
BUSINESS COMBINATIONS AND CHANGES IN CONTROL
HIGH VOTE PROVISIONS. In general, the NCBCA requires that any merger,
share exchange, voluntary liquidation or transfer of substantially all the
assets (other than in the ordinary course of business) of a business
corporation be approved by the corporation's shareholders by a majority of the
votes entitled to be cast on the proposed transaction. CCB's Restated Articles
and Stone Street's Charter, however, contain "supermajority" provisions that,
in the case of certain business combination transactions, require a higher vote
of CCB's or Stone Street's shareholders than otherwise would be required by the
NCBCA.
CCB's supermajority provision ("CCB's 85% Vote Requirement") requires that
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any securities
exchange or otherwise, certain "CCB Business Combinations" with an "Interested
Shareholder" (as those terms are defined below) require the affirmative vote of
both (i) the holders of at least 85% of each class of outstanding shares of
CCB's capital stock entitled to vote generally in the election of directors
(each voting separately as a class), and (ii) the holders of at least a
majority of the issued and outstanding voting stock of CCB held by persons
other than the Interested Shareholder or an affiliate or associate of the
Interested Shareholder. However, CCB's 85% Vote Requirement will not apply in
the case of a CCB Business Combination that has been approved by a majority of
CCB's directors who are not affiliated with the Interested Shareholder and who
become directors before the Interested Shareholder became such (the "CCB
Continuing Directors") or which satisfies the "CCB Fair Price Provisions" (as
described below) also contained in the CCB Restated Articles.
The term "CCB Business Combination" generally includes:
o any merger or consolidation of CCB or a subsidiary with an Interested
Shareholder or an affiliate or associate of an Interested Shareholder;
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with an Interested Shareholder or an affiliate or
associated of an Interested Shareholder of all or substantially all, or as
much as 10% of, the assets or businesses of CCB or any subsidiary;
o any purchase, exchange, lease or other acquisition by CCB or any
subsidiary of all or substantially all, or as much as 10% of, the assets
or businesses of an Interested Shareholder or an affiliate or associate of
an Interested Shareholder;
o the issuance or transfer of any securities of CCB or any subsidiary to an
Interested Shareholder or an affiliate or associate of an Interested
Shareholder for consideration having a value of more than $5 million;
59
o the adoption of any plan proposed by or on behalf of an Interested
Shareholder or an affiliate or associate of an Interested Shareholder for
the liquidation or dissolution of CCBF; and
o any recapitalization or reclassification of securities, or any merger or
consolidation of CCB with any of its subsidiaries, or any other
transaction (whether or not involving an Interested Shareholder) that
would have the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of CCB or any subsidiary which is directly or
indirectly owned by an Interested Shareholder or an affiliate or associate
of an Interested Shareholder.
An "Interested Shareholder" for purposes of CCB's 85% Vote Requirement
generally is any person who: (i) together with his or its affiliates,
beneficially owns, directly or indirectly, 20% or more of any class of CCB's
outstanding voting stock, (ii) is an affiliate of CCB and at any time within
the preceding two years beneficially owned, directly or indirectly, 20% or more
of any class of CCB's outstanding voting stock; or (iii) is an assignee of or
has otherwise succeeded to any shares of any class of outstanding voting stock
which at any time within the preceding two years were beneficially owned by any
Interested Shareholder.
Stone Street's Charter requires the affirmative vote of 75% of the
outstanding Stone Street shares entitled to vote to approve a merger,
consolidation, or other business combination, unless the transaction is
approved, prior to consummation, by the vote of at least 75% of the number of
"Stone Street's Continuing Directors" ("Stone Street's 75% Vote Requirement").
The "Stone Street Continuing Directors" generally includes all members of Stone
Street's Board of Directors who are not affiliated with any individual,
partnership, trust or other person or entity (or the affiliates and associates
of such person or entity) which is a beneficial owner of 10% or more of the
Stone Street Common Stock. The Stone Street 75% Vote Requirement could tend to
make the acquisition of Stone Street more difficult to accomplish without the
cooperation or favorable recommendation of its Board of Directors.
CCB FAIR PRICE PROVISIONS. A provision of CCB's Restated Articles (the
"CCB Fair Price Provisions") provides that the CCB 85% Vote Requirement will
not apply in the case of a CCB Business Combination if:
(i) the aggregate consideration to be received per share of CCB stock
by CCB's shareholders is not less than the higher of:
o the highest price per share paid by the Interested Shareholder for CCB
Common Stock within two years preceding the announcement of the CCB
Business Combination or the date the person became an Interested
Shareholder; and
o the fair market value per share of CCB Common Stock on such announcement
date or on the date the person became an Interested Shareholder;
(ii) the aggregate consideration to be received by CCB's shareholders
per share of any other class of CCB's voting stock other than the
CCB stock is not less than the higher of:
o the highest price per share paid by the Interested Shareholder for shares
of such other class of voting stock within two years preceding the
announcement of the CCB Business Combination or the date the person
became an Interested Shareholder,
o the highest preferential amount per share to which holders of shares of
such other class are entitled in the event of any liquidation,
dissolution or winding up of CCB; and
o the fair market value per share of such other class on such announcement
date or on the date the person became an Interested Shareholder;
(iii) the consideration to be received by CCB's shareholders is in cash
or in the same form as the consideration paid by the Interested
Shareholder in acquiring shares already owned (provided, that if
60
the Interested Shareholder has paid varying forms of consideration, the
form of consideration paid to CCB's shareholders in the CCB Business
Combination shall either be cash or in the form used to acquire the
largest number of shares of such class of voting stock already owned);
(iv) except as approved by the CCB Continuing Directors, after the
Interested Shareholder has become such and prior to consummation of
the CCB Business Combination:
o there has been no failure to pay any regular quarterly dividend on any
outstanding Preferred Stock or reduction in the annual dividend rate on
CCB stock, and
o the Interested Shareholder shall not have acquired beneficial ownership
of any additional shares of CCB voting stock;
(v) after becoming an Interested Shareholder, such person shall not
have received the benefit of certain financial assistance or tax
advantages; and
(vi) a proxy statement in conformity with the 1934 Act and regulations
thereunder shall be mailed to all CCB shareholders.
STONE STREET MERGER FACTORS. Stone Street's Charter provides that, when
evaluating a proposed business combination, its Board of Directors shall give
due consideration to all relevant factors in determining what is in the best
interests of Stone Street and its shareholders. Factors considered may include:
o the effect that accepting such an offer would have on customers,
borrowers and creditors;
o the ability of Stone Street and its subsidiaries to fulfill the
objectives of a depository institution and holding company under
applicable law;
o the financial circumstances of the person proposing the combination and
their possible effect on Stone Street, its subsidiaries and its
communities;
o the character of the persons proposing the business combination; and
o the prospects that the business combination will be concluded
successfully.
This provision may be viewed as making acquisition of Stone Street more
difficult to accomplishing, by person who contend that directors can consider
only proposed financial returns to shareholders in determining the best
interests of the Corporation and shareholders.
NORTH CAROLINA SHAREHOLDER PROTECTION ACT. The North Carolina Shareholder
Protection Act (the "Shareholder Protection Act") generally requires that,
unless certain "fair price" and procedural requirements are satisfied, an
affirmative vote of 95% of a corporation's voting shares is required to approve
certain business combination transactions with another entity that is the
beneficial owner, directly or indirectly, of more than 20% of the corporation's
voting shares or which is an affiliate of the corporation and previously has
been a 20% beneficial holder of such shares. The Shareholder Protection Act is
applicable to CCB. It is not applicable to Stone Street.
CONTROL SHARE ACQUISITION ACT. The North Carolina Control Share
Acquisition Act (the "Control Share Act") generally provides that, except as
provided below, "Control Shares" will not have any voting rights. Control
Shares are shares acquired by a person under certain circumstances which, when
added to other shares owned, would give such person effective control over
one-fifth, one-third or a majority of all voting power in the election of the
corporation's directors. However, voting rights will be restored to Control
Shares by resolution approved by the affirmative vote of the holders of a
majority of the corporation's voting stock (other than shares held by the owner
of the Control Shares, officers of the corporation, and directors of the
corporation). If voting rights are granted to Control Shares which give the
hold a majority of all voting power
61
in the election of the corporation's directors, then the corporation's other
shareholders may require the corporation to redeem their shares at their fair
value. The Control Share Act is applicable to CCB. It is not applicable to
Stone Street.
AMENDMENT OF ORGANIZATIONAL DOCUMENTS
CCB RESTATED ARTICLES. Subject to certain conditions, an amendment to
CCB's Restated Articles may be effected if the amendment is approved by the
vote of the holders of a majority of the CCB Common Stock present at the
shareholders meeting at which such amendment proposal is considered. However,
unless recommended to CCB's shareholders by a vote of three-fourths of the CCB
Continuing Directors, the affirmative vote of both (i) the holders of not less
than 85% of each class of CCB's outstanding voting stock (each voting
separately as a class) and (ii) the holders of a majority of outstanding CCB
voting stock held by persons other than an Interested Shareholder or any
affiliate or associate of an Interested Shareholder, is required to amend or
repeal, or to adopt provisions inconsistent with, the provisions of the CCB 85%
Vote Requirement and the CCB Fair Price Provisions.
STONE STREET CHARTER. An amendment to Stone Street's Charter may be
effected by a vote of the holders of a majority of the Stone Street Common
Stock present at a shareholders meeting at which such amendment is considered;
provided, however, that the Stone Street 75% Vote Requirement may not be
amended, repealed or modified, directly or indirectly, except (a) if the
proposal has been adopted by at least 75% of the Stone Street Continuing
Directors, upon the affirmative vote of the holders of a majority of Stone
Street's shares, or (b) if such director action has not occurred, upon the
affirmative vote of the holders of 75% of Stone Street's shares.
BYLAWS. CCB's Bylaws may be amended or repealed, and new Bylaws may be
adopted, by the affirmative vote of a simple majority of CCB's directors or by
the affirmative vote of the holders of a majority of the shares of CCB Common
Stock represented, in person or by proxy, at a shareholders' meeting; provided,
however, that any Bylaw approved by CCB's shareholders may be amended or
repealed only by a vote of the shareholders and any Bylaw providing for a
higher Board or shareholder vote requirement for its amendment or repeal may be
amended or repealed by such higher vote. Stone Street's Bylaws have
substantially the same provisions.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
Certain of the provisions of CCB's Restated Articles and Bylaws discussed
above may have the effect of preventing, discouraging or delaying a change in
control of CCB not approved by its Board of Directors, but pursuant to which
its shareholders might receive a substantial premium for their shares over
current market prices. As a result, shareholders who might desire to
participate in such a transaction may not have an opportunity to do so.
The authority of CCB's Board of Directors to issue Preferred Stock with
such rights and privileges as it may deem appropriate may enable such Board to
prevent a change in control despite a shift in ownership of CCB Common Stock.
In addition, such Board's power to issue additional shares of CCB Common Stock
may help delay or discourage a change in control by increasing the number of
shares needed to gain control.
The ability of CCB's Board to expand the number of directors up to 30,
without shareholder approval, and to fill vacancies resulting from such an
increase, may allow the Board to prevent, for a period of time, a person or
entity owning a majority of the voting shares of CCB from electing a majority
of the directors of CCB's Board. Further, the overall effect of the
classification of CCB's Board may be to delay a dissatisfied shareholder or
anyone who obtains a majority of the CCB Common Stock from electing its
designees to a majority of the seats on the CCB Board.
62
The CCB 85% Vote Requirement is designed to make more difficult an
acquisition of CCB by an Interested Shareholder who has accumulated a
sufficient number of shares of CCB Common Stock to influence or cause a CCB
Business Combination on terms favoring or giving preferential treatment to the
Interested Shareholder. Should such a CCB Business Combination be proposed and
not receive the approval of CCB Continuing Directors, absent compliance with
the CCB Fair Price Provisions, the holders of a small minority of CCB Common
Stock who elect to oppose the proposed CCB Business Combination could prevent
the consummation of such transaction.
The CCB Fair Price Provisions are designed to discourage attempts to take
over CCB in nonnegotiated transactions utilizing two-tier pricing tactics
(which typically involve the accumulation of a substantial block of the target
corporation's Stock followed by a merger or other reorganization of the
acquired company on terms determined by the purchaser). Therefore, due to the
difficulties of complying with the requirements of such provisions, they have
an anti-takeover effect and generally may discourage attempts to obtain control
of CCB. As a result, holders of CCB Stock may be deprived of an opportunity to
sell their shares at a premium above the market price. In addition, the CCB
Fair Price Provisions would give veto power to the holders of a minority of the
shares of CCB's voting shares, and could give veto power to a minority of CCB's
Board of Directors, with respect to a CCB Business Combination, which a
majority of the shareholders and directors may believe to be desirable and
beneficial. In any CCB Business Combination not receiving the requisite
approval of CCB's shareholders or directors, requirements regarding minimum
price, while providing objective pricing criteria, could be arbitrary and not
indicative of value. The purpose of the CCB Fair Price Provisions is to
encourage potential acquirors to engage in arm's length negotiations with CCB
before attempting takeover transactions in order to provide protection for CCB
and its shareholders and to insure that all shareholders receive a fair price
for their shares. These provisions also are intended to prevent an acquiror
from obtaining an initial position and thereafter acquiring CCB's remaining
shares for a lower price or with a less desirable form of consideration.
Similarly, CCB's Rights Plan may have an anti-takeover effect. The Rights
Plan would enable CCB's existing shareholders to purchase shares of Series A
Preferred Stock at the stated Purchase Price or a number of shares of CCB
Common Stock equal in value to twice the Purchase Price. The effect of the
Rights Plan may be to discourage an uninvited or unfriendly attempt to acquire
control of CCB as the effect of purchases of Series A Preferred Stock or CCB
Common Stock likely would be to cause an Acquiring Person to suffer substantial
dilution of its voting power and significant deterioration in the value of its
shares.
The cumulative impact of the applicability of the Shareholder Protection
Act and the Control Share Act is to render more difficult, or to discourage, a
merger, tender offer or proxy contest, or the assumption of control by the
holder of a large block of CCB's voting securities, and would make more
difficult any attempt to remove incumbent management, even if any one or more
of the foregoing matters may be favorable to, or in the bests interests, of
CCB's shareholders.
INDEMNIFICATION
The NCBCA provides for indemnification by a corporation of 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.
PERMISSIBLE INDEMNIFICATION. Under the NCBCA, a corporation may, but is
not required to, indemnify any such person against liability and expenses
incurred in any such proceeding, provided such person conducted himself or
herself in good faith and (i) in the case of conduct in his or her official
capacity, reasonably believed that his or her conduct was in the corporation's
best interests, and (ii) in all other cases, reasonably believed that his or
her conduct was at least not opposed to the corporation's best interests; and,
in the case of
63
a criminal proceeding, where he or she had no reasonable cause to believe his
or her conduct was unlawful. However, 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,
the NCBCA 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 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 of 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 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).
VOLUNTARY INDEMNIFICATION. In addition to and separate and apart from
"permissible" and "mandatory" indemnification described above, a corporation
may, by charter, bylaw, contract, or resolution, indemnify or agree to
indemnify any one or more of its directors, officers, employees or agents
against liability and expenses in any proceeding (including any 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. However, the
corporation may not indemnify or agree to indemnify a person against liability
or expenses he may incur on account of activities which were at the time taken,
known or believed by such person to be clearly in conflict with the best
interests of the corporation. 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 attorney's 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.
PARTIES ENTITLED TO INDEMNIFICATION. The NCBCA 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 CCB. Subject to restrictions as are provided by federal
securities law, CCB's Bylaws provide for indemnification of CCB's directors and
officers to the fullest extent permitted by the NCBCA, and
64
require its Board of Directors to take all actions necessary and appropriate to
authorize such indemnification. Stone Street's Bylaws contain substantially the
same provisions.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling CCB or Stone Street
pursuant to CCB's Restated Articles, CCB's Bylaws, the Merger Agreement, or the
NCBCA, CCB and Stone Street have been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and, therefore, is unenforceable.
RELEASE OF DIRECTOR LIABILITY. As discussed above, CCB's Restated Articles
eliminate, to the fullest extent permitted by the NCBCA, the personal liability
of its directors in any action by or in the right of CCB or otherwise for
monetary damages for breach of their duties as directors.
LEGAL MATTERS
The validity of the shares of CCB Common Stock to be issued to Stone
Street shareholders in connection with the Merger will be passed upon for CCB
by Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., who serves as counsel
to CCB with respect to the acquisition transactions. Robert A. Singer, a
partner in such firm, beneficially owns, or has sole or shared voting control
as a trustee or otherwise over, a total of 11,906 shares of CCB Common Stock.
Certain legal matters pertaining to Stone Street will be passed upon Poyner &
Spruill L.L.P., special counsel to Stone Street.
EXPERTS
The consolidated financial statements of CCB as of December 31, 1998 and
1997 and for each of the years in the three-year period ended December 31, 1998
have been incorporated by reference herein in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Stone Street as of December 31,
1998 and 1997 and for each of the years in the three-year period ended December
31, 1998 have been incorporated by reference herein in reliance upon the report
of Weir Smith Jones Elliott & Miller, independent certified public accountants,
and upon the authority of said firm as experts in accounting and auditing.
FORWARD LOOKING STATEMENTS
This Proxy Statement - Prospectus contains certain forward-looking
statements with respect to the anticipated financial condition, results of
operations and business of CCB after its acquisition of Stone Street. These
forward-looking statements are based on estimates, beliefs and assumptions made
by CCB's management and are not guarantees of the impact of the acquisition
upon CCB or CCB's future performance. Factors that may cause actual results to
differ from those expressed or implied include, but are not limited to:
o possible cost savings from the acquisition may not be fully realized
within the estimated time frame;
o deposit attrition, customer loss or revenue loss may be greater than
expected;
o costs or difficulties related to the integration of the companies may be
greater than expected;
o competitive pressures among depository and other financial institutions
may increase significantly;
o changes in the interest rate environment may reduce margins;
o changes in technology, including Year 2000 compliance issues;
65
o changes in economic or business conditions may be less favorable than
expected, resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit; and
o legislative, regulatory or tax changes may adversely affect the business
in which the companies are engaged.
Other factors that may cause actual results to differ from those expressed or
implied are set forth in the CCB's 1998 Annual Report on Form 10-K, Stone
Street's 1998 Annual Report on Form 10-K and subsequent filings of CCB and
Stone Street under the 1934 Act, all of which reports and filings are
incorporated herein by reference.
OTHER MATTERS
Stone Street's Board of Directors does not intend to bring any matter
before the Special Meeting other than as specifically set forth in this Proxy
Statement - Prospectus, it knows of no other business that will be brought
before the Special Meeting by any other person. However, should other matters
properly be presented for action at the Special Meeting, the persons named in
appointments of proxy to represent shareholders at the Special Meeting, or
their substitutes, will be authorized to vote shares represented by those
appointments of proxy according to their best judgment on such matters.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
It is presently anticipated that if the acquisition transactions are not
completed, Stone Street's 2000 Annual Meeting of Shareholders will be held on
April 18, 2000. In order for shareholder proposals to be included in the Stone
Street's proxy materials for that meeting, such proposals must be received by
Stone Street's Secretary of its principal executive office no later than
November 15, 1999, and meet all other applicable requirements for inclusion in
the proxy statement.
In the alternative, a shareholder may commence his or her own proxy
solicitation and present a proposal from the floor at the 2000 Annual Meeting.
In order to do so, the shareholder must notify Stone Street's Secretary in
writing, at its principal executive office no later than January 28, 2000, of
his or her proposal. If the shareholder desires to prevent Stone Street from
voting proxies solicited by its Board (under the discretionary authority
granted by the form of proxy to be solicited by Stone Street's Board of
Directors for use at the 2000 Annual Meeting) on his or her proposal, the
notice must also state the shareholder's intent to solicit the required number
of votes for passage of his or her proposal and the shareholder must provide
evidence to Stone Street that the solicitation has occurred.
WHERE YOU CAN GET MORE INFORMATION
Because CCB and Stone Street are subject to the informational requirements
of the 1934 Act, they file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by CCB or Stone Street can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices located at Room 1204, Everett McKinley
Dirksen Building, 219 South Dearborn Street, Chicago, Illinois and at Room
1028, Federal Building, 26 Federal Plaza, New York, New York 10006. You can
obtain copies of such material by mail from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a web site (http://www.sec.gov) that contains
reports, proxy statements and other information regarding CCB, Stone Street and
other registrants. Copies of reports, proxy statements and other information
filed by CCB with the NYSE may be inspected at 20 Broad Street, New York, New
York 10005, and copies of reports, proxy statements and other information filed
by Stone Street with the AMEX may be inspected at 86 Trinity Place, New York,
New York 10006-1881.
66
Additional information about CCB is also available at its web site,
http://www.CCBonline.com. Stone Street maintains a web site,
http://www.stonestreetmocksville.com, which provides additional information
about it.
CCB has filed with the Commission a Registration Statement on Form S-4
under the 1933 Act with respect to the CCB Common Stock offered in the Merger.
This Proxy Statement - Prospectus is part of that Registration Statement but
does not contain all the information set forth in the Registration Statement as
permitted by the Commission. If you would like to be more informed about CCB
and its Common Stock, please refer to the Registration Statement and its
exhibits which you may review without charge at Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also make
copies of all or any part of the Registration Statement at the Commission's
office in Washington, D.C. upon payment of the prescribed fees. In addition,
copies of the exhibits to the Registration Statement may be obtained from W.
Harold Parker, Jr., Senior Vice President and Controller, CCB Financial
Corporation, 111 Corcoran Street, Durham, North Carolina 27702 (919) 683-7631.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by CCB with the Commission (SEC
File No. 0-12358) are incorporated by reference into this Proxy Statement -
Prospectus: (i) CCB's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998; (ii) CCB's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999; (iii) CCB's Current Reports on Form 8-K dated April 14,
1999 and April 27, 1999; and (iv) the description of CCB Common Stock contained
in its current report on Form 8-K dated July 1, 1983, as amended by its Form
8-K/A2 filed June 14, 1996, its Form 8-A dated July 29, 1996 and its Form
8-K/A3 filed October 1, 1998, as each is amended by CCB's subsequent reports
filed under the 1934 Act.
The following documents previously filed by Stone Street with the
Commission are incorporated by reference into this Proxy Statement -
Prospectus: (i) Stone Street's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998; (ii) Stone Street's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999; (iii) Stone Street's Current Report on Form
8-K dated April 14, 1999, as each is amended by Stone Street's subsequent
reports filed under the 1934 Act.
Copies of those documents (other than exhibits to such documents which are
not specifically incorporated by reference into such documents) will be
provided without charge upon request as described below. Requests for documents
regarding CCB should be directed to W. Harold Parker, Jr., Senior Vice
President and Controller, CCB Financial Corporation, Post Office Box 931,
Durham, North Carolina 27702, telephone (919) 683-7631. Requests for documents
regarding Stone Street should be directed to Marjorie D. Foster, Stone Street
Bancorp, Inc., 232 South Main Street, Mocksville, North Carolina 27028,
telephone (336) 751-5936. In order to ensure timely delivery of the documents
before the Special Meeting, any such requests should be made by September 7,
1999.
In addition, all other documents filed by CCB or Stone Street pursuant to
Section 13(a), 14 or 15(d) of the 1934 Act prior to the date of Stone Street's
Special Meeting has been finally adjourned shall be deemed to be incorporated
by reference herein and will be deemed to be modified or superseded for
purposes of this Proxy Statement - Prospectus 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 hereof.
67
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APPENDIX A
AMENDED AND RESTATED
AGREEMENT OF COMBINATION
BY AND AMONG
CCB FINANCIAL CORPORATION,
CCBFC, INC.
AND
CENTRAL CAROLINA BANK AND TRUST COMPANY,
AND
STONE STREET BANCORP, INC.
