Capital Bank Corp · S-4/A · On 12/21/98 · EX-8

Filed On 12/21/98   ·   SEC File 333-65853   ·   Accession Number 950168-98-3923

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   ·   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Capital Bank Corp. S-4/A                             250  1,145K 
 2: EX-8        Exhibit 8.1                                            6     29K 
 3: EX-8        Exhibit 8.2                                            4     20K 
 4: EX-23       Exhibit 23.1                                           1      6K 
 5: EX-23       Exhibit 23.2                                           1      6K 
 6: EX-99       Ex-99.3                                               52    242K 

EX-8   ·   Exhibit 8.1
Exhibit Table of Contents

EX-8
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                                                                     EXHIBIT 8.1

PricewaterhouseCoopers (logo)                                                   
--------------------------------------------------------------------------------

[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLP]

December 18, 1998                                                               

Capital Bank Corporation                                                        
c/o Mr. James A. Beck                                                           
4400 Falls of  Neuse Road                                                       
Raleigh, North Carolina  27609                                                  

Home Savings Bank of Siler City, Inc., SSB                                      
c/o Mr. Edwin E. Bridges                                                        
300 East Raleigh Street                                                         
Siler City, North Carolina 27344                                                

                   Re:  Agreement and Plan of Reorganization and Share
                Exchange by and among Capital Bank, Capital Bank
                       Corporation, and Home Savings Bank of Siler City, Inc.,
SSB.                            

Gentlemen:                                                                      

Pursuant to your request and as required by Article VII, Section 7.01.F of the  
Agreement and Plan of Reorganization and Share Exchange by and among Capital    
Bank, Capital Bank Corporation, and Home Savings Bank of Siler City, Inc., SSB  
dated as of September 29, 1998 (the "Agreement"), we are providing you our      
opinion of the material federal income tax consequences of the transaction      
described herein. Unless otherwise noted, all section references herein shall be
to the Internal Revenue Code of 1986, as amended (the "Code"), and the          
regulations thereunder.                                                         

Facts                                                                           

A.    Parties to the Proposed Transaction                                       

1.    Capital Bank Corporation ("CBC")                  

                 CBC is a North Carolina corporation with its principal office
              and place of business located at 4400 Falls of Neuse Road,
                 Raleigh, North Carolina. CBC is authorized by its Articles of
             Incorporation to issue 20,000,000 shares of voting common
                  stock, each of no par value (the "CBC Common Stock"), of which
  there was 1 share issued and outstanding as of

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PricewaterhouseCoopers (logo)                                                   

Mr. James A. Beck                                                               
Mr. Edwin E. Bridges                                                            
Page 2                                                                          
December 18, 1998                                                               

August 31, 1998.                            

2.    Capital Bank ("Capital")                          

                  Capital is a North Carolina commercial bank with its principal
               office and place of business located at 4400 Falls of Neuse
               Road, Raleigh, North Carolina. Capital is authorized by its
                  Articles of Incorporation to issue 20,000,000 shares of common
                  stock, each of $5.00 par value (the "Capital Stock"), of which
                 there were 2,477,651 shares issued and outstanding as of June
30, 1998.                                   

 3.    Home Savings Bank of Siler City, Inc., SSB ("Home")

            Home is a North Carolina savings bank with its principal
            office and place of business located at 300 East Raleigh
                 Street, Siler City, North Carolina. Home is authorized by its
                 Articles of Incorporation to issue 5,000,000 shares of common
               stock, each of $1.00 par value (the "Home Stock"), of which
                 there were 922,686 shares issued and outstanding as of August
31, 1998.                                   

        4.    Shareholders of Home Savings Bank of Siler City, Inc., SSB
("Home Shareholders")                       

            Home is a publicly owned company. Home stock is reported
               over-the-counter in the "pink sheets" by the National Daily
                Quotation System published by the National Quotation Bureau,
Inc.                                        

B.    Proposed Transaction Between the Parties                                  

 Prior to the Effective Time (as defined below) of the Agreement, each
  share of Capital Stock outstanding shall be exchanged for or converted
into one share of CBC Common Stock. As a result, Capital will be a  
wholly-owned subsidiary of CBC.                                     

     Pursuant to the Agreement and in accordance with North Carolina law, Home
   Shareholders and CBC shall consummate a share exchange (the "Exchange")
  whereby each of the outstanding shares of Home Stock will be exchanged
      solely for shares of CBC Common Stock. The separate corporate existence of
  Home and CBC shall continue unaffected and unimpaired by the Exchange.

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PricewaterhouseCoopers (logo)                                                   

Mr. James A. Beck                                                               
Mr. Edwin E. Bridges                                                            
Page 3                                                                          
December 18, 1998                                                               

      Subsequent to the Exchange and in accordance with North Carolina law, Home
shall be merged with and into Capital (the "Merger") with Capital   
   surviving the Merger. At this time, the separate corporate existence of
Home shall cease while the corporate existence of Capital, as the   
  surviving corporation, shall continue unaffected and unimpaired by the
Merger. The duration of the corporate existence of Capital, as the  
surviving corporation, shall be perpetual and unlimited.            

