SUMMARY

This summary is a brief overview of the key aspects of the merger and the issuance of shares of NCC common stock and cash in the merger. This summary only identifies those aspects of the merger that are most significant to you in your review of this joint proxy statement-prospectus. It is necessarily general and abbreviated, and it is not intended to be a complete explanation of all of the matters covered in this joint proxy statement-prospectus. To understand the merger and the issuance of cash and shares of NCC common stock in the merger, please see the more complete and detailed information in the sections that follow this summary, as well as the financial statements and appendices included in this joint proxy statement-prospectus by reference. We urge you to read all of these documents in their entirety prior to returning your proxy or voting at the special meeting of your company’s stockholders.

Each item in this summary refers to the page of this joint proxy statement-prospectus on which that subject is discussed in more detail.

The Companies (See page 106 for NCC and page 156 for United)

National Commerce Corporation

NCC, a Delaware corporation, is a bank holding company headquartered in Birmingham, Alabama. Substantially all of the operations of NCC are conducted through NCC’s wholly owned subsidiary, National Bank of Commerce. National Bank of Commerce currently operates eight full-service banking offices throughout the state of Alabama, in Birmingham, Huntsville, Auburn-Opelika and Baldwin County. National Bank of Commerce also operates a loan production office in Vero Beach, Florida and has received all required regulatory approvals to open a full-service banking office there, which will replace the existing loan production office. Additionally, effective August 29, 2014, National Bank of Commerce owns a controlling interest in a receivables factoring company based in Decatur, Alabama. The main office of NCC and National Bank of Commerce is located at 813 Shades Creek Parkway, Suite 100, Birmingham, Alabama 35209, and the telephone number is (205) 313-8100.

The principal business of National Bank of Commerce is to accept demand and savings deposits from the general public and to invest these funds in residential mortgage, commercial and consumer loans and investment securities. National Bank of Commerce offers a broad array of competitively priced products and services, either directly or through relationships with third-party providers.

NCC’s management believes that the proposed merger will enable NCC to fulfill a variety of strategic objectives. Specifically, it will enable NCC to achieve critical scale, with approximately $1 billion in total assets as a result of the merger. Management believes that it is necessary for NCC to continue to grow in order to offer the breadth of products and services necessary to compete effectively and to manage increasingly complex regulatory compliance, operational and risk management requirements efficiently. Management believes that NCC’s financial condition, results of operation and capital and asset quality ratios are of sufficient strength to enable it to make acquisitions while maintaining strong capital ratios. See “United and NCC Joint Proposal No. 1 – The Merger; Reasons for the Merger” beginning on page 50, “United and NCC Joint Proposal No. 1 – The Merger; Opinion of NCC’s Financial Advisor” beginning on page 62 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NCC” beginning on page 133.

United Group Banking Company of Florida, Inc.

United, a Florida corporation, is a bank holding company headquartered in Longwood, Florida. All of its operations are conducted through its wholly owned subsidiary, United Legacy Bank. United Legacy Bank currently operates five banking offices located in three counties in Florida. The main office of United and United Legacy Bank is located at 425 Highway 17-92 South, Longwood, Florida 32750, and the telephone number is (407) 261-2800.

 

United Legacy Bank is in the business of community banking, which consists of accepting deposits from its client base and making loans and other investments. United Legacy Bank’s chief source of funds for loans and investments is a diversified array of traditional deposit services. United Legacy Bank’s principal sources of income are interest and fees collected on loans, interest earned on other investments and other service charge revenue. Its principal expenses are interest paid on deposit products, other borrowings, compensation and other overhead-related costs.

The Board of Directors of United has unanimously approved the Merger Agreement and believes that the merger is in the best interests of United’s stockholders. See “United and NCC Joint Proposal No. 1 – The Merger; Reasons for the Merger” beginning on page 50, “United and NCC Joint Proposal No. 1 – The Merger; Opinion of United’s Financial Advisor” beginning on page 52 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of United” beginning on page 162.