AND
STONE STREET BANK & TRUST
----------
DATED AS OF JUNE 22, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS...................................................2
ARTICLE II
THE MERGERS AND RELATED TRANSACTIONS
2.1 Merger and Second Merger................................................................................13
2.2 Bank Merger.............................................................................................13
2.3 Time and Place of Closing...............................................................................13
2.4 Effective Time..........................................................................................13
2.5 Subsequent Actions......................................................................................14
2.6 Advisory Directors......................................................................................14
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares....................................................................................15
3.2 Conversion of Options...................................................................................17
3.3 Anti-Dilution Provisions................................................................................17
3.4 Shares Held by CCBF or Stone Street.....................................................................17
3.5 Fractional Shares.......................................................................................18
3.6. Transfers...............................................................................................18
ARTICLE IV
EXCHANGE OF SHARES
4.1 Exchange Procedures.....................................................................................18
4.2 Voting and Dividends....................................................................................20
(i)
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF STONE STREET
5.1 Organization, Standing, and Authority...................................................................20
5.2 Capital Stock...........................................................................................21
5.3 Stone Street Subsidiaries...............................................................................21
5.4 Authorization of Merger, Bank Merger and Related Transactions...........................................22
5.5 SEC Filings; Financial Statements.......................................................................23
5.6 Books and Corporate Records.............................................................................23
5.7 Absence of Undisclosed Liabilities......................................................................24
5.8 Tax Matters.............................................................................................24
5.9 Allowance for Loan Losses...............................................................................25
5.10 Assets..................................................................................................25
5.11 Compliance with Laws....................................................................................26
5.12 Employee Benefit Plans..................................................................................26
5.13 Commitments and Contracts...............................................................................29
5.14 Material Contract Defaults..............................................................................30
5.15 Legal Proceedings.......................................................................................30
5.16 Absence of Certain Changes or Events....................................................................30
5.17 Reports.................................................................................................31
5.18 Insurance...............................................................................................31
5.19 Labor...................................................................................................31
5.20 Material Interests of Certain Persons...................................................................31
5.21 Registration Obligations................................................................................31
5.22 Environmental Matters...................................................................................31
5.23 Accounting; Tax; Regulatory Matters.....................................................................33
5.24 Brokers and Finders.....................................................................................33
5.25 State Takeover Laws.....................................................................................33
5.26 Charter Provisions......................................................................................33
5.27 Derivatives Contracts...................................................................................33
5.28 Y2K Compliance..........................................................................................34
5.29 Statements True and Correct.............................................................................34
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CCBF
6.1 Organization, Standing, and Authority...................................................................34
6.2 Capital Stock...........................................................................................35
6.3 CCBF Subsidiaries.......................................................................................35
6.4 Authorization of Merger and Related Transactions........................................................36
(ii)
6.5 SEC Filings; Financial Statements.......................................................................36
6.6 Absence of Undisclosed Liabilities......................................................................37
6.7 Tax Matters.............................................................................................37
6.8 Compliance With Laws................................................................................... 38
6.9 Employee Benefit Plans..................................................................................38
6.10 Legal Proceedings.......................................................................................41
6.11 Absence of Certain Changes or Events....................................................................41
6.12 Reports.................................................................................................41
6.13 Accounting; Tax; Regulatory Matters.....................................................................42
6.14 Brokers and Finders.....................................................................................42
6.15 Capital Stock Issued in Merger..........................................................................42
6.16 Derivatives Contracts...................................................................................42
6.17 Y2K Compliance..........................................................................................42
6.18 Statements True and Correct.............................................................................42
ARTICLE VII
CONDUCT PRIOR TO THE EFFECTIVE TIME
7.1 Affirmative Covenants of Stone Street...................................................................43
7.2 Negative Covenants of Stone Street......................................................................43
7.3 Covenants of CCBF.......................................................................................45
7.4 Adverse Changes in Condition............................................................................46
7.5 Reports.................................................................................................46
7.6 Confidentiality.........................................................................................46
7.7 Current Information.....................................................................................47
7.8 Registration Statement; Regulatory Matters..............................................................47
7.9 Directors' and Shareholders' Approvals..................................................................48
7.10 Agreements of Affiliates................................................................................48
7.11 Delivery of Monthly Financial Statements ...............................................................49
7.12 Tax-Free Reorganization.................................................................................49
7.13 Press Releases..........................................................................................49
7.14 Exchange Listing........................................................................................49
7.15 Miscellaneous Agreements and Consents...................................................................49
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Indemnification and Insurance...........................................................................50
8.2 Employee Contracts; Employee Benefits; Director Benefits................................................51
8.3 Modification of Employee Benefits.......................................................................51
(iii)
ARTICLE IX
CONDITIONS
9.1 Conditions to Each Party's Obligations to Effect the Merger.............................................52
9.2 Conditions to the Obligations of Stone Street and Mocksville............................................54
9.3 Conditions to the Obligations of CCBF, CCBFC and CCB Bank ..............................................54
ARTICLE X
TERMINATION
10.1 Termination.............................................................................................55
10.2 Effect of Termination...................................................................................56
10.3 Expenses................................................................................................56
10.4 Wrongful Termination....................................................................................57
10.5 Termination Fee.........................................................................................57
ARTICLE XI
GENERAL PROVISIONS
11.1 Non-Survival of Representations, Warranties and Covenants Following
the Effective Time....................................................................................57
11.2 Entire Agreement........................................................................................57
11.3 Amendments..............................................................................................58
11.4 Waivers.................................................................................................58
11.5 No Assignment...........................................................................................58
11.6 Notices.................................................................................................59
11.7 Severability............................................................................................60
11.8 Governing Law...........................................................................................60
11.9 Counterparts............................................................................................60
11.10 Captions; Articles; and Section.........................................................................60
11.11 Interpretations.........................................................................................60
11.12 Enforcement of Agreement................................................................................60
APPENDIX A Plan of Merger
APPENDIX B Bank Plan of Merger
APPENDIX C Holding Company Plan of Merger
APPENDIX D Affiliate Agreement
(iv)
AMENDED AND RESTATED AGREEMENT OF COMBINATION
This AMENDED AND RESTATED AGREEMENT OF COMBINATION (this "Agreement")
is made and entered into as of June 22, 1999 by and among CCB Financial
Corporation, a North Carolina corporation ("CCBF"), CCBFC, Inc., a North
Carolina corporation and a newly-formed, wholly-owned subsidiary of CCBF
("CCBFC"), and Central Carolina Bank and Trust Company, a North Carolina
commercial bank and a wholly-owned subsidiary of CCBF ("CCB Bank"), and Stone
Street Bancorp, Inc., a North Carolina corporation ("Stone Street"), and Stone
Street Bank & Trust, a North Carolina savings bank formerly known as "Mocksville
Savings Bank, Inc., SSB" and a wholly-owned subsidiary of Stone Street
("Mocksville"), and amends and restates the Agreement of Combination, dated as
of April 13, 1999, among the foregoing parties.
W I T N E S S E T H:
WHEREAS, CCBF is a registered bank holding company and Stone Street is
a registered savings bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHCA"); and
WHEREAS, at the Effective Time, CCBFC shall merge with and into Stone
Street (the "Merger"), with Stone Street as the surviving corporation (the
"Surviving Corporation"); and,
WHEREAS, immediately after the Effective Time, Stone Street shall merge
with and into CCBF (the "Second Merger"), with CCBF as the surviving corporation
of the Second Merger (the "Resulting Corporation"), and Mocksville shall then
merge with and into CCB Bank ("Bank Merger"), with CCB Bank as the surviving
financial institution (the "Surviving Bank");
WHEREAS, the Executive Committees of the Boards of Directors of CCBF
and CCB Bank, the Board of Directors of CCBFC, and the Boards of Directors of
Stone Street and Mocksville have resolved, as applicable, that the Merger, the
Bank Merger, the Second Merger, and the other transactions described herein are
in the best interests of the parties and their respective shareholders and have
approved this Agreement and authorized the execution hereof; and
WHEREAS, the Boards of Directors of CCBF and CCB Bank, the shareholder
of CCBFC and CCB Bank, the shareholders of Stone Street and the shareholder of
Mocksville shall consider and act upon resolutions to approve and adopt this
Agreement and to authorize the execution and delivery of such other agreements
and other documents as are necessary to consummate, as applicable, the Merger,
the Bank Merger and the Second Merger and such other transactions; and
WHEREAS, CCBF, CCBFC, CCB Bank, Stone Street and Mocksville desire to
provide for certain undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1
ARTICLE I
DEFINITIONS
"Action" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or other proceeding relating to
or affecting a Party, its business, its Assets (including Contracts related to
it), or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities; provided such term shall include, notices, demand
letters, or requests from any Environmental Agency.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"Affiliate Agreement" shall mean the Affiliate Agreement substantially
in the form of Appendix D hereto.
"Agreement" shall mean this Amended and Restated Agreement of
Combination.
"Allowance" shall have the meaning set forth in Section 5.9 of this
Agreement.
"AMEX" shall mean the American Stock Exchange, Inc.
"Articles of Merger" shall have the meaning set forth in Section 2.4(a)
of this Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"Bank Act" shall mean Chapter 53 of the North Carolina General
Statutes.
"Bank Articles of Merger" shall have the meaning set forth in Section
2.4(c) of this Agreement.
"Bank Effective Time" shall have the meaning set forth in Section
2.4(c) of this Agreement.
2
"Bank Merger" shall have the meaning set forth in the preamble to this
Agreement.
"BHCA" shall have the meaning set forth in the preamble to this
Agreement.
"Cash Election Shares" shall have the meaning set forth in Section
3.1(c) of this Agreement.
"CCBF" shall have the meaning set forth in the preamble to this
Agreement.
"CCBFC" shall have the meaning set forth in the preamble to this
Agreement.
"CCB Bank" shall have the meaning set forth in the preamble to this
Agreement.
"CCBF Common Stock" shall have the meaning set forth in Section 3.1 of
this Agreement.
"CCBF Financial Statements" shall mean (i) the audited consolidated
balance sheets of CCBF as of December 31, 1998 and 1997 and the related audited
consolidated statements of income, shareholders' equity and cash flows
(including related notes, schedules, if any, and independent auditors' reports)
for each of the years ended December 31, 1998, 1997 and 1996, as have been
Previously Disclosed and (ii) CCBF's unaudited consolidated balance sheet
(including related notes and schedules, if any) and the related unaudited
consolidated statements of income, shareholders' equity and cash flows for each
three-month period subsequent to January 1, 1999 as will be provided to Stone
Street prior to the Effective Time.
"CCBF Rights" shall have the meaning set forth in Section 3.1 of this
Agreement.
"CCBF Rights Plan" shall have the meaning set forth in Section 3.1 of
this Agreement.
"CCBF SEC Reports" shall have the meaning set forth in Section 6.5 of
this Agreement.
"CCBF Stock Price" shall mean the closing sales price of CCBF Common
Stock on the NYSE - Composite Transactions List (as reported by THE WALL STREET
JOURNAL or, if not reported thereby, any other authoritative source selected by
CCBF) on the trading day, or the average closing sales price of CCBF Common
Stock (determined as provided previously in this definition) over the number of
consecutive trading days, specified in the context in which the defined term is
used.
"CCBF Subsidiaries" shall mean any or all of CCB Bank, American Federal
Bank, F.S.B., and Central Carolina Bank - Georgia, all of which are subsidiaries
of CCBF, and the following direct or indirect subsidiaries of CCBF: CCB
Investment and Insurance Service Corporation, Southland Associates, Inc., CCBDE,
Inc., Salem Trust Company; Corcoran Holdings, Inc.; AMFEDDE, Inc.; McBee
Holdings, Inc.; Finance South, Inc.; Mortgage North, Inc.; Greenville
Participations, Inc.; and, American Service Corporation of S.C.
"Closing" shall have the meaning set forth in Section 2.3 of this
Agreement.
3
"Closing Date" shall have the meaning set forth in Section 2.3 of this
Agreement.
"Commission" shall mean the North Carolina Banking Commission.
"Commissioner" shall mean the North Carolina Commissioner of Banks.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets, or business.
"Costs" shall have the meaning set forth in Section 10.3 of this
Agreement.
"Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit.
"Derivatives Contract" shall have the meaning set forth in Section 5.27
of this Agreement.
"D&O Insurance" shall have the meaning set forth in Section 8.1(c) of
this Agreement.
"Effective Time" shall mean the time and date specified pursuant to
Section 2.6 of this Agreement as the effective time of the Merger.
"Electing Holder" shall have the meaning set forth in Section 3.1(c) of
this Agreement.
"Employee Benefit Plan" shall mean any (i) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (ii) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (iii) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, (iv)
Employee Welfare Benefit Plan or material fringe benefit plan or program, or (v)
stock option, stock purchase, stock appreciation, stock or cash bonus, or
similar plan or arrangement.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
ERISA Section 3(1).
4
"Environmental Agency" means the United States Environmental Protection
Agency or any other federal, state, or local agency responsible for regulating
or enforcing laws, relating to (i) the protection, preservation, or restoration
of the environment (including, without limitation, air, water, vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life, or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release, or disposal of any substance presently listed,
defined, designated, or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, whether by type or by quantity, including any
material containing any such substance as a component.
"Environmental Costs" shall mean the total projected cost of curing all
indicated violations of Environmental Laws and all related remediation required
by applicable Environmental Laws and Environmental Agencies with respect to the
Assets of Stone Street and the Stone Street Subsidiaries, with such total
projected cost being determined by an environmental engineering firm selected by
CCBF, and reasonably satisfactory to Stone Street, and being set forth in a
written report of such firm to CCBF and Stone Street detailing the bases of such
projected costs and the standards used for their determination; provided,
however, that such total projected cost shall be reduced by any insurance
proceeds or governmental reimbursements which at or before the Effective Time
CCBF or Stone Street has received or is entitled to receive under the Law.
"Environmental Law" shall mean any Law, Permit, Consent, Order, or
agreement with any Environmental Agency relating to (i) the protection,
preservation, or restoration of the environment (including, without limitation,
air, water, vapor, surface water, groundwater, drinking water supply, surface
soil, subsurface soil, plant and animal life, or any other natural resource),
and/or (ii) the use, storage, recycling, disposal of any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, whether by type or by quantity, including any
material containing any such substance as a component.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Agent" shall have the meaning set forth in Section 3.6 of
this Agreement.
"Exchange Ratio" shall have the meaning set forth in Section 3.1 of
this Agreement.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"Federal Reserve" shall mean the Federal Reserve Bank of Richmond
acting under delegated authority from the Federal Reserve Board, or any
successor thereto.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System, or any successor thereto.
5
"Fiduciary" shall have the meaning set forth in ERISA Section 3(21).
"GAAP" shall mean generally accepted accounting principles in effect in
the United States from time to time, as applied by the entity in respect of
which the term is used consistently with its past practices.
"Hazardous Materials" shall mean solid waste (as that term is defined
under the Resource Conservation and Recovery Act, 42 U.S.C.A. ss. 6901 ET Seq.
("RCRA"), and the regulations adopted pursuant to RCRA), hazardous waste (as
that term is defined under RCRA, and the regulations adopted pursuant to RCRA),
hazardous substances (as that term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.A. ss. 9601, ET Seq.
("CERCLA"), and the regulations adopted pursuant to CERCLA), and other
pollutants, including, without limitation, any solid, liquid, gaseous, or
thermal irritant or contaminant, such as smoke, vapor, soot, fumes, acids,
alkalis, or chemicals.
"Holding Company Plan of Merger" shall have the meaning set forth in
Section 2.4(b) of this Agreement.
"HSR Act" shall have the meaning set forth in Section 5.4(c).
"IRS" shall mean the Internal Revenue Service.
"Indemnifiable Losses" shall mean any and all Actions, Orders, damages,
penalties, fines, costs, amounts paid in settlement or compromise, Liabilities,
expenses, fees (including attorneys' fees awarded to third parties), court
costs, and reasonable attorneys', expert witnesses', consultants', and
accountants' fees and expenses incurred by an Indemnified Party as a result or
by reason of the Indemnifying Party's breach of its obligations under this
Agreement or violation of Law, except to the extent that such otherwise
Indemnifiable Losses arise as a result or by reason of the Indemnified Party's
breach of its obligations under this Agreement or its violation of Law.
"Knowledge," when used in the phrase "to the Knowledge" or a similar
phrase, shall mean the knowledge of the senior executive officers (including,
without limitation, the senior executive officers responsible for Tax matters)
of CCBF (with respect to CCBF, CCBFC and CCB Bank) or Stone Street (with respect
to Stone Street and Mocksville), as applicable, after reasonable inquiry of the
other executive officers and the directors of CCBF (with respect to CCBF, CCBFC
and CCB Bank) or Stone Street (with respect to Stone Street and Mocksville), as
applicable.
"Liabilities" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
6
"Law" shall mean any federal, state, local or foreign statute, code,
law, ordinance, regulation, rule, code, order, reporting requirement or
licensing requirement, including, without limitation, the BHCA, the Bank Act,
the Savings Bank Act, the FDIA and the NCBCA.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, deed of trust, pledge, reservation, restriction, security interest,
title retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property Taxes
not yet due and payable, (ii) for depository institution Subsidiaries of a
Person, pledges to secure deposits and other Liens incurred in the ordinary
course of the financial institution business, and (iii) Liens which do not
materially impair the use of, title to, or the ability to sell or transfer for
fair value the Assets subject to such Lien.
"Material Adverse Event" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger, the Bank Merger or the other transactions
contemplated by this Agreement, provided that "Material Adverse Event" shall not
be deemed to include the impact of (a) changes in banking and similar Laws of
general applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles generally
applicable to banks, savings banks, and their holding companies, (c) actions and
omissions of a Party (or any of its Subsidiaries) taken with the prior informed
Consent of the other Party in contemplation of the transactions contemplated
hereby, and (d) the direct effects of compliance with this Agreement on the
operating performance of the Parties, including expenses incurred by the Parties
in consummating the transactions contemplated by this Agreement.
"Merger" shall have the meaning set forth in the preamble to this
Agreement.
"Mocksville" shall have the meaning set forth in the preamble to this
Agreement.
"MRP Rights" shall mean the rights of a qualified participant in the
Stone Street MRP Plan to have issued and outstanding shares of Stone Street
Common Stock vested in such participant as provided in the Stone Street MRP
Plan.
"New Building" shall mean the building (and related improvements) under
construction by Mocksville at 915 Valley Road, Mocksville, North Carolina.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"NC SecState" shall mean the North Carolina Secretary of State.
"NYSE" shall mean the New York Stock Exchange, Inc.
7
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"OMC" shall have the meaning set forth in Section 5.24.
"Operating Property" shall mean any property owned, leased, or operated
by the Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property; provided,
however, that with respect to any Operating Property in which a Party or one of
its Subsidiaries holds a security interest only and of which it is neither the
owner nor an operator, all representations, warranties, covenants and
disclosures in this Agreement, or provided pursuant to this Agreement, shall be
to the Knowledge of such Party (and its applicable Subsidiary).
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Ordinary Course of Business" shall mean the ordinary course of
business of the Party or its Subsidiary respecting which this term is used,
conducted in the same manner as theretofore conducted during the two (2) year
period preceding the date of this Agreement and consistent with such Party's or
Subsidiary's past policies, practices, and methods (including with respect to
quantity and frequency) in effect during such two year period.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PCBs" shall have the meaning set forth in Section 5.22 of this
Agreement.
"Party" shall mean either CCBF, CCBFC and CCB Bank (or any of them as
the context requires) or Stone Street and Mocksville (or either of them as the
context requires), and "Parties" shall mean all of the foregoing.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of Person or its securities, Assets, or
business.
8
"Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, a governmental
entity (or any department, agency, or political subdivision thereof).
"Plan of Bank Merger" shall have the meaning set forth in Section
2.4(c) of this Agreement.
"Plan of Merger" shall have the meaning set forth in Section 2.4(a) of
this Agreement.
"Previously Disclosed" shall mean, as to Stone Street, all information
disclosed in a letter delivered by Stone Street to CCBF, and, as to CCBF, all
information disclosed in a letter delivered by CCBF to Stone Street, in each
case making such disclosure specifically referring to this Agreement and
arranged in sections, subsection, and items corresponding to the Sections,
subsections and items of this Agreement applicable thereto, which letters have
been delivered on or before the second business day preceding the date of this
Agreement. Information shall be deemed Previously Disclosed for the purpose of a
given Section, subsection or item only to the extent a specific reference
thereto is made in connection with disclosure of such information at the time of
such delivery.
"Prohibited Transaction" shall have the meaning set forth in ERISA
Section 406 and Tax Code Section 4975.
"Proxy Statement" shall have the meaning set forth in Section 7.8 of
this Agreement.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by CCBF under the 1933 Act
with respect to the offering and sale of the shares of CCBF Common Stock and the
attached CCBF Rights to be issued to the shareholders of Stone Street in
connection with the transactions contemplated by this Agreement.
"Regulatory Agreement" shall have the meaning set forth in Section
5.11(b) of this Agreement.
"Regulatory Approvals" shall have the meaning set forth in Section
2.4(a) of this Agreement.
"Regulatory Authorities" shall mean, collectively, the SEC, the NYSE,
the AMEX, the United States Department of Justice, the Federal Reserve Board,
the Federal Reserve, the FDIC, the Commission, the Commissioner, the Savings
Bank Administrator, and all other federal, state, county, local, or other
governmental or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"Reportable Event" shall have the meaning set forth in ERISA Section
4043.
9
"Resulting Corporation" shall have the meaning set forth in the
preamble to this Agreement.
"Rights" shall mean shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants, or
other binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights or by which a Person is or may be bound to pay
cash by reference to the value, or any increase in the value, of shares of the
capital stock of such Person.
"Savings Bank Act" shall mean Chapter 54C of the North Carolina General
Statutes.
"Savings Bank Administrator" shall mean the Administrator of the
Savings Institutions Division of the North Carolina Department of Commerce.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Document" shall mean any registration statement, proxy statement,
form, document, report, notice or other filing filed by a Person or any
Subsidiary of a Person with the SEC pursuant to the Securities Laws.
"Second Articles of Merger" shall have the meaning set forth in Section
2.4(b) of this Agreement.
"Securities Laws" shall have the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall have the meaning set forth in Section 7.9
of this Agreement.
"Significant Contract" shall mean (a) any Contract which evidences or
secures indebtedness of a Party (other than a deposit) with a balance
outstanding of $25,000 or more, which cannot be redeemed or prepaid at the
option of such Person for an amount which, when added to the outstanding
principal balance, would be less than $25,000, (b) any Contract, except a lease
of real or personal property, to which such Party is a party or by which it is
bound, if (i) such Contract was not made in the Ordinary Course of Business by
such Party, or (ii) the performance or nonperformance of such contract could
either (X) increase the Liabilities or decrease the Assets of the Party, or (Y)
decrease the income or increase the expenses of such Party, in each case by
$25,000 or more over the remaining term of the Contract, exclusive of all
optional renewal periods and extensions of the term; provided, however, that any
such Contract shall not be deemed to be a Significant Contract in the event such
Party has the contractual right to terminate the Contract in question on 30
days' notice or less, without incurring a penalty or premium in excess of
$25,000.
10
It is understood that Significant Contracts do not include loans or commitments
to fund loans or to extend credit.
"Significant Lease" shall mean (a) any lease of real or personal
property, or any sublease of real property, by a Party, as lessee, pursuant to
which such Party reasonably anticipates the payment of aggregate rent, Taxes,
insurance, utilities (if applicable) and other charges in excess of $25,000 over
the remaining term of the lease, exclusive of all optional renewal periods and
optional extensions of the term (provided, however, that any such lease shall
not be deemed a Significant Lease in the event that such Party has the
contractual right to terminate the lease in question on 30 days' notice or less,
without incurring a penalty or premium in excess of $25,000); or (b) any lease
of real or personal property, or any sublease of real property, by such Party,
as lessor, pursuant to which such Party reasonably anticipates the collection of
aggregate rent in excess of $25,000 over the remaining term of the lease,
exclusive of all optional renewal periods and extensions of the term (provided,
however, that any such lease shall not be deemed a Significant Lease in the
event that such Party has the contractual right to terminate the lease in
question on 30 days' notice or less, without incurring a penalty or premium in
excess of $25,000).
"Stone Street" shall have the meaning set forth in the preamble to this
Agreement.
"Stone Street Benefit Plans" shall have the meaning set forth in
Section 5.12(a) of this Agreement.
"Stone Street Common Stock" shall have the meaning set forth in Section
3.1 of this Agreement.
"Stone Street ESOP" shall mean the Employee Stock Ownership Plan of
Mocksville Savings Bank, Inc. SSB.
"Stone Street Financial Statements" shall mean (i) the audited
consolidated balance sheets of Stone Street as of December 31, 1998 and 1997 and
the related audited consolidated statements of income, stockholders' equity and
cash flows (including related notes, schedules, if any, and independent
auditors' reports) for each of the years ended December 31, 1998, 1997 and 1996,
as have been Previously Disclosed, and (ii) Stone Street's unaudited
consolidated balance sheet (including related notes and schedules, if any) and
the related unaudited consolidated statements of income, stockholders' equity
and cash flows for each three-month period ended subsequent to January 1, 1999
as will be provided to CCBF prior to the Effective Time.
"Stone Street MRP Plan" shall mean the Mocksville Savings Bank, Inc.,
SSB Management Recognition Plan.
"Stone Street Options Plans" shall mean the Stone Street Bancorp, Inc.
Stock Option Plan, and all stock option plans and other plans providing for
options to acquire Stone Street Common Stock adopted or assumed by Stone Street.