The Exchange and subsequent Merger (the "Proposed Transactions") are
     expected to provide CBC with certain business advantages in comparison to
CBC's current structure, including increased ability to expand the  
business and economies of scale.                                    

    Pursuant to the Agreement, the Home Shareholders will receive (through a
      designated transfer agent) 1.28 shares of the CBC Common Stock, rounded to
  the nearest whole share, for each share of Home Stock held immediately
prior to the Effective Time (as defined below) of the Exchange. No  
fractional shares of CBC Common Stock will be issued to the Home    
   Shareholders. Instead, CBC Common Stock to be issued will be rounded to
   the nearest whole share and any Home Shareholder who would otherwise be
entitled to receive five-tenths (.5) or more of a share will instead
      receive an additional whole share; and any shareholder who would otherwise
     be entitled to less than five-tenths (.5) of a share will not receive any
consideration for such fractional interest.                         

   Pursuant to the Agreement, Home and Capital have entered into a certain
     Stock Option Agreement (the "Stock Option Agreement") whereby Capital has
   the option to acquire 183,615 shares of Home Stock at a price of $11.75
      per share payable in cash (the "Option"). Capital may exercise the Option,
     in whole or in part, at any time or from time to time if a Purchase Event
 (as defined in the Stock Option Agreement) shall have occurred and be
  continuing; provided that to the extent the Option shall not have been
   exercised, it shall terminate and be of no further force or effect upon
   the earliest to occur of (i) the Effective Time of the Exchange or (ii)
  termination of the Agreement in accordance with the provisions thereof
 prior to the occurrence of a Purchase Event (other than a termination
 resulting from a breach by Home of any covenant contained therein) or
   (iii) six months after termination of the Agreement if such termination
    follows the occurrence of a Purchase Event or is due to a breach by Home
of any covenant contained therein.                                  

Any shareholder of Home who has and properly exercises the right of 
     dissent and appraisal with respect to the Exchange as provided in Article
   13 of the North Carolina Business Corporation Act ("Dissenters Rights")
     shall be entitled to receive cash payment of the fair value of all of his
   or her shares of Home Stock from the Escrow Fund (defined below) in the
      manner and pursuant to the procedures provided therein, subject further to

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PricewaterhouseCoopers (logo)                                                   

Mr. James A. Beck                                                               
Mr. Edwin E. Bridges                                                            
Page 4                                                                          
December 18, 1998                                                               

     the conditions set forth in Article VII, Section 7.03.H of the Agreement.
     Shares of Home Stock held by persons who exercise Dissenters Rights shall
    not be exchanged for CBC Common Stock as provided above. However, if any
     shareholder of Home who exercises Dissenters Rights shall fail to perfect
      his or her right to receive cash payment as provided above, or effectively
  shall waive or lose such right, then each of his or her shares of Home
    Stock, at CBC's sole option, shall be deemed to have been converted into
      the right to receive CBC Common Stock as of the Effective Time (as defined
below).                                                             

   Upon its receipt of any notice of a Home Shareholder's intent to assert
      Dissenters Rights pursuant to the North Carolina Business Corporation Act,
Home shall establish an escrow fund (the "Escrow Fund") with an     
   independent third party (the "Escrow Agent") reasonably satisfactory to
 Capital and CBC, from which the Escrow Agent shall make all payments,
     whether before or after the Effective Time, necessary with respect to the
exercise of such Dissenters Rights.                                 

Neither CBC nor Capital nor any entity affiliated with either CBC or
     Capital shall, directly or indirectly, contribute any funds to the Escrow
Fund. Home shall deposit in the Escrow Fund an amount, subject to   
     Capital's and CBC's approval, that Home reasonably believes is sufficient
 to pay fully the claims of all Home Shareholders asserting Dissenters
  Rights, and shall make additional deposits to the Escrow Fund as Home,
    Capital, or CBC may reasonably determine to be necessary to satisfy such
     claims. In the event funds remain in the Escrow Fund after all claims for
      payment pursuant to Dissenters Rights have finally expired, terminated, or
     have been finally satisfied or settled, then any balance remaining in the
Escrow Fund shall be returned to Home.                              

      The "Effective Time" of the Exchange is defined in Article I, Section 1.04
     of the Agreement as the date and time when the Exchange becomes effective
as set forth in the Articles of Share Exchange filed with the North 
  Carolina Secretary of State in accordance with North Carolina law. The
 Articles of Share Exchange will be filed after the Agreement has been
      approved by the required governmental and regulatory authorities and after
the required shareholder approvals.                                 

