Form S-4
Table of Contents

As filed with the Securities and Exchange Commission on March 6, 2020

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CapStar Financial Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Tennessee   6022   81-1527911
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

1201 Demonbreun Street, Suite 700

Nashville, Tennessee 37203

(615) 732-6400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Timothy K. Schools

President and Chief Executive Officer

1201 Demonbreun Street, Suite 700

Nashville, Tennessee 37203

(615) 732-6400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

 

Matthew M. Guest, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
 

Gerald L. Ewell, Jr.
President
FCB Corporation
100 West High Street
Manchester, Tennessee 37355

(931) 728-3518

 

William B. Bryant

President and Chief Executive Officer

The Bank of Waynesboro

201 South Main Street

Waynesboro, Tennessee 38485

(931) 722-2265

   Adam G. Smith, Esq.
Butler Snow LLP
150 3rd Avenue South, Suite 1600
Nashville, Tennessee 37201
(615) 651-6730

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed mergers described in the enclosed proxy statements/prospectus have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

 

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each Class of
Securities to be Registered
  Amount
to be
Registered
  Proposed
Maximum
Offering Price
Per Share
  Proposed
Maximum
Aggregate
Offering Price
  Amount of
Registration Fee

Common stock, par value $1.00 per share

  3,634,218(1)   N/A   $72,371,052.90(2)   $9,393.77(3)

 

 

(1)

Represents the estimated maximum number of shares of the Registrant’s common stock, par value $1.00 per share, to be issued in connection with the mergers described in the proxy statements/prospectus contained herein.

(2)

Pursuant to Rule 457(f)(2) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and solely for the purpose of calculating the registration fee, the proposed aggregate maximum offering price is equal to the sum of: (i) the product of (x) $281.67, the book value per share of FCB Corporation common stock as of March 6, 2020, the last practicable date prior to filing this Registration Statement, and (y) 216,678, the estimated maximum number of shares of FCB Corporation common stock that may be exchanged for the merger consideration; and (ii) the product of (x) $764.52, the book value per share of The Bank of Waynesboro common stock as of March 6, 2020, the last practicable date prior to filing this Registration Statement, and (y) 14,832, the estimated maximum number of shares of The Bank of Waynesboro common stock that may be exchanged for the merger consideration.

(3)

Computed in accordance with Rule 457(f) under the Securities Act to be $9,393.77, which is equal to 0.0001298 multiplied by the proposed maximum aggregate offering price of $72,371,052.90.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED MARCH 6, 2020

 

 

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear FCB Corporation Shareholder:

On January 23, 2020, FCB Corporation, or “FCB,” and CapStar Financial Holdings, Inc., or “CapStar,” entered into an Agreement and Plan of Merger (which, as it may be amended, supplemented, or modified from time to time, we refer to as the “FCB merger agreement”) providing for the merger of FCB with and into CapStar (which we refer to as the “FCB merger”). The FCB merger agreement also contemplates that, immediately following the completion of the FCB merger, The First National Bank of Manchester, or “FNBM,” FCB’s wholly owned bank subsidiary, will merge with and into CapStar Bank, CapStar’s wholly owned bank subsidiary, with CapStar Bank to be the bank to survive this merger, and The Bank of Waynesboro, or “BOW,” FCB’s majority owned bank subsidiary, will merge with and into CapStar Bank (which we refer to as the “BOW merger”), with CapStar Bank to be the bank to survive this merger.

The FCB merger agreement provides that, at the effective time of the FCB merger, the outstanding shares of FCB common stock (other than dissenting shares and certain excluded shares as described in the enclosed proxy statements/prospectus) collectively will be converted into the right to receive, in the aggregate, 2,969,418 shares of CapStar common stock and $21,570,701 in cash, subject to certain adjustments provided for in the FCB merger agreement (which we refer to as the “FCB merger consideration”). Based on 216,678 shares of FCB common stock issued and outstanding as of January 23, 2020 and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, each issued and outstanding share of FCB common stock (other than dissenting shares and certain excluded shares) would be converted into the right to receive approximately 13.70428931 shares of CapStar common stock (with cash in lieu of fractional shares) and $99.55 in cash.

Based on the closing price for CapStar common stock of $16.23 per share on January 23, 2020, the last trading day before the public announcement of the FCB merger agreement, and 216,678 shares of FCB common stock outstanding on that date, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, the FCB merger consideration represented approximately $321.97 in value for each share of FCB common stock. Based on the closing price for CapStar common stock of $[●] per share on [●], 2020, the last practicable trading day before the date of the enclosed proxy statements/prospectus, and [●] shares of FCB common stock outstanding on that date, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, the FCB merger consideration represented approximately $[●] in value for each share of FCB common stock. The market value of the FCB merger consideration will fluctuate with the market price of CapStar’s common stock and will not be known until the FCB merger is completed. We encourage you to obtain current market quotations for the CapStar common stock before you vote. CapStar common stock is currently quoted on the Nasdaq Global Select Market under the symbol “CSTR.”

The FCB merger consideration is subject to adjustments for transaction expenses, real estate valuations, and the proceeds of sales of certain equity interests by FCB, BOW, and their subsidiaries. See the section titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments” for a discussion of these adjustments to the FCB merger consideration. Consequently, the value of the per share FCB merger consideration you will receive in exchange for your shares of FCB common stock will not be known at the time you vote on the FCB merger agreement, and the value and amount, respectively, of the actual per share FCB merger consideration you will receive may be different from that described above.

Based on [●] shares of CapStar common stock outstanding on [●], 2020, the record date for the FCB special meeting, and assuming 2,969,418 shares of CapStar common stock are issued by CapStar as FCB merger consideration and that 664,800 shares of CapStar common stock are issued by CapStar to shareholders of BOW


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other than FCB as consideration for the BOW merger, current FCB shareholders would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (not taking into account for this purpose shares of BOW common stock owned by FCB shareholders and without giving effect to any shares of CapStar common stock held by FCB shareholders prior to the FCB merger), and current FCB shareholders and current BOW shareholders (other than FCB), collectively as a group, would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (without giving effect to any shares of CapStar common stock held by them prior to the mergers).

FCB will hold a special meeting of its shareholders in connection with the FCB merger. At this special meeting, FCB shareholders will be asked to vote to approve the FCB merger agreement and certain related matters, as described in the enclosed proxy statements/prospectus.

The special meeting of FCB shareholders will be held on [●], 2020 at [●] local time, at the FNBM main office located at 100 West High Street, Manchester, Tennessee 37355.

Your vote is important. We cannot complete the FCB merger unless FCB’s shareholders approve the FCB merger agreement. The affirmative vote of holders of a majority of the outstanding shares of FCB common stock entitled to vote on the FCB merger agreement is required for the approval of the FCB merger agreement by FCB’s shareholders. Regardless of whether you plan to attend the special meeting, please take the time to vote your shares in accordance with the instructions contained in the enclosed proxy statements/prospectus.

The FCB board of directors recommends that FCB shareholders vote “FOR” the approval of the FCB merger agreement and “FOR” the other matters to be considered at the FCB special meeting.

The enclosed proxy statements/prospectus describes the special meeting, the FCB merger, the documents related to the FCB merger, and other related matters. Please carefully read the entire proxy statements/prospectus, including the section titled “Risk Factors,” for a discussion of the risks relating to the proposed FCB merger. You also can obtain information about the proposed FCB merger, and CapStar from documents that CapStar has filed with the U.S. Securities and Exchange Commission.

If you have any questions regarding the FCB merger, please contact Tim Spry, FNBM’s President and Chief Executive Officer, by mail at 100 West High Street, Manchester, Tennessee 37355 or by telephone at (615) 563-8011.

We are excited about the opportunities afforded by the FCB merger and look forward to seeing you at the special meeting.

Sincerely,

Gerald L. Ewell, Jr.    

President

FCB Corporation

Neither the U.S. Securities and Exchange Commission nor any state securities commission, nor any bank regulatory agency, has approved or disapproved of the securities to be issued in the FCB merger or determined if the enclosed proxy statements/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The securities to be issued in the FCB merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either CapStar or FCB, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of the enclosed proxy statements/prospectus is [●], 2020, and it is first being mailed or otherwise delivered to the shareholders of FCB on or about [●], 2020.


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LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear Bank of Waynesboro Shareholder:

On January 23, 2020, The Bank of Waynesboro, or “BOW,” CapStar Financial Holdings, Inc., or “CapStar,” and CapStar Bank, CapStar’s wholly owned bank subsidiary, entered into a Plan of Bank Merger (which, as it may be amended, supplemented, or modified from time to time, we refer to as the “BOW merger agreement”) providing for the merger of BOW with and into CapStar Bank (which we refer to as the “BOW merger”) immediately following the merger of FCB Corporation, or “FCB,” which as of the date hereof owns 50.56% of the outstanding common stock of BOW, with and into CapStar (the “FCB merger”) pursuant to an Agreement and Plan of Merger entered into by FCB and CapStar on January 23, 2020.

The BOW merger agreement provides that, at the effective time of the BOW merger, the outstanding shares of BOW common stock (other than dissenting shares and certain excluded shares, including shares held by CapStar as successor to FCB, as described in the enclosed proxy statements/prospectus) collectively will be converted into the right to receive, in the aggregate, 664,800 shares of CapStar common stock and $4,829,299 in cash, subject to certain adjustments provided for in the BOW merger agreement (which we refer to as the “BOW merger consideration”). Based on 14,832 shares of BOW common stock issued and outstanding and held by BOW shareholders other than FCB (which shareholders we refer to collectively as the “BOW minority shareholders”) as of January 23, 2020 and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, each issued and outstanding share of BOW common stock (other than dissenting shares and certain excluded shares) held by the BOW minority shareholders would be converted into the right to receive approximately 44.82200647 shares of CapStar common stock (with cash in lieu of fractional shares) and $325.60 in cash.