11
"Stone Street Retirement Plan" shall mean Stone Street's 401(k) Plan.
"Stone Street SEC Reports" shall have the meaning set forth in Section
5.5.
"Stone Street Stock Options" shall mean the options to acquire Stone
Street Common Stock outstanding as of April 13, 1999 under the Stone Street
Options Plan.
"Stone Street Subsidiaries" shall mean Mocksville, Stone Street
Financial Services, Inc. and RAL II, Inc.
"Subsidiaries" shall mean all those non-natural Persons of which the
Person in question either (i) owns or controls 50% or more of the outstanding
equity securities either directly or through an unbroken chain of entities as to
each of which 50% or more of the outstanding equity securities is owned directly
or indirectly by its parent (provided, there shall not be included any such
Person the equity securities of which are owned or controlled in a fiduciary
capacity), (ii) in the case of partnerships, serves as a general partner, (iii)
in the case of a limited liability company, serves as a manager or a managing
member, or (iv) otherwise has the ability to elect a majority of the directors,
trustees, managers, or managing members thereof.
"Surviving Bank" shall have the meaning set forth in the preamble to
this Agreement.
"Surviving Corporation" shall have the meaning set forth in the
preamble to this Agreement.
"Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, AD
VALOREM, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposes or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
"Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, any amendment thereof, and any such document of
an affiliated or combined or unitary group that includes a Party or its
Subsidiaries.
Other terms used herein are defined elsewhere in this Agreement.
12
ARTICLE II
THE MERGERS AND RELATED TRANSACTIONS
2.1 MERGER AND SECOND MERGER. Subject to the terms and conditions of
this Agreement, CCBFC shall be merged with and into Stone Street, with Stone
Street as the Surviving Corporation and with the effect set forth in Section
55-11-06 of the NCBCA. The Articles of Incorporation and Bylaws of Stone Street
and the officers and director of CCBFC shall be those of the Surviving
Corporation. Immediately thereafter, the Surviving Corporation shall be merged
with and into CCBF, with CCBF as the Resulting Corporation and with the effect
set forth in Section 55-11-06 of the NCBCA. The Amended and Restated Articles of
Incorporation (as amended), Amended Bylaws (as amended), officers and directors
of CCBF shall be those of the Resulting Corporation.
2.2 BANK MERGER. Subject to the terms and conditions of this Agreement
and immediately after the Second Merger, Mocksville shall be merged with and
into CCB Bank, with CCB Bank as the Surviving Bank and with the effect set forth
in Sections 53-13 and 53-17 of the Bank Act and Section 54C-40 of the Savings
Bank Act. The Amended and Restated Articles of Incorporation, Bylaws (as
amended), officers and directors of CCB Bank shall be those of the Surviving
Bank.
2.3 TIME AND PLACE OF CLOSING. The closing of the Merger, the Second
Merger, the Bank Merger and the other transactions contemplated hereby (the
"Closing") will take place at the principal offices of CCBF in Durham, North
Carolina at 11:00 o'clock, a.m., on the date that the Effective Time occurs, or
at such other prior time, and at such place, as may be mutually agreed upon by
CCBF and Stone Street (the "Closing Date").
2.4 EFFECTIVE TIME.
(a) Subject to the terms and conditions of this Agreement, the
Merger shall become effective on the date and at the time (the "Effective Time")
on which Articles of Merger containing a Plan of Merger in substantially the
form of Appendix A hereto (the "Plan of Merger") and the other provisions
required by, and executed in accordance with, Section 55-11-05 of the NCBCA (the
"Articles of Merger") shall have been accepted for filing by the NC SecState (or
such later date and time as may be specified in the Articles of Merger). Unless
otherwise mutually agreed upon by CCBF and Stone Street, subject to the terms
and conditions hereof, the Effective Time shall occur on the first business day
following the last to occur of (i) the date that is 30 days after the date of
the order of the Federal Reserve approving the Merger pursuant to the BHCA, (ii)
the effective date of the last required Order or Consent of a Regulatory
Authority approving or exempting the Merger, the Second Merger and the Bank
Merger (the "Regulatory Approvals"), (iii) the expiration of all required
waiting periods after the filing of notices with, or the receipt of Regulatory
Approvals from, all Regulatory Authorities required for consummation of the
Merger, the Second Merger and the Bank Merger, and (iv) the later of the dates
on which the shareholder of CCB Bank and CCBFC and the shareholders of Stone
Street approve this Agreement and the transactions contemplated hereby. The
separate corporate existence of CCBFC shall thereupon cease, and Stone Street
shall be the Surviving Corporation.
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(b) Subject to the terms and conditions of this Agreement, the
Second Merger shall become effective on the date and time on which Articles of
Merger containing a Plan of Merger in substantially the form of Appendix C
hereto (the "Holding Company Plan of Merger") and the other provisions required
by, and executed in accordance with, Section 55-11-05 of the NCBCA (the "Second
Articles of Merger") shall have been accepted for filing by the NC SecState (or
such later date and time as may be specified in the Second Articles of Merger).
The effectiveness of the Second Merger shall only occur subsequent to the
Effective Time and the receipt of all required Regulatory Approvals. The
separate corporate existence of Stone Street shall thereupon cease, and CCBF
shall be the Resulting Corporation.
(c) Subject to the terms and conditions of this Agreement, the
Bank Merger shall become effective in accordance with the provisions of Sections
55-12, 55-13 and 55-17 of the Bank Act and Section 54C-40 of the Savings Bank
Act on the date and time ("Bank Effective Time") on which Articles of Merger
containing a Plan of Merger substantially in the form of Appendix B hereto
("Plan of Bank Merger") and the other provisions required by, and executed in
accordance with, the foregoing Sections of the Bank Act and the Savings Bank Act
shall have been approved by the Commissioner and the Savings Bank Administrator
and accepted for filing by the NC SecState (or such later date and time as may
be specified therein) ("Bank Articles of Merger"). The Bank Effective Time shall
occur immediately after the Effective Time, the effectiveness of the Second
Merger and the receipt of all required Regulatory Approvals. The separate
corporate existence of Mocksville shall thereupon cease, and CCB Bank shall be
the Surviving Bank.
2.5 SUBSEQUENT ACTIONS. If, at any time after the Effective Time, Stone
Street or CCBF shall consider or be advised that any corporate or regulatory
filings, regulatory approvals, deeds, bills of sale, assignments, assurances or
any other actions or things are necessary or desirable to vest, perfect or
confirm of record, or otherwise, in the Surviving Corporation, the Resulting
Corporation or the Surviving Bank its right, title or interest in, to or under
any of the rights or Assets of the Parties acquired or to be acquired by the
Surviving Corporation, the Resulting Corporation or the Surviving Bank as a
result of, or in connection with, the Merger, the Second Merger or the Bank
Merger, or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation, the Resulting Corporation or the Surviving Bank shall
be authorized to execute and deliver, and file, if required in the name and on
behalf of each of the Parties or otherwise, all such corporate or regulatory
filings, deeds, bills of sale, assignments and assurances and to take and do, in
the name and on behalf of each of the Parties or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights or Assets in
the Surviving Corporation, the Resulting Corporation or the Surviving Bank, or
otherwise to carry out this Agreement.
2.6 ADVISORY DIRECTORS. Upon the Bank Effective Time, each member of
the Board of Directors of Mocksville in office immediately prior thereto shall
be appointed to CCB Bank's Mocksville Advisory Board and, for a period of two
(2) years from the Bank Effective Time, shall be paid for his or her service
thereon an annual amount equal to the current annual director's fee received by
him or her from Mocksville as of the date of this Agreement. After such two (2)
year
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period, the members of CCB Bank's Mocksville Advisory Board and such Board shall
be subject to the compensation, participation, retirement and other policies of
CCB Bank applicable to its local advisory boards.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. (a) Subject to the provisions of this Article
III, at the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each of the shares of common stock, no par
value per share, of Stone Street (the "Stone Street Common Stock") issued and
outstanding immediately prior to the Effective Time (excluding shares held by
CCBF, Stone Street, any CCBF Subsidiary or any Stone Street Subsidiary, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted), shall be converted into and become the right to receive (i) cash as
provided in Section 3.1(c) or (ii) that percent of a share of the common stock,
$5.00 par value per share, of CCBF (the "CCBF Common Stock") and that percent of
a preferred share purchase right (a "CCBF Right") as described in CCBF's
Shareholder Rights Plan, amended and restated as of October 1, 1998 (the "CCBF
Rights Plan") computed as follows: (a) if the CCBF 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 such average CCBF Stock Price; (b) if the CCBF Stock
Price for such ten (10) trading days is less than $44.52, such percent shall be
.48; and (c) if the CCBF Stock Price for such ten (10) trading days is more than
$60.24, such percent shall be .3548; provided, however, that if the amount of
Environmental Costs shall be greater than $150,000, but less than $500,000, then
each share of Stone Street Common Stock shall be converted into and become the
right to receive that percent of a share of CCBF Common Stock (and the same
percent of a CCBF Right) computed as follows: (A) if item (a) above is
applicable, the percent shall be calculated by (i) dividing the Environmental
Costs in excess of $150,000 (but no more than $350,000) by the number of the
then outstanding shares of Stone Street Common Stock, (ii) subtracting the
resulting quotient from $21.37, and (iii) dividing the resulting remainder by
the average CCBF Stock Price described above; (B) if item (b) above is
applicable, the percent shall be calculated by (i) subtracting the Environmental
Costs in excess of $150,000 (but no more than $350,000) from $35,013,719, (ii)
dividing the resulting remainder by $35,013,719, and (iii) multiplying .48 by
the resulting quotient; and (C) if item (c) above is applicable, the percent
shall be calculated by (i) subtracting the Environmental Costs in excess of
$150,000 (but no more than $350,000) from $35,013,719, (ii) dividing the
resulting remainder by $35,013,719, and (iii) multiplying .3548 by the resulting
quotient (the "Exchange Ratio").
(b) The legal and beneficial ownership rights of the holders of issued
and outstanding shares of Stone Street Common Stock subject to a MRP Right shall
vest, if at all, as of the Effective Time in accordance with the Stone Street
MRP Plan. Each such vested share shall be converted into cash as set forth in
Section 3.1(c) or that portion of a share of CCBF Common Stock (and that
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portion of an attached CCBF Right) determined under Section 3.1(a). Each such
unvested share shall be converted into that portion of a share of CCBF Common
Share (and that portion of an attached CCBF Right) determined under Section
3.1(a). Thereupon, each such MRP Right shall be deemed canceled and of no
further force or effect.
(c) Subject to the terms and conditions of this Agreement, each holder
of shares of Stone Street Common Stock converted under Section 3.1(a) or under
Section 3.1(b) may elect as provided herein, with respect to all such shares, to
receive for each such share either (i) that portion of a share of CCBF Common
Stock (and that portion of an attached CCBF Right) calculated by application of
the Exchange Ratio or (ii) in lieu of receiving a portion of a share of CCBF
Common Stock (and a portion of an attached CCBF Right), cash equal to one (1)
share of Stone Street Common Stock multiplied by the Exchange Ratio multiplied
by the CCBF Stock Price for the ten (10) trading days ending on the last trading
day prior to the Closing Date; provided, however that no more than 18% of such
shares of Stone Street Common Stock may be converted into and become rights to
receive cash rather than portions of shares of CCBF Common Stock (and attached
CCBF Rights). In the event that holders of shares of Stone Street Common Stock
described in Section 3.1(a) and (b) elect to receive cash ("Electing Holders")
for more than 18% of such shares, then CCBF shall be required to accept for
conversion to cash (x) all shares of Stone Street Common Stock tendered for cash
by the Stone Street ESOP and (y) only the percentage of shares of each other
Electing Holder ("Cash Election Shares") determined by (A) dividing the total
number of Cash Election Shares tendered by all Electing Holders other than the
Stone Street ESOP by the total number of outstanding shares of Stone Street
Common Stock, (B) dividing .18, less the percentage of all outstanding shares of
Stone Street Common Stock tendered for cash by the Stone Street ESOP (expressed
in decimal terms), by the quotient resulting under item (A), and (C) multiplying
each such other Electing Holder's Cash Election Shares by the quotient resulting
under item (B). Except as provided in Section 3.5, each share of outstanding
Stone Street Common Stock not converted unto the right to receive cash as
provided in this Section 3.1(c) shall be converted into a right to receive a
portion of a share of CCBF Common Stock (and a portion of an attached CCBF
Right) as provided in Section 3.1(a) or (b). Electing Holders must tender all of
their shares of Stone Street Common Stock for cash or they may tender none of
such shares for cash.
(d) Each of the shares of common stock of CCBFC outstanding immediately
prior to the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, shall be converted into and become a share of
Stone Street Common Stock. Each of the shares of CCBF Common Stock (and the
attached CCBF Rights) outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding, and shall not be converted, exchanged or
altered in any manner as a result of the Merger.
(e) Upon the effectiveness of the Second Merger, by virtue of the
Second Merger and without any action on the part of CCBF, each of the shares of
Stone Street Common Stock into which the shares of the common stock of CCBFC
were converted under Section 3.1(d) shall be canceled. Each of the shares of
CCBF Common Stock (and the attached CCBF Rights) outstanding immediately prior
to the effectiveness of the Second Merger shall continue to be issued and
16
outstanding, and shall not be converted, exchanged or altered in any manner as a
result of the Second Merger.
(f) At the Bank Effective Time, by virtue of the Bank Merger and
without any action on the part of Stone Street, each of the shares of common
stock, no par value per share of Mocksville issued and outstanding immediately
prior to the Bank Effective Time shall be canceled.
3.2. CONVERSION OF OPTIONS. At the Effective Time, all Stone Street
Stock Options granted under Stone Street Options Plans, whether or not then
exercisable, shall be converted into and become Rights with respect to CCBF
Common Stock, and CCBF shall assume all obligations of Stone Street with respect
to each Stone Street Stock Option, in accordance with the terms of the Stone
Street Options Plan under which it was issued and the stock option agreement by
which it may be evidenced. From and after the Effective Time, (i) each Stone
Street Stock Option shall be assumed by CCBF in accordance with the foregoing,
except that each such Stone Street Stock Option may be exercised solely for
shares of CCBF Common Stock (which shall have attached thereto CCBF Rights),
(ii) the number of shares of CCBF Common Stock (with attached CCBF Rights)
subject to each Stone Street Stock Option shall be equal to the number of shares
of Stone Street Common Stock subject to such Stone Street Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio
(rounded up to the nearest whole share of CCBF Common Stock), and (iii) the per
share exercise price under each such Stone Street Stock Option shall be adjusted
by dividing the per share exercise price under each such Option by the Exchange
Ratio and rounding down to the nearest cent; PROVIDED, HOWEVER, that the number
of shares of CCBF Common Stock (with attached CCBF Rights) subject to each Stone
Street Stock Option and the per share exercise price for each Stone Street Stock
Option shall be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction
declared or effected by CCBF subsequent to the Effective Time. It is intended
that the foregoing adjustments and assumption shall be undertaken in a manner
that will not constitute a "modification" within the meaning of, and that is
otherwise consistent with, Tax Code Section 424(a) as to any stock option which
is an "incentive stock option" (as defined in Section 422 of the Tax Code).
3.3 ANTI-DILUTION PROVISIONS. Except for the issuance of Stone Street
Common Stock pursuant to the exercise of Stone Street Stock Options, in the
event that Stone Street changes the number of shares of Stone Street Common
Stock issued and outstanding between the date hereof and the Effective Time or
grants additional Stone Street Stock Options or MRP Rights between the date
hereof and the Effective Time, either the Exchange Ratio shall be
proportionately adjusted or CCBF may exercise its rights under Article X, as
CCBF may so elect. In the event that CCBF shall declare a stock split, a stock
dividend or a recapitalization having a record date prior to the Effective Time,
the Exchange Ratio shall be proportionately adjusted.
3.4 SHARES HELD BY CCBF OR STONE STREET. Except as otherwise provided
in Section 3.1(d) and Section 3.1(e), each of the shares of Stone Street Common
Stock held by CCBF, any CCBF Subsidiary or Stone Street or any Stone Street
Subsidiary, other than shares held in a fiduciary
17
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of a share of Stone Street Common Stock converted into a
portion of a share of CCBF Common Stock (and a portion of an attached CCBF
Right) pursuant to the Merger or of Stone Street Stock Options, who would
otherwise have been entitled to receive a portion of a share of CCBF Common
Stock and an attached CCBF Right (after taking into account the aggregate of all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of the
CCBF Common Stock multiplied by the market value of one (1) share of CCBF Common
Stock at the Effective Time, in the case of shares of Stone Street Common Stock
converted into a portion of a share of CCBF Common Stock (and a portion of an
attached CCBF Right) pursuant to the Merger, or as of the date of exercise, in
the case of Stone Street Stock Options. The market value of one share of CCBF
Common Stock at the Effective Time or the date of exercise, as the case may be,
shall be the CCBF Stock Price on the last trading day preceding the Effective
Time or the date of exercise, as the case may be. No such holder will be
entitled to dividends, voting rights or any other rights as a shareholder in
respect of any fractional share.
3.6 TRANSFERS. At the Effective Time, the stock transfer books of Stone
Street shall be closed as to holders of Stone Street Common Stock immediately
prior to the Effective Time and no transfer of Stone Street Common Stock by any
such holder shall thereafter be made or recognized except as provided in Section
3.1(d). If, after the Effective Time, certificates are properly presented in
accordance with Article IV of this Agreement to the Registrar and Transfer
Company, acting as the exchange agent for CCBF Common Stock (the "Exchange
Agent"), such certificates shall be canceled and exchanged for certificates
representing the number of whole shares of CCBF Common Stock (and attached CCBF
Rights), and a check representing the amount of cash for fractional shares, if
any, into which the Stone Street Common Stock represented thereby was converted
in the Merger. Any other provision of this Agreement notwithstanding, none of
the Parties, the Exchange Agent or any Affiliate of the foregoing shall be
liable to a holder of Stone Street Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar Law.
ARTICLE IV
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES.
(a) Promptly after the Effective Time, CCBF shall cause the Exchange
Agent to mail appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Stone Street Common Stock shall pass,
18
only upon proper delivery of such certificates to the Exchange Agent) to the
former shareholders of Stone Street. After the Effective Time, each holder of
shares of Stone Street Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be canceled pursuant to Section 3.4 of
this Agreement) shall surrender the certificate or certificates theretofore
representing such shares, together with such transmittal materials properly
executed, to the Exchange Agent and promptly upon surrender shall receive in
exchange therefor the consideration provided in Section 3.1 and Section 3.5, if
applicable, of this Agreement, together with all declared but unpaid dividends
in respect of shares of CCBF Common Stock (and an attached CCBF Rights) received
as all or a part of such consideration. Subject to the provisions of Section
3.1(c), consideration in the form of cash rather than shares of CCBF Common
Stock (and attached CCBF Rights) will be paid to each Electing Holder who
properly elects to receive cash as provided herein. Those holders of shares of
Stone Street Common Stock who do not comply with the "cash election" provisions
of this Agreement will be deemed to have elected to receive consideration for
their shares in the form of shares of CCBF Common Stock (and attached CCBF
Rights). To the extent provided by Section 3.5 of this Agreement, each holder of
shares of Stone Street Common Stock issued and outstanding immediately prior to
the Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional shares of
CCBF Common Stock of which such holder would otherwise be entitled. CCBF shall
not be obligated to deliver the consideration to which any former holder of
Stone Street Common Stock is entitled as a result of the Merger until such
holder surrenders his certificate or certificates representing shares of Stone
Street Common Stock for exchange as provided in this Article IV. Any certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and the Person requesting such exchange shall affix any requisite stock
transfer Tax stamps to the certificate surrendered, shall provide funds for
their purchase or for any transfer or other Taxes required by reason of the
delivery of such certificate, or shall establish to the satisfaction of the
Exchange Agent that such Taxes have been paid or are not payable. In addition,
certificates surrendered for exchange by any Person constituting an "affiliate"
of Stone Street for purposes of Rule 145(c) under the 1933 Act shall not be
exchanged for certificates representing whole shares of CCBF Common Stock until
CCBF has received an Affiliate Agreement from such Person as provided in Section
7.10. In the event any certificate shall have been lost, stolen or destroyed,
upon receipt of appropriate evidence as to such loss, theft or destruction and
to ownership of such certificate by the Person claiming such certificate to be
lost, stolen or destroyed and the receipt by the Exchange Agent of appropriate
and customary indemnification, the Exchange Agent will pay or issue in exchange
for such lost, stolen or destroyed certificate cash and/or shares of CCBF Common
Stock (with attached CCBF Rights) and a check representing cash in lieu of
fractional shares, and declared but unpaid dividends deliverable in respect of
the shares of CCBF Common Stock to be received. Adoption of this Agreement by
the shareholders of Stone Street shall constitute ratification of the
appointment of the Exchange Agent.
(b) Subject to prior review by Stone Street, CCBF shall deliver to the
shareholders of Stone Street at the time of the delivery of, and together with,
the Proxy Statement, an election form pursuant to which shareholders of Stone
Street may elect to be Electing Holders. Any such election form in which a
shareholder properly elects to be an Electing Holder, which such election form
is returned to CCBF by the required return date set forth therein and which CCBF
accepts, shall be
19
deemed a binding and irrevocable election of such shareholder to be an Electing
Holder. In the event such Electing Holder subsequently delivers transmittal
materials to the Exchange Agent inconsistent with such returned and accepted
election form, such election form shall be deemed controlling.
4.2 VOTING AND DIVIDENDS. Former shareholders of record of Stone Street
shall be entitled to vote after the Effective Time, at any meeting of
shareholders of CCBF, the number of whole shares of CCBF Common Stock into which
their respective shares of Stone Street Common Stock have been converted,
regardless of whether such holders have exchanged their certificates
representing Stone Street Common Stock for certificates representing CCBF Common
Stock in accordance with the provisions of this Agreement. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Stone Street Common Stock
(other than shares to be canceled pursuant to Section 3.4 of this Agreement and
other than shares into which shares of the common stock of CCBFC were converted)
shall from and after the Effective Time represent for all purposes only the
right to receive cash and/or shares of CCBF Common Stock (with attached CCBF
Rights), and cash in lieu of fractional shares as set forth in this Agreement.
Whenever a dividend or other distribution is declared by CCBF on the CCBF Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of CCBF
Common Stock (and attached CCBF Rights) issuable pursuant to this Agreement, but
beginning on the 91st day after the date on which the Effective Time shall
occur, no dividend or other distribution payable to the holders of record of
CCBF Common Stock at or as of any time after the Effective Time shall be paid to
the holder of any certificate representing shares of Stone Street Common Stock
issued and outstanding at the Effective Time that have been converted into
rights to receive shares of CCBF Common Stock (and attached CCBF Rights) until
such holder physically surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement, promptly after which time all such dividends or
distributions shall be paid (without interest).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STONE STREET
Stone Street represents and warrants to CCBF as follows:
5.1 ORGANIZATION, STANDING, AND AUTHORITY. (a) Stone Street is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of North Carolina, and is duly qualified to do business and in good
standing in all jurisdictions (whether federal, state, local or foreign) where
both its ownership or leasing of Assets or the conduct of its business requires
it to be so qualified and the failure to do so would constitute a Material
Adverse Event. Stone Street has all requisite corporate power and authority to
carry on its business as now conducted and to own, lease and operate its Assets
and business, and to execute, deliver and perform its obligations under this
Agreement. Stone Street is duly registered as a savings bank holding company
under the
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BHCA. Except as Previously Disclosed, Stone Street has in effect all Permits
necessary for it to own or lease its Assets and to carry on its business as now
conducted.
(b) Mocksville is a state savings bank duly organized, validly existing
and in good standing under the Laws of the State of North Carolina, and is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where both its ownership or leasing of Assets
or the conduct of its business requires it to be so qualified and the failure to
do so would constitute a Material Adverse Event. Mocksville has all requisite
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its Assets and business, and to execute, deliver and
perform its obligations under this Agreement. Except as Previously Disclosed,
Mocksville has in effect all Permits necessary for it to own or lease its Assets
and to carry on its business as now conducted. Mocksville is an "insured
institution" as defined in the FDIA and applicable regulations thereunder, and
the deposits in which are insured by the Savings Association Insurance Fund.
5.2 CAPITAL STOCK.
(a) The authorized capital stock of Stone Street consists of
(i) 5,000,000 shares of preferred stock, no par value, none of which has been
issued and (ii) 20,000,000 shares of Stone Street Common Stock, no par value, of
which 1,638,452 shares (including 73,002 shares subject to MRP Rights) were
issued and outstanding on April 13, 1999. All of the issued and outstanding
shares of Stone Street Common Stock are duly and validly issued and outstanding
and are fully paid and nonassessable. None of the outstanding shares of Stone
Street Common Stock has been issued in violation of any preemptive Rights.