  At Capital's option and pursuant to Article VII, Section 7.03.J of the
    Agreement, in the event that Capital is not a wholly-owned subsidiary of
CBC prior to the Effective Time of the Exchange, the transaction    
      contemplated by the Agreement may be restructured such that Home is merged
 into Capital in consideration for the distribution by Capital to Home
    Shareholders of 1.280 shares of Capital's common stock for each share of
      Home Stock (other than any shares held by Capital or as to which rights of
dissent and appraisal are properly exercised).                      

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PricewaterhouseCoopers (logo)                                                   

Mr. James A. Beck                                                               
Mr. Edwin E. Bridges                                                            
Page 5                                                                          
December 18, 1998                                                               

 Opinion

In rendering our opinion, we have relied upon (i) the Agreement; (ii) the       
written representations given by the parties, which are annexed hereto; and     
(iii) such other documents as we have deemed necessary or appropriate. We have  
assumed the genuiness of all signatures, the legal capacity of all natural      
persons, the authenticity of all documents submitted to us as originals, the    
conformity to original documents of all documents submitted to us as certified, 
conformed or photostatic copies, and the authenticity of the originals of such  
copies. We have also assumed that the documents identified in (i) through (iii) 
above reflect all the material facts relating to CBC, Capital, and Home. Our    
opinion is expressly conditioned on, among other things, the accuracy as of the 
date hereof, and the continuing accuracy, of all such facts and representations.
If any of the representations annexed hereto are incorrect in whole or in part, 
or if the terms of the Agreement are altered before consummation of the Proposed
Transactions, such inaccuracies or alterations may have a material effect upon  
our opinion expressed in this letter.                                           

Based upon the foregoing, and taking into consideration the statements contained
in the Section marked "Caveat" below, it is our opinion that:                   

1.    The Proposed Transactions will qualify as a reorganization under Section  
368(a) of the Code;                                                 

2.    No gain or loss will be recognized by the Home Shareholders upon receipt  
of the CBC Common Stock solely in exchange for shares of Home Stock;

3.    The aggregate federal income tax basis of the CBC Common Stock received by
      each Home Shareholder will be the same as the aggregate federal income tax
basis of the Home Stock surrendered in exchange therefor;           

4.    The holding period of the CBC Common Stock received by each Home          
      Shareholder will include the period for which the exchanged Home Stock was
  held, provided the exchanged Home Stock was held as a capital asset by
each Home Shareholder on the date of the Exchange.                  

Caveat

The foregoing opinion addresses only the four items set forth herein and,       
therefore, no tax opinion is hereby expressed regarding any other federal,      
state, local, or other tax issues or about any other matter not specifically    
mentioned herein.                                                               

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PricewaterhouseCoopers (logo)                                                   

Mr. James A. Beck                                                               
Mr. Edwin E. Bridges                                                            
Page 6                                                                          
December 18, 1998                                                               

No opinion is expressed regarding any tax consequences should Capital exercise  
its option pursuant to Article VII, Section 7.03.J of the Agreement to merge    
Home into Capital whereby the Home Shareholders receive Capital Stock.          

No opinion is expressed regarding the Proposed Transactions if either CBC or    
Capital exercises any rights to acquire Home Stock pursuant to the Stock Option 
Agreement discussed above.                                                      

No opinion is expressed regarding the tax consequences of the conversion of     
outstanding options to purchase common stock of Home into options to purchase   
common stock of CBC. Holders of Home's outstanding options should consult their 
own tax advisors regarding the effect of the proposed Exchange.                 

No opinion is expressed regarding the proposed exchange of Capital Stock for CBC
Common Stock.                                                                   

No opinion is expressed regarding any tax consequences affecting recapture of   
loan loss reserves and the related bad debt reserves for any of the parties to  
the Exchange which may arise from the application of Section 585 of the Code.   

Our opinion is based on the relevant provisions of the Code, the regulations    
thereunder, and the judicial and administrative interpretations thereof. There  
are no assurances that the conclusions reached herein will be accepted by the   
Internal Revenue Service or judicial authorities if challenged. Any legislative,
regulatory, administrative, or judicial decisions subsequent to the date of this
opinion may have an impact on the validity of our conclusions. Unless you       
specifically request otherwise, we will not update our opinion for changes to   
the law, regulations, or the judicial and administrative interpretations        
thereof.                                                                        

This opinion is being furnished in connection with the Registration Statement on
Form S-4 to be filed by CBC. We hereby consent to the filing of this opinion as 
an exhibit to the Registration Statement. This opinion may not be circulated,   
quoted, or otherwise referred to for any other purpose without our express      
written consent.                                                                

                                 Very truly yours,

                                          PRICEWATERHOUSECOOPERS LLP

                                              /s/ PRICEWATERHOUSECOOPERS LLP

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This S-4/A Filing		Date		First		Last			Other Filings
		6/30/98		2
		8/31/98		2
		9/29/98		1
		12/18/98		1		6
Filed On / Filed As Of		12/21/98
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