Based on the closing price for CapStar common stock of $16.23 per share on January 23, 2020, the last trading day before the public announcement of the BOW merger agreement, and 14,832 shares of BOW common stock outstanding on that date and owned by the BOW minority shareholders, and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the BOW merger consideration represented approximately $1,053.06 in value for each share of BOW common stock held by the BOW minority shareholders. Based on the closing price for CapStar common stock of $[●] per share on [●], 2020, the last practicable trading day before the date of the enclosed proxy statements/prospectus, and [●] shares of BOW common stock outstanding on that date and owned by the BOW minority shareholders, and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the BOW merger consideration represented approximately $[●] in value for each share of BOW common stock held by the BOW minority shareholders. The market value of the BOW merger consideration will fluctuate with the market price of CapStar’s common stock and will not be known until the BOW merger is completed. We encourage you to obtain current market quotations for the CapStar common stock before you vote. CapStar common stock is currently quoted on the Nasdaq Global Select Market under the symbol “CSTR.”

The BOW merger consideration is subject to adjustments for transaction expenses, real estate valuations, and the proceeds of sales of certain equity interests by BOW and its subsidiary. See the section titled “The BOW Merger Agreement—BOW Merger Consideration Adjustments” for a discussion of these adjustments to the BOW merger consideration. Consequently, the value of the per share BOW merger consideration you will receive in exchange for your shares of BOW common stock will not be known at the time you vote on the BOW merger agreement and the value and amount, respectively, of the actual per share BOW merger consideration you will receive may be different from that described above.


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Based on [●] shares of CapStar common stock outstanding on [●], 2020, the record date for the BOW special meeting, and assuming 664,800 shares of CapStar common stock are issued by CapStar as BOW merger consideration and that 2,969,418 shares of CapStar common stock are issued by CapStar to shareholders of FCB as consideration for the FCB merger, current BOW minority shareholders would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (not taking into account for this purpose shares of FCB common stock owned by BOW minority shareholders and without giving effect to any shares of CapStar common stock held by BOW minority shareholders prior to the BOW merger), and current BOW minority shareholders and current FCB shareholders, collectively as a group, would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (without giving effect to any shares of CapStar common stock held by them prior to the mergers).

BOW will hold a special meeting of its shareholders in connection with the BOW merger. At this special meeting, BOW shareholders will be asked to vote to approve the BOW merger agreement and certain related matters, as described in the enclosed proxy statements/prospectus.

The special meeting of BOW shareholders will be held on [●], 2020 at [●] local time, at the Griggs Building, 108 Public Square North, Waynesboro, Tennessee 38485.

Your vote is important. We cannot complete the BOW merger unless BOW’s shareholders, including the BOW minority shareholders voting separately as a group, approve the BOW merger agreement. Both (i) the affirmative vote of the holders of a majority of the outstanding shares of BOW common stock entitled to vote on the BOW merger agreement and (ii) the affirmative vote of the holders of a majority of the outstanding shares of BOW common stock entitled to vote on the BOW merger agreement and owned by the BOW minority shareholders, with the BOW minority shareholders voting separately as a group, are required for the approval of the BOW merger agreement. Regardless of whether you plan to attend the special meeting, please take the time to vote your shares in accordance with the instructions contained in the enclosed proxy statements/prospectus.

A special committee of the BOW board of directors, comprised solely of directors unaffiliated with FCB, CapStar, and CapStar Bank (which we refer to as the “BOW special committee”) determined that the BOW merger agreement, including the terms thereof and the transactions contemplated thereby, including the BOW merger, were fair to and in the best interests of BOW and its shareholders, including the BOW minority shareholders, and that it was advisable and in the best interests of BOW and its shareholders, including the BOW minority shareholders, for BOW to enter into the BOW merger agreement. The BOW special committee recommended to the BOW board of directors that the board adopt and approve and declare advisable the BOW merger agreement and the transactions, including the BOW merger, contemplated thereby, and recommend to the shareholders of BOW the approval of the BOW merger agreement.

The BOW board of directors (based on the recommendation of the BOW special committee) recommends that BOW shareholders (including the BOW minority shareholders) vote “FOR” the approval of the BOW merger agreement and “FOR” the other matters to be considered at the BOW special meeting.

The enclosed proxy statements/prospectus describes the special meeting, the BOW merger, the documents related to the BOW merger, and other related matters. Please carefully read the entire proxy statements/prospectus, including the section titled “Risk Factors,” for a discussion of the risks relating to the proposed BOW merger. You also can obtain information about the proposed BOW merger, and CapStar from documents that CapStar has filed with the U.S. Securities and Exchange Commission.

If you have any questions regarding the BOW merger, please contact William (“Bill”) Bryant, BOW’s President and Chief Executive Officer, by mail at 201 South Main Street, Waynesboro, Tennessee 38485 or by telephone at (931) 722-2265


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We are excited about the opportunities afforded by the BOW merger and look forward to seeing you at the special meeting.

Sincerely,

William (“Bill”) Bryant

Chairman, President, and Chief Executive Officer

The Bank of Waynesboro

Neither the U.S. Securities and Exchange Commission nor any state securities commission, nor any bank regulatory agency, has approved or disapproved of the securities to be issued in the BOW merger or determined if the enclosed proxy statements/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The securities to be issued in the BOW merger are not savings or deposit accounts or other obligations of BOW or any bank or non-bank subsidiary of CapStar, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of the enclosed proxy statements/prospectus is [●], 2020, and it is first being mailed or otherwise delivered to the shareholders of BOW on or about [●], 2020.


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LOGO

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

FCB Corporation Shareholders:

You are cordially invited to attend a special meeting of the shareholders of FCB Corporation (which we refer to as “FCB”) to be held on [●], at [●] local time, at the main office of The First National Bank of Manchester, 100 West High Street, Manchester, Tennessee 37355 (which we refer to as the “FCB special meeting”), for the purpose of FCB’s shareholders considering and voting on the following proposals:

 

   

a proposal to approve the Agreement and Plan of Merger dated January 23, 2020, by and between FCB and CapStar Financial Holdings, Inc. (which we refer to as the “FCB merger agreement”), a copy of which is attached to the enclosed proxy statements/prospectus as Appendix A, as more fully described in the enclosed proxy statements/prospectus (which we refer to as the “FCB merger proposal”); and

 

   

a proposal to adjourn the FCB special meeting, if necessary or appropriate, including for the purpose of permitting further solicitation of proxies in favor of the FCB merger proposal (which we refer to as the “FCB adjournment proposal”).

We have fixed the close of business on [●], 2020, as the record date for determining FCB shareholders entitled to notice of and to vote at the FCB special meeting (which we refer to as the “FCB record date”). Only holders of record of FCB common stock at the close of business on the FCB record date are entitled to notice of and to vote at the FCB special meeting or any adjournment or postponement thereof. Approval of the FCB merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of FCB common stock entitled to vote on the FCB merger proposal. Approval of the FCB adjournment proposal requires that the votes cast by FCB shareholders in favor of the FCB adjournment proposal at the FCB special meeting to exceed the votes cast by FCB shareholders against the FCB adjournment proposal.

The FCB board of directors recommends that FCB shareholders vote “FOR” the FCB merger proposal and “FOR” the FCB adjournment proposal.

Your vote is very important. We cannot complete the transactions contemplated by the FCB merger agreement unless FCB’s shareholders approve the FCB merger agreement.

Whether or not you plan to attend the FCB special meeting, we encourage you to complete and sign the enclosed proxy card and return it promptly in the enclosed self-addressed envelope, as described in the accompanying proxy statements/prospectus. If you decide to attend the FCB special meeting, then you may, if you desire, revoke your proxy and vote your shares in person. If you hold your stock in “street name” through a bank, broker, or other nominee, please follow the instructions on the voting instruction card furnished by the record holder.

As required by Chapter 23 of the Tennessee Business Corporation Act, FCB is notifying all FCB shareholders entitled to vote on the FCB merger proposal that you are or may be entitled to assert dissenters’ rights under the dissenters’ rights chapter of the Tennessee Business Corporation Act. A copy of the dissenters’ rights chapter is included with the enclosed proxy statements/prospectus as Appendix E. Also see the section titled “The Mergers—Dissenters Rights for FCB Shareholders” in the enclosed proxy statements/prospectus for more information.


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The enclosed proxy statements/prospectus provides a detailed description of the FCB special meeting, the FCB merger proposal, the FCB merger agreement and the transactions contemplated by the FCB merger agreement, and other related matters. We urge you to read the proxy statements/prospectus, including any documents incorporated in the proxy statements/prospectus by reference, and its appendices carefully and in their entirety.

If you have any questions regarding the FCB merger proposal, the FCB adjournment proposal, or the proxy statements/prospectus, would like additional copies of the proxy statements/prospectus, or need help voting your shares of FCB common stock, please contact Tim Spry, President and Chief Executive Officer of The First National Bank of Manchester, by mail at 100 West High Street, Manchester, Tennessee 37355 or by telephone at (615) 563-8011.

On behalf of the FCB board of directors, thank you for your prompt attention to this matter.