Except for the Stone Street Stock Options, there are no other shares of capital
stock or other equity securities of Stone Street outstanding and no Rights
(other than the MRP Rights) relating to the capital stock of Stone Street. There
are outstanding Stone Street Stock Options to acquire 172,244 shares of Stone
Street Common Stock, and Stone Street has reserved a total of 182,505 shares of
Stone Street Common Stock with respect to the Stone Street Option Plan.
(b) The Stone Street Common Stock is duly registered under the
1934 Act and is listed on the AMEX. The Stone Street Common Stock is not subject
to any restrictions as to transfer thereof (exclusive of restrictions arising
under the Stone Street MRP Plan and restrictions respecting shares of Stone
Street Common Stock held by its directors, officers or other "affiliates"
imposed in accordance with the Securities Laws). To the Knowledge of Stone
Street and except as Previously Disclosed, as of the date hereof, no Person is a
beneficial owner of, or has a Right to own beneficially, five percent (5%) or
more of the Stone Street Common Stock. For purposes of this Section 5.2, the
term "beneficial owner" shall have the meaning provided in Rule 13d-3 of the
rules and regulations of the SEC as in effect on the date hereof, except that
the term "beneficial owner" shall not include ownership of any of the Stone
Street Common Stock held by the trustees of the Stone Street ESOP or by
Mocksville as trustee or in some other fiduciary or custodial capacity.
5.3 STONE STREET SUBSIDIARIES.
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(a) Each of the Stone Street Subsidiaries (i) is duly
organized, validly existing and in good standing under the Laws of the state or
other jurisdiction of its incorporation, (ii) is duly qualified to do business
and is in good standing in all jurisdictions (whether federal, state, local or
foreign) where both its ownership or leasing of Assets or the conduct of its
business requires it to be so qualified and the failure to do so would
constitute a Material Adverse Event, and (iii) has all requisite corporate power
and authority to, and, except as Previously Disclosed, has in effect all Permits
necessary for it to, carry on its business as now conducted and to own, lease
and operate its Assets and business. Other than the Stone Street Subsidiaries,
Stone Street neither owns nor controls five percent (5%) or more of the
outstanding equity securities, either directly or indirectly, of any Person.
(b) Stone Street is the direct, record and beneficial owner of
100% of the outstanding shares of the capital stock of each of the Stone Street
Subsidiaries which are its direct subsidiaries, and Mocksville is the direct,
record and beneficial owner of 100% of the outstanding shares of capital stock
of each of the Stone Street Subsidiaries which are its direct subsidiaries. All
of the shares of capital stock of each of the Stone Street Subsidiaries are
fully paid and nonassessable and are owned by Stone Street or Mocksville free
and clear of any Lien. No equity securities of any Stone Street Subsidiary are
or may become required to be issued or sold (other than to Stone Street or
Mocksville) under any Rights.
5.4. AUTHORIZATION OF MERGER, BANK MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement by Stone
Street and Mocksville and the consummation of the transactions contemplated
hereby to which either or both of them are a party have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Stone Street and Mocksville, subject to the approval of the shareholders of
Stone Street to the extent required by applicable Law. This Agreement, subject
to such Stone Street shareholder approval and Regulatory Approvals, represents a
legal, valid and binding obligation of Stone Street and Mocksville enforceable
against Stone Street and Mocksville in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
Stone Street and Mocksville, nor the consummation by them of the transactions
contemplated hereby to which they are a party, nor compliance by them with any
of the provisions hereof will (i) conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of Stone Street, Mocksville
or any Stone Street Subsidiary or any resolutions adopted by the Board of
Directors of Stone Street or Mocksville, (ii) constitute or result in a Default
under, or require any Consent pursuant to, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any Lien upon any Asset of Stone Street or any Stone Street
Subsidiary under any Contract or Permit of Stone Street or any Stone Street
Subsidiary, or (iii) subject to receipt of all requisite shareholder approvals,
Consents and Regulatory Approvals, violate any Law or Order applicable to Stone
Street or any Stone Street Subsidiary or any of their respective Assets.
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(c) Other than (i) in connection or compliance with the
provisions of applicable Securities Laws and the rules and regulations of the
AMEX, (ii) Consents required from Regulatory Authorities, (iii) notices to or
filings with the IRS or the PBGC with respect to any employee benefit plans, or
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and (iv) filings of the Articles of Merger and the Bank Articles of
Merger with the NC SecState, no notice to, filing with or Consent of any public
body or authority is necessary for the consummation by Stone Street of the
Merger, the consummation by Mocksville of the Bank Merger or the consummation of
the other transactions contemplated in this Agreement.
5.5 SEC FILINGS; FINANCIAL STATEMENTS. Stone Street has timely filed
and made available to CCBF all SEC Documents required to be filed by Stone
Street since December 31, 1995 (the "Stone Street SEC Reports"). The Stone
Street SEC Reports (i) at the time filed, complied in all material respects with
the applicable requirements of the Securities Laws and other applicable Laws and
(ii) did not, at the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Stone Street SEC Reports or necessary in order to
make the statements in such Stone Street SEC Reports, in light of the
circumstances under which they were made, not misleading. No Stone Street
Subsidiary is registered or operates as a broker, dealer, or investment advisor,
and no Stone Street Subsidiary is required to file any SEC Documents.
(b) Stone Street (i) has delivered (or will deliver, when
issued) to CCBF copies of the Stone Street Financial Statements. The Stone
Street Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or will be in accordance with the books and records of Stone
Street, which are or will be complete and accurate in all material respects and
which have been or will have been maintained in accordance with good business
practices, (ii) present or will present fairly in all material respects the
consolidated financial position and the consolidated results of operations,
changes in stockholders' equity and cash flows of Stone Street as of the dates
and for the periods indicated, in accordance with GAAP, subject in the case of
interim financial statements to normal recurring year-end adjustments which were
not or, to the Knowledge of Stone Street, are not expected to be material in
amount, and (iii) with respect to the Stone Street Financial Statements as of
and for the years ended December 31, 1998, December 31, 1997 and December 31,
1996, have been audited and reported upon by independent certified public
accountants.
5.6 BOOKS AND CORPORATE RECORDS.
(a) Except as Previously Disclosed, the books of account of
Stone Street and the Stone Street Subsidiaries have been maintained in
substantial compliance with all applicable legal and accounting requirements and
in such manner as to reflect accurately their respective items of income and
expense and all of their respective Assets, Liabilities and stockholders'
equity. To the Knowledge of Stone Street, Stone Street and the Stone Street
Subsidiaries have filed all material reports and returns, including Tax Returns,
required by any Law to be filed and have duly paid or accrued on their
respective books of account all Taxes and charges due pursuant to such reports
and
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returns, or assessed against any of them, including, without limitation, all
such reports, statements and assessments which Stone Street or Stone Street
Subsidiary is required to have filed or paid pursuant to all Laws, none of which
reports, returns, statements or assessments has been the subject of any material
objection by the Regulatory Authority with which filed.
(b) The minute books of Stone Street and each Stone Street
Subsidiary accurately reflect in all material respects the corporate actions
which its shareholders and Board of Directors, and all committees thereof, have
taken during the time periods covered by such minute books. Such minute books
have been or will be made available to CCBF and its representatives.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed
or reflected in any Stone Street SEC Report filed since December 31, 1998 and
prior to the date hereof, since December 31, 1998, neither Stone Street nor any
Stone Street Subsidiary has incurred or paid any Liability which could
constitute a Material Adverse Event.
5.8 TAX MATTERS.
(a) Except as Previously Disclosed, all Tax Returns required
to be filed by or on behalf of Stone Street or any Stone Street Subsidiary have
been timely filed, or requests for extensions have been timely filed and granted
and have not expired, for periods ending on or before January 1, 1999, and all
such Tax Returns filed are complete and accurate in all material respects.
Except as Previously Disclosed, all Taxes due under such Tax Returns have been
paid. Except as Previously Disclosed, there is no audit examination, deficiency
or refund litigation or matter in controversy with respect to any material
amount of Taxes. All Taxes due from Stone Street or any Stone Street Subsidiary
with respect to completed and settled examinations or concluded Tax litigation
have been paid.
(b) Except as Previously Disclosed, neither Stone Street nor
any Stone Street Subsidiary has executed an extension or waiver of any statute
of limitations on the assessment or collection of any Tax due that is currently
in effect.
(c) In the opinion of Stone Street's management, adequate
provision for any Taxes due or to become due from Stone Street or any Stone
Street Subsidiary for any period or periods through and including December 31,
1998, has been made and is reflected in the December 31, 1998 financial
statements of Stone Street included in the Stone Street Financial Statements.
(d) Deferred Taxes of Stone Street and each Stone Street
Subsidiary have been provided for in the Stone Street Financial Statements in
accordance with GAAP.
(e) Stone Street and each of the Stone Street Subsidiaries is
in compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state, and local Tax Laws, and such records identify with specificity all
24
accounts subject to backup withholding under Section 3406 of the Tax Code,
except for such instances of noncompliance and such omissions as are not
reasonably likely to constitute a Material Adverse Event.
(f) Neither Stone Street nor any Stone Street Subsidiary has
made any payments, is obligated to make any payments, or is a party to any
Contract that could obligate it to make any payments that would be disallowed as
a deduction under Sections 280G or 162(m) of the Tax Code.
(g) There has not been an ownership change, as defined in Tax
Code Section 382(g), of Stone Street or any Stone Street Subsidiary that
occurred during or after any taxable period in which Stone Street and the Stone
Street Subsidiaries incurred a net operating loss that carries over to any
taxable period ending after December 31, 1998.
(h) Neither Stone Street nor any Stone Street Subsidiary has
or has had in any foreign country a permanent establishment, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country.
5.9 ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses (the
"Allowance") shown on the consolidated statements of financial condition of
Stone Street as of December 31, 1998 included in the Stone Street Financial
Statements was, and the Allowance shown on the consolidated statements of
financial condition of Stone Street as of dates subsequent to the execution of
this Agreement included in the Stone Street Financial Statements will be, in
each case as of the dates thereof, in the opinion of management of Stone Street,
adequate to provide for losses relating to or inherent in the loan portfolios
(including accrued interest receivables) of Stone Street and the Stone Street
Subsidiaries.
5.10 ASSETS. Except as Previously Disclosed, Stone Street and each
Stone Street Subsidiary has good and marketable title to all its material
Assets, including, but not limited to, all material Assets reflected in the
consolidated balance sheet of Stone Street as of December 31, 1998 included in
the Stone Street Financial Statements or reflected in the notes thereto, and all
Assets purchased by Stone Street or a Stone Street Subsidiary since such date,
except for such Assets which have been sold or otherwise disposed of in the
Ordinary Course of Business, are in each case free and clear of all Liens,
except for (a) Liens Previously Disclosed, (b) zoning ordinances, easements of
record, permits and other restrictions or limitations on the use of real
property which do not materially detract from the value of, or impair the use
of, such property by Stone Street or a Stone Street Subsidiary in the operation
of its business, (c) Liens for current Taxes on property not yet due, and (d)
Liens which do not materially affect the operation of the business of Stone
Street or a Stone Street Subsidiary. Stone Street has Previously Disclosed all
material Assets which have been purchased or disposed of by Stone Street or a
Stone Street Subsidiary since December 31, 1998. Stone Street has Previously
Disclosed all business locations of Stone Street and the Stone Street
Subsidiaries, including whether such locations are owned or leased and a
statement of when such locations were first occupied by Stone Street or a Stone
Street Subsidiary. Stone Street has Previously Disclosed its construction of the
New Building; the architectural and construction
25
drawings, plans and specifications, and the planned equipment, furniture and
fixtures of the New Building; the projected total cost of such construction,
equipment, furnishings and upfitting (including land costs); and the current
status of all Permits necessary to construct, own and operate the New Building
for its intended purpose.
5.11 COMPLIANCE WITH LAWS.
(a) To the Knowledge of Stone Street and except as Previously
Disclosed, Stone Street and each Stone Street Subsidiary is in compliance in all
material respects with all Laws, any Regulatory Agreements and its internal
policies and procedures.
(b) Except as Previously Disclosed, neither Stone Street nor
any Stone Street Subsidiary has received any notification or communication from,
or consented to, entered into or been subjected to any Order with, any
Regulatory Authority, (i) asserting that it is not in substantial compliance
with any of the Laws which such Regulatory Authority has promulgated or
enforces, or the internal policies and procedures of such company, (ii)
threatening to revoke any Permit, (iii) requiring or threatening to require it,
or indicating that it may be required, to enter into a cease and desist Order
restricting or limiting or purporting to restrict or limit in any manner its
operations, including, without limitation, any restriction on the payment of
dividends, or (iv) directing, restricting or limiting, or purporting to direct,
restrict or limit in any manner its operations, including, without limitation,
any restriction on the payment of dividends (any such notification,
communication, memorandum, agreement or order described in this sentence herein
referred to as a "Regulatory Agreement"). True and correct copies of all
Regulatory Agreements, if any, have been or will be delivered to CCBF by Stone
Street.
(c) Neither Stone Street nor any Stone Street Subsidiary:
(i) is in Default under any of the provisions of its
certificate or articles of incorporation or bylaws (or other governing
instruments); or
(ii) is in Default under any Orders applicable to its
business or employees conducting its business.
5.12 EMPLOYEE BENEFIT PLANS.
(a) Stone Street has Previously Disclosed, and will deliver to
CCBF true and correct copies in each case of, all pension, retirement,
profit-sharing, supplemental retirement, deferred compensation, stock
appreciation right, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written or unwritten
employee programs or Contracts, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or fringe
benefit plans, including "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by Stone Street, any Stone Street Subsidiary or
any ERISA Affiliate thereof for
26
the benefit of current or former officers or employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate, including all
amendments thereto adopted and effective since the most recent restatement
thereof (collectively, the "Stone Street Benefit Plans"). In addition, Stone
Street will deliver to CCBF (i) with respect to each Stone Street Benefit Plan,
including any amendment thereto, the most recent determination letter, if any,
issued by the IRS, (ii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any Stone Street Benefits Plan with respect to the most
recent three plan years, and (iii) the most recent summary plan descriptions
(and any material modifications thereto). Any of the Stone Street Benefit Plans
which is an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, is referred to herein as a "Stone Street ERISA Plan." Each Stone
Street ERISA Plan which is also a "defined benefit plan" (as defined in Section
414(j) of the Tax Code) is referred to herein as a "Stone Street Pension Plan."
No Stone Street Pension Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(b) All Stone Street Benefit Plans and any related trusts, to
the extent applicable, are in compliance with the applicable terms of ERISA, the
Tax Code, any other applicable Laws, and the written terms of such Stone Street
Benefit Plans, the breach or violation of which are reasonably likely to
constitute a Material Adverse Event with respect to Stone Street. Neither Stone
Street nor any Stone Street Subsidiary has received notice from any governmental
authority, including the IRS, questioning or challenging such compliance. Each
Stone Street ERISA Plan which is intended to be qualified under Section 401(a)
of the Tax Code has received a favorable determination letter from the IRS, and
Stone Street is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. To the Knowledge of Stone Street,
neither it nor any Stone Street Subsidiary has engaged in a transaction with
respect to any Stone Street Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof, would subject Stone Street or
any Stone Street Subsidiary to a Tax imposed by either Section 4975 of the Tax
Code or Section 502(i) of ERISA in amounts which are reasonably likely to
constitute a Material Adverse Event with respect to Stone Street.
(c) No Stone Street Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, based on
actuarial assumptions set forth for such plan's most recent actuarial
valuations. Since the date of the most recent actuarial valuation, there has
been (i) no material change in the financial position of any Stone Street
Pension Plan, (ii) no change in the actuarial assumptions with respect to any
Stone Street Pension Plan, and (iii) no increase in benefits under any Stone
Street Pension Plan as a result of plan amendments or changes in applicable Law
which is reasonably likely to constitute a Material Adverse Event or materially
adversely affect the funding status of any such plan. Neither any Stone Street
Pension Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by Stone Street or any
Stone Street Subsidiary, or the single-employer plan of any entity which is
considered one employer with Stone Street under Section 4001 of ERISA or Section
414 of the Tax Code or Section 302 of ERISA (an "ERISA Affiliate") has an
"accumulated funding
27
deficiency" (whether or not waived) within the meaning of Section 412 of the Tax
Code or Section 302 of ERISA, which is reasonably likely to constitute a
Material Adverse Event. Neither Stone Street nor any Stone Street Subsidiary has
provided, or is required to provide, security to a Stone Street Pension Plan or
to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Tax Code.
(d) Within the six-year period preceding the Effective Time,
no Liability under Subtitle C or D of Title IV of ERISA has been or is expected
to be incurred by Stone Street or any Stone Street Subsidiary with respect to
any ongoing, frozen, or terminated single-employer plan or the single-employer
plan of any ERISA Affiliate, which Liability is reasonably likely to constitute
a Material Adverse Event with respect to Stone Street. Neither Stone Street nor
any Stone Street Subsidiary has incurred any withdrawal Liability with respect
to a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate), which Liability is
reasonably likely to constitute a Material Adverse Event. No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Stone Street Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Neither Stone Street nor any Stone Street Subsidiary has
any Liability for retiree health and life benefits under any of the Stone Street
Benefit Plans and there are no restrictions on the rights of Stone Street or any
Stone Street Subsidiary to amend or terminate any such retiree health or benefit
plan without incurring any Liability thereunder, which Liability is reasonably
likely to constitute a Material Adverse Event with respect to Stone Street.
(f) Except as disclosed in Stone Street SEC Reports and with
respect to the Stone Street MRP Plan, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any director or any employee of Stone
Street or any Stone Street Subsidiary from Stone Street or any Stone Street
Subsidiary under any Stone Street Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any Stone Street Benefit Plan, or (iii) result
in any acceleration of the time of payment or vesting of any such benefit, where
such payment, increase, or acceleration is reasonably likely to constitute a
Material Adverse Event with respect to Stone Street. The provisions of this
Section 5.12(f) shall not apply to the acceleration of vesting or other payment
of compensation or other benefits under any Stone Street ERISA Plan, Stone
Street Option Plan, Special Termination Agreement between Mocksville and Allen
W. Carter, Special Termination Agreement between Mocksville and Marjorie D.
Foster, Mocksville Savings Bank, SSB Severance Plan, Retirement Payment
Agreements between Stone Street and the members of its Board of Directors, or
Employment Agreement between Mocksville and J. Charles Dunn Previously Disclosed
to CCBF; provided, however, that all acceleration of vesting and other payment
of compensation or other benefits provisions of the Employment Agreement between
Mocksville and Mr. Dunn shall be waived by Mocksville and Mr. Dunn, and shall
not become or be effective, upon the condition that an Amended and Restated
28
Employment between CCB Bank and Mr. Dunn, and acceptable to each of them, shall
be entered into and effective as of the Effective Time.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of Stone Street or any Stone Street Subsidiary and their
respective beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Tax Code or
Section 302 of ERISA, have been fully reflected on the Stone Street Financial
Statements to the extent required by and in accordance with GAAP.
(h) There are no unresolved claims or disputes under the terms
of, or in connection with, the Stone Street Benefit Plans other than claims for
benefits which are payable in the Ordinary Course of Business, and no Action has
been commenced with respect to any Stone Street Benefit Plan.
(i) All Stone Street Benefit Plan documents and annual reports
or returns, audited or unaudited financial statements, actuarial valuations,
summary annual reports, and summary plan descriptions issued with respect to the
Stone Street Benefit Plans are correct and complete in all material respects,
and there have been no changes in the information set forth therein.
(j) All Liabilities of Stone Street or any Stone Street
Subsidiary arising out of or related to Stone Street Benefit Plans are reflected
in the Stone Street Financial Statements in accordance with GAAP.
(k) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to each such Stone Street
Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and
of Tax Code Section 4980B have been met with respect to each such Stone Street
Benefit Plan which is an Employee Welfare Benefit Plan and which is subject to
such requirements.
(l) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such Stone Street Benefit Plan which is a Stone Street ERISA Plan.
5.13 COMMITMENTS AND CONTRACTS. Except as Previously Disclosed, neither
Stone Street nor any Stone Street Subsidiary is a party or subject to any of the
following:
(a) any employment Contract (including any Contracts with
respect to severance or termination pay Liabilities or fringe benefits) with any
present or former officer, director, employee or spouse thereof, including in
any such Person's capacity as a consultant;
29
(b) any labor Contract with any labor union;
(c) any Contract which limits its ability to compete in any
line of business or which involves any restriction of the geographic area in
which it may carry on its business (other than as may be required by law or
applicable Regulatory Authorities), or which would restrict in any way the
ability of the Resulting Corporation or the Surviving Bank to so compete; or
(d) any Significant Contract or Significant Lease.
5.14 MATERIAL CONTRACT DEFAULTS. Neither Stone Street nor any Stone
Street Subsidiary is, and none of them has received any notice or has any
Knowledge that any other party is, in Default in any respect under any Contract
to which Stone Street or any Stone Street Subsidiary is a party or by which
Stone Street or any Stone Street Subsidiary or the respective Assets, business
or operations may be bound or affected or under which it or its Assets, business
or operations receives benefits, except for those Defaults which would not
constitute a Material Adverse Event, and there has not occurred any event that
with the lapse of time or the giving of notice or both would constitute such a
Default.
5.15 LEGAL PROCEEDINGS. Except as Previously Disclosed, there are no
Actions instituted or pending or, to the Knowledge of Stone Street, threatened
against Stone Street or any Stone Street Subsidiary, or against any Asset of
Stone Street or any Stone Street Subsidiary, that if decided adversely to it
could constitute a Material Adverse Event or that might reasonably be expected
to threaten or significantly impede the consummation of the transactions
contemplated by this Agreement. Neither Stone Street nor any Stone Street
Subsidiary is subject to any Order that could constitute a Material Adverse
Event or that might reasonably be expected to threaten or significantly impede
the consummation of the transactions contemplated by this Agreement.
5.16 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1998,
except (i) as disclosed in any Stone Street SEC Report filed since December 31,
1998 and prior to the date hereof or (ii) as Previously Disclosed, neither Stone
Street nor any Stone Street Subsidiary has (A) failed to operate in the Ordinary
Course of Business, (B) suffered any change that could constitute a Material
Adverse Event, (C) incurred any material Liabilities or engaged in any material
transaction or entered into any material Contract outside of the Ordinary Course
of Business, (D) increased the salaries, compensation or general benefits
payable to its directors or employees other than in the Ordinary Course of
Business, (E) suffered any loss, destruction or damage to any of its Assets that
could constitute a Material Adverse Event, (F) made a material acquisition or
disposition of any Assets or entered into any Significant Contract or
Significant Lease other than in the Ordinary Course of Business, or (G) taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Stone Street provided in Article VII.
30
5.17 REPORTS. Since December 31, 1994, Stone Street has filed all
reports and statements, together with all amendments required to be made with
respect thereto, that it was required to file with Regulatory Authorities. A
copy of each such report or document has been delivered or will be made
available to CCBF. As of their respective dates, each such report or document
complied in all material respects with applicable Laws enforced or promulgated
by the respective Regulatory Authorities, and no such report contained any
information that was false or misleading with respect to any material fact or
omitted to state any material fact necessary in order to make the statements
therein not misleading.
5.18 INSURANCE. Stone Street and each Stone Street Subsidiary is
presently insured, and during each of the past five (5) calendar years has been
insured, for reasonable amounts against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. The policies of fire, theft, liability and other insurance
maintained with respect to the Assets or businesses of Stone Street or such
Stone Street Subsidiary provide adequate coverage against loss, and the fidelity
bonds in effect as to which Stone Street and/or a Stone Street Subsidiary is a
named insured are sufficient for their purpose.
5.19 LABOR. No work stoppage involving Stone Street or any Stone Street
Subsidiary is pending or, to the Knowledge of Stone Street, threatened. Stone
Street and each Stone Street Subsidiary has, to the Knowledge of Stone Street,
complied in all material respects with all Laws relating to the employment of
labor, including, without limitation, any provisions thereof relating to wages,
and no Person has, to the Knowledge of Stone Street, asserted that Stone Street
or any Stone Street Subsidiary has Liabilities for any arrears or wages or any
Taxes or penalties for failure to comply with any of the foregoing. Except as
Previously Disclosed, there is no Action by any Person pending or, to the
Knowledge of Stone Street, threatened, against Stone Street or any Stone Street
Subsidiary (or any of the employees thereof), involving employment
discrimination, sexual harassment, wrongful discharge or similar claims.