The Merger Agreement (See page 76)

Under the terms of the merger agreement, United will merge with and into NCC, with NCC being the surviving corporation. As soon as practicable following the merger of United with and into NCC, United Legacy Bank will merge with and into National Bank of Commerce, with National Bank of Commerce being the surviving bank. Both NCC and National Bank of Commerce will continue their existence under Delaware law and the laws of the United States, respectively, while United and United Legacy Bank will cease to exist; provided, however, that, subject to applicable laws and non-objection from applicable regulatory authorities, NCC and United intend for the former banking offices of United Legacy Bank, along with any banking offices of National Bank of Commerce in the same market and under common day-to-day management with the former banking offices of United Legacy Bank, to continue to operate and conduct business under the trade name “United Legacy Bank, a division of National Bank of Commerce” for a period of at least two years. The merger agreement is attached to this joint proxy statement-prospectus as Appendix A and is incorporated into this joint proxy statement-prospectus by reference. We encourage you to read the entire merger agreement carefully, as it is the legal document that governs the proposed merger.

What You Will Receive in the Merger (See page 76)

United stockholders will have the opportunity to elect to receive, for each of their shares, either (i) 0.057794 shares of NCC common stock, which we refer to as the “exchange ratio,” (ii) $1.30 in cash, without interest, or (iii) a combination of shares of NCC common stock and cash, if the merger is completed. However, the number of shares of United common stock for which NCC has agreed to pay cash is limited to 2,268,851, and the total amount of cash to be paid (other than with respect to fractional shares) is limited to $2,949,506.30. We refer to these limitations as the “share limitation” and the “cash limitation,” respectively. If the total amount of all valid cash elections exceeds the cash limitation, then for each United stockholder who validly elects to receive cash for some or all of such stockholder’s shares of United common stock, the number of shares for which such stockholder will receive cash will equal the product of (i) the number of shares for which that stockholder elected to receive cash and (ii) a fraction, the numerator of which is the share limitation (2,268,851) and the denominator of which is the total number of shares for which cash was elected by all United stockholders. Other shares of United common stock for which a valid cash election has been made (after applying this formula), along with all shares of United common stock for which a valid cash election has not been made, will be converted into the right to receive NCC common stock. For more information, including an example applying the proration formula, see “The Merger Agreement – Proration Procedures” beginning on page 78.

No fractional shares of NCC common stock will be issued in connection with the merger. Instead, NCC will make a cash payment without interest to each stockholder of United who would otherwise receive a fractional share of NCC common stock. The amount of such cash payment will be determined by multiplying the fraction

 

of a share of NCC common stock otherwise issuable to such stockholder by $22.68, the value attributed to each share of NCC common stock solely for purposes of this transaction. The amount of cash available for cash payments in lieu of fractional shares will not be affected by the cash limitation described above, nor will the amount of cash payable pursuant to cash elections be affected by cash payments in lieu of fractional shares.

With the exception of any cash payments made to NCC stockholders who exercise their dissenters’ rights, NCC stockholders will not receive any consideration in the merger and will retain their existing shares of NCC common stock.

Cash and Stock Elections (See page 77)

A form of election will be provided to United stockholders at a later date, and United stockholders should carefully review and follow the instructions that will be included with the election form. The deadline to make an election will be 5:00 p.m. Eastern Time on the day before the special meeting of United stockholders. In the event that the number of shares of United common stock as to which holders have elected to receive cash exceeds the share limitation, all stockholders who elected to receive cash will have their elections prorated to ensure that the amount of cash to be paid in the merger does not exceed the cash limitation.

Effect of the Merger on United Options (See page 80)

As of June 30, 2014, there were 1,775,000 outstanding options to purchase United common stock, with a weighted average exercise price of $1.35 per share. The merger agreement provides that each outstanding and unexercised option to purchase shares of United common stock will cease to represent an option to purchase United common stock at the effective time of the merger and will be converted automatically into an option to purchase NCC common stock, and that NCC will assume each United option subject to its terms, including any acceleration in vesting that will occur as a consequence of the merger. At the effective time of the merger, (i) the number of shares of NCC common stock purchasable upon exercise of each United option will equal the product of (A) the number of shares of United common stock that were purchasable under the United option immediately before the effective time of the merger multiplied by (B) the exchange ratio, rounded to the nearest whole share; and (ii) the per share exercise price for each United option will equal the quotient obtained by dividing (A) the per share exercise price of the United option in effect immediately before the effective time of the merger by (B) the exchange ratio, rounded to the nearest cent.