BY ORDER OF THE BOARD OF DIRECTORS

Gerald L. Ewell, Jr.

Chairman

[●], 2020


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LOGO

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

Bank of Waynesboro Shareholders:

You are cordially invited to attend a special meeting of the shareholders of The Bank of Waynesboro (which we refer to as “BOW”) to be held on [●], at [●] local time, at the Griggs Building, 108 Public Square North, Waynesboro, Tennessee 38485 (which we refer to as the “BOW special meeting”), for the purpose of BOW’s shareholders considering and voting on the following proposals:

 

   

a proposal to approve the Plan of Bank Merger dated January 23, 2020, by and among BOW, CapStar Financial Holdings, Inc., and CapStar Bank (which we refer to as the “BOW merger agreement”), a copy of which is attached to the enclosed proxy statements/prospectus as Appendix B, as more fully described in the enclosed proxy statements/prospectus (which we refer to as the “BOW merger proposal”); and

 

   

a proposal to adjourn the BOW special meeting, if necessary or appropriate, including for the purpose of permitting further solicitation of proxies in favor of the BOW merger proposal (which we refer to as the “BOW adjournment proposal”).

We have fixed the close of business on [●], 2020, as the record date for determining BOW shareholders entitled to notice of and to vote at the BOW special meeting (which we refer to as the “BOW record date”). Only holders of record of BOW common stock at the close of business on the BOW record date are entitled to notice of and to vote at the BOW special meeting or any adjournment or postponement thereof. Approval of the BOW merger proposal requires both (i) the affirmative vote of the holders of a majority of the outstanding shares of BOW common stock entitled to vote on the BOW merger proposal and (ii) the affirmative vote of the holders of a majority of the outstanding shares of BOW common stock entitled to vote on the BOW merger proposal and owned by BOW shareholders other than FCB Corporation (which owns 50.56% of the outstanding common stock of BOW) (whom we refer to as the “BOW minority shareholders”), voting separately as a group. Approval of the BOW adjournment proposal requires that the votes cast by BOW shareholders in favor of the BOW adjournment proposal at the BOW special meeting exceed the votes cast by BOW shareholders against the BOW adjournment proposal.

A special committee of the BOW board of directors, comprised solely of directors unaffiliated with FCB Corporation, CapStar Financial Holdings, Inc., and CapStar Bank (which we refer to as the “BOW special committee”) determined that the BOW merger agreement, including the terms thereof and the transactions contemplated thereby, including the BOW merger, were fair to and in the best interests of BOW and its shareholders, including the BOW minority shareholders, and that it was advisable and in the best interests of BOW and its shareholders, including the BOW minority shareholders, for BOW to enter into the BOW merger agreement. The BOW special committee recommended to the BOW board of directors that the board adopt and approve and declare advisable the BOW merger agreement and the transactions, including the BOW merger, contemplated thereby, and recommend to the shareholders of BOW the approval of the BOW merger agreement.

The BOW board of directors (based on the recommendation of the BOW special committee) recommends that BOW shareholders (including the BOW minority shareholders) vote “FOR” the BOW merger proposal and “FOR” the BOW adjournment proposal.


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Your vote is very important. We cannot complete the transactions contemplated by the BOW merger agreement unless BOW’s shareholders and the BOW minority shareholders approve the BOW merger agreement.

Whether or not you plan to attend the BOW special meeting, we encourage you to complete and sign the enclosed proxy card and return it promptly in the enclosed self-addressed envelope, as described in the accompanying proxy statements/prospectus. If you decide to attend the BOW special meeting, then you may, if you desire, revoke your proxy and vote your shares in person. If you hold your stock in “street name” through a bank, broker, or other nominee, please follow the instructions on the voting instruction card furnished by the record holder.

As required by Chapter 23 of the Tennessee Business Corporation Act, BOW is notifying all BOW shareholders entitled to vote on the BOW merger proposal that you are or may be entitled to assert dissenters’ rights under the dissenters’ rights chapter of the Tennessee Business Corporation Act. A copy of the dissenters’ rights chapter is included with the enclosed proxy statements/prospectus as Appendix E. Also see the section titled “The Mergers—Dissenters’ Rights for BOW Shareholders” in the enclosed proxy statements/prospectus for more information.

The enclosed proxy statements/prospectus provides a detailed description of the BOW special meeting, the BOW merger proposal, the BOW merger agreement and the transactions contemplated by the BOW merger agreement, and other related matters. We urge you to read the proxy statements/prospectus, including any documents incorporated in the proxy statements/prospectus by reference, and its appendices carefully and in their entirety.

If you have any questions regarding the BOW merger proposal, the BOW adjournment proposal, or the proxy statements/prospectus, would like additional copies of the proxy statements/prospectus, or need help voting your shares of BOW common stock, please contact William (“Bill”) Bryant, BOW’s President and Chief Executive Officer, by mail at 201 South Main Street, Waynesboro, Tennessee 38485 or by telephone at (931) 722-2265.

On behalf of the BOW board of directors, thank you for your prompt attention to this matter.

BY ORDER OF THE BOARD OF DIRECTORS

William (“Bill”) Bryant

Chairman

[●], 2020


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REFERENCES TO ADDITIONAL INFORMATION

CapStar

CapStar files annual, quarterly and special reports, proxy statements and other business and financial information with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). You may read and copy any materials that CapStar files with the SEC at its Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 ((800) 732-0330)) for further information on the public reference room. In addition, CapStar files reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at http://www.sec.gov containing this information. You will also be able to obtain these documents, free of charge, from CapStar by accessing CapStar’s website at www.CapStarbanks.com. References to CapStar’s, FCB’s, The First National Bank of Manchester’s and BOW’s websites in this proxy statements/prospectus are intended to serve as textual references only; the contents of those websites are not incorporated herein by reference.

Copies of these documents can also be obtained, free of charge, by directing a written request to:

CapStar Financial Holdings, Inc.

1201 Demonbreun Street, Suite 700

Nashville, Tennessee 37203

Attn: Investor Relations

Telephone: (615) 732-6455

CapStar has filed a registration statement on Form S-4 (File No. 333-[•]) to register with the SEC shares of CapStar common stock to be issued pursuant to the mergers. This proxy statements/prospectus is a part of that registration statement on Form S-4. As permitted by SEC rules, this proxy statements/prospectus does not contain all of the information included in the registration statement on Form S-4 or in the exhibits or schedules to the registration statement on Form S-4. You may read and copy the registration statement on Form S-4, including any amendments, schedules and exhibits, at the SEC’s Public Reference Room at the address noted above. The registration statement on Form S-4, including any amendments, schedules and exhibits, is also available, free of charge, by accessing the websites of the SEC and CapStar or upon written request to CapStar at the address set forth above.

Statements contained in this proxy statements/prospectus as to the contents of any contract or other documents referred to in this proxy statements/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement on Form S-4. This proxy statements/prospectus incorporates important business and financial information about CapStar that is not included in or delivered with this proxy statements/prospectus, including incorporating by reference documents that CapStar has previously filed with the SEC. These documents contain important information about CapStar and its financial condition. See the section titled “Where You Can Find More Information.” These documents are available free of charge upon written request to CapStar at the address listed above.

Except where the context otherwise indicates, CapStar supplied all information contained in, or incorporated by reference into, this proxy statements/prospectus relating to CapStar, and FCB and BOW, respectively, supplied all information contained in this proxy statements/prospectus relating to FCB and BOW.

FCB

FCB does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934 (which we refer to as the “Exchange Act”), is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and, accordingly, does not file documents and reports with the SEC.


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If you have any questions concerning the FCB merger or this proxy statements/prospectus, would like additional copies of this proxy statements/prospectus or need help voting your shares of FCB common stock, please contact FCB at:

FCB Corporation

100 West High Street

Manchester, Tennessee 37355

Attn: Tim Spry, FNBM’s President and Chief Executive Officer

Telephone: (615) 563-8011

To obtain timely delivery of these documents, you must request them no later than [•], 2020 in order to receive them before the FCB special meeting.

BOW

BOW does not have a class of securities registered under Section 12 of the Exchange Act, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and, accordingly, does not file documents and reports with the SEC.

If you have any questions concerning the BOW merger or this proxy statements/prospectus, would like additional copies of this proxy statements/prospectus or need help voting your shares of BOW common stock, please contact BOW at:

The Bank of Waynesboro

201 South Main Street

Waynesboro, Tennessee 38485

Attn: William B. Bryant, President and Chief Executive Officer

Telephone: (931) 722-2265

To obtain timely delivery of these documents, you must request them no later than [•], 2020 in order to receive them before the BOW special meeting.