Employees of Stone Street and the Stone Street Subsidiaries are not represented
by any labor union, and, to the Knowledge of Stone Street, no labor union is
attempting to certify a collective bargain unit of any such employees or
engaging in any other organizational activity.
5.20 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as Previously
Disclosed, no officer or director of Stone Street or any Stone Street
Subsidiary, or any "associate" (as such term is defined in Rule 14a-1 under the
1934 Act) of any such officer or director, has any material interest in any
Significant Contract or Significant Lease or any Asset used in or pertaining to
the business of Stone Street or any Stone Street Subsidiary.
5.21 REGISTRATION OBLIGATION. Except as Previously Disclosed, Stone
Street is not under any obligation, contingent or otherwise, which will survive
the Merger by reason of any Contract to register any of its securities or Rights
relating thereto under the 1933 Act.
5.22 ENVIRONMENTAL MATTERS.
31
(a) To the Knowledge of Stone Street, Stone Street and each
Stone Street Subsidiary and their respective Participation Facilities and
Operating Properties are, and have been, in compliance with all Environmental
Laws and are not subject to Liabilities under Environmental Laws, except for
violations and Liabilities which are not reasonably likely to constitute a
Material Adverse Event.
(b) There is no Action pending or, to the Knowledge of Stone
Street, threatened before any court, governmental agency, or authority or other
forum in which Stone Street, any Stone Street Subsidiary or any of their
respective Operating Properties or Participation Facilities has been or, with
respect to threatened Action, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site owned, leased, or operated by
Stone Street, any Stone Street Subsidiary or any of their respective Operating
Properties or Participation Facilities, except for such Action pending or
threatened that is not reasonably likely to constitute a Material Adverse Event,
nor is there any reasonable basis for any Action of a type described in this
sentence, except such as is not reasonably likely to constitute a Material
Adverse Event.
(c) During the period of (i) any Stone Street's or any Stone
Street Subsidiary's ownership or operation of any of their respective current
properties, (ii) Stone Street's or any Stone Street Subsidiary's participation
in the management of any Participation Facility, or (iii) Stone Street's or any
Stone Street Subsidiary's holding of a security interest in an Operating
Property, (1) there have been no releases, discharges, spillages, or disposals
of Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties, Participation Facilities or Operating Properties,
(2) no Hazardous Materials have been generated, treated, stored, or disposed of
at, or transported to or from, any such property, Operating Property or
Participation Facility at any time, except in compliance with the Environmental
Laws, (3) no friable asbestos containing material is or has been in use, or is
or has been stored or disposed of on or upon any such property, Operating
Property or Participation Facility, (4) no polychlorinated biphenyls ("PCBs")
are or have been located on or in any such property, Operating Property or
Participation Facility in any form or device, including, without limitation, in
the form of electrical transformers, fluorescent light fixtures with ballasts,
or cooling oils, except in compliance with the Environmental Laws, and (5) no
underground storage tanks are or have been located on any such property,
Operating Property or Participation Facility and subsequently removed or filled
except in compliance with all Environmental Laws, except such as are not
reasonably likely to constitute a Material Adverse Event. Prior to the period of
(i) Stone Street's or any Stone Street Subsidiary's ownership or operation of
any of their respective current properties, (ii) Stone Street's or any Stone
Street Subsidiary's participation in the management of any Participation
Facility, or (iii) Stone Street's or any Stone Street Subsidiary's holding of a
security interest in an Operating Property, to the Knowledge of Stone Street,
(1) there were no releases, discharges, spillages, or disposals of Hazardous
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, (2) no Hazardous Materials were generated, treated,
stored, or disposed of at, or
32
transported to or from, any such property, Operating Property or Participation
Facility at any time, except in compliance with the Environmental Laws, (3) no
friable asbestos containing material were used, stored, or disposed of on or
upon any such property, Operating Property or Participation Facility, (4) no
PCBs were located on or in any such Operating Property or Participation Facility
in any form or device, including, without limitation, in the form of electrical
transformers, fluorescent light fixtures with ballasts, or cooling oils, except
in compliance with the Environmental Laws, and (5) no underground storage tanks
were located on any such property, Operating Property or Participation Facility
and subsequently removed or filled except in compliance with all Environmental
Laws, except such as are not reasonably likely to constitute a Material Adverse
Event.
5.23 ACCOUNTING; TAX; REGULATORY MATTERS. To its Knowledge, neither
Stone Street nor any Stone Street Subsidiary has taken or agreed to take any
action nor does Stone Street have any Knowledge of any fact or circumstance that
would (i) prevent (or, together with other events, would be reasonably likely to
prevent) the Merger and the Second Merger from qualifying as a Tax-free
reorganization within the meaning of Tax Code Section 368, or (ii) significantly
impede or delay receipt of any Regulatory Approval.
5.24 BROKERS AND FINDERS. Except for Orr Management Company ("OMC"),
neither Stone Street nor any of its respective officers, directors or employees
has employed any broker or finder or incurred any Liability for any financial
advisory fees, brokerage fees, commissions or finders' fees, and no broker or
finder has acted directly or indirectly for Stone Street in connection with this
Agreement or the transactions contemplated hereby.
5.25 STATE TAKEOVER LAWS. Stone Street and each Stone Street Subsidiary
has taken all necessary action to exempt the transactions contemplated by this
Agreement from, or if necessary to challenge the validity or applicability of,
any applicable "moratorium," "fair price," "business combination," "control
share," or other anti-takeover Laws.
5.26 CHARTER PROVISIONS. Stone Street and each Stone Street Subsidiary
has taken all action so that the entering into of this Agreement and the
consummation of the Merger, the Bank Merger, the Second Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the certificate or articles of
incorporation, bylaws, or other governing instruments of Stone Street or any
Stone Street Subsidiary or restrict or impair the ability of CCBF or any CCBF
Subsidiary to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Stone Street or any Stone Street Subsidiary that may be
directly or indirectly acquired or controlled by them.
5.27 DERIVATIVES CONTRACTS. Neither Stone Street nor any Stone Street
Subsidiary is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
Contract, or any other interest rate or foreign currency protection Contract
which is a financial derivative Contract (including various combinations
thereof) (each a "Derivatives Contract").
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5.28 Y2K COMPLIANCE. Stone Street, with respect to itself and the Stone
Street Subsidiaries, has made and is making inquiries of its and their software
and data processing providers with respect to Year 2000 problem compliance, and
it and, to the Knowledge of Stone Street, they are in compliance in all material
respects with the FFIEC Interagency Statement, "Guidance Concerning Institution
Due Diligence in Connection with Service Provider and Software Vendor Year 2000
Readiness" (March 17, 1998) (the "Interagency Statement").
5.29 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by Stone Street, any
Stone Street Subsidiary or any Affiliate thereof to CCBF pursuant to this
Agreement or any other document, agreement, or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by Stone Street, any Stone Street
Subsidiary or any Affiliate thereof for inclusion in the Registration Statement
to be filed by CCBF with the SEC will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by Stone Street, any Stone
Street Subsidiary or any Affiliate thereof for inclusion in the Proxy Statement
to be mailed to Stone Street's shareholders in connection with the Shareholders'
Meeting, and any other documents to be filed by Stone Street, any Stone Street
Subsidiary or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Stone Street, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Shareholder's
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholder's Meeting. All documents that Stone Street, any Stone Street
Subsidiary or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CCBF
CCBF represents and warrants to Stone Street as follows:
6.1 ORGANIZATION, STANDING AND AUTHORITY. CCBF is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
North Carolina, and is duly qualified
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to do business and in good standing in all jurisdictions (whether federal,
state, local or foreign) where both its ownership or leasing of Assets or the
conduct of its business requires it to be so qualified and the failure to do so
would constitute a Material Adverse Event. CCBF has all requisite corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its Assets and business, and to execute, deliver and perform its
obligations under this Agreement. CCBF is duly registered as a bank holding
company under the BHCA. Except as Previously Disclosed, CCBF has in effect all
Permits necessary for it to own or lease its Assets and to carry on its business
as now conducted.
6.2 CAPITAL STOCK.
(a) The authorized capital stock of CCBF consists of (i)
100,000,000 shares of CCBF Common Stock, of which 40,058,092 shares were issued
and outstanding as of April 13, 1999, and (ii) 10,000,000 shares of serial
preferred stock, none of which were issued and outstanding on such date. All of
the issued and outstanding shares of CCBF Common Stock are duly and validly
issued and outstanding and are fully paid and nonassessable. None of the
outstanding shares of CCBF Common Stock has been issued in violation of any
preemptive Rights.
(b) The CCBF Common Stock is duly registered under the 1934
Act and is listed on the NYSE. The CCBF Common Stock is not subject to any
restrictions as to the transfer thereof (exclusive of restrictions respecting
CCBF Common Stock held by its directors, officers or other Affiliates in
accordance with the Securities Laws). To the Knowledge of CCBF and except as
Previously Disclosed, as of the date hereof, no Person is a beneficial owner of,
or has a Right to own beneficially, five percent (5%) or more of the CCBF Common
Stock. For purposes of this Section 6.2, the term "beneficial owner" shall have
the meaning provided in Rule 13d-3 of the rules and regulations of the SEC as in
effect on the date hereof, except that the term shall not include ownership of
any of the CCBF Common Stock held by any CCBF Subsidiary or its designees as
trustee or in some other fiduciary or custodial capacity.
6.3. CCBF SUBSIDIARIES.
(a) Each of the CCBF Subsidiaries (i) is duly organized,
validly existing and in good standing under the Laws of the state or other
jurisdiction of its incorporation, (ii) is duly qualified to do business and is
in good standing in all jurisdictions (whether federal, state, local or foreign)
where both its ownership or leasing of Assets or the conduct of its business
requires it to be so qualified and the failure to do so would constitute a
Material Adverse Event, and (iii) has all requisite corporate power and
authority to, and, except as Previously Disclosed, has in effect all Permits
necessary for it to, carry on its business as now conducted and to own, lease
and operate its Assets and businesses. Other than the CCBF Subsidiaries, CCBF
neither owns nor controls five percent (5%) or more of the outstanding equity
securities, either directly or indirectly, of any Person. CCB Bank is an
"insured institution" as defined in the FDIA and applicable regulations
thereunder, and the deposits in which are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund.
35
(b) CCBF is the direct, record and beneficial owner of 100% of
the outstanding shares of the capital stock of each of the CCBF Subsidiaries
which are its direct subsidiaries, and CCB Bank is the direct, record and
beneficial owner of 100% of the outstanding shares of capital stock of each of
the CCBF Subsidiaries which are its direct subsidiaries. All of the shares of
capital stock of each of the CCBF Subsidiaries are fully paid and nonassessable
(except, with respect to CCB Bank, as otherwise provided under Section 53-42 of
the Bank Act) and are owned by CCBF, CCB Bank or another CCBF Subsidiary free
and clear of any Lien. No equity securities of any CCBF Subsidiary are or may
become required to be issued (other than to CCBF or another CCBF Subsidiary)
under any Rights.
6.4 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.
(a) The execution and delivery of this Agreement by CCBF,
CCBFC and CCB Bank and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of CCBF, CCBFC and CCB Bank, subject to (a)
ratification by the Boards of Directors of CCBF and CCB Bank of the actions of
their respective Executive Committees in adopting this Agreement, and (b) the
approval of the shareholder of CCBFC and CCB Bank to the extent required by
applicable Law. This Agreement, subject to requisite director and shareholder
approvals and Regulatory Approvals, represents a legal, valid and binding
obligation of CCBF, CCBFC and CCB Bank, enforceable against CCBF, CCBFC and CCB
Bank in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
CCBF, CCBFC or CCB Bank, nor the consummation by CCBF, CCBFC or CCB Bank of the
transactions contemplated hereby to which they are a party, nor compliance by
them with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of CCBF's Amended and Restated Articles of Incorporation
or Amended Bylaws (as amended), CCFC's Articles of Incorporation or Bylaws, or
CCB Bank's Amended and Restated Articles of Incorporation (as amended) or
Amended Bylaws (as amended), or (ii) constitute or result in a Default under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any Lien upon, any Assets of any of CCBF or any
CCBF Subsidiary, or (iii) subject to receipt of all requisite director and
shareholder approvals and Regulatory Approvals, violate any Law applicable to
CCBF or any CCBF Subsidiary or any of their respective Assets.
(c) Other than (i) in connection or compliance with the
provisions of applicable Securities Laws and the rules and regulations of the
NYSE, (ii) Consents required from Regulatory Authorities, (iii) notices to or
filings with the IRS or the PBGC with respect to any employee benefit plans, or
under the HSR Act, and (iv) filings of the Articles of Merger and the Bank
Articles of Merger with the NC SecState, no notice to, filing with or Consent of
any public body or authority is necessary for the consummation by CCBF, CCBFC
and CCB Bank of the Merger, the Bank Merger, the Second Merger, and the other
transactions contemplated in this Agreement.
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
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(a) CCBF has timely filed and made available to Stone Street
all SEC Documents required to be filed by CCBF since December 31, 1995 (the
"CCBF SEC Reports"). The CCBF SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
other applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such CCBF SEC Reports or
necessary in order to make the statements in such CCBF SEC Reports, in light of
the circumstances under which they were made, not misleading.
(b) CCBF (i) has delivered (or will deliver, when issued) the
CCBF Financial Statements to Stone Street. Except as Previously Disclosed, the
CCBF Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or will be in accordance with the books and records of CCBF and
the CCBF Subsidiaries, which are or will be complete and accurate in all
material respects and which have been or will have been maintained in accordance
with good business practices, (ii) present or will present fairly in all
material respects the consolidated financial position and the consolidated
results of operations, changes in shareholders' equity and cash flows of CCBF
and the CCBF Subsidiaries as of the dates and for the periods indicated, in
accordance with GAAP, subject in the case of interim financial statements to
normal recurring year-end adjustments which were not or, to the Knowledge of
CCBF, are not expected to be material in amount, and (iii) with respect to the
CCBF Financial Statements as of and for the years ended December 31, 1998,
December 31, 1997 and December 31, 1996, have been audited and reported upon by
independent certified public accountants.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed
or reflected in any CCBF SEC Report filed since December 31, 1998 and prior to
the date hereof, neither CCBF nor any CCBF Subsidiary has incurred any
Liabilities that could constitute a Material Adverse Event.
6.7 TAX MATTERS.
(a) Except as Previously Disclosed, all Tax Returns required
to be filed by or on behalf of CCBF have been timely filed, or requests for
extensions have been timely filed and granted and have not expired, for periods
ending before January 1, 1999, and all such Tax Returns filed are complete and
accurate in all material respects. Except as Previously Disclosed or reflected
on any SEC Document filed by CCBF since December 31, 1998 and prior to the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any material amount of Taxes. All Taxes due from
CCBF with respect to completed and settled examinations or concluded Tax
litigation have been paid.
(b) Except as Previously Disclosed, CCBF has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect.
37
(c) In the opinion of CCBF's management, adequate provision
for any Taxes due or to become due from CCBF for any period or periods through
and including December 31, 1998, has been made and is reflected in the December
31, 1998 financial statements of CCBF included in the CCBF Financial Statements.
(d) Deferred Taxes of CCBF and each CCBF Subsidiary have been
provided for in the CCBF Financial Statements in accordance with GAAP.
(e) CCBF and each of the CCBF Subsidiaries is in compliance
with, and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Tax Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to constitute a
Material Adverse Event.
(f) There has not been an ownership change, as defined in Tax
Code Section 382(g), of CCBF or any CCBF Subsidiary that occurred during or
after any taxable period in which CCBF and the CCBF Subsidiaries incurred a net
operating loss that carries over to any taxable period ending after December 31,
1998.
(g) Neither CCBF nor any CCBF Subsidiary has or has had in any
foreign country a permanent establishment, as defined in any applicable Tax
treaty or convention between the United States and such foreign country.
6.8 COMPLIANCE WITH LAWS.
(a) To the Knowledge of CCBF and except as Previously
Disclosed, each of CCBF and the CCBF Subsidiaries is in compliance in all
material respects with all Laws, any Regulatory Agreement (substituting CCBF and
the CCBF Subsidiaries for Stone Street and the Stone Street Subsidiaries within
the definition of such term) and with its internal policies and procedures.
(b) Except as Previously Disclosed, neither CCBF nor any CCBF
Subsidiary has received, consented to or entered into any Regulatory Agreement
(substituting CCBF and the CCBF Subsidiaries for Stone Street within the
definition of such term). True and complete copies of all such Regulatory
Agreements, if any, have been or will be delivered to Stone Street by CCBF.
6.9 EMPLOYEE BENEFIT PLANS.
(a) CCBF has Previously Disclosed, and will deliver to Stone
Street true and correct copies in each case of, all pension, retirement,
profit-sharing, stock appreciation right, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
38
written or unwritten employee programs, all medical, vision, dental, or other
health plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including "employee benefit plans" as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by CCBF, any CCBF Subsidiary or any ERISA
Affiliate thereof for the benefit of current officers or employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate, including all
amendments thereto adopted and effective since the most recent restatement
thereof (collectively, the "CCBF Benefit Plans"). In addition, CCBF will deliver
to Stone Street (i) with respect to each CCBF Benefit Plan (including any
amendment thereto), the most recent determination letter, if any, issued by the
IRS, (ii) annual reports or returns, audited or unaudited financial statements,
actuarial valuations and reports, and summary annual reports prepared for any
CCBF Benefits Plan with respect to the most recent three plan years, and (iii)
the most recent summary plan descriptions (and any material modifications
thereto). Any of the CCBF Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "CCBF ERISA Plan." Each CCBF ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Tax Code) is referred to herein as a
"CCBF Pension Plan." No CCBF Pension Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA.
(b) All CCBF Benefit Plans and any related trusts, to the
extent applicable, are in compliance with the applicable terms of ERISA, the Tax
Code, any other applicable Laws, and the written terms of such CCBF Benefit
Plans, the breach or violation of which are reasonably likely to constitute a
Material Adverse Event with respect to CCBF. Neither CCBF nor any CCBF
Subsidiary has received notice from any governmental authority, including the
IRS, questioning or challenging such compliance. Each CCBF ERISA Plan which is
intended to be qualified under Section 401(a) of the Tax Code has received a
favorable determination letter from the IRS, and CCBF is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. To the Knowledge of CCBF, neither it nor any CCBF Subsidiary has engaged
in a transaction with respect to any CCBF Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
CCBF or any CCBF Subsidiary to a Tax imposed by either Section 4975 of the Tax
Code or Section 502(i) of ERISA in amounts which are reasonably likely to
constitute a Material Adverse Event with respect to CCBF.
(c) No CCBF Pension Plan has any "unfunded current liability,"
as that term is defined in Section 302(d)(8)(A) of ERISA, based on actuarial
assumptions set forth for such plan's most recent actuarial valuations. Since
the date of the most recent actuarial valuation, there has been (i) no material
change in the financial position of any CCBF Pension Plan, (ii) no change in the
actuarial assumptions with respect to any CCBF Pension Plan, and (iii) no
increase in benefits under any CCBF Pension Plan as a result of plan amendments
or changes in applicable Law which is reasonably likely to constitute a Material
Adverse Event or materially adversely affect the funding status of any such
plan. Neither any CCBF Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
CCBF or any CCBF
39
Subsidiary, or the single-employer plan of any entity which is considered one
employer with CCBF under Section 4001 of ERISA or Section 414 of the Tax Code or
Section 302 of ERISA (an "ERISA Affiliate") has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the Tax
Code or Section 302 of ERISA, which is reasonably likely to constitute a
Material Adverse Event. Neither CCBF nor any CCBF Subsidiary has provided, or is
required to provide, security to a CCBF Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Tax Code.
(d) Within the six-year period preceding the Effective Time,
no Liability under Subtitle C or D of Title IV of ERISA has been or is expected
to be incurred by CCBF or any CCBF Subsidiary with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate, which Liability is reasonably likely to constitute a Material
Adverse Event with respect to CCBF. Neither CCBF nor any CCBF Subsidiary has
incurred any withdrawal Liability with respect to a multiemployer plan under
Subtitle B of Title IV of ERISA (regardless of whether based on contributions of
an ERISA Affiliate), which Liability is reasonably likely to constitute have a
Material Adverse Event. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any CCBF Pension Plan or by any ERISA
Affiliate within the 12- month period ending on the date hereof.
(e) Except as Previously Disclosed, neither CCBF nor any CCBF
Subsidiary has any Liability for retiree health and life benefits under any of
the CCBF Benefit Plans and there are no restrictions on the rights of CCBF or
any CCBF Subsidiary to amend or terminate any such retiree health or benefit
plan without incurring any Liability thereunder, which Liability is reasonably
likely to constitute a Material Adverse Event with respect to CCBF.
(f) Except as disclosed in CCBF SEC Reports, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of CCBF or any CCBF Subsidiary from any CCBF
or any CCBF Subsidiary under any CCBF Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any CCBF Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit, where
such payment, increase, or acceleration is reasonably likely to constitute a
Material Adverse Event with respect to CCBF.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of CCBF or any CCBF Subsidiary and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Tax Code or Section 302 of
ERISA, have been fully reflected on the CCBF Financial Statements to the extent
required by and in accordance with GAAP.
40
(h) There are no unresolved claims or disputes under the terms
of, or in connection with, the CCBF Benefit Plans other than claims for benefits
which are payable in the Ordinary Course of Business, and no Action has been
commenced with respect to any CCBF Benefit Plan.
(i) All CCBF Benefit Plan documents and annual reports or
returns, audited or unaudited financial statements, actuarial valuations,
summary annual reports, and summary plan descriptions issued with respect to the
CCBF Benefit Plans are correct and complete in all material respects, and there
have been no changes in the information set forth therein.
(j) All Liabilities of CCBF or any CCBF Subsidiary arising out
of or related to CCBF Benefit Plans are reflected in the CCBF Financial
Statements in accordance with GAAP.
(k) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to each such CCBF Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and of Tax Code
Section 4980B have been met with respect to each such CCBF Benefit Plan which is
an Employee Welfare Benefit Plan and which is subject to such requirements.
(l) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such CCBF Benefit Plan which is a CCBF ERISA Plan.
6.10 LEGAL PROCEEDINGS. Except as Previously Disclosed, there are no
Actions, instituted or pending or, to the Knowledge of CCBF, threatened against
CCBF or any CCBF Subsidiary, or against any Asset of any of them, that, if
decided adversely to it, could constitute a Material Adverse Event or that might
reasonably be expected to threaten or significantly impede the consummation of
the transactions contemplated by this Agreement. Neither CCBF nor any CCBF
Subsidiary is subject to any Order might reasonably be expected to threaten or
significantly impede the consummation of the transactions contemplated by this
Agreement.
6.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1998,
except (i) as disclosed in any CCBF SEC Report filed since December 31, 1998 and
prior to the date hereof or (ii) as Previously Disclosed, neither CCBF nor any
CCBF Subsidiary has (A) failed to operate in the Ordinary Course of Business,
(B) suffered any change that could constitute a Material Adverse Event, (C)
incurred any material Liabilities or engaged in any material transaction or
entered into any material agreement outside of the Ordinary Course of Business,
or (D) suffered a material loss, destruction or damage to any of its Assets,
that could constitute a Material Adverse Event.
6.12 REPORTS. Since December 31, 1994, CCBF has filed all reports and
statements, together with all amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities. A copy of
each such report or document will be made available to
41
Stone Street upon request. As of their respective dates, each such report or
document complied in all material respects with all of the Laws enforced or
promulgated by the respective Regulatory Authorities and no such report
contained any information that was false or misleading with respect to any
material fact or omitted to state any material fact necessary in order to make
the statements therein not misleading.
6.13 ACCOUNTING; TAX; REGULATORY MATTERS. Neither CCBF nor any CCBF
Subsidiary has taken or agreed to take any action or has any Knowledge of any
fact or circumstance that would (i) prevent the Merger and the Second Merger
from qualifying as a Tax-free reorganization within the meaning of Tax Code
Section 368, or (ii) significantly impede or delay receipt of any Regulatory
Approval.
6.14 BROKERS AND FINDERS. Neither CCBF nor any CCBF Subsidiary nor any
of their respective officers, directors or employees has employed any broker or
finder on a fee basis or incurred any Liability for any financial advisory fees,
brokerage fees, commissions or finder's fees in connection with this Agreement
or the transactions contemplated hereby.
6.15 CAPITAL STOCK ISSUED IN MERGER. At the Effective Time, CCBF Common
Stock (and the attached CCBF Rights) issued pursuant to the Merger will be duly
authorized, validly issued, fully paid (except as provided in the CCBF Rights
Plan) and nonassessable and not subject to preemptive Rights, or any Rights
(other than the CCBF Rights), created by CCBF or any CCBF Subsidiary, and such
CCBF Common Stock will be approved for listing on the NYSE.