Your Expected Tax Treatment as a Result of the Merger (See page 71)

We expect that United stockholders who receive only NCC common stock for their shares of United common stock will not recognize any gain or loss for U.S. federal income tax purposes as a result of the merger. The completion of the merger is conditioned on receipt of a tax opinion from Maynard, Cooper & Gale, P.C. that the merger qualifies as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and that United stockholders will not recognize gain or loss in connection with the exchange of their shares (except with respect to any cash received). The opinion will not bind the Internal Revenue Service, which could take a different view. This tax treatment will not apply to any United stockholder who receives cash consideration in the merger in exchange for United common stock, or who receives cash pursuant to the exercise of dissenters’ rights.

Any stockholder of United who receives cash in the merger, whether as a result of the cash election, the receipt of cash in lieu of fractional shares, as a result of perfecting dissenters’ rights under Florida law or otherwise, will recognize gain to the extent the cash received exceeds the stockholder’s tax basis in his or her United common stock. See “Material United States Federal Income Tax Consequences of the Merger” beginning on page 71 for additional information.

 

The merger itself should result in no tax consequences for NCC stockholders.

Determining the actual tax consequences of the merger to you as an individual taxpayer can be complicated. The tax treatment will depend on your specific situation and many variables not within our control. For these reasons, we recommend that you consult your tax advisor concerning the federal and any applicable state, local or other tax consequences of the merger to you.

Dissenters’ Rights (See page 98)

If the merger is completed, stockholders of United or NCC who do not vote in favor of the merger and who comply with all of the requirements and procedures required by Florida law or Delaware law, respectively, and described in this joint proxy statement-prospectus, will be entitled to exercise dissenters’ rights of appraisal and receive the “fair value” of their shares in cash. If you exercise and perfect your dissenters’ rights, you will not receive any merger consideration but will be entitled to receive the “fair value” of your shares of stock in cash as determined in accordance with Florida law (for United stockholders) or Delaware law (for NCC stockholders). Failure to adhere strictly to the requirements and procedures of the dissenters’ rights provisions under applicable state law may result in the loss, termination or waiver of a stockholder’s dissenters’ rights. The “fair value” of your shares may be more or less than the consideration to be paid in the merger. Pursuant to the merger agreement, if more than 5% of the outstanding shares of either NCC or United properly assert their dissenters’ rights of appraisal, the NCC board of directors may terminate the merger agreement and abandon the merger. Additionally, if more than 5% of the outstanding shares of NCC properly assert their dissenters’ rights of appraisal, the United board of directors may terminate the merger agreement and abandon the merger.

A United stockholder who wishes to exercise dissenters’ rights of appraisal with respect to the merger must (i) deliver to United, before the vote is taken at the special meeting, written notice of the stockholder’s intent to demand payment if the merger is consummated, (ii) not vote, or cause or permit to be voted, any shares of United common stock in favor of the merger and (iii) otherwise comply with the applicable procedural requirements of the FBCA. A NCC stockholder who wishes to exercise dissenters’ rights of appraisal with respect to the merger must (i) not vote the stockholder’s shares of NCC common stock in favor of the merger, (ii) deliver to NCC a written demand for appraisal of the NCC shares before the date of the special meeting, (iii) continuously hold the shares of NCC common stock through the date the merger is completed and (iv) otherwise comply with the applicable procedural requirements of the DGCL.

A failure to vote will not constitute a waiver of a United or NCC stockholder’s dissenters’ rights of appraisal under Florida or Delaware law; however, if you sign and send in your proxy card and do not indicate how you want to vote on the merger proposal, your proxy will be voted FOR the proposal to approve the merger agreement, and you will effectively waive your appraisal rights. Therefore, a United or NCC stockholder who submits a proxy and who also wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the merger agreement or abstain from voting on the adoption of the merger agreement.

Appendix B includes the relevant provisions of Florida law, and Appendix C includes the relevant provisions of Delaware law, regarding these rights. See “Dissenters’ Rights of Appraisal” beginning on page 98 for additional information on how to assert dissenter’s rights. In view of the complexity of the procedures specified under the FBCA and the DGCL, stockholders who wish to pursue dissenters’ appraisal rights should promptly consult their legal, financial and tax advisors.