You should rely only on the information contained in, or incorporated by reference into, this proxy statements/prospectus. No one has been authorized to give any information or make any representation about the mergers or about FCB, BOW or CapStar (or their subsidiaries) that differs from, or adds to, the information in this proxy statements/prospectus or in documents that are publicly filed with the SEC. Therefore, if anyone does give you different or additional information, you should not rely on it. You should not assume that the information contained in this proxy statements/prospectus is accurate as of any date other than the date of this proxy statements/prospectus, and you should not assume that any information incorporated by reference into this proxy statements/prospectus is accurate as of any date other than the date of such other document, and neither the mailing of this proxy statements/prospectus to FCB shareholders or BOW shareholders nor the issuance of CapStar common stock or the payment of cash (as merger consideration or in lieu of fractional shares) by CapStar in the mergers shall create any implication to the contrary.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE FCB MERGER AND THE FCB SPECIAL MEETING

     1  

QUESTIONS AND ANSWERS ABOUT THE BOW MERGER AND THE BOW SPECIAL MEETING

     8  

SUMMARY

     15  

Information Regarding CapStar, FCB and BOW

     15  

The FCB Merger

     18  

The BOW Merger

     18  

Closing and Effective Time of the FCB Merger

     18  

Closing and Effective Time of the BOW Merger

     19  

FCB Merger Consideration

     19  

BOW Merger Consideration

     20  

Conversion of FCB Shares; Exchange of FCB Certificates

     21  

Conversion of BOW Shares; Exchange of BOW Certificates

     21  

Material U.S. Federal Income Tax Consequences of the FCB Merger and the BOW Merger

     21  

Dissenters’ Rights for FCB and BOW Shareholders

     21  

Opinion of FCB’s Financial Advisor

     22  

Opinion of BOW’s Financial Advisor

     22  

Recommendation of the FCB Board of Directors

     23  

Recommendation of the BOW Board of Directors

     23  

Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger

     24  

Interests of BOW Directors and Executive Officers in the BOW Merger

     24  

Regulatory Approvals

     25  

Conditions to Completion of the FCB Merger

     25  

Conditions to Completion of the BOW Merger

     26  

FCB Merger Agreement: Agreement Not to Solicit Other Offers

     27  

BOW Merger Agreement: Agreement Not to Solicit Other Offers

     27  

Termination of the FCB Merger Agreement

     27  

Termination of the BOW Merger Agreement

     28  

FCB Merger Agreement Termination Fee

     30  

BOW Merger Agreement Termination Fee

     30  

Public Trading Markets

     31  

FCB Special Meeting

     31  

BOW Special Meeting

     32  

FCB Voting Agreements

     32  

BOW Voting Agreements

     33  

Comparison of Shareholders’ Rights

     33  

Risk Factors

     33  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     34  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL DATA

     35  

MARKET PRICES AND DIVIDEND INFORMATION

     36  

RISK FACTORS

     39  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     45  

INFORMATION ABOUT THE FCB SPECIAL MEETING

     47  

FCB PROPOSALS

     51  

INFORMATION ABOUT THE BOW SPECIAL MEETING

     52  

BOW PROPOSALS

     57  

 

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     Page  

THE MERGERS

     58  

Terms of the FCB Merger

     58  

Terms of the BOW Merger

     58  

Background of the Mergers

     59  

Recommendation of the FCB Board of Directors and FCB’s Reasons for the FCB Merger

     63  

Opinion of FCB’s Financial Advisor

     66  

Recommendation of the BOW Board of Directors and BOW’s Reasons for the BOW Merger

     77  

Opinion of BOW’s Financial Advisor

     80  

Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger

     87  

Interests of BOW Directors and Executive Officers in the BOW Merger

     91  

Public Trading Markets

     94  

CapStar’s Dividend Policy

     94  

Regulatory Approvals

     95  

Dissenters’ Rights for FCB Shareholders

     96  

Dissenters’ Rights for BOW Shareholders

     98  

Board of Directors and Management of CapStar Following the Mergers

     100  

THE FCB MERGER AGREEMENT

     102  

THE BOW MERGER AGREEMENT

     121  

ACCOUNTING TREATMENT

     140  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS

     141  

THE COMPANIES

     145  

CapStar

     145  

FCB

     145  

BOW

     146  

FCB MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     148  

BOW MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     162  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FCB

     179  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF BOW

     181  

DESCRIPTION OF CAPSTAR CAPITAL STOCK

     183  

COMPARISON OF SHAREHOLDERS’ RIGHTS

     187  

LEGAL MATTERS

     200  

EXPERTS

     200  

HOUSEHOLDING OF PROXY MATERIALS

     201  

DEADLINES FOR SUBMITTING SHAREHOLDER PROPOSALS

     202  

WHERE YOU CAN FIND MORE INFORMATION

     203  

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

     204  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF FCB

     F-1  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF BOW

     G-1  

APPENDICES:

 

Appendix A

  —        Agreement and Plan of Merger, dated January 23, 2020, by and between CapStar Financial Holdings, Inc. and FCB Corporation

Appendix B

  —        Plan of Bank Merger, dated January 23, 2020, by and among CapStar Financial Holdings, Inc., CapStar Bank and The Bank of Waynesboro

Appendix C

  —        Opinion of ProBank Austin

Appendix D

  —        Opinion of Mercer Capital Management, Inc.

Appendix E

  —        Provisions of Tennessee Business Corporation Act Relating to Dissenters’ Rights

 

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QUESTIONS AND ANSWERS ABOUT THE FCB MERGER AND THE FCB SPECIAL MEETING

The following are some questions that FCB shareholders may have about the FCB merger and the FCB special meeting and brief answers to those questions. We urge FCB shareholders to read carefully the remainder of this proxy statements/prospectus because the information in this section does not provide all of the information that might be important to FCB shareholders with respect to the FCB merger and the FCB special meeting. Additional important information is also contained in the appendices to, and documents incorporated by reference into, this proxy statements/prospectus. See the section titled “Where You Can Find More Information.”

 

Q:

Why are FCB shareholders receiving this proxy statements/prospectus?

 

A:

FCB has entered into an Agreement and Plan of Merger, dated as of January 23, 2020, with CapStar (which we refer to as the “FCB merger agreement”). A copy of the FCB merger agreement is included in this proxy statements/prospectus as Appendix A. Under the FCB merger agreement, FCB will be merged with and into CapStar (which we refer to as the “FCB merger”), with CapStar continuing as the surviving corporation. We sometimes refer to CapStar following the FCB merger as the “surviving corporation.” The FCB merger agreement also contemplates that, immediately following the completion of the FCB merger, The First National Bank of Manchester, or “FNBM,” FCB’s wholly owned bank subsidiary, will merge with and into CapStar Bank, CapStar’s wholly owned bank subsidiary, with CapStar Bank continuing as the surviving entity (which we refer to as the “bank merger”), and The Bank of Waynesboro, or “BOW,” FCB’s majority owned bank subsidiary, will merge with and into CapStar Bank, with CapStar Bank continuing as the surviving entity (which we refer to as the “BOW merger”). We refer to the FCB merger and the BOW merger, collectively, in this proxy statements/prospectus as the “mergers”.

We are delivering this document to FCB shareholders because it is a proxy statement being used by the FCB board of directors to solicit proxies from FCB shareholders in connection with the approval of the FCB merger agreement and related matters by FCB’s shareholders. This document also constitutes a prospectus of CapStar because CapStar is offering shares of its common stock to shareholders of FCB, in exchange for outstanding shares of FCB common stock, as partial consideration for the FCB merger.

In order for FCB shareholders to approve the FCB merger agreement and certain related matters, FCB has called a special meeting of its shareholders (which we refer to as the “FCB special meeting”). This document serves as a proxy statement for the FCB special meeting and describes the proposals to be presented at the FCB special meeting.

This proxy statements/prospectus contains important information about the FCB merger, the FCB merger agreement, the FCB special meeting, and related matters, as well as important information to consider in connection with an investment in CapStar common stock. You should read this proxy statements/prospectus carefully and in its entirety.

 

Q:

What will I receive in the FCB merger?

 

A:

If the FCB merger is completed, holders of FCB common stock will collectively have the right to receive, without interest, 2,969,418 shares of common stock of CapStar and $21,570,701 in cash, subject to adjustments in accordance with the terms of the FCB merger agreement. Based on 216,678 shares of FCB common stock issued and outstanding as of January 23, 2020 and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, each issued and outstanding share of FCB common stock (other than dissenting shares and certain excluded shares) will be converted into the right to receive approximately 13.70428931 shares of CapStar common stock and $99.55 in cash. CapStar will not issue any fractional shares of CapStar common stock in the FCB merger. Instead, an FCB shareholder who otherwise would have received a fraction of a share of CapStar common stock will receive an amount in cash rounded to the nearest whole cent. This cash amount will be determined by multiplying (1) the fraction of a share of CapStar common stock to which the holder would otherwise be entitled by (2) the average closing price of CapStar common stock reported on the Nasdaq Global Select Market (which we refer to as the “NASDAQ”) for the 10 consecutive full trading days ending on and including the trading


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  day before the closing date (which we refer to as the “CapStar average closing price”). See the sections titled “The FCB Merger Agreement—Terms of the FCB Merger—FCB Merger Consideration” and “The FCB Merger Agreement—Terms of the FCB Merger—FCB Merger Consideration Adjustments.”

Based on the closing price for CapStar common stock of $16.23 per share on January 23, 2020, the last trading day before the public announcement of the FCB merger agreement, and 216,678 shares of FCB common stock outstanding on that date, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, the FCB merger consideration represented approximately $321.97 in value for each share of FCB common stock. Based on the closing price for CapStar common stock of $[●] per share on [●], 2020, the last practicable trading day before the date of this proxy statements/prospectus, and [●] shares of FCB common stock outstanding on that date, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, the FCB merger consideration represented approximately $[●] in value for each share of FCB common stock. The market value of the FCB merger consideration will fluctuate with the market price of CapStar’s common stock and will not be known until the FCB merger is completed.

We encourage you to obtain current market quotations for the CapStar common stock before you vote. CapStar common stock is currently quoted on the NASDAQ under the symbol “CSTR.”