6.16 DERIVATIVES CONTRACTS. Except as described in the CCBF Financial
Statements, neither CCBF nor any CCBF Subsidiary is a party to or has agreed to
enter into a Derivatives Contract.
6.17 Y2K COMPLIANCE. CCBF, with respect to itself and the CCBF
Subsidiaries, has made and is making inquiries of its and their software and
data processing providers with respect to Year 2000 problem compliance, and it
and, to the Knowledge of CCBF, they are in compliance in all material respects
with the Interagency Statement.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by CCBF, any CCBF
Subsidiary or any Affiliate thereof to Stone Street pursuant to this Agreement
or any other document, agreement, or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by CCBF, any CCBF Subsidiary or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
CCBF with the SEC, will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by CCBF, any CCBF Subsidiary or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to Stone
Street's
42
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by CCBF, any CCBF Subsidiary or any Affiliate thereof with
the SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the shareholders of
Stone Street, be false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Shareholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting. All documents that CCBF, any CCBF
Subsidiary or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
ARTICLE VII
CONDUCT PRIOR TO THE EFFECTIVE TIME
7.1 AFFIRMATIVE COVENANTS OF STONE STREET. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written Consent of CCBF shall have been obtained,
and except as otherwise expressly contemplated herein, Stone Street shall and
shall cause each of the Stone Street Subsidiaries to (a) operate its business
only in the Ordinary Course of Business, including with respect to loan
underwriting and loan and deposit pricing, (b) preserve intact its business
organization and Assets, use its reasonable efforts to retain the services of
its officers and key employees, and maintain its rights and franchises, (c) take
no action which would (i) materially adversely affect the ability of any Party
to obtain any Consents required for the transactions contemplated hereby, or
(ii) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement, and (d) consult with CCBF prior
to (i) approving a new loan (which shall not include extensions or renewals of
loans outstanding or committed to as of the date of this Agreement) in excess of
25% of Stone Street's legal lending limit, or (ii) purchasing (or otherwise
acquiring), or selling (or otherwise disposing of) any Asset with a cost or book
value in excess of $50,000, except with respect to the New Building.
7.2 NEGATIVE COVENANTS OF STONE STREET. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
unless the prior written Consent of CCBF shall have been obtained and except as
otherwise expressly contemplated herein, Stone Street covenants and agrees that
it will not do or agree or commit to do, or permit any Stone Street Subsidiary
to do or agree or commit to do, any of the following:
(a) amend the Articles of Incorporation, Bylaws, or other
governing instruments of Stone Street or any Stone Street Subsidiary, or
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(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 except in its Ordinary
Course of Business (which shall include creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities); or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the Ordinary Course of Business under Stone Street Benefit
Plans or with respect to put options under the Stone Street ESOP), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of Stone Street or any Stone Street Subsidiary, or declare or pay
any dividend or make any other distribution in respect of Stone Street Capital
Stock, provided that Stone Street may (to the extent legally and contractually
permitted to do so), but shall not be obligated to, declare and pay regular
quarterly cash dividends on the outstanding shares of Stone Street Common Stock
at a rate not in excess of $0.1175 per share with usual and regular record and
payment dates in accordance with past practice and such dates may not be changed
without the prior written consent of CCBF, provided that any dividend declared
or payable on the shares of Stone Street Common Stock for the quarterly period
during which the Effective Time occurs shall, unless otherwise agreed upon in
writing by CCBF and Stone Street, be declared with a record date prior to the
Effective Time only if the normal record date for payment of the corresponding
quarterly dividend to holders of CCBF Common Stock is before the Effective Time;
or
(d) except pursuant to the exercise of Stone Street Stock Options
outstanding as of the date hereof under the Stone Street Option Plans and
pursuant to the terms thereof in existence on the date hereof, issue, sell,
pledge, encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise permit to
become outstanding, any shares of Stone Street Common Stock or any other capital
stock of Stone Street or any Stone Street Subsidiary, or any Rights; or
(e) adjust, split, combine, or reclassify any capital stock of
Stone Street or any Stone Street Subsidiary or issue or authorize the issuance
of any Rights or other securities in respect of or in substitution for shares of
Stone Street Common Stock, or sell, lease, mortgage, or otherwise dispose of or
otherwise encumber any shares of capital stock of Stone Street or any Stone
Street Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another Stone Street or a Stone Street Subsidiary); or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of five years
or less, purchase, agree to purchase or otherwise incur an obligation to
purchase any securities or make any material investment, either by purchase of
stock or securities, contributions to capital, Asset transfers, or purchase of
any Assets, in any Person other than a Stone Street Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) foreclosures in the Ordinary Course of Business, (ii) acquisitions of
control by a Stone Street Subsidiary that is a depository institution in its
fiduciary
44
capacity, or (iii) the creation of new wholly-owned Stone Street Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of Stone Street or any Stone Street Subsidiary, except in
accordance with its Ordinary Course of Business or as required by Law; pay any
retirement or pension allowance not required by a Stone Street Benefit Plan; pay
any severance or termination pay or any bonus other than pursuant to written
policies or written Contracts in effect on the date of this Agreement; and enter
into or amend any severance agreements with officers of Stone Street or any
Stone Street Subsidiary; grant any increase in fees or other increases in
compensation or other benefits to directors of Stone Street or any Stone Street
Subsidiary; or voluntarily accelerate the vesting of any Stone Street Options or
MRP Rights or other stock-based compensation or employee benefits or other
Rights; or
(h) enter into or amend any employment Contract between Stone
Street or any Stone Street Subsidiary and any Person (unless such amendment is
required by Law) that Stone Street or any Stone Street Subsidiary does not have
the unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of Stone Street or any
Stone Street Subsidiary or terminate or withdraw from, or amend, any Stone
Street Benefit Plan other than any such change that is required by Law or that,
in the opinion of counsel, is necessary or advisable to maintain the Tax
qualified status of any such plan, or make any distributions from any Stone
Street Benefit Plan, except as required by Law, the terms of such Stone Street
Benefit Plan or in the Ordinary Course of Business; or
(j) make any change in any Tax or accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to changes
in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Action other than in the Ordinary Course of
Business, settle any Action involving any Liability of Stone Street or any Stone
Street Subsidiary for material money damages or restrictions upon the operations
of Stone Street or any Stone Street Subsidiary; or
(l) except in the Ordinary Course of Business, enter into, modify,
amend, or terminate any material Contract or waive, release, compromise, or
assign any material rights or claims.
7.3 COVENANTS OF CCBF. From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, unless the prior
written consent of Stone Street shall have been obtained, and except as
otherwise expressly contemplated herein, CCBF covenants and agrees that it shall
(a) continue to conduct its business and the business of the CCBF Subsidiaries
in a manner designed in its reasonable judgment, to enhance the long-term value
of the CCBF Common Stock and the business prospects of CCBF and the CCBF
Subsidiaries and to the extent consistent therewith use all reasonable efforts
to preserve intact CCBF's and the CCBF Subsidiaries' core
45
businesses and goodwill with their respective employees and the communities they
serve, and (b) take no action which would (i) materially adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby, or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have a material adverse affect on
any of the business, material Assets, financial condition or results of
operations of such Party, and (ii) would cause or constitute a material breach
of any of its representations, warranties, agreements, or covenants contained
herein, and to use its reasonable efforts to prevent or promptly to remedy the
same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, as applicable, such financial
statements will fairly present the consolidated financial position of the Party
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will 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. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports. From and after
the Effective Time for so long as is necessary in order to permit "affiliates"
of Stone Street to offer and sell CCBF Common Stock pursuant to Rule 145, and to
the extent applicable, Rule 144, CCBF will file on a timely basis all reports
required pursuant to Section 13 or 15(d) of the 1934 Act, referred to in
paragraph (c)(1) of Rule 144 under the 1933 Act (or CCBF will make publicly
available the information regarding itself referred to in paragraph (c)(2) of
Rule 144) in order to permit "affiliates" of Stone Street to sell, pursuant to
the terms and conditions of Rule 145 and the applicable provisions of Rule 144,
CCBF Common Stock.
7.6 CONFIDENTIALITY. Each Party shall, and shall cause its Affiliates,
advisors and representatives to, (i) hold confidential all information obtained
in connection with any transaction contemplated hereby with respect to the other
Party which is not otherwise public knowledge, (ii) in the event of the
termination of this Agreement return all documents (including copies thereof)
obtained hereunder from the other Party, and (iii) use its best efforts to cause
all information obtained pursuant to this Agreement or in connection with the
negotiation hereof to be treated as confidential and not use, or knowingly
permit others to use, any such information unless such information becomes
generally available to the public through no fault of such Party. Each Party
acknowledges and agrees that a breach of any of their respective obligations
under this Section 7.6
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would cause the other irreparable harm for which there is no adequate remedy at
law, and that, accordingly, each is entitled to injunctive and other equitable
relief for the enforcement thereof, in addition to damages or any other relief
available at law, and to recover its reasonable attorneys' fees and expenses
incurred in such enforcement.
7.7 CURRENT INFORMATION. During the period from the date of the execution
of this Agreement to the Effective Time, each of CCBF and Stone Street shall,
and each shall cause its representatives to, confer on a regular and request
basis with representatives of the other. Each of CCBF and Stone Street shall
promptly notify the other of (i) any material change in its business, material
Assets, results of operations or prospects, (ii) any Actions (or communications
indicating that the same may be contemplated) of any Regulatory Authority or
Environmental Agency, (iii) the institution or the threat of a material Action
involving such Party, or (iv) any event or condition that might be reasonably
expected to cause any of such Party's representations or warranties set forth
herein not to be true and correct in all material respects as of the Effective
Time; and in each case shall keep the other Party fully informed with respect
thereto.
7.8 REGISTRATION STATEMENT; REGULATORY MATTERS.
(a) None of the information supplied or to be supplied by CCBF or
Stone Street for inclusion in the Registration Statement to be filed by CCBF,
the proxy statement to be used by Stone Street to solicit any required approval
of its shareholders as contemplated by this Agreement (the "Proxy Statement") or
any other document to be filed with any Regulatory Authority in connection with
the transactions contemplated hereby will contain when filed, or, in the case of
the Proxy Statement, when it is first mailed to the shareholders of Stone
Street, any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which such statements are made, not misleading, or, in the
case of the Registration Statement, when it becomes effective under the 1933
Act, be false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements therein not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, including any
adjournments thereof, be false or misleading with respect to any material fact
or omit to state any material fact necessary to correct any statement or remedy
any omission in any earlier communication with respect to the solicitation of
any proxy for the Shareholders' Meeting.
(b) CCBF shall (i) with the assistance of Stone Street, prepare
and file with the SEC as soon as practicable the Registration Statement and the
Proxy Statement, (ii) use its best efforts to cause the Registration Statement
to become effective under the 1933 Act, and (iii) take any action required to be
taken under any applicable state securities or "Blue Sky" Laws in connection
therewith. Stone Street shall furnish CCBF with all information concerning Stone
Street, the Stone Street Subsidiaries and the holders of Stone Street Common
Stock, Stone Street Stock Options and MRP Rights, as CCBF may reasonably request
in connection with the foregoing.
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(c) Each Party shall cooperate and use its respective best efforts
(i) as soon as practicable to prepare all documentation, to effect all filings
and to obtain all Regulatory Approvals and all other Permits and Consents of all
third parties, Regulatory Authorities and other governmental authorities
necessary to consummate the Merger, the Second Merger, the Bank Merger and the
other transactions contemplated by this Agreement, and (ii) to cause the Merger,
the Second Merger, the Bank Merger and the other transactions contemplated by
this Agreement to be consummated as soon as reasonably practicable. Each Party
shall advise one another concerning all filings to be made by it and all other
Consents and Permits required to be obtained by it, and shall promptly furnish
the other Party with copies of all such filings and all correspondence and other
communications in connection with all such filings, Consents, Permits, Orders
and all Regulatory Approvals.
7.9 DIRECTORS' AND SHAREHOLDERS' APPROVALS. Stone Street shall cause a
duly called and noticed meeting of its shareholders to be held as soon as
practicable for the purpose of voting upon the Merger (including the Plan of
Merger), and related matters (the "Shareholders' Meeting"). Stone Street, as the
shareholder of Mocksville, shall approve this Agreement and the Bank Merger
(including the Bank Plan of Merger) promptly. CCBF shall cause a duly called and
noticed meeting of its directors and CCBFC and CCB Bank shall cause duly called
and noticed meetings of their directors and shareholder (which meetings shall be
held prior to the Shareholders' Meeting) for the purposes of (a) the Boards of
Directors of CCBF and CCB Bank voting upon ratification of their respective
Executive Committee's adoption of this Agreement, and (b) the Board of Directors
and shareholder of CCBFC and the shareholder of CCB Bank voting upon the Merger,
the Bank Merger, the Second Merger and related matters (including the Plan of
Merger and the Bank Plan of Merger). In connection with the Shareholders'
Meeting, CCBF and Stone Street shall prepare the Proxy Statement and mail it to
Stone Street's shareholders. The Board of Directors of Stone Street shall submit
for approval of Stone Street's shareholders the matters to be voted upon at the
Shareholders' Meeting, and shall, subject to its fiduciary obligations,
recommend approval of such matters and use its best efforts (including, without
limitation, soliciting proxies for such approvals) to obtain such shareholder
approval.
7.10 AGREEMENTS OF AFFILIATES. Stone Street shall Previously Disclose all
Persons whom it reasonably believes is an "affiliate" of Stone Street for
purposes of Rule 145 under the 1933 Act. Stone Street shall use its reasonable
efforts to cause each such Person to deliver to CCBF not later than 30 days
prior to the Effective Time, an Affiliate Agreement providing that such Person
will not sell, pledge, transfer, or otherwise dispose of the shares of Stone
Street Common Stock held by such Person except as contemplated by such Affiliate
Agreement or by this Agreement and will not sell, pledge, transfer, or otherwise
dispose of the shares of CCB Common Stock to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder (and CCBF shall be
entitled to place restrictive legends upon certificates for shares of CCBF
Common Stock issued to affiliates of Stone Street pursuant to this Agreement to
enforce the provisions of this Section 7.10). CCBF shall not be required to
maintain the effectiveness of the Registration Statement under the 1933 Act for
the purposes of resale of CCBF Common Stock by such affiliates.
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7.11 DELIVERY OF MONTHLY FINANCIAL STATEMENTS. Within fifteen (15) days
after the end of each calendar month occurring after the date of this Agreement
and prior to the Effective Time, Stone Street shall deliver to CCBF its
unaudited monthly consolidated financial statements normally generated by it for
such month certified by its Chief Executive Officer. Such financial statements
shall fairly present in all material respects the financial condition and
results of operations of Stone Street on a consolidated basis on the dates and
for the periods indicated in accordance with GAAP, subject to normal and
recurring year-end audit adjustments.
7.12 TAX-FREE REORGANIZATION. Each Party undertakes and agrees to use its
best efforts to cause the Merger, the Bank Merger and the Second Merger to
qualify as a Tax-free reorganization under Tax Code Section 368.
7.13 PRESS RELEASES. CCBF and Stone Street shall promptly consult with
each other as to the form and substance, and prior to the release or issuance,
of any press release or other public disclosure materially related to this
Agreement, the Merger or any other transaction contemplated hereby. CCBF and
Stone Street agree not to release or issue any such press release or other
public disclosure without the approval of the other unless required by law.
7.14 EXCHANGE LISTING. CCBF shall use its reasonable efforts to list,
prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of CCB Common Stock and the CCB Rights attached thereto to
be issued to the holders of Stone Street Common Stock pursuant to the Merger,
and CCBF shall give all notices and make all filings with the NYSE required in
connection with the transactions contemplated herein.
7.15 MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and
conditions of this Agreement, each of the Parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement as expeditiously as reasonably practicable, including, without
limitation, using its best efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby. CCBF and Stone Street shall
use, CCBF shall cause each of the CCBF Subsidiaries, and Stone Street shall
cause each of the Stone Street Subsidiaries to use, their best efforts to obtain
all Regulatory Approvals and all other Consents and Permits of third parties,
including the NYSE, AMEX and Regulatory Authorities, necessary or, in the
reasonable opinion of CCBF and Stone Street, desirable for the consummation of
the transactions contemplated by this Agreement. After the Effective Time, CCBF
shall cause appropriate documents to be delivered to holders of Stone Street
Stock Options and MRP Rights to reflect the Rights to acquire CCBF Stock into
which such Stone Street Stock Options and MRP Rights were converted. CCBF shall
reserve shares of CCBF Stock sufficient to issue the requisite number of shares
of CCBF Stock upon exercise of the former Stone Street Stock Options and MRP
Rights and shall take appropriate action to cause such shares to be offered in a
registered offering.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 INDEMNIFICATION AND INSURANCE.
(a) CCBF agrees to indemnify, defend and hold harmless Stone
Street and the Stone Street Subsidiaries, and each of the present and former
officers, directors, employees and agents of Stone Street and the Stone Street
Subsidiaries from and against all Indemnifiable Losses attributable to CCBF,
CCBFC or CCB Bank. Stone Street agrees to indemnify, defend and hold harmless
CCBF and the CCBF Subsidiaries, and each of the present and former officers,
directors, employees and agents of CCBF and the CCBF Subsidiaries, from and
against all Indemnifiable Losses attributable to Stone Street or a Stone Street
Subsidiary.
(b) In addition to the provisions of Section 8.1(a), after the
Effective Time, the Resulting Corporation and the Surviving Bank shall jointly
and severally indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of Stone Street and Mocksville from
and against all Indemnifiable Losses arising from or related to matters
occurring at or prior to the Effective Time and, further, to indemnify such
present and former officers, directors, employees and agents of Stone Street and
Mocksville to the full extent then permitted under the Bank Act and NCBCA,
including provisions relating to advances of expenses incurred in the defense of
any action or suit.
(c) CCBF shall maintain a policy or policies of directors' and
officers' liability insurance (the "D&O Insurance") covering Persons who are
currently covered by Stone Street's existing D&O Insurance, or shall otherwise
continue D&O Insurance coverage for such Persons for a period of at least three
(3) years after the Effective Time, which coverage shall have terms at least as
favorable as those of Stone Street's existing D&O Insurance in effect on the
date hereof; provided, that CCBF shall not be obligated to make annual premium
payments for such three-year period in respect of such policy (or coverage
replacing such policy) which exceed 150% of the annual premium payments on Stone
Street's current policy in effect as of the date of this Agreement (the "Maximum
Amount"). If the amount of the premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, CCBF shall use its reasonable
efforts to maintain the most advantageous policies of D&O Insurance obtainable
for a premium equal to the Maximum Amount.
(d) If the Resulting Corporation or the Surviving Bank or any of
their respective successors or assigns (i) shall merge into any other Person and
shall not be the continuing or surviving corporation or entity of such merger,
or (ii) shall transfer all or substantially all of its Assets to any Person,
then and in each such case, proper provision shall be made so that such
successors and assigns shall assume the obligations set forth in this Section
8.1.
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8.2 EMPLOYEE CONTRACTS; EMPLOYEE BENEFITS; DIRECTOR BENEFITS. Following
the Effective Time, the Resulting Corporation and the Surviving Bank each and
together will continue to honor, and will assume and perform in accordance with
their terms, all Previously Disclosed employment, severance, deferred
compensation, split dollar insurance, salary continuation, consulting and other
compensation Contracts between Stone Street or Mocksville and any current or
former director, officer or employee thereof (including, but not limited to, the
Stone Street Options Plans, the Retirement Payment Agreements between Stone
Street and the members of its Board of Directors and the Supplemental Income
Agreement between Mocksville and J. Charles Dunn), and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective Time
under any Stone Street Benefit Plan; provided, however, that the Stone Street
ESOP and the 401(k) Profit Sharing Plan of SSB Bank shall be terminated
immediately prior to the Effective Time. The Trustees of the Stone Street ESOP
shall tender shares of Stone Street Common Stock held by the Stone Street ESOP
for cash as provided in Section 3.1(c). The employment agreements between
certain Stone Street's senior executive officers and Stone Street (or certain of
Mocksville's senior executive officers and Mocksville) may be amended and
restated effective as of the Effective Time in the forms mutually agreed upon by
CCBF, Stone Street (or Mocksville) and such senior executive officers.
8.3 MODIFICATION OF EMPLOYEE BENEFITS. Except as otherwise provided in
Section 8.2 or this Section 8.3, the Stone Street Benefit Plans will be reviewed
and appropriate amendments, consolidations or terminations will be made thereto
at or after the Effective Time; provided, however, that (i) the employees of
Stone Street shall be eligible to receive group hospitalization, medical, life,
disability and similar benefits on the same basis and under the same terms
available to the present employees of CCBF and the CCBF Subsidiaries, (ii) in
the event a Stone Street Benefit Plan is terminated, its affected participants
shall become fully vested in accordance with ERISA and the Tax Code, with each
participating Stone Street employee having the right or option either to receive
the benefits to which he or she is entitled as a result of such termination or
to have such benefits "rolled" into an Individual Retirement Account or the
appropriate CCBF Benefit Plan, on the same basis and applying the eligibility
standards as would apply to the employees of CCBF and the CCBF Subsidiaries as
if such employee's prior service to Stone Street had been performed on behalf of
CCBF and the CCBF Subsidiaries for qualification, participation and vesting, but
not for funding, purposes, and (iii) in the event a Stone Street Benefit Plan is
merged into a CCBF Benefit Plan, shall be entitled to participate in such CCBF
Benefit Plan on the same basis and applying the same eligibility standards as
would apply to employees of CCBF and the CCBF Subsidiaries. CCBF and Stone
Street agree that the overall level of benefits offered or provided to the
employees of Stone Street and the Stone Street Subsidiary under the CCBF Benefit
Plans will be no less than that offered or provided to the present employees of
CCBF and the CCBF Subsidiaries, and that for purposes of eligibility,
qualification and vesting (but not for purposes of calculating the amount of
benefits under any CCBF Pension Plan), the employees of Stone Street and the
Stone Street Subsidiary shall receive credit for their periods of service to
Stone Street or a Stone Street Subsidiary.
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For purposes of item (i) above, CCBF shall cause the relevant CCBF
Benefit Plans (A) to waive any pre-existing condition limitations for conditions
covered under the applicable Stone Street Benefit Plans, (B) to honor any
deductible and out-of-pocket expenses incurred by the employees and their
beneficiaries under the Stone Street Benefit Plans during the portion of 1999
preceding the Effective Time, and (C) with respect to any Stone Street Benefit
Plan providing group term life insurance, to waive any medical certification for
employees of Stone Street or a Stone Street Subsidiary up to the amount of term
life insurance coverage such employees had under such Stone Street Benefit Plan
at the Effective Time. Stone Street and CCBF may agree to (i) cause any Stone
Street Benefit Plan to be terminated at or prior to the Effective Time; (ii)
cause a CCBF Subsidiary chosen by CCBF to assume at the Effective Time any or
all fiduciary positions with respect to any Stone Street Benefit Plan which will
continue to have obligations to pay benefits following the Effective Time; and
(iii) cause the merger of any cafeteria plan (within the meaning of Tax Code
Section 125, and including any flexible spending account arrangement thereunder)
maintained by Stone Street or any Stone Street Subsidiary with the similar plan
of CCBF or a CCBF Subsidiary.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each Party to effect the Merger, the Second Merger,
the Bank Merger and the other transactions contemplated hereby shall be subject
to the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) The Boards of Directors of CCBF and CCB Bank shall ratify the
adoption of this Agreement by their respective Executive Committees, the Board
of Directors of CCBFC shall adopt this Agreement, and the shareholder of CCBFC
and CCB Bank and the shareholders of Stone Street and the shareholder of
Mocksville shall have approved all matters relating to this Agreement and the
Merger required to be approved by such shareholders by the votes required under
the Bank Act, the Savings Bank Act and the NCBCA.
(b) The Merger, the Bank Merger, the Second Merger and the other
transactions contemplated hereby shall have received all Regulatory Approvals,
including all required approvals by the Federal Reserve Board, Federal Reserve,
the FDIC, the Commission, the Commissioner, the Savings Bank Administrator, the
NYSE, the AMEX and any other Regulatory Authority whose approval is required for
consummation of the transactions contemplated hereby, and no such Regulatory
Approvals or other required approval shall have imposed any condition or
requirement which would so materially adversely impact the economic benefits of
the transactions contemplated by this Agreement as to render inadvisable in the
reasonable opinion of the Board of Directors of either CCBF or Stone Street the
consummation of the Merger.
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(c) The Registration Statement shall have been declared effective
by the SEC and CCBF shall have received all state securities or "Blue Sky" law
Permits, or confirmations as to the availability of an exemption from
registration requirements, as may be necessary to issue CCBF Common Stock and
CCBF Rights pursuant to the terms of this Agreement. Neither the Registration
Statement nor any such Permit or confirmation shall be subject to any stop
order, threatened stop order, rescission or withdrawal by the SEC or any state
securities or "Blue Sky" authority with competent jurisdiction.