If you hold your shares of United or NCC common stock through a bank, brokerage firm, trust or other nominee and you wish to exercise dissenters’ appraisal rights, you should consult with your bank, brokerage firm, trust or other nominee to determine the appropriate procedures for the making of a demand for appraisal through your nominee.

 

Comparative Stock Prices (See page 40 for NCC and page 41 for United)

NCC

NCC common stock does not currently trade on any securities exchange or interdealer quotation system, and, historically, shares of NCC common stock have been inactively traded. The last known private resale price for a share of NCC common stock prior to the mailing of this joint proxy statement-prospectus was $16.13 on August 22, 2014.

During June of 2014, two of NCC’s directors exercised warrants to purchase an aggregate of 30,000 shares of NCC common stock at an exercise price of $20.00 per share. Additionally, during July and August of 2014, NCC sold 163,485 shares of NCC common stock at $18.35 per share in a private placement in connection with NCC’s recent entry into the Vero Beach, Florida market area, which private placement was completed on August 8, 2014.

United

United common stock does not currently trade on any securities exchange or interdealer quotation system. The last known sale price for a share of United common stock prior to the mailing of this joint proxy statement-prospectus was $1.20 on May 30, 2014.

NCC Dividends (See page 40)

NCC’s board of directors has not declared a dividend since its inception and does not currently expect to do so in the foreseeable future. As of June 30, 2014, National Bank of Commerce had a negative retained earnings balance and is currently prohibited by the Office of the Comptroller of the Currency (the “OCC”) from paying any dividends on its common stock to NCC, its sole stockholder, for as long as the negative balance exists. NCC’s board of directors currently anticipates that all earnings, if any, will be used for working capital, to support NCC’s operations and to finance the growth and development of its business, including the merger and integration of United. Future determinations regarding dividend policy will be made at the discretion of NCC’s board of directors based on factors that it deems relevant at that time.

Reasons for the Merger (See page 50)

NCC

In deciding to pursue an acquisition of United, NCC’s management and board of directors noted, and consulted with its legal counsel and financial advisor regarding, numerous factors, including the following:

 

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information concerning the business, operations, earnings, asset quality and financial condition of United;

 

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the financial terms of the merger, including the relationship of the value of the consideration issuable in the merger to the market value, tangible book value and earnings per share of United’s common stock;

 

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the ability of United’s operations to contribute to NCC’s earnings after the merger;

 

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the recent comparative earnings and financial performance of United and NCC;

 

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the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected combinations with the terms of the proposed merger;

 

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the various effects of NCC becoming a public reporting company under the regulations of the SEC as a result of the merger;

 

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the compatibility of United’s management team, strategic objectives and geographic footprint with those of NCC;

 

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the opportunity to leverage the infrastructure of NCC;

 

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the nonfinancial terms of the merger, including the treatment of the merger as a tax-free reorganization for U.S. federal income tax purposes;

 

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the opinion of FIG Partners LLC (“FIG”) that the consideration to be provided to United’s stockholders in the merger is fair, from a financial point of view, to the stockholders of NCC; and

 

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the likelihood of the merger being approved by applicable regulatory authorities without undue conditions or delay.

United

In deciding to engage in the merger transaction, United’s management and board of directors noted, and consulted with its legal counsel and financial advisor regarding, numerous factors, including the following:

 

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the value of the consideration to be received by United’s stockholders compared to stockholder value for United as an independent entity;

 

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information concerning business, operations, earnings, asset quality, financial condition, prospects and capital levels of United and NCC, both individually and as a combined entity;

 

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the ability to achieve scale and efficiency as a part of a larger organization in which operating costs and regulatory compliance costs can be shared across a larger revenue base and in which a larger capital base provides access to larger customers;

 

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the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected combinations with the terms of the proposed merger;

 

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the receipt of the stock consideration by United’s stockholders on a tax-free basis;

 

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the opinion of Monroe Financial Partners, Inc. (“Monroe”) that the consideration to be received by United’s stockholders in the merger is fair from a financial point of view; and

 

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the likelihood of the merger being approved by applicable regulatory authorities without undue conditions or delay.

See “United and NCC Joint Proposal No. 1 – The Merger; Reasons for the Merger” beginning on page 50 for additional information.

Opinion of United’s Financial Advisor (See page 52)

In deciding to approve the merger, the board of directors of United considered the opinion of its financial advisor, Monroe. Monroe, an investment banking and financial advisory firm, has given a fairness opinion to the United board of directors that the consideration to be received by United stockholders is fair from a financial point of view. The opinion is based on and subject to the procedures, matters and limitations described in the opinion and other matters that Monroe considered relevant. The fairness opinion is attached to this joint proxy statement-prospectus as Appendix D. We urge all stockholders of United to read the entire opinion, which describes the procedures followed, matters considered and limitations on the review undertaken by Monroe in providing its opinion. See “United and NCC Joint Proposal No. 1 – The Merger; Opinion of United’s Financial Advisor” beginning on page 52 for additional information.

 

Opinion of NCC’s Financial Advisor (See page 62)

In deciding to approve the merger, the board of directors of NCC considered the opinion of its financial advisor, FIG. FIG, an investment banking and financial advisory firm, has given a fairness opinion to the NCC board of directors that the consideration to be provided to United’s stockholders in the merger is fair, from a financial point of view, to the stockholders of NCC. The opinion is based on and subject to the procedures, matters and limitations described in the opinion and other matters that FIG considered relevant. The fairness opinion is attached to this joint proxy statement-prospectus as Appendix E. We urge all stockholders of NCC to read the entire opinion, which describes the procedures followed, matters considered and limitations on the review undertaken by FIG in providing its opinion. See “United and NCC Joint Proposal No. 1 – The Merger; Opinion of NCC’s Financial Advisor” beginning on page 62 for additional information.

Both Boards of Directors Recommend Stockholder Approval of the Merger Agreement (See pages 44 and 47)

United

The board of directors of United has unanimously approved the merger agreement and believes that the merger is in the best interests of United’s stockholders. The board unanimously recommends that you vote FOR approval of the merger agreement and the merger.

NCC

The board of directors of NCC has unanimously approved the merger agreement and believes that the merger is in the best interests of NCC’s stockholders. The board unanimously recommends that you vote FOR approval of the merger agreement and the merger.

Information About the Stockholders’ Meetings (See pages 42 and 45)

A special meeting of the stockholders of United will be held on [ — ], 2014, at [ — ], local time. The meeting will be held at [ — ]. At the meeting, the stockholders of United will vote on the merger agreement described herein. If United’s stockholders approve the merger agreement and the conditions to completing the merger are satisfied, we expect to complete the merger shortly after the special stockholders’ meeting. See “The United Special Meeting” beginning on page 42 for additional information.

A special meeting of the stockholders of NCC will be held on [ — ], 2014, at [ — ], local time. The meeting will be held at [ — ]. At the meeting, the stockholders of NCC will vote on the merger agreement described herein. If NCC’s stockholders approve the merger agreement and the other conditions to completing the merger are satisfied, we expect to complete the merger shortly after the special stockholders’ meeting. See “The NCC Special Meeting” beginning on page 45 for additional information.

Quorum and Vote Required at the Meetings (See pages 42 and 45)

United

Stockholders who own United common stock at the close of business on [ — ], 2014, the record date, will be entitled to vote at the meeting. A majority of the issued and outstanding shares of United common stock, as of the record date for the meeting, must be present in person or by proxy at the meeting in order for a quorum to be present. If a quorum is not present at the meeting, the meeting will be adjourned, and no vote will be taken until and unless a quorum is present. Approval of the merger agreement requires the affirmative vote of a majority of the shares of United common stock issued and outstanding on the record date. Approval of the Adjournment Proposal requires more votes to be cast in favor of this proposal than the number of votes cast against it. See “The United Special Meeting – Record Date; Quorum and Vote Required” beginning on page 42 for additional information.

 

NCC

Stockholders who own NCC common stock at the close of business on [ — ], 2014, the record date, will be entitled to vote at the meeting. A majority of the issued and outstanding shares of NCC common stock, as of the record date for the meeting, must be present in person or by proxy at the meeting in order for a quorum to be present. If a quorum is not present at the meeting, the meeting will be adjourned, and no vote will be taken until and unless a quorum is present. Approval of the merger agreement requires the affirmative vote of a majority of the shares of NCC common stock issued and outstanding on the record date. Charles Investment Group, LLC, a Delaware limited liability company (“CIG”), which owned approximately [ — ]% of the outstanding shares of NCC common stock as of the record date, has entered into a binding agreement with United to vote all of the shares of NCC common stock over which it has voting control in favor of the merger agreement, subject to its duties or obligations as a registered bank holding company or as otherwise required by applicable law. Therefore, the merger will be approved by NCC stockholders regardless of how many other stockholders of NCC vote against the merger. See “The NCC Special Meeting – Record Date; Quorum and Vote Required” beginning on page 45 for additional information.

Share Ownership of Management (See pages 113 and 160)

United

As of the record date for the United special meeting, directors and executive officers of United had or shared voting or dispositive power over approximately [ — ]% of the issued and outstanding United common stock. United’s directors have entered into written agreements with NCC providing that they will vote the shares over which they have voting power, subject to their fiduciary duties, in favor of the merger agreement.

The directors and executive officers of NCC do not have or share voting or dispositive power over any of the issued and outstanding shares of United common stock.

NCC

As of the record date for the NCC special meeting, directors and executive officers of NCC had or shared voting or dispositive power over approximately [ — ]% of the issued and outstanding shares of NCC common stock, which includes the 3,860,000 shares of NCC common stock currently owned by CIG. The shares owned by CIG represented [ — ]% of the outstanding shares of NCC common stock as of the record date. Certain directors and executive officers of NCC own approximately 52.5% of the membership interests of CIG, and four of NCC’s directors, Messrs. Holcomb, Murray, McWane and Page, serve as the managers of CIG. CIG has entered into a written agreement with United providing that it will vote the shares of NCC common stock over which it has voting control, subject to its duties or obligations as a registered bank holding company and as otherwise required by applicable law, in favor of the merger agreement. It is also anticipated that NCC’s directors and executive officers will vote any shares of NCC common stock that they hold directly in favor of the merger agreement.

The directors and executive officers of United do not have or share voting or dispositive power over any of the issued and outstanding shares of NCC common stock.

Structure of the Merger (See page 48)

As a result of the merger and the bank merger:

 

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United and United Legacy Bank will cease to exist.

 

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Subsequent to the merger and the bank merger, and subject to applicable laws and non-objection from applicable regulatory authorities, NCC and United intend for the former banking offices of United Legacy Bank to continue to operate and conduct business under the trade name “United Legacy Bank, a division of National Bank of Commerce” for a period of at least two years.

 

Status and Effect of Regulatory Approvals (See page 69)

All regulatory approvals required to be obtained in connection with the merger and the bank merger have been received. NCC and United believe that the merger and the bank merger are compatible with the applicable regulatory requirements and criteria; however, we cannot assure you, among other things, that we will be able to comply with any required conditions or that compliance or noncompliance with any such conditions would not have adverse consequences for the combined company after the merger.

We Must Meet Several Conditions to Complete the Merger (See page 82)

The merger will only be completed if certain mutual conditions are met, including the following:

 

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approval by United’s stockholders and NCC’s stockholders of the merger agreement by the required vote;

 

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approval of the merger and the transactions contemplated thereby by applicable regulatory authorities;

 

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receipt of all third-party consents (other than the regulatory consents described above) necessary to consummate the merger, other than those that would not have a material adverse effect on the party required to obtain the consent;

 

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receipt by United and NCC of an opinion from Maynard, Cooper & Gale, P.C. that the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code;

 

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the absence of a stop order suspending the effectiveness of NCC’s registration statement under the Securities Act and any action, suit, proceeding or investigation for that purpose with respect to the shares of NCC common stock to be issued to the United stockholders; and

 

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the absence of an order, decree or injunction enjoining or prohibiting completion of the merger, or the initiation of or known threat of any action or proceeding seeking to restrain consummation of the merger or the bank merger that renders such transactions inpossible or inadvisable in the opinion of either party.

If these and certain other conditions to completion specific to the respective parties are satisfied, NCC and United contemplate that they will complete the merger in the fourth quarter of 2014. See “The Merger Agreement – Conditions to the Merger.”

Termination and Termination Fee (See page 90)

The merger agreement may be terminated, either before or after stockholder approval, under certain circumstances described in detail elsewhere in this joint proxy statement-prospectus. If either party terminates the merger agreement because United’s board withdraws or changes its recommendation of the merger agreement, cancels the meeting at which United’s stockholders or board will vote on the merger agreement, or recommends, approves or announces a transaction for the sale to or merger with an entity other than NCC (such transaction, an “acquisition transaction”), or if United terminates the merger agreement because it has received an offer for such an acquisition transaction, then United (or its successor) must pay NCC a termination fee of $750,000.

Note that, pursuant to the merger agreement, the NCC board of directors may terminate the merger agreement and abandon the merger of NCC and United if more than 5% of the outstanding shares of either NCC or United properly assert their dissenters’ rights of appraisal, and the United board of directors may terminate the merger agreement and abandon the merger of NCC and United if more than 5% of the outstanding shares of NCC properly assert their dissenters’ rights of appraisal.

 

Some of United’s Directors and Executive Officers Have Interests in the Merger that Differ from its Stockholders’ Interests (See page 92)

Some of the executive officers and directors of United have interests in the merger that are different from, or in addition to, those of United stockholders generally. The members of the United board of directors knew about these additional interests and considered them when they approved the merger agreement. These interests include the following:

 

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The merger agreement calls for an aggregate of $1,066,841 in lump sum cash payments to be made at the closing of the merger to United’s four executive officers ($477,509 to David G. Powers, $210,115 to Shirley L. Tyler, $205,389 to David L. McLeod and $173,828 to Michael R. Scures) in connection with the termination of these executives’ existing employment and related agreements with United and United Legacy Bank.

 

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Pursuant to the merger agreement, NCC has entered into new five-year employment agreements with United’s four executive officers, which agreements take effect at the closing of the merger, and which agreements provide that:

 

(i)

the executives are entitled to receive minimum annual base salaries of $331,738 for Mr. Powers, $167,438 for Ms. Tyler, $212,503 for Mr. McLeod and $200,298 for Mr. Scures;

 

(ii)

the executives are entitled to receive vacation days, paid sick days and reimbursement for specified types of business expenses;

 

(iii)

the executives are entitled to receive certain perquisites, valued at approximately $13,440 per year for Mr. Powers, $3,790 per year for Ms. Tyler, $12,840 per year for Mr. McLeod and $6,850 per year for Mr. Scures;

 

(iv)

the executives are eligible to receive annual bonuses, participate in NCC’s equity incentive plan and participate in employer-sponsored health and retirement plans;

 

(v)

if NCC terminates the employment of the executives other than “for cause” or the executive terminates the employment for “good reason” (as defined in the employment agreements), the executives are entitled to receive salary continuation payments equal to the executive’s base salary then in effect until the expiration of the five-year term of the agreement; and

 

(vi)

in the event that the termination of employment occurs either (1) upon the closing of a change in control of NCC that occurs prior to the natural expiration of the term of the agreement, or (2) prior to or upon the natural expiration of the term of the agreement and a change in control of NCC occurs at any time thereafter, the executives are entitled to a one-time payment in an amount calculated by multiplying the sum of the executive’s average base annual salary and the average annual bonus during the three-year period immediately preceding the termination of employment by a specified multiplier set forth in the executive’s employment agreement (1.495x for Mr. Powers and Ms. Tyler, 0.995x for Messrs. McLeod and Scures).

 

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The merger agreement requires NCC, at the time of the closing of the merger, to assume and maintain the four United executives’ split dollar life insurance plans that are currently maintained by United Legacy Bank. Under each of the split dollar arrangements, the executive’s named beneficiary will receive a life insurance payment equal to 50% of the net death proceeds upon the executive’s death. The estimated split dollar benefit for each executive ranges from approximately $157,000 to $186,000 for Mr. Powers, $168,000 to $187,000 for Ms. Shirley, $160,000 to $186,000 for Mr. McLeod, and $159,000 to $186,000 for Mr. Scures, depending in each case on the age of such executive at the time of his or her death.

 

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Pursuant to the merger agreement, United’s executives, along with all full-time employees of United and United Legacy Bank, will be eligible to participate in all NCC benefit plans and arrangements that are made available to all NCC full-time employees, which benefits include health and dental insurance, vision insurance, life insurance and short and long-term disability insurance.

 

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Pursuant to the merger agreement, NCC has agreed to increase the size of its board of directors by one seat as of the effective time of the merger and to fill the vacancy with a designee chosen by United. United’s board of directors has selected Donald F. Wright, a current director of United and United Legacy Bank, to serve on the NCC board of directors. As is the case with all non-employee directors of NCC, Mr. Wright will be entitled to receive board meeting fees for his attendance at board meetings, which fees are estimated to be $4,800 per year (assuming he attends 12 regular board meetings per year).

 

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Pursuant to the merger agreement, NCC has agreed to cause National Bank of Commerce to increase the size of its board of directors by one seat as of the effective time of the merger and to fill the vacancy with a designee chosen by United Legacy Bank. United Legacy Bank’s board of directors has selected Timothy L. Murphy, a current director of United and United Legacy Bank, to serve on the board of directors of National Bank of Commerce. As is the case with all non-employee directors of National Bank of Commerce, Mr. Murphy will be entitled to receive board meeting fees for his attendance at board meetings, which fees are estimated to be $4,800 per year (assuming he attends 12 regular board meetings per year).

 

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Under the terms of the merger agreement, NCC has agreed to maintain director and officer liability insurance for the benefit of United’s officers and directors and to indemnify United’s officers and directors for certain liabilities.

Additionally, under the terms of the merger agreement, all of the outstanding unvested options to purchase United common stock, including unvested options held by the executives of United, will vest and be assumed by NCC as a result of the merger. However, at an assumed price of $18.35 per share, the options held by United’s executives that are vesting as a result of the merger presently have no value due to the exercise price exceeding $18.35 per share on an as assumed basis.

The above described interests constitute all of the interests of the executive officers and directors of United in the merger apart from their interests as United stockholders generally. For a more complete description of these interests, see “The Merger Agreement – Interests of Certain Persons in the Merger.”

Employee Benefits of United Employees after the Merger (See page 89)

NCC has agreed to offer to all current employees of United who become NCC employees as a result of the merger substantially similar employee benefits to those that NCC offers to its employees in similar positions.

Differences in Rights of United’s Stockholders after the Merger (See page 198)

United stockholders who receive NCC common stock in the merger will become NCC stockholders as a result of the merger. Their rights as stockholders after the merger will be governed by Delaware law and by NCC’s certificate of incorporation and bylaws. The rights of NCC stockholders are different in certain respects from the rights of United’s stockholders. See “Comparison of Rights of NCC Stockholders and United Stockholders” beginning on page 198 for additional information.

 

RECENT DEVELOPMENTS – NCC’S ACQUISITION OF CBI

On August 29, 2014, National Bank of Commerce entered into a membership interest purchase agreement with the members of CBI Holding Company, LLC, a Delaware limited liability company (“CBI”), pursuant to which National Bank of Commerce acquired, effective as of August 29, 2014, 70% of the outstanding membership interests of CBI in exchange for cash consideration of $16,180,587. CBI owns 100% of the membership interests of Corporate Billing, LLC (“Corporate Billing”), an Alabama limited liability company based in Decatur, Alabama that is engaged in the business of factoring commercial accounts receivable. Corporate Billing owns 100% of the membership interests of CBI Real Estate Holdings, LLC, which owns certain real property in Decatur, Alabama that is leased to Corporate Billing. The remaining 30% of the outstanding membership interests of CBI are owned by Factor, LLC, which is owned by three of the former members of CBI.

In connection with the transaction, National Bank of Commerce and Factor, LLC entered into an amended and restated limited liability company agreement for CBI. Under the terms of this agreement, National Bank of Commerce has an option to purchase Factor’s 30% interest in CBI for a purchase price based on a multiple of CBI’s earnings. The option is exercisable by National Bank of Commerce at any time beginning on the fifth anniversary of the closing date and ending on the eighth anniversary of the closing date.

Also in connection with the transaction, National Bank of Commerce made a $100 million line of credit available to Corporate Billing. Corporate Billing utilized the line of credit to refinance its existing line of credit with another commercial bank and to payoff subordinated debt. The line of credit bears interest at the federal funds target rate plus twenty-five (25) basis points and is secured by all of the assets of Corporate Billing. The line of credit is also guaranteed by CBI.