The FCB merger consideration is subject to adjustments for transaction expenses, real-estate valuations and the proceeds of sales of certain equity interests by FCB, BOW and their subsidiaries. See the section titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments” for a discussion of these adjustments to the FCB merger consideration. Consequently, the value of the per share FCB merger consideration that FCB shareholders will receive in exchange for their shares of FCB common stock will not be known at the time they vote on the FCB merger agreement and the value and amount, respectively, of the actual per share FCB merger consideration they will receive may be different from the amounts described in this proxy statements/prospectus.

If the FCB merger is completed, FCB shareholders will be entitled to receive dividends with a record date after the effective time of the FCB merger on shares of CapStar common stock received in the FCB merger. See the section titled “The FCB Merger Agreement—Terms of the FCB Merger—Dividends and Distributions”.

For more information regarding CapStar’s dividend policy, see the section titled “The Mergers—CapStar’s Dividend Policy.”

 

Q:

What equity stake will FCB shareholders hold in CapStar immediately following the mergers?

 

A:

Based on [●] shares of CapStar common stock outstanding on [●], 2020, the record date for the FCB special meeting, and assuming 2,969,418 shares of CapStar common stock are issued by CapStar as FCB merger consideration and that 664,800 shares of CapStar common stock are issued by CapStar to shareholders of BOW other than FCB as consideration for the BOW merger, current FCB shareholders would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (not taking into account for this purpose shares of BOW common stock owned by FCB shareholders and without giving effect to any shares of CapStar common stock held by FCB shareholders prior to the FCB merger), and current FCB shareholders and current BOW shareholders (other than FCB), collectively as a group, would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (without giving effect to any shares of CapStar common stock held by them prior to the mergers).

 

Q:

Will the value of the FCB merger consideration change between the date of this proxy statements/prospectus and the time the FCB merger is completed?

 

A:

The value of the FCB merger consideration may fluctuate between the date of this proxy statements/prospectus and the completion of the FCB merger based upon the market value for CapStar common

 

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  stock. The aggregate merger consideration in the FCB merger consists of a certain number of shares of CapStar common stock and cash. Any fluctuation in the market price of CapStar common stock after the date of this proxy statements/prospectus and before the effective time of the FCB merger will change the value of the shares of CapStar common stock that FCB shareholders will receive.

The FCB merger consideration is subject to adjustments for transaction expenses, real estate valuations and the proceeds of sales of certain equity interests by FCB, BOW and their subsidiaries. See the section titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments” for a discussion of these adjustments to the FCB merger consideration. Consequently, the value of the per share FCB merger consideration that FCB shareholders will receive in exchange for their shares of FCB common stock will not be known at the time they vote on the FCB merger agreement and the value and amount, respectively, of the actual per share FCB merger consideration they will receive may be different from that described in this proxy statements/prospectus.

FCB shareholders should obtain current sale prices for the CapStar common stock. The CapStar common stock is traded on the NASDAQ under the symbol “CSTR.”

 

Q:

On what are FCB shareholders being asked to vote?

 

A:

FCB is soliciting proxies from its shareholders with respect to the following proposals:

 

   

a proposal to approve the FCB merger agreement (which we refer to as the “FCB merger proposal”); and

 

   

a proposal to adjourn the FCB special meeting, if necessary or appropriate, including for the purpose of permitting further solicitation of proxies in favor of the FCB merger proposal (which we refer to as the “FCB adjournment proposal”).

The FCB merger cannot be completed unless, among other things, FCB’s shareholders approve the FCB merger proposal. Approval of the FCB adjournment proposal by the shareholders of FCB is not a condition to the completion of the FCB merger.

 

Q:

How does the FCB board of directors recommend that FCB shareholders vote at the FCB special meeting?

 

A:

The FCB board of directors recommends that FCB shareholders vote “FOR” the approval of the FCB merger proposal and “FOR” the approval of the FCB adjournment proposal.

 

Q:

Are there any voting agreements in relation to the FCB merger?

 

A:

In connection with the execution of the FCB merger agreement, the directors and one certain shareholder of FCB executed voting and support agreements with CapStar and FCB pursuant to which they generally agreed, among other things, to vote their shares of FCB common stock (subject to certain adjustments in the case of the directors of FCB such that the aggregate number of FCB common stock subject to the FCB voting agreements do not exceed 39.99% of FCB common stock outstanding as of the FCB record date) for the approval of the FCB merger proposal and the FCB adjournment proposal and against any competing acquisition proposal with respect to FCB.

As of the record date for the FCB special meeting, the directors and shareholder of FCB that executed voting and support agreements collectively beneficially owned with the power to vote [●] shares of FCB common stock, of which a total of [●] shares, representing approximately [●]% of the outstanding shares of FCB common stock on that date, are required to vote for the approval of the FCB merger proposal and the FCB adjournment proposal and against any competing acquisition proposal with respect to FCB.

 

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Q:

Who can vote at the FCB special meeting?

 

A:

Only holders of record of FCB common stock as of the close of business on [●], 2020, which is the date the FCB board of directors has fixed as the record date for determining FCB shareholders entitled to notice of and to vote at the FCB special meeting (which date we refer to as the “FCB record date”), are entitled to receive notice of and to vote at the FCB special meeting or any adjournment or postponement thereof.

 

Q:

When and where is the FCB special meeting?

 

A:

The FCB special meeting will be held on [●], at [●] local time, at the main office of The First National Bank of Manchester, 100 West High Street, Manchester, Tennessee 37355.

 

Q:

What constitutes a quorum for the FCB special meeting?

 

A:

The presence at the FCB special meeting, in person or by proxy, of holders of a majority of the outstanding shares of FCB common stock entitled to vote at the FCB special meeting will constitute a quorum for the transaction of business at the FCB special meeting. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the FCB special meeting for the purpose of determining the presence of a quorum.

 

Q:

What is the vote required for approval of the proposals to be considered at the FCB special meeting?

 

A:

FCB Merger Proposal. Approval of the FCB merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of FCB common stock entitled to vote on the proposal. If an FCB shareholder marks “ABSTAIN” on the shareholder’s proxy card, fails to submit a proxy or vote in person at the FCB special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the FCB merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

FCB Adjournment Proposal. Approval of the FCB adjournment proposal requires that the votes cast by FCB shareholders in favor of the proposal at the FCB special meeting exceed the votes cast by FCB shareholders against the proposal. If an FCB shareholder marks “ABSTAIN” on the shareholder’s proxy card or abstains from voting in person, fails to submit a proxy or vote in person at the FCB special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the FCB adjournment proposal, it will have no effect on the voting for this proposal.

 

Q:

Why is the vote of each FCB shareholder important?

 

A:

If an FCB shareholder fails to vote, it will be more difficult for FCB to obtain the quorum necessary to hold and transact business at the FCB special meeting. Also, if an FCB shareholder abstains from voting or fails to vote, or fails to instruct the shareholder’s bank, broker, or other nominee how to vote, it will have the same effect as a vote “AGAINST” approval of the FCB merger agreement, because the FCB merger agreement must be approved by the affirmative vote of holders of a majority of the outstanding shares of FCB common stock entitled to vote on the FCB merger agreement.

 

Q:

What do FCB shareholders need to do now?

 

A:

After FCB shareholders have carefully read this proxy statements/prospectus and have decided how they wish to vote their shares of FCB common stock, FCB shareholders are asked to please vote their shares promptly so that their shares are represented and voted at the FCB special meeting. If you are an FCB shareholder of record as of the FCB record date, you can vote your shares of FCB common stock by completing, dating, and signing the enclosed proxy card and returning it in the enclosed postage-paid envelope.

 

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If you are an FCB shareholder of record as of the FCB record date, you may also vote your shares of FCB common stock in person at the FCB special meeting; however, voting in advance of the FCB special meeting as described above is strongly encouraged.

If you are an FCB shareholder and hold your shares in “street name” through a bank, broker, or other nominee, that institution will send you separate instructions describing the procedures you must follow to vote your shares. “Street name” shareholders who wish to vote in person at the FCB special meeting will need to obtain a proxy form from their bank, broker, or other nominee.

 

Q:

If my shares of FCB common stock are held in “street name” by my bank, broker, or other nominee, will my bank, broker, or other nominee automatically vote my shares for me?

 

A:

No. If your bank, broker, or other nominee holds your shares of FCB common stock in “street name,” your bank, broker, or other nominee will vote your shares of FCB common stock only if you provide instructions as to how to vote by filling out the voter instruction form sent to you by your bank, broker, or other nominee with this proxy statements/prospectus. If you fail to provide voting instructions for any such shares, it will result in a broker non-vote and will have the same effect as if those shares were voted “AGAINST” the FCB merger proposal.

 

Q:

Can FCB shareholders attend the FCB special meeting and vote their shares of FCB common stock in person?

 

A:

Yes. All FCB shareholders, including both shareholders of record and shareholders who hold their shares through banks, brokers, or other nominees, are invited to attend the FCB special meeting. If you are not an FCB shareholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares in order to be able to vote in person at the FCB special meeting. Please bring proper identification to the special meeting, together with proof that you are a record owner of FCB common stock or, if your shares are held in street name, proof of beneficial ownership as of the FCB record date, such as a letter from your broker or an account statement evidencing beneficial ownership.

 

Q:

What if an FCB shareholder returns a proxy card without indicating how the covered shares are to be voted?

 

A:

If an FCB shareholder signs and return a proxy card without indicating how the shares covered by the proxy card are to be voted on any particular proposal, the shares will be voted in accordance with the recommendation of the FCB board of directors.

 

Q:

Can an FCB shareholder change his or her vote?