(d) No Party shall be subject to any Action which enjoins or
prohibits the consummation of the Merger, the Bank Merger or the Second Merger
or which could constitute a Material Adverse Event as to CCBF or Stone Street.
No Action shall be pending or threatened which seeks to restrain or prohibit the
Merger, the Bank Merger or the Second Merger or to obtain any substantial
monetary or other relief in connection with this Agreement unless in the
reasonable opinion of counsel to the Party wishing to proceed (which opinion
shall be satisfactory in substance to the other Party in its reasonable
judgment), such Action is likely to be resolved in such a way as to not deprive
any Party of any of the material benefits to be derived from the consummation of
the Merger, the Bank Merger or the Second Merger or in such a way which would
not constitute a Material Adverse Event as to the Party subject thereto.
(e) The shares of CCBF Common Stock (and attached CCBF Rights)
issuable pursuant to the Merger shall have been approved for listing on the
NYSE.
(f) CCBF and Stone Street shall have received an opinion of KPMG
LLP or CCBF's legal counsel, satisfactory in form and substance to each of CCBF
and Stone Street, to the effect that the Merger, the Second Merger and the Bank
Merger together will constitute a Tax-free reorganization within the meaning of
Tax Code Section 368 and that (i) no gain or loss will be recognized by a
shareholder of Stone Street to the extent that such shareholder receives CCBF
Common Stock (and attached CCBF Rights) in exchange for such shareholder's Stone
Street Common Stock in the Merger, except that gain or loss will be recognized
on the receipt of cash that is received by Electing Holders rather than shares
of CCBF Common Stock (and attached CCBF Rights) and that gain or loss will be
recognized on the receipt of cash by any Stone Street shareholder that is
received in lieu of fractional shares; any cash received by a shareholder of
Stone Street in lieu of a fractional share will be treated as received in
exchange for such fractional share and not as a dividend, and any gain or loss
recognized as a result of the receipt of such cash will be capital gain or loss
equal to the difference between the cash received and the portion of the
shareholder's basis in Stone Street Common Stock allocable to such fractional
share interest; (ii) the tax basis of the shares of CCBF Common Stock (and
attached CCBF Rights) received by each shareholder of Stone Street will equal
the tax basis of such shareholder's shares of Stone Street Common Stock (reduced
by any amount allocable to fractional share interests for which cash is
received) exchanged in the Merger; and (iii) the holding period for the shares
of CCBF Common Stock (and attached CCBF Rights) received by each shareholder of
Stone Street will include the holding period for the shares of Stone Street
Common Stock of such shareholder exchanged in the Merger.
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9.2 CONDITIONS TO THE OBLIGATIONS OF STONE STREET AND MOCKSVILLE. The
obligations of Stone Street and Mocksville to effect the Merger, the Bank Merger
and the other transactions contemplated hereby shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CCBF, CCBFC and CCB Bank set forth in Article VI hereof shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Time (as though made on and as of the Effective Time except
to the extent such representations and warranties are by their express
provisions made as of a specified date) and Stone Street shall have received a
certificate signed by the Chief Executive Officer and the Chief Financial
Officer of CCBF to that effect.
(b) PERFORMANCE OF OBLIGATIONS. CCBF, CCBFC and CCB Bank shall
have performed in all material respects all obligations and covenants required
to be performed by them under this Agreement prior to the Effective Time, and
Stone Street shall have received a certificate signed by the Chief Executive
Officer and the Chief Financial Officer of CCBF to that effect.
(c) LEGAL OPINION. Stone Street shall have received from Brooks,
Pierce, McLendon, Humphrey & Leonard, L.L.P., counsel to CCBF, CCBFC and CCB
Bank, an opinion as to such matters as Stone Street and its counsel may
reasonably request. In rendering the foregoing opinion, such counsel may rely as
to questions of fact and of good standing upon the representations and
warranties of CCBF, CCBFC and CCB Bank contained in this Agreement or upon the
certificate of appropriate officers of CCBF, CCBFC and CCB Bank and of public
officials.
(d) FAIRNESS OPINION. Stone Street shall have received the opinion
of OMC, its financial advisor, that the consideration to be received by the
shareholders of Stone Street as a result of the transactions contemplated by
this Agreement is fair to the shareholders of Stone Street from a financial
point of view. The opinion shall be in a form reasonably satisfactory to Stone
Street and shall be dated as of the date of the Proxy Statement and confirmed as
of a date within five (5) business days prior to the Effective Time.
9.3 CONDITIONS TO THE OBLIGATIONS OF CCBF, CCBFC AND CCB BANK. The
obligations of CCBF, CCBFC and CCB Bank to effect the Merger, the Bank Merger,
the Second Merger and the other transactions contemplated hereby shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Stone Street set forth in Article V hereof shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time (as though made on and as of the Effective Time except to the
extent such representations and warranties are by their express provisions made
as of a specified date) and CCBF, CCBFC and CCB Bank shall have received a
certificate signed by the Chief Executive Officer of Stone Street to that
effect.
54
(b) PERFORMANCE OF OBLIGATIONS. Stone Street and Mocksville shall
have performed in all material respects all obligations and covenants required
to be performed by it under this Agreement prior to the Effective Time, and
CCBF, CCBFC and CCB Bank shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of Stone Street to that
effect.
(c) LEGAL OPINION. CCBF, CCBFC and CCB Bank shall have received
from Poyner & Spruill, L.L.P., counsel to Stone Street and Mocksville, an
opinion as to such matters as CCBF and its counsel may reasonably request. In
rendering the foregoing opinion, such counsel may rely as to questions of fact
and of good standing upon the representations and warranties of Stone Street and
Mocksville contained in this Agreement or upon the certificate of appropriate
officers of Stone Street and Mocksville and of public officials.
(d) AFFILIATES AGREEMENTS. Stone Street shall have delivered to
CCBF the Affiliates Agreements described in Section 7.10.
ARTICLE X
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement, the Merger, the Bank Merger,
the Second Merger and the other transactions contemplated hereby by the
shareholder of CCBFC and CCB Bank or the shareholders of Stone Street, or the
shareholders of any of the Parties, this Agreement may be terminated and such
transactions abandoned at any time prior to the Effective Time:
(a) by mutual consent of the Boards of Directors of CCBF and Stone
Street;
(b) upon notice to the other Party, by the Board of Directors of
CCBF or the Board of Directors of Stone Street (provided that the terminating
Party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if the Effective Time shall not have
occurred on or before December 31, 1999;
(c) upon notice to the other Party, by the Board of Directors of
CCBF or the Board of Directors of Stone Street if any Regulatory Authority has
denied approval of the Merger, the Second Merger or the Bank Merger or any
Regulatory Approval (or any condition to the receipt of a Regulatory Approval)
or an Order from any Regulatory Authority or any court having competent
jurisdiction has imposed any condition or requirement which would so
substantially and adversely impact the economic or business benefits of the
Merger to CCBF and its shareholders or to Stone Street and its shareholders, as
applicable, as to render inadvisable in the reasonable opinion, exercised in
good faith, of the Boards of Directors of CCBF or the Board of Directors of
Stone
55
Street, as applicable, the consummation of the Merger, the Second Merger and the
Bank Merger such denial or imposition has become final and nonappealable;
(d) upon notice to the other Party, by the Board of Directors of
CCBF or the Board of Directors of Stone Street in the event of a material breach
by the other Party of any representation, warranty, covenant or other agreement
contained herein, which breach is not cured after 30 days' written notice
thereof is given to the Party committing such breach;
(e) upon notice to the other Party, by the Board of Directors of
CCBF or the Board of Directors of Stone Street if there has occurred an Action
seeking to restrain the Merger, the Second Merger or the Bank Merger or an
Action by a shareholder of CCBF or Stone Street to obtain material money damages
should such transactions be consummated (unless counsel for the Party wishing to
proceed with such transactions renders an opinion that such Action is likely to
be resolved in a way which would not deprive any Party of the material benefits
of the Merger or in a way which would not result in substantial money damages to
one or more directors of such Party which would not be covered by D&O
Insurance);
(f) upon notice to the other Party, by the Board of Directors of
CCBF or the Board of Directors of Stone Street if there has occurred a
declaration of war by the United States of America or a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States of America or the State of North Carolina; or
(g) upon notice to Stone Street, by the Board of Directors of CCBF
if the Environmental Costs exceed $500,000; provided, however, that if Stone
Street delivers to CCBF within thirty (30) days from the date of delivery of
such notice a fixed price contract from a reputable environmental remediation
firm (which firm must have expertise, resources and financial capabilities
reasonably acceptable to CCBF) providing for the curing of all indicated
violations of Environmental Laws and all related remediation required by
Environmental Laws and Environmental Agencies with respect to the Assets of
Stone Street and the Stone Street Subsidiaries for an amount that is less than
$500,000, then such notice of termination by the CCBF Board of Directors shall
be deemed withdrawn and of no effect.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of Section 7.6,
Section 7.13, Section 8.1(a), Section 10.3 and Section 10.4 (insofar as it
applies to a termination under Section 10.1(d)) shall survive any such
termination and abandonment, and (ii) no Party shall be relieved or released
from any Liability arising out of a willful or grossly negligent breach of any
provision of this Agreement.
10.3 EXPENSES. Unless this Agreement is terminated as described in
Section 10.4 and except as provided in the next following sentence, each Party
hereto shall bear its own expenses incident to preparing, entering into and
carrying out this Agreement and the transactions contemplated hereby, including
filing fees, printing and distribution costs, and consultant, financial advisor,
legal,
56
accounting and investment banking fees and expenses (the "Costs"). In the event
of a termination and abandonment of this Agreement pursuant to the provisions of
this Article X (except in the event of (i) a termination by CCBF pursuant to
Section 10.1(d) or (g) or (ii) a wrongful termination by Stone Street), CCBF
shall reimburse Stone Street for all direct, documented costs incurred by Stone
Street that result from changes to the architectural and construction drawings,
plans and specifications or the equipment, furniture and fixture (including the
vault) specifications for the New Building requested by CCBF in anticipation of
consummation of the Merger ("Building Costs").
10.4 WRONGFUL TERMINATION. Notwithstanding the provisions of Sections
10.2 and 10.3, and except as otherwise provided in Section 10.5, if the Merger,
the Second Merger and the Bank Merger fail to be consummated because of the
wrongful termination of this Agreement or a willful or grossly negligent breach
by a Party of any representation, warranty, covenant, undertaking, term,
agreement or restriction contained herein, then the Party wrongfully terminating
or breaching this Agreement shall (i) reimburse the other Party for all of such
other Party's Costs (and, if CCBF is the wrongfully breaching or terminating
Party, it shall pay the Building Costs), and (ii) pay the other Party $250,000
as liquidated damages in full compensation of all other harm suffered by such
Party as a result thereof. A termination of this Agreement under the provisions
of Section 10.1, other than a termination under Section 10.1(d), shall not cause
application of this Section 10.4.
10.5 TERMINATION FEE. If (a) this Agreement is terminated because Stone
Street has entered theretofore into a letter of intent or an agreement with a
Person other than CCBF that provides for such Person to acquire Stone Street or
Mocksville, merge with or into Stone Street or Mocksville, or purchase all or
substantially all of the Assets of Stone Street or Mocksville or (b) prior to
termination of this Agreement Stone Street engages in negotiations relating to
any such transaction and a letter of intent or agreement with respect thereto is
entered into within twelve (12) months following the termination of this
Agreement, and CCBF has not given written Consent to such negotiations by Stone
Street pursuant to Section 7.2 hereof, then Stone Street shall pay to CCBF a
termination fee of $1,225,500.
ARTICLE XI
GENERAL PROVISIONS
11.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS FOLLOWING
THE EFFECTIVE TIME. Except for Articles III and IV and Sections 7.11, 8.1, 8.2
and 8.3, none of the respective representations, warranties, obligations,
covenants and agreements of the Parties thereto shall survive the Effective
Time.
11.2 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement contains the entire agreement between the Parties with respect to
the transactions contemplated hereunder and thereunder, and such agreements
supersede all prior arrangements or understandings with respect thereto, written
or oral. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors. Other
than the provisions of Article III and Sections 8.1, 8.2 and 8.3, nothing in
this Agreement, expressed or
57
implied, is intended to confer upon any Person, other than CCBF, CCBFC, CCB
Bank, Stone Street, Mocksville, the Surviving Corporation, the Resulting
Corporation and the Surviving Bank and their respective successors, any rights,
remedies, or Liabilities under or by reason of this Agreement.
11.3 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Board of Directors of each of them; provided, however, that the
provisions hereof relating to the manner or basis in which shares of Stone
Street Common Stock will be exchanged for CCBF Common Stock (and attached CCBF
Rights) shall not be amended after the Shareholders' Meeting in a manner adverse
to the holders of Stone Street Common Stock without any requisite approval of
the holders of the Stone Street Common Stock entitled to vote thereon.
11.4 WAIVERS.
(a) Prior to or at the Effective Time, CCBF, acting through its
Board of Directors, Chief Executive Officer, or another officer authorized to so
act by such Board, shall have the right to waive any Default in the performance
of any term of this Agreement by Stone Street or Mocksville, to waive or extend
the time for the compliance or fulfillment by Stone Street or Mocksville of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of CCBF under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of CCBF.
(b) Prior to or at the Effective Time, Stone Street, acting
through its Board of Directors, Chief Executive Officer, or another officer
authorized to so act by such Board, shall have the right to waive any Default in
the performance of any term of this Agreement by CCBF, CCBFC or CCB Bank, to
waive or extend the time for the compliance or fulfillment by CCBF, CCBFC or CCB
Bank of any and all of its obligations under this Agreement, and to waive any or
all of the conditions precedent to the obligations of Stone Street under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Stone Street.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.5 NO ASSIGNMENT. None of the Parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
Person. Any such purported assignment or delegation that is made without the
prior written consent of the other parties to this Agreement shall be void and
of no effect.
58
11.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, or by registered or certified mail, postage prepaid, to
the Persons at the addresses set forth below (or at such other address as may be
provided hereunder):
If to CCBF, CCBFC or CCB Bank:
Ernest C. Roessler
Chairman, President and Chief Executive Officer
CCB Financial Corporation
Post Office Box 931
Durham, North Carolina 27702
Telecopy: (919) 683-7254
With a required copy to:
Robert A. Singer
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
Post Office Box 26000
Greensboro, North Carolina 27420-6000
Telecopy: (336) 378-1001
If to Stone Street or Mocksville:
J. Charles Dunn, President
Stone Street Bancorp, Inc.
232 South Main Street
Mocksville, North Carolina 27028
Telecopy: (336) 751-1362
With a required copy to:
Michael S. Colo
Poyner & Spruill, L.L.P.
130 S. Franklin Street
Rocky Mount, North Carolina 27802
Telecopy: (252) 446-4060
or to such other Person as any party shall specify by notice in writing to each
of the other party. All such notices or other communications shall be deemed to
have been delivered (i) upon receipt when delivery is made by hand, (ii) on the
third business day after deposit in the United States mail when
59
delivery is made by registered or certified mail, and (iii) upon transmission,
when evidenced by a sender transmission completed confirmation, when made by
facsimile transmission.
11.7 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a Regulatory Authority or court of
competent jurisdiction to be invalid, void, unenforceable or against public or
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be effected, impaired or invalidated.
11.8 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the Laws of the State of North Carolina, except
to the extent the Laws of the United States specifically apply.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
11.10 CAPTIONS; ARTICLES; AND SECTION. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
11.11 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
11.12 ENFORCEMENT OF AGREEMENT. The Parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement was not
performed in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
60
IN WITNESS WHEREOF, CCBF, CCBFC, CCB Bank, Stone Street and Mocksville
have caused this Agreement to be signed by their respective officers, hereunto
duly authorized, all as of the date first written above.
CCB FINANCIAL CORPORATION
By: ___________________________________________
Ernest C. Roessler, Chairman, President
and Chief Executive Officer
CCBFC, INC.
By: __________________________________________
Ernest C. Roessler, Chairman, President
and Chief Executive Officer
CENTRAL CAROLINA BANK AND TRUST
COMPANY
By: ___________________________________________
Ernest C. Roessler, Chairman, President
and Chief Executive Officer
STONE STREET BANCORP, INC.
By: ___________________________________________
J. Charles Dunn, President
STONE STREET BANK & TRUST
By: ___________________________________________
J. Charles Dunn, President
61
APPENDIX A
Plan of Merger
PLAN OF MERGER
OF
CCBFC, INC.
WITH AND INTO
STONE STREET BANCORP, INC.
I. CORPORATIONS PARTICIPATING IN THE MERGER.
CCBFC, Inc., a North Carolina corporation ("CCBFC" or the "Merging
Corporation") and a wholly-owned subsidiary of CCB Financial Corporation
("CCBF"), shall merge with and into Stone Street Bancorp, Inc., a North Carolina
corporation ("Stone Street" or the "Surviving Corporation"), pursuant to the
provisions of, and with the effect provided under, Section 55-11-06 of the North
Carolina General Statutes.
II. NAME OF SURVIVING CORPORATION.
Upon the effectiveness of the merger (the "Effective Time"), the name of
the Surviving Corporation shall be Stone Street Bancorp, Inc. It is intended
that the Surviving Corporation subsequently shall be merged with and into CCBF.
III. TERMS AND CONDITIONS OF THE MERGER.
1. Subject to the terms and conditions of the Amended and Restated
Agreement of Combination, dated as of June 22, 1999 (the
"Agreement"), by and among CCBF, CCBFC, Central Carolina Bank and
Trust Company ("CCB Bank"), Stone Street and Stone Street Bank &
Trust, a wholly-owned subsidiary of Stone Street formerly known as
Mocksville Savings Bank, Inc., SSB ("Mocksville") (the "Agreement
of Combination"), and except insofar as the same may be continued
by law or in order to carry out the purposes of this Plan of
Merger and the Agreement of Combination, and except as continued
in and merged into the Surviving Corporation, the separate
existence of the Merging Corporation shall cease as of the
Effective Time. The Surviving Corporation, upon the merger and
without any order or other action on the part of any court of
otherwise, shall hold and enjoy all rights of property, franchises
and interest, including appointments, designations and
nominations, and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian
of estates, assignee and receiver, and in every other fiduciary
capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by the
Merging Corporation at the time of the merger. The Surviving
Corporation shall be responsible and liable for all liabilities of
every kind and description of the Merging Corporation, existing
immediately prior to the Effective Time, to the extent provided by
law.
1
2. The Articles of Incorporation of Stone Street in effect
immediately prior to the Effective Time shall continue in full
force and effect until amended in accordance with applicable laws.
3. The Bylaws of Stone Street in effect immediately prior to the
Effective Time shall continue in full force and effect until
amended in accordance with applicable laws.
4. The officers and director of CCBFC in office immediately prior to
the Effective Time shall be the officers and director of the
Surviving Corporation.
IV. EFFECTIVENESS OF THE MERGER.
The merger shall be effective on the date and at the time set forth in
the Articles of Merger setting forth, among other things, this Plan of Merger,
that are filed with, and accepted for filing by, the Secretary of State of North
Carolina as required under Section 55-11-05 of the North Carolina General
Statutes.
V. CONVERSION AND EXCHANGE OF SHARES.
As of the Effective Time, the outstanding shares of the corporations
participating in the merger will be converted and exchanged as follows:
1. Each outstanding share of the common stock of CCBFC shall be
converted into a share of the common stock of Stone Street ("Stone Street
Common Stock") by virtue of the merger. Any of the shares of common stock
of CCBF ("CCBF Common Stock") and attached preferred stock purchase
rights ("CCBF Rights") outstanding immediately prior to the Effective
Time shall continue to be issued and outstanding, and shall not be
converted, exchanged or altered in any manner as a result of the merger.
2. (a) Each of the shares of Stone Street Common Stock outstanding
immediately prior to the Effective Time (excluding shares held, other
than in a fiduciary capacity or as a result of debts previously
contracted, by CCBF, CCBFC, CCB Bank, Stone Street or Mocksville or any
of their subsidiaries) shall be converted into and become the right to
receive (i) cash as provided in V.2.(c) below or (ii) that portion of a
share of CCBF Common Stock and that percent a CCBF Right, as described in
CCBF's Shareholder Rights Plan, amended and restated as of October 1,
1998, computed as follows: (x) if the CCBF Stock Price for the ten (10)
trading days ending on the last trading day prior to the date on which
the Effective Time occurs (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 such average CCBF Stock Price; (y) if the CCBF Stock Price for
such ten (10) trading days is less than $44.52, such percent shall be
.48; and (z) if the CCBF Stock Price for such ten (10) trading days is
more than $60.24, such percent shall be .3548; provided, however, that if
the amount of Environmental Costs shall be greater than $150,000, but
less than $500,000, then each share of Stone Street Common Stock shall
2
be converted into and become the right to receive that percent of a share
of CCBF Common Stock (and the same percent of a CCBF Right) computed as
follows: (A) if item (x) above is applicable, the percent shall be
calculated by (i) dividing the Environmental Costs in excess of $150,000
(but no more than $350,000) by the number of the then outstanding shares
of Stone Street Common Stock, (ii) subtracting the resulting quotient
from $21.37, and (iii) dividing the resulting remainder by the average
CCBF Stock Price described above; (B) if item (y) above is applicable,
the percent shall be calculated by (i) subtracting the Environmental
Costs in excess of $150,000 (but no more than $350,000) from $35,013,719,
(ii) dividing the resulting remainder by $35,013,719, and (iii)
multiplying .48 by the resulting quotient; and (C) if item (z) above is
applicable, the percent shall be calculated by (i) subtracting the
Environmental Costs in excess of $150,000 (but no more than $350,000)
from $35,013,719, (ii) dividing the resulting remainder by $35,013,719,
and (iii) multiplying .3548 by the resulting quotient (the "Exchange
Ratio").
(b) Under the Mocksville Savings Bank, Inc., SSB Management
Recognition Plan, the legal and beneficial ownership rights of the
holders of the issued and outstanding shares of Stone Street Common Stock
subject to a Management Recognition Plan Award shall vest, if at all, as
of the Effective Time in accordance with such Plan. Accordingly, each
such vested share shall be converted into cash as set forth in V.2.(c) or
that portion of a share of CCBF Common Stock (and that portion of an
attached CCBF Right) determined under V.2.(a). Each such unvested share
shall be converted into that portionof a share of CCBF Common Stock (and
the portion of an attached CCBF Right) determined under V.2.(a).
Thereupon, each such Management Recognition Plan Award shall be deemed
canceled and of no further force or effect.
(c) Subject to the terms and conditions of the Agreement, each
holder of shares of Stone Street Common Stock converted under V.2.(a) or
under V.2(b) immediately prior to the Effective Time may elect as
provided herein, with respect to all such shares, to receive for each
such share either (i) that portion of a share of CCBF Common Stock (and
that portion of an attached CCBF Right) calculated by application of the
Exchange Ratio or (ii) in lieu of receiving a portion of a share of CCBF
Common Stock (and a portion of an attached CCBF Right), cash equal to one
(1) share of Stone Street Common Stock multiplied by the Exchange Ratio
multiplied by the CCBF Stock Price for the ten (10) trading days ending
on the last trading day prior to the Closing Date; provided, however that
no more than 18% of such shares of Stone Street Common Stock may be
converted into and become rights to receive cash rather than portions of
shares of CCBF Common Stock (and attached CCBF Rights). In the event that
holders of shares of Stone Street Common Stock described in V.2.(a) and
V.2.(b) elect to receive cash ("Electing Holders") for more than 18% of
such shares, then CCBF shall be required to accept for conversion to cash
(x) all shares of Stone Street Common Stock tendered for cash by the
Employee Stock Ownership Plan of Stone Street Bank and Trust (the "Stone
Street ESOP") and (y) only the percentage of shares of each other
Electing Holder ("Cash Election Shares") determined by (A) dividing the
total number of Cash Election Shares tendered by Electing Holders other
than the Stone Street ESOP by the total number of
3
outstanding shares of Stone Street Common Stock, (B) dividing .18, less
the percentage of all outstanding shares of Stone Street Common Stock
tendered for cash by the Stone Street ESOP (expressed in decimal terms),
by the quotient resulting under item (A), and (C) multiplying each such
other Electing Holder's Cash Election Shares by the quotient resulting
under item (B). Except as otherwise provided herein, each share of
outstanding Stone Street Common Stock not converted unto the right to
receive cash as provided in this V.2.(a) shall be converted into a right
to receive a portion of a share of CCBF Common Stock (and a portion of an
attached CCBF Right) as provided in V.2.(a) or V.2.(b). Electing Holders
must tender all of their shares of Stone Street Common Stock for cash or
they may tender none of such shares for cash.