 

A:

Yes. A holder of record of FCB common stock can change his or her vote in any of the following ways:

 

   

by submitting another valid proxy card bearing a later date;

 

   

by attending the FCB special meeting and voting in person; or

 

   

by, prior to the FCB special meeting, delivering a written notice of revocation to FCB at the following address: FCB Corporation, 100 West High Street, Manchester, Tennessee 37355, Attention: Tim Spry, FNBM’s President and Chief Executive Officer.

If a holder of record of FCB common stock chooses to submit a completed proxy card bearing a later date or a notice of revocation, the proxy card or notice of revocation must be received by [●], 2020. Attendance at the FCB special meeting will not, in and of itself, constitute revocation of a previously-submitted proxy. If an FCB shareholder holds his or her shares in street name with a bank, broker, or other nominee, the shareholder must follow the directions the shareholder receives from his or her bank, broker, or other nominee in order to change his or her vote.

 

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Q:

What happens if an FCB shareholder sells his or her shares of FCB common stock before the FCB special meeting?

 

A:

The record date for the FCB special meeting is earlier than both the date of the FCB special meeting and the effective date of the FCB merger. If an FCB shareholder transfers his or her shares of FCB common stock after the FCB record date but before the FCB special meeting, that shareholder will, unless the transferee requests a proxy, retain his or her right to vote at the FCB special meeting but will transfer the right to receive the per share FCB merger consideration to the person to whom the shares are transferred. If you are an FCB shareholder, in order to receive the per share FCB merger consideration, you must hold your shares of FCB common stock at the effective time of the FCB merger.

 

Q:

Will FCB be required to submit the FCB merger proposal to its shareholders even if the FCB board of directors has withdrawn, modified, or changed its recommendation regarding how FCB shareholders should vote with respect to the FCB merger proposal?

 

A:

Yes. Unless the FCB merger agreement is terminated before the FCB special meeting in accordance with the terms of the FCB merger agreement, the FCB merger agreement requires that FCB convene the FCB special meeting and submit the FCB merger proposal to FCB’s shareholders even if the FCB board of directors has withdrawn, modified, or changed its recommendation regarding how FCB shareholders should vote with respect to the FCB merger proposal.

 

Q:

Do any of the FCB or FNBM directors or executive officers have interests in the FCB merger that differ from those of other FCB shareholders?

 

A:

Yes. FCB’s and FNBM’s directors and executive officers have interests in the FCB merger that are different from, or in addition to, those of FCB shareholders generally. As described further below, members of the FCB board of directors were aware of and considered these interests, among other matters, in evaluating the FCB merger agreement and the FCB merger and in recommending that FCB shareholders approve the FCB merger proposal. For a description of these interests, refer to the section of this proxy statements/prospectus titled “The Mergers—Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger.”

 

Q:

Are FCB shareholders entitled to dissenters’ rights?

 

A:

Yes. If you are an FCB shareholder and want to exercise dissenters’ rights and receive the fair value of your shares of FCB common stock in cash instead of the per share FCB merger consideration, then you must deliver a written notice to FCB prior to the FCB special meeting stating, among other things, that you will exercise your right to dissent if the FCB merger is completed. Also, you may not vote in favor of the FCB merger proposal and must follow certain other procedures, both before and after the FCB special meeting, as described in Appendix E to this proxy statements/prospectus. Note that if you return a signed proxy card without voting instructions, then your shares of FCB common stock will be voted in favor of the FCB merger proposal and you will lose all dissenters’ rights available under the Tennessee Business Corporation Act (which we refer to as the “TBCA”). A summary of the dissenters’ rights provisions of the TBCA can be found under “The Mergers—Dissenters’ Rights for FCB Shareholders.” Failure to strictly comply with the applicable TBCA provisions will result in the loss of dissenters’ rights.

 

Q:

What should an FCB shareholder do if he or she receives more than one set of voting materials?

 

A:

FCB shareholders may receive more than one set of voting materials, including multiple copies of this proxy statements/prospectus and multiple proxy cards or voting instruction cards. For example, if an FCB shareholder holds shares of FCB common stock in more than one brokerage account, that shareholder will receive a separate voting instruction card for each brokerage account in which the shareholder holds such shares. If you are a holder of record of FCB common stock and your shares are registered in more than one

 

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  name, you will receive more than one proxy card. In addition, if you are a holder of both FCB common stock and BOW common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. Please complete, date, sign, and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this proxy statements/prospectus to ensure that you vote every share of FCB common stock that you own.

 

Q:

Are there any risks that FCB shareholders should consider when deciding whether to vote for approval of the FCB merger agreement?

 

A:

Yes. FCB shareholders should read and carefully consider the risk factors set forth in the section of this proxy statements/prospectus titled “Risk Factors.” FCB shareholders also should read and carefully consider the risk factors of CapStar contained in the documents that are incorporated by reference into this proxy statements/prospectus. See the section of this proxy statements/prospectus titled “Where You Can Find More Information.”

 

Q:

Whom should FCB shareholders call with questions or to obtain additional copies of this proxy statements/prospectus?

 

A:

FCB shareholders that have questions regarding the FCB merger or this proxy statements/prospectus, would like additional copies of this proxy statements/prospectus, or need help voting their shares of FCB common stock, should contact Tim Spry, FNBM’s President and Chief Executive Officer, by mail at 100 West High Street, Manchester, Tennessee 37355 or by telephone at (615) 563-8011.

 

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QUESTIONS AND ANSWERS ABOUT THE BOW MERGER AND THE BOW SPECIAL MEETING

The following are some questions that BOW shareholders may have about the BOW merger and the BOW special meeting and brief answers to those questions. We urge BOW shareholders to read carefully the remainder of this proxy statements/prospectus because the information in this section does not provide all of the information that might be important to BOW shareholders with respect to the BOW merger and the BOW special meeting. Additional important information is also contained in the appendices to, and documents incorporated by reference into, this proxy statements/prospectus. See the section titled “Where You Can Find More Information.”

 

Q:

Why are BOW shareholders receiving this proxy statements/prospectus?

 

A:

BOW has entered into a Plan of Bank Merger, dated as of January 23, 2020, with CapStar and CapStar Bank (which we refer to as the “BOW merger agreement”). A copy of the BOW merger agreement is included in this proxy statements/prospectus as Appendix B. Under the BOW merger agreement, BOW will be merged with and into CapStar Bank (which we refer to as the “BOW merger”), with CapStar Bank continuing as the surviving bank, immediately following the merger of FCB Corporation, or “FCB,” which owns 50.56% of the outstanding common stock of BOW, as of the date hereof, with and into CapStar (the “FCB merger”) pursuant to an Agreement and Plan of Merger entered into by FCB and CapStar on January 23, 2020. We sometimes refer to CapStar Bank following the BOW merger as the “surviving bank.” The FCB merger and the BOW merger are cross-conditioned on each other, as described more fully in this proxy statements/prospectus. We refer to the FCB merger and the BOW merger, collectively, in this proxy statements/prospectus as the “mergers”.

We are delivering this document to BOW shareholders because it is a proxy statement being used by the BOW board of directors to solicit proxies from BOW shareholders in connection with the approval of the BOW merger agreement and related matters by BOW’s shareholders. This document also constitutes a prospectus of CapStar because CapStar is offering shares of its common stock to shareholders of BOW, in exchange for outstanding shares of BOW common stock, as partial consideration for the BOW merger.

In order for BOW shareholders to approve the BOW merger agreement and certain related matters, BOW has called a special meeting of its shareholders (which we refer to as the “BOW special meeting”). This document serves as a proxy statement for the BOW special meeting and describes the proposals to be presented at the BOW special meeting.

This proxy statements/prospectus contains important information about the BOW merger, the BOW merger agreement, the BOW special meeting, and related matters, as well as important information to consider in connection with an investment in CapStar common stock. You should read this proxy statements/prospectus carefully and in its entirety.

 

Q:

What will I receive in the BOW merger?

 

A:

If the BOW merger is completed, holders of BOW common stock other than FCB (whom we refer to as the “BOW minority shareholders”; we refer to the shares of BOW common stock held by the BOW minority shareholders as the “BOW minority shares”) will collectively have the right to receive, without interest, 664,800 shares of common stock of CapStar and $4,829,299 in cash, subject to adjustments in accordance with the terms of the BOW merger agreement. Based on 14,832 shares of BOW common stock outstanding as of January 23, 2020 held by the BOW minority shareholders and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, each issued and outstanding share of BOW common stock (other than dissenting shares and certain excluded shares) held by the BOW minority shareholders will be converted into the right to receive approximately 44.82200647 shares of CapStar common stock and $325.60 in cash. CapStar will not issue any fractional shares of CapStar common stock in the BOW merger. Instead, a BOW minority shareholder who otherwise would have received a fraction of a share of CapStar common stock will receive an amount in cash rounded to the

 

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  nearest whole cent. This cash amount will be determined by multiplying (1) the fraction of a share of CapStar common stock to which the holder would otherwise be entitled by (2) the average closing price of CapStar common stock reported on the Nasdaq Global Select Market (which we refer to as the “NASDAQ”) for the 10 consecutive full trading days ending on and including the trading day before the closing date (which we refer to as the “CapStar average closing price”). See the sections titled “The BOW Merger Agreement—Terms of the BOW Merger—BOW Merger Consideration” and “The BOW Merger Agreement—Terms of the BOW Merger—BOW Merger Consideration Adjustments.”

Based on the closing price for CapStar common stock of $16.23 per share on January 23, 2020, the last trading day before the public announcement of the BOW merger agreement, and 14,832 shares of BOW common stock outstanding on that date and owned by the BOW minority shareholders, and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the BOW merger consideration represented approximately $1,053.06 in value for each share of BOW common stock held by the BOW minority shareholders. Based on the closing price for CapStar common stock of $[●] per share on [●], 2020, the last practicable trading day before the date of the enclosed proxy statements/prospectus, and [●] shares of BOW common stock outstanding on that date and owned by the BOW minority shareholders, and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the BOW merger consideration represented approximately $[●] in value for each share of BOW common stock held by the BOW minority shareholders. The market value of the BOW merger consideration will fluctuate with the market price of CapStar’s common stock and will not be known until the BOW merger is completed. We encourage you to obtain current market quotations for the CapStar common stock before you vote. CapStar common stock is currently quoted on the NASDAQ under the symbol “CSTR.”

The BOW merger consideration is subject to adjustments for transaction expenses, real estate valuations and the proceeds of the sales of certain equity interests by BOW and its subsidiary. See the section titled “The BOW Merger Agreement—BOW Merger Consideration Adjustments” for a discussion of these adjustments to the BOW merger consideration. Consequently, the value of the per share BOW merger consideration that BOW minority shareholders will receive in exchange for their shares of BOW common stock will not be known at the time they vote on the BOW merger agreement and the value and amount, respectively, of the actual per share BOW merger consideration they will receive may be different from that described in this proxy statements/prospectus.

If the BOW merger is completed, the BOW minority shareholders will be entitled to receive dividends with a record date after the effective time of the BOW merger on shares of CapStar common stock received in the BOW merger. See the section titled “The BOW Merger Agreement—Terms of the BOW Merger—Dividends and Distributions.”

For more information regarding CapStar’s dividend policy, see the section titled “The Mergers—CapStar’s Dividend Policy.”

 

Q:

What equity stake will BOW shareholders hold in CapStar immediately following the mergers?

 

A:

Based on [●] shares of CapStar common stock outstanding on [●], 2020, the record date for the BOW special meeting, and assuming 664,800 shares of CapStar common stock are issued by CapStar as BOW merger consideration and that 2,969,418 shares of CapStar common stock are issued by CapStar to shareholders of FCB as consideration for the FCB merger, current BOW minority shareholders would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (not taking into account for this purpose shares of FCB common stock owned by BOW minority shareholders and without giving effect to any shares of CapStar common stock held by BOW minority shareholders prior to the BOW merger), and current BOW minority shareholders and current FCB shareholders, collectively as a group, would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (without giving effect to any shares of CapStar common stock held by them prior to the mergers).

 

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Q:

Will the value of the BOW merger consideration change between the date of this proxy statements/prospectus and the time the BOW merger is completed?

 

A:

The value of the BOW merger consideration may fluctuate between the date of this proxy statements/prospectus and the completion of the BOW merger based upon the market value for CapStar common stock. The aggregate merger consideration in the BOW merger consists of a certain number of shares of CapStar common stock and cash. Any fluctuation in the market price of CapStar common stock after the date of this proxy statements/prospectus and before the effective time of the BOW merger will change the value of the shares of CapStar common stock that BOW minority shareholders will receive. The BOW merger consideration is subject to adjustments for transaction expenses, real estate valuations and the proceeds of sales of certain equity interests by BOW and its subsidiary. See the section titled “The BOW Merger Agreement—BOW Merger Consideration Adjustments” for a discussion of these adjustments to the BOW merger consideration. Consequently, the value of the per share BOW merger consideration that BOW minority shareholders will receive in exchange for their shares of BOW common stock will not be known at the time they vote on the BOW merger agreement and the value and amount, respectively, of the actual per share BOW merger consideration they will receive may be different from that described in this proxy statements/prospectus.

BOW shareholders should obtain current sale prices for the CapStar common stock. The CapStar common stock is traded on the NASDAQ under the symbol “CSTR.”

 

Q:

On what are BOW shareholders being asked to vote?

 

A:

BOW is soliciting proxies from its shareholders with respect to the following proposals:

 

   

a proposal to approve the BOW merger agreement (which we refer to as the “BOW merger proposal”); and

 

   

a proposal to adjourn the BOW special meeting, if necessary or appropriate, including for the purpose of permitting further solicitation of proxies in favor of the BOW merger proposal (which we refer to as the “BOW adjournment proposal”).

The BOW merger cannot be completed unless, among other things, BOW’s shareholders approve the BOW merger proposal. Approval of the BOW adjournment proposal by the shareholders of BOW is not a condition to the completion of the BOW merger.

 

Q:

How does the BOW board of directors recommend that BOW shareholders vote at the BOW special meeting?

 

A:

The BOW board of directors (based on the recommendation of a special committee of the BOW board of directors comprised solely of directors unaffiliated with FCB, CapStar and CapStar Bank) recommends that BOW shareholders vote “FOR” the approval of the BOW merger proposal and “FOR” the approval of the BOW adjournment proposal.

 

Q:

Are there any voting agreements in relation to the BOW merger?

 

A:

In connection with the execution of the BOW merger agreement, the directors of BOW executed voting and support agreements with CapStar and BOW pursuant to which they generally agreed, among other things, to vote their shares of BOW common stock for the approval of the BOW merger proposal and the BOW adjournment proposal and against any competing acquisition proposal with respect to BOW.

As of the record date for the BOW special meeting, the directors of BOW collectively beneficially owned with the power to vote [●] shares of BOW common stock, representing approximately [●]% of the outstanding shares of BOW common stock and approximately [●]% of the BOW minority shares on that date.

 

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Q:

Who can vote at the BOW special meeting?

 

A:

Only holders of record of BOW common stock as of the close of business on [●], 2020, which is the date the BOW board of directors has fixed as the record date for determining BOW shareholders entitled to notice of and to vote at the BOW special meeting (which date we refer to as the “BOW record date”), are entitled to receive notice of and to vote at the BOW special meeting or any adjournment or postponement thereof.

 

Q:

When and where is the BOW special meeting?

 

A:

The BOW special meeting will be held on [●], at [●] local time, at the Griggs Building, 108 Public Square North, Waynesboro, Tennessee 38485.

 

Q:

What constitutes a quorum for the BOW special meeting?

 

A:

The BOW merger proposal must be approved by (i) the requisite vote of the holders of all outstanding shares of BOW common stock entitled to vote on the BOW merger proposal, voting together a separate voting group (which we refer to as the “BOW general voting group”) and (ii) the requisite vote of the holders of all BOW minority shares entitled to vote on the BOW merger proposal, voting together a separate voting group (which we refer to as the “BOW minority voting group”).

The presence at the BOW special meeting, in person or by proxy, of holders of a majority of the outstanding shares of BOW common stock entitled to vote at the BOW special meeting will constitute a quorum for the transaction of business by the BOW general voting group at the BOW special meeting. The presence at the BOW special meeting, in person or by proxy, of holders of a majority of the BOW minority shares entitled to vote at the BOW special meeting will constitute a quorum for the transaction of business by the BOW minority voting group at the BOW special meeting. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the BOW special meeting for the purpose of determining the presence of a quorum.

 

Q:

What is the vote required for approval of the proposals to be considered at the BOW special meeting?

 

A:

BOW Merger Proposal. Under Tennessee law, approval of the BOW merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of BOW common stock entitled to vote on the proposal (which we refer to as the “BOW general shareholder approval”). Additionally, in adopting the BOW merger agreement, the BOW board of directors expressly conditioned the consummation of the BOW merger upon the approval of the BOW merger agreement by the shareholders of BOW other than FCB by the affirmative vote of holders of a majority of the BOW minority shares entitled to vote on the BOW merger agreement, voting together a separate voting group (which we refer to as the “BOW minority shareholder approval”). If a BOW shareholder marks “ABSTAIN” on the shareholder’s proxy card, fails to submit a proxy or vote in person at the BOW special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the BOW merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

As of the BOW record date, FCB owned [●] shares of BOW common stock representing [●]% of the outstanding BOW common stock. We expect that FCB will vote all of the BOW common stock owned by FCB in favor of approval of the BOW merger proposal, which will be sufficient in and of itself for the BOW general shareholder approval. As it relates to the BOW minority shareholder approval, BOW directors owning approximately [●]% of the BOW minority shares entitled to vote on the BOW merger agreement have executed voting and support agreements with CapStar and BOW pursuant to which they have generally agreed to vote their shares of BOW common stock for the approval of the BOW merger proposal.

BOW Adjournment Proposal. Approval of the BOW adjournment proposal requires that the votes cast by BOW shareholders in favor of the proposal at the BOW special meeting exceed the votes cast by BOW shareholders against the proposal. If a BOW shareholder marks “ABSTAIN” on the shareholder’s proxy

 

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card or abstains from voting in person, fails to submit a proxy or vote in person at the BOW special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the BOW adjournment proposal, it will have no effect on the voting for this proposal.

 

Q:

Why is the vote of each BOW shareholder important?

 

A:

If a BOW shareholder fails to vote, it will be more difficult for BOW to obtain the quorum necessary to hold and transact the business to be conducted at the BOW special meeting. Also, if a BOW shareholder abstains from voting or fails to vote, or fails to instruct the shareholder’s bank, broker, or other nominee how to vote, it will have the same effect as a vote “AGAINST” approval of the BOW merger agreement, because the BOW merger agreement must be approved both (i) by the affirmative vote of holders of a majority of the outstanding shares of BOW common stock entitled to vote on the BOW merger agreement and (ii) by the affirmative vote of holders of a majority of the BOW minority shares entitled to vote on the BOW merger agreement, voting together a separate voting group.

 

Q:

What do BOW shareholders need to do now?

 

A:

After BOW shareholders have carefully read this proxy statements/prospectus and have decided how they wish to vote their shares of BOW common stock, BOW shareholders are asked to please vote their shares promptly so that their shares are represented and voted at the BOW special meeting. If you are a BOW shareholder of record as of the BOW record date, you can vote your shares of BOW common stock by completing, dating, and signing the enclosed proxy card and returning it in the enclosed postage-paid envelope.

If you are a BOW shareholder of record as of the BOW record date, you may also vote your shares of BOW common stock in person at the BOW special meeting; however, voting in advance of the BOW special meeting as described above is strongly encouraged.

If you are a BOW shareholder and hold your shares in “street name” through a bank, broker, or other nominee, that institution will send you separate instructions describing the procedures you must follow to vote your shares. “Street name” shareholders who wish to vote in person at the BOW special meeting will need to obtain a proxy form from their bank, broker, or other nominee.

 

Q:

If my shares of BOW common stock are held in “street name” by my bank, broker, or other nominee, will my bank, broker, or other nominee automatically vote my shares for me?

 

A:

No. If your bank, broker, or other nominee holds your shares of BOW common stock in “street name,” your bank, broker, or other nominee will vote your shares of BOW common stock only if you provide instructions as to how to vote by filling out the voter instruction form sent to you by your bank, broker, or other nominee with this proxy statements/prospectus. If you fail to provide voting instructions for any such shares, it will result in a broker non-vote and will have the same effect as if those shares were voted “AGAINST” the BOW merger proposal.

 

Q:

Can BOW shareholders attend the BOW special meeting and vote their shares of BOW common stock in person?

 

A:

Yes. All BOW shareholders, including both shareholders of record and shareholders who hold their shares through banks, brokers, or other nominees, are invited to attend the BOW special meeting. If you are not a BOW shareholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares in order to be able to vote in person at the BOW special meeting. Please bring proper identification to the special meeting, together with proof that you are a record owner of BOW common stock or, if your shares are held in street name, proof of beneficial ownership as of the BOW record date, such as a letter from your broker or an account statement evidencing beneficial ownership.

 

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Q:

What if a BOW shareholder returns a proxy card without indicating how the covered shares are to be voted?

 

A:

If a BOW shareholder signs and return a proxy card without indicating how the shares covered by the proxy card are to be voted on any particular proposal, the shares will be voted in accordance with the recommendation of the BOW board of directors.

 

Q:

Can a BOW shareholder change his or her vote?

 

A:

Yes. A holder of record of BOW common stock can change his or her vote in any of the following ways:

 

   

by submitting another valid proxy card bearing a later date;

 

   

by attending the BOW special meeting and voting in person; or

 

   

by, prior to the BOW special meeting, delivering a written notice of revocation to BOW at the following address: The Bank of Waynesboro, 201 South Main Street, Waynesboro, Tennessee 38485, Attention: William (“Bill”) Bryant, President and Chief Executive Officer.

If a holder of record of BOW common stock chooses to submit a completed proxy card bearing a later date or a notice of revocation, the proxy card or notice of revocation must be received by [●], 2020. Attendance at the BOW special meeting will not, in and of itself, constitute revocation of a previously-submitted proxy. If a BOW shareholder holds his or her shares in street name with a bank, broker, or other nominee, the shareholder must follow the directions the shareholder receives from his or her bank, broker, or other nominee in order to change his or her vote.

 

Q:

What happens if a BOW shareholder sells his or her shares of BOW common stock before the BOW special meeting?

 

A:

The record date for the BOW special meeting is earlier than both the date of the BOW special meeting and the effective date of the BOW merger. If a BOW shareholder transfers his or her shares of BOW common stock after the BOW record date but before the BOW special meeting, that shareholder will, unless the transferee requests a proxy, retain his or her right to vote at the BOW special meeting but will transfer the right to receive the per share BOW merger consideration to the person to whom the shares are transferred. If you are a BOW shareholder, in order to receive the per share BOW merger consideration, you must hold your shares of BOW common stock at the effective time of the BOW merger.

 

Q:

Will BOW be required to submit the BOW merger proposal to its shareholders even if the BOW board of directors has withdrawn, modified, or changed its recommendation regarding how BOW shareholders should vote with respect to the BOW merger proposal?

 

A:

Yes. Unless the BOW merger agreement is terminated before the BOW special meeting in accordance with the terms of the BOW merger agreement, the BOW merger agreement requires that BOW convene the BOW special meeting and submit the BOW merger proposal to BOW’s shareholders even if the BOW board of directors has withdrawn, modified, or changed its recommendation regarding how BOW shareholders should vote with respect to the BOW merger proposal.

 

Q:

Do any of the BOW directors or executive officers have interests in the BOW merger that differ from those of other BOW shareholders?

 

A:

Yes. BOW’s directors and executive officers have interests in the BOW merger that are different from, or in addition to, those of BOW shareholders generally. As described further below, members of the BOW board of directors were aware of and considered these interests, among other matters, in evaluating the BOW merger agreement and the BOW merger and in recommending that BOW shareholders approve the BOW merger proposal. For a description of these interests, refer to the section of this proxy statements/prospectus titled “The Mergers—Interests of BOW Directors and Executive Officers in the BOW Merger.”

 

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Q:

Are BOW shareholders entitled to dissenters’ rights?

 

A:

Yes. If you are a BOW shareholder and want to exercise dissenters’ rights and receive the fair value of your shares of BOW common stock in cash instead of the BOW merger consideration, then you must deliver a written notice to BOW prior to the BOW special meeting stating, among other things, that you will exercise your right to dissent if the BOW merger is completed. Also, you may not vote in favor of the BOW merger proposal and must follow certain other procedures, both before and after the BOW special meeting, as described in Appendix E to this proxy statements/prospectus. Note that if you return a signed proxy card without voting instructions, then your shares of BOW common stock will be voted in favor of the BOW merger proposal and you will lose all dissenters’ rights available under the Tennessee Business Corporation Act (which we refer to as the “TBCA”). A summary of the dissenters’ rights provisions of the TBCA can be found under “The Merger—Dissenters’ Rights for FCB and BOW Shareholders.” Failure to strictly comply with the applicable TBCA provisions will result in the loss of dissenters’ rights.

 

Q:

What should a BOW shareholder do if he or she receives more than one set of voting materials?

 

A:

BOW shareholders may receive more than one set of voting materials, including multiple copies of this proxy statements/prospectus and multiple proxy cards or voting instruction cards. For example, if a BOW shareholder holds shares of BOW common stock in more than one brokerage account, that shareholder will receive a separate voting instruction card for each brokerage account in which the shareholder holds such shares. If you are a holder of record of BOW common stock and your shares are registered in more than one name, you will receive more than one proxy card. In addition, if you are a holder of both BOW common stock and FCB common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. Please complete, date, sign, and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this proxy statements/prospectus to ensure that you vote every share of BOW common stock that you own.

 

Q:

Are there any risks that BOW shareholders should consider when deciding whether to vote for approval of the BOW merger agreement?

 

A:

Yes. BOW shareholders should read and carefully consider the risk factors set forth in the section of this proxy statements/prospectus titled “Risk Factors.” BOW shareholders also should read and carefully consider the risk factors of CapStar contained in the documents that are incorporated by reference into this proxy statements/prospectus. See the section of this proxy statements/prospectus titled “Where You Can Find More Information.”

 

Q:

Whom should BOW shareholders call with questions or to obtain additional copies of this proxy statements/prospectus?

 

A:

BOW shareholders that have questions regarding the BOW merger or this proxy statements/prospectus, would like additional copies of this proxy statements/prospectus, or need help voting their shares of BOW common stock, should contact William (“Bill”) Bryant, BOW’s President and Chief Executive Officer, by mail at 201 South Main Street, Waynesboro, Tennessee 38485 or by telephone at (931) 722-2265.

 

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SUMMARY

The following summary highlights selected information from this proxy statements/prospectus. It does not contain all of the information that is important to you. Each item in this summary refers to the page where that subject is discussed in more detail. You should carefully read the entire proxy statements/prospectus and the other documents to which we refer to understand fully the mergers. See the section titled “Where You Can Find More Information” on how to obtain copies of those documents. In addition, the FCB merger agreement is attached as Appendix A to this proxy statements/prospectus and the BOW merger agreement is attached as Appendix B to this proxy statements/prospectus. We encourage you to read the FCB merger agreement and BOW merger agreement because they are the legal documents that govern the FCB merger and BOW merger, respectively.

Unless the context otherwise requires throughout this proxy statements/prospectus, “CapStar” refers to CapStar Financial Holdings, Inc., “FCB” refers to FCB Corporation, “BOW” refers to The Bank of Waynesboro and “we,” and “our” refer collectively to CapStar, FCB and BOW. Throughout this summary, the “BOW minority shareholders” refers to the shareholders of BOW before the effective time of the BOW merger, other than FCB.

Information Regarding CapStar, FCB and BOW

CapStar Financial Holdings, Inc. (see page 145)

1201 Demonbreun Street, Suite 700

Nashville, Tennessee 37203

(615) 732-6400

CapStar is a bank holding company that is headquartered in Nashville, Tennessee and that operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank was incorporated in the State of Tennessee in