3. Any shares of any of the subsidiaries of CCBF, CCBFC, CCB Bank,
Stone Street or Mocksville outstanding immediately prior to the Effective
Time shall continue to be issued and outstanding, and shall not be
converted, exchanged or altered in any manner as a result of the merger.
4. As of the Effective Time, all rights with respect to options to
purchase shares of Stone Street Common Stock granted by Stone Street (the
"Stone Street Stock Options") pursuant to stock option plans or other
plans or agreements of Stone Street (the "Stone Street Option Plans"),
which are outstanding immediately prior to the Effective Time in
compliance with the Agreement of Combination, whether or not then
exercisable, shall be converted into and become rights with respect to
CCBF Common Stock (with attached CCBF Rights), and CCBF shall assume all
obligations of Stone Street with respect to each Stone Street Stock
Option, in accordance with the terms of the respective Stone Street
Option Plan under which it was issued and the stock option agreement by
which it may be evidenced. From and after the Effective Time, (i) each
Stone Street Stock Option assumed by CCBF may be exercised solely for
shares of the CCBF Common Stock (with attached CCBF Rights), (ii) the
number of shares of the CCBF Common Stock (with attached CCBF Rights)
subject to each Stone Street Stock Option shall be equal to the number of
shares of Stone Street Common Stock subject to such Stone Street Stock
Option immediately prior to the Effective Time multiplied by the Exchange
Ratio (rounded up to the nearest whole share of CCBF Common Stock), and
(iii) the per share exercise price under each such Stone Street Stock
Option shall be adjusted by dividing the per share exercise price under
each such option by the Exchange Ratio and rounding to the nearest cent;
PROVIDED, HOWEVER, that the number of shares of CCBF Common Stock (with
attached CCBF Rights) subject to each Stone Street Stock Option and the
per share exercise price shall be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization
or other similar transaction subsequent to the Effective Time.
5. Each holder of shares of Stone Street Common Stock converted
into shares of CCBF Stock (and attached CCBF Rights) pursuant to the
merger or of Stone Street Stock Options, who would otherwise have been
entitled to receive a fraction of a share of the CCBF Common Stock and a
fraction of a CCBF Right (after taking into account the aggregate of all
certificates delivered or all Stone Street Stock Options held by such
holder), shall receive, in
4
lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of the CCBF Common Stock multiplied by the
market value of one share of the CCBF Common Stock as of the Effective
Time, in the case of shares of Stone Street Common Stock converted
pursuant to the merger, or the date of exercise, in the case of Stone
Street Stock Options. The market value of one share of the CCBF Common
Stock at the Effective Time or the date of exercise, as the case may be,
shall be the closing sales price of the CCBF Common Stock on the New York
Stock Exchange - Composite Transactions List (as reported by THE WALL
STREET JOURNAL or, if not reported thereby, any of the authoritative
source selected by CCBF) on the last trading day preceding the Effective
Time or the date of exercise, as the case may be. No such holder will be
entitled to dividends, voting rights or any other rights as a shareholder
in respect of any fractional share.
6. From and after the Effective Time, each holder of any of the
shares of Stone Street Common Stock to be converted as provided in items
2., 4. and 5. above shall be entitled, upon presentation and surrender to
CCBF of the certificates representing such shares, to receive in exchange
therefor (a) cash and/or (b) certificates representing the number of
whole shares of the CCBF Common Stock (with attached CCBF Rights), and a
check representing the amount of cash for fractional shares, if any, into
which such shares shall have been converted. The surrendered shares of
Stone Street Common Stock shall be canceled. Until so surrendered, each
outstanding certificate which prior to the Effective Time represented
Stone Street Common Stock shall be deemed for all corporate purposes to
evidence the right to receive cash and/or ownership of the number of
shares of the CCBF Common Stock (with attached CCBF Rights) into which
the same shall have been converted; PROVIDED, HOWEVER, beginning on the
91st day after the date on which the Effective Time shall occur, no
dividend or other distribution payable to the holders or record of the
CCBF Common Stock (and attached CCBF Rights) at or as of any time after
the Effective Time shall be paid to the holder of any certificate
representing shares of Stone Street Common Stock issued and outstanding
as of the Effective Time that have been converted into the rights to
receive shares of CCBF Common Stock (and attached CCBF Rights) until such
holder physically surrenders such certificate for exchange, promptly
after which time all such dividends or distributions shall be paid
(without interest). In the event any certificate representing shares to
be converted pursuant to the merger shall have been lost, stolen or
destroyed, upon receipt of appropriate indemnification therefor, cash
and/or certificates representing the CCBF Common Stock (with attached
CCBF Rights) will be paid or issued in exchange therefor as described
above, along with a check representing cash in lieu of fractional shares,
if any, and declared but unpaid dividends deliverable in respect of any
shares of CCBF Common Stock (and attached CCBF Rights) into which such
shares have been converted.
7. The outstanding shares of Stone Street Common Stock are listed
on the American Stock Exchange, Inc. Therefore, dissenters' rights are
not available to the holders of such shares under Section 55-13-02(c) of
the North Carolina General Statutes.
5
8. Shares of Stone Street Common Stock held immediately prior to
the Effective Time by CCBF, CCBFC or Stone Street or any of their
subsidiaries, other than in a fiduciary capacity or as a result of debts
previously contracted, shall be canceled as of the Effective Time.
VI. ABANDONMENT.
This Plan of Merger may be terminated and the merger abandoned at any
time prior to the Effective Time upon termination of the Agreement of
Combination by CCBF, CCBFC and CCB Bank, by Stone Street and Mocksville, or by
all such parties in accordance with the terms thereof.
6
APPENDIX B
Plan of Bank Merger
PLAN OF BANK MERGER
OF
STONE STREET BANK & TRUST
WITH AND INTO
CENTRAL CAROLINA BANK AND TRUST COMPANY
I. CORPORATIONS PARTICIPATING IN THE MERGER.
Stone Street Bank & Trust (formerly known as Mocksville Savings Bank,
Inc., SSB), a North Carolina savings bank ("Mocksville" or the "Merging Bank"),
shall merge with and into Central Carolina Bank and Trust Company, a North
Carolina commercial bank ("CCB Bank" or the "Surviving Bank"), pursuant to the
provisions of, and with the effect provided under, Section 55-11-06, Sections
53-12, -13 and -17, and Section 54C-40 of the North Carolina General Statutes.
II. NAME OF SURVIVING CORPORATION.
Upon the effectiveness of the merger (the "Effective Time"), the name of
the Surviving Bank shall be "Central Carolina Bank and Trust Company."
III. TERMS AND CONDITIONS OF THE MERGER.
1. Subject to the terms and conditions of the Amended and Restated
Agreement of Combination, dated as of June 22, 1999, by and
between CCB Financial Corporation ("CCBF"), CCBFC, Inc., CCB Bank,
Stone Street Bancorp, Inc. ("Stone Street") and Mocksville (the
"Agreement of Combination"), and except insofar as the same may be
continued by law or in order to carry out the purposes of this
Plan of Merger and the Amended and Restated Agreement of
Combination, and except as continued in and merged into the
Surviving Bank, the separate existence of the Merging Bank shall
cease as of the Effective Time. The Surviving Bank, upon the
merger and without any order or other action on the part of any
court of otherwise, shall hold and enjoy all rights of property,
franchises and interest, including appointments, designations and
nominations, and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian
of estates, assignee and receiver, and in every other fiduciary
capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by the
Merging Bank at the time of the merger. The Surviving Bank shall
be responsible and liable for all liabilities of every kind and
description of the Merging Bank, existing immediately prior to the
Effective Time, to the extent provided by law.
2. The Amended and Restated Articles of Incorporation (as amended) of
CCB Bank in effect immediately prior to the Effective Time shall
continue in full force and effect until amended in accordance with
applicable laws.
1
3. The Amended Bylaws (as amended) of CCB Bank in effect immediately
prior to the Effective Time shall continue in full force and
effect until amended in accordance with applicable laws.
4. The directors and officers of CCB Bank shall be the directors and
officers of the Surviving Bank, and shall serve in such capacities
for the terms set forth in the Amended Bylaws (as amended) of CCB
Bank.
IV. EFFECTIVENESS OF THE MERGER.
The merger shall be effective on the date and at the time set forth in
the Articles of Merger setting forth, among other things, this Plan of Merger,
that are filed with, and accepted for filing by, the Secretary of State of North
Carolina as required under Section 55-11-05, Section 53-13, and Section 54C-40
of the North Carolina General Statutes.
V. CONVERSION AND EXCHANGE OF SHARES.
As of the Effective Time, the outstanding shares of the parties
participating in the merger will be converted and exchanged as follows:
1. Any of the shares of common stock of CCB Bank ("CCB Bank Common
Stock") outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding, and shall not be converted,
exchanged or altered in any manner as a result of the Merger.
2. Each of the shares of common stock of Mocksville ("Mocksville
Common Stock") outstanding immediately prior to the Effective Time shall
be canceled.
3. Any shares of any of CCBF, CCBFC, Inc. or the subsidiaries of
CCBF, CCBFC, Inc., CCB Bank or the Merging Bank outstanding immediately
prior to the Effective Time shall continue to be issued and outstanding,
and shall not be converted, exchanged or altered in any manner as a
result of the merger.
VI. ABANDONMENT.
This Plan of Merger may be terminated and the merger abandoned at any
time prior to the Effective Time upon termination of the Amended and Restated
Agreement of Combination by CCBF, CCBFC, Inc., CCB Bank, by Stone Street and
Mocksville, or by all such parties in accordance with the terms thereof.
2
APPENDIX C
PLAN OF HOLDING COMPANY MERGER
PLAN OF HOLDING COMPANY MERGER
OF
STONE STREET BANCORP, INC.
WITH AND INTO
CCB FINANCIAL CORPORATION
I. CORPORATIONS PARTICIPATING IN THE MERGER.
Stone Street Bancorp, Inc., a North Carolina corporation (the "Merging
Corporation") and a wholly-owned subsidiary of CCB Financial Corporation by
virtue of the merger of CCBFC, Inc. with and into the Merging Corporation, shall
merge with and into CCB Financial Corporation, a North Carolina corporation
("CCBF" or the "Surviving Corporation"), pursuant to the provisions of, and with
the effect provided under, Sections 55-11-04 and 55-11-06 of the North Carolina
General Statutes.
II. NAME OF SURVIVING CORPORATION.
Upon the effectiveness of the merger (the "Effective Time"), the name of
the Surviving Corporation shall be "CCB Financial Corporation."
III. TERMS AND CONDITIONS OF THE MERGER.
4. Subject to the terms and conditions of the Amended and Restated
Agreement of Combination, dated as of June 22, 1999, by and among
CCBF, the Merging Corporation, Central Carolina Bank and Trust
Company ("CCB Bank"), CCBFC, Inc., a wholly- owned subsidiary of
CCBF ("CCBFC"), and Mocksville Savings Bank, Inc., SSB
("Mocksville") (the "Agreement of Combination"), and except
insofar as the same may be continued by law or in order to carry
out the purposes of this Plan of Merger and the Amended and
Restated Agreement of Combination, and except as continued in and
merged into the Surviving Corporation, the separate existence of
the Merging Corporation shall cease as of the Effective Time. The
Surviving Corporation, upon the merger and without any order or
other action on the part of any court of otherwise, shall hold and
enjoy all rights of property, franchises and interest, including
appointments, designations and nominations, and all other rights
and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee and receiver, and
in every other fiduciary capacity, in the same manner and to the
same extent as such rights, franchises and interests were held or
enjoyed by the Merging Corporation at the time of the merger. The
Surviving Corporation shall be responsible and liable for all
liabilities of every kind and description of the Merging
Corporation, existing immediately prior to the Effective Time, to
the extent provided by law.
1
5. The Amended and Restated Articles of Incorporation, as amended, of
CCBF in effect immediately prior to the Effective Time shall
continue in full force and effect until amended in accordance with
applicable laws.
6. The Amended Bylaws (as amended) of CCBF in effect immediately
prior to the Effective Time shall continue in full force and
effect until amended in accordance with applicable laws.
4. The directors and officers of CCBF shall be the directors and
officers of the Surviving Corporation, and shall serve in such
capacities for the terms set forth in the Amended Bylaws (as
amended) of CCBF.
IV. EFFECTIVENESS OF THE MERGER.
The merger shall be effective on the date and at the time set forth in
the Articles of Merger setting forth, among other things, this Plan of Merger,
that are filed with, and accepted for filing by, the Secretary of State of North
Carolina as required under Section 55-11-05 of the North Carolina General
Statutes.
V. CONVERSION AND EXCHANGE OF SHARES.
As of the Effective Time, the outstanding shares of the parties
participating in the merger will be converted and exchanged as follows:
1. Any of the shares of common stock of CCBF ("CCBF Common Stock")
outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding, and shall not be converted, exchanged or altered
in any manner as a result of the merger.
2. Each of the shares of common stock of the Merging Corporation
outstanding immediately prior to the Effective Time shall be canceled.
3. Any shares of CCBF or any of its subsidiaries (other than the
Merging Corporation) outstanding immediately prior to the Effective Time
shall continue to be issued and outstanding, and shall not be converted,
exchanged or altered in any manner as a result of the merger.
VI. ABANDONMENT.
This Plan of Merger may be terminated and the merger abandoned at any
time prior to the Effective Time upon termination of the Amended and Restated
Agreement of Combination by CCBF, CCBFC, CCB Bank, by Stone Street and
Mocksville, or by all such parties in accordance with the terms thereof.
2
APPENDIX D
AFFILIATE AGREEMENT
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27701
Attention: Ernest C. Roessler
Chairman, President and Chief Executive Officer
Ladies and Gentlemen:
The undersigned is a shareholder of Stone Street Bancorp, Inc., a North
Carolina corporation ("Stone Street'), and will become a shareholder of CCB
Financial Corporation ("CCB"), a North Carolina corporation, pursuant to the
transactions described in the Agreement of Combination, dated as of April 13,
1999 (the "Agreement"), by and between CCB and Stone Street. Under the terms of
the Agreement, CCBFC, Inc., a CCB subsidiary, will be merged into Stone Street
(the "Merger"), and the shares of the common stock of Stone Street ("Stone
Street Common Stock") will be converted into and exchanged for cash and/or
shares of the common stock of CCB ("CCB Common Stock") and attached preferred
stock purchase rights (the "CCB Rights"). Stone Street subsequently will be
merged into CCB. This Affiliate Agreement represents an agreement between the
undersigned and CCB regarding certain rights and obligations of the undersigned
in connection with any shares of CCB Common Stock to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and CCB hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Stone Street he may be an "affiliate" 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 ("1933 Act"), and the undesigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) The CCB Common Stock to be received by the undersigned as a
result of the Merger will be taken for his own account and not for
others, directly or indirectly, in whole or in part.
(b) CCB has informed the undersigned that any distribution by the
undersigned of CCB Common Stock has not been registered under the 1933
Act and that shares of CCB Common Stock received pursuant to the Merger
may be sold by the undersigned only (1) following registration of a
distribution of such shares under the 1933 Act, or (2) in conformity with
the volume and other requirements of Rule 145(d) promulgated by the SEC
as the same now exist or may hereafter be amended, or (3) to the extent
some other exemption from registration
1
under the 1933 Act might be available. The undersigned understands that
CCB is under no obligation to file a registration statement with the SEC
covering the disposition of the undersigned's shares of CCB Common Stock
or to take any other action necessary to make compliance with an
exemption from such registration available.
(c) The undersigned is aware that CCB intends to treat the Merger
as a tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended ("Code"), for federal income tax purposes. The
undersigned agrees to treat the transaction in the same manner as CCB for
federal income tax purposes. The undersigned acknowledges that Section
1.368-1(b) of the Income Tax Regulations require "continuity of interest"
in order for the Merger to be treated as tax-free under Section Code 368.
This requirement is satisfied if, taking into account those Stone Street
shareholders who receive cash in exchange for their stock or who receive
cash in lieu of fractional shares, there is no plan or intention on the
part of the Stone Street shareholders to sell or otherwise dispose of the
CCB Common Stock to be received in the Merger that will reduce such
shareholders' ownership to a number of shares having, in the aggregate, a
value at the time of the merger of less than 80% of the total fair market
value of the Stone Street Common Stock outstanding immediately prior to
the Merger. The undersigned has no prearrangement, plan or intention to
sell or otherwise dispose of an amount of his CCB Common Stock to be
received in the Merger which would cause the foregoing requirement not to
be satisfied.
3. Restrictions on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of CCB Common Stock
received by the undersigned pursuant to the Merger will be given to CCB's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
The shares represented by this certificate may not be sold, transferred
or otherwise disposed of except or unless (1) such distribution is the
subject of an effective registration statement under the Securities Act
of 1933, as amended, (2) in accordance with (i) Rule 145(d) (in the case
of shares issued to an individual who is not an affiliate of CCB) or (ii)
Rule 144 (in the case of shares issued to an individual who is an
affiliate of CCB) of the Rules and Regulations of such Act, or (3) in
accordance with a legal opinion satisfactory to counsel for CCB that such
sale or transfer is otherwise exempt from the registration requirements
of such Act.
Such legend will also be placed on any certificate representing CCB securities
issued subsequent to the original issuance of the CCB Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the CCB Common Stock issued to
the undersigned pursuant to the Merger has not been transferred in such manner
to justify the removal of the legend therefrom. If the provisions of Rule 144
and 145 are amended to eliminate restrictions applicable to the CCB Common Stock
received by the undersigned pursuant to the Merger, or at the expiration of the
restriction period set forth in Rule 145(d), CCB, upon the request of the
undersigned, will cause the certificates representing the shares of CCB
2
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to the restrictions set forth in Rules 144
and 145(d) upon receipt by CCB of an opinion of its counsel to the effect that
such legend may be removed.
4. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of CCB Common Stock to be received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for Stone Street.
5. Filing of Reports by CCB. CCB agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended ("1934 Act"), so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of CCB Common Stock to be issued to the undersigned pursuant to the
Merger.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of CCB Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
Transfer Agent for CCB Common Stock together with such additional information as
the Transfer Agent may reasonably request. If CCB's counsel concludes that such
proposed sale or transfer complies with the requirements of Rule 145(d), CCB
shall cause such counsel to provide such opinions as may be necessary to CCB's
Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of Stone
Street and CCB that are deemed to be beneficially owned by the undersigned
pursuant to applicable federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name of (i) the spouse
of the undersigned, (ii) any relative of the undersigned or of the spouse of the
undersigned who has the same home as the undersigned, (iii) any trust or estate
in which the undersigned, the undersigned's spouse, and any such relative
collectively own at least a 10% beneficial interest or of which any of the
foregoing serves as trustee, executor, or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative collectively own at least 10% of any class of
equity securities or of the equity interest. The undersigned further recognizes
that, in the event that the undersigned is a director or officer of Stone Street
or becomes a director or officer of CCB upon consummation of the Merger, among
other things, any sale of CCB Common Stock by the undersigned within a period of
less than six months following the effective time of the Merger may subject the
undersigned to liability pursuant to Section 16(b) of the 1934 Act.
3
8. Miscellaneous. This Affiliate Agreement is the complete agreement
between CCB and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of North
Carolina.
This Affiliate Agreement is executed as of the ___ day of
_______________, 1999.
Very truly yours,
____________________________________________
(Name)
____________________________________________
(Address)
[add below the signatures of all registered owners
of shares deemed beneficially owned by the affiliate]
____________________________________________
Name:
____________________________________________
Name:
____________________________________________
Name:
AGREED TO AND ACCEPTED as of _________________, 1999.
________________________________
By:_____________________________
4
APPENDIX B
ORR MANAGEMENT COMPANY
INVESTMENT BANKING AND CONSULTING SERVICES
June 22, 1999
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the stockholders, ("Company Common Stock"), of
Stone Street Bancorp, Inc. (the "Company") of the consideration to be received
by such stockholders in the proposed merger (the "Merger") of the Company with
CCB Financial Corporation ("Acquiror") pursuant to an Amended and Restated
Agreement of Combination (the "Merger Agreement"), between the Company and
Acquiror. Upon the effectiveness of the Merger, each issued and outstanding
share of Company Common Stock will be converted into shares having an aggregate
value of $21.37 (with the Acquiror's Stock valued at the Fair Market Value) as
long as Acquiror's stock price for the ten (10) trading days ending on the last
trading day prior to the closing is equal to or more than $44.52 but equal to
or less than $60.24. If the Acquiror's stock price for the ten (10) trading
days is less than $44.52, the exchange ratio will be fixed at .47 shares for
each Stone Street Bancorp share. If the Acquiror's stock price for the ten (10)
trading days is more than $60.24, the exchange ratio will be fixed at .3548
shares for each Stone Street Bancorp share.
In connection with rendering our opinion, we have reviewed and analyzed, among
other things, the following: (i) the Merger Agreement; (ii) certain publicly
available information concerning the Company and Acquiror, including the Annual
Reports on Form 10-K of the Company for each of the years in the three year
period ended December 31, 1996-1998 and of the Acquiror for each of the years
in the three year period ended December 31, 1996-1998, the Quarterly Reports on
Form 10-Q of the Company and Acquiror for the quarter ended March 31, 1999,
(iii) certain available financial forecasts concerning the business and
operations of the Company and Acquiror that were prepared by management of the
Company and Acquiror, respectively, and (iv) certain publicly available
information with respect to other companies that we believe to be comparable in
certain respects to the Company and Acquiror and the trading markets for such
other companies' securities. We have held discussions with certain officers and
employees of the Company and Acquiror to discuss the past and current business
operations, financial condition and prospects of the Company and Acquiror, as
well as matters we believe relevant to our inquiry. We have also considered
other information, financial studies, analyses, investigations and financial,
economic and market criteria that we deemed relevant.
In our review and analysis, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information provided us, or that
is publicly available, and have not attempted independently to verify nor
assumed responsibility for verifying any such information. With respect to the
financial projections, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
Company or Acquiror, as the case may be, and we express no opinion with respect
to such forecasts or the assumptions on which they are based. We have not made
or obtained or assumed any responsibility for making or obtaining any
independent evaluations or appraisals of any of the assets (including
properties and facilities) or liabilities of the Company or Acquiror.
- --------------------------------------------------------------------------------
110 South Stratford Road o Winston-Salem, NC 27104
Post Office Box 5176 o Winston-Salem, NC 27113-5176
336-722-7881 o Fax 336-722-7517
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors that we have deemed
appropriate under the circumstances, including the following: (i) the
historical and current financial position and results of operations of the
Company and Acquiror; (ii) the historical and current market for the equity
securities of the Company, Acquiror and other companies that we believe to be
comparable in certain respects to the Company or Acquiror; (iii) the nature and
terms of certain other acquisition transactions that we believe to be relevant;
and (iv) the current and historical relationships between the trading levels of
the Company Common Stock and Acquiror Common Stock. We have taken into account
our assessment of general economic, market and financial conditions and our
knowledge of the banking industry, as well as our experience in connection with
similar transactions and securities valuation generally. Our opinion is based
upon conditions as they exist and can be evaluated on the date hereof. Our
opinion expressed below does not imply any conclusion as to the likely trading
range for Acquiror Common Stock following the consummation of the Merger, which
may vary depending upon, among other factors, changes in interest rates,
dividend rates, market conditions, general economic conditions and factors that
generally influence the price of securities. Our opinion does not address the
Company's underlying business decision to effect the Merger. Our opinion is
directed only to the fairness, from a financial point of view, of the Merger
Consideration and does not constitute a recommendation concerning how holders
of Company Common Stock should vote with respect to the Merger Agreement. Orr
Management Company was requested to solicit third-party offers to acquire all
of the Company immediately preceding or in connection with the process
resulting in the proposed Merger and Orr Management Company did participate in
the discussions and negotiations with respect to the proposed Merger.
In rendering our opinion we have assumed that in the course of obtaining the
necessary regulatory approvals for the Merger no restrictions will be imposed
that would have a material adverse affect on the contemplated benefits of the
Merger to the Company following the Merger. We understand that the Merger will
qualify as a tax-free reorganization under the Internal Revenue Code and that,
for accounting purposes, the Merger will be accounted for as a purchase.
We will receive a fee from the Company for delivery of this fairness opinion,
the payment of which is contingent upon consummation of the Merger.
Subject to the foregoing, it is our opinion that, as of the date hereof, the
Merger Consideration to be received by the stockholders is fair to such holders
from a financial point of view.
Very truly yours,
/s/ Laney G. Orr, III
LANEY G. ORR, III
/s/ Orr Management Company
Orr Management Company
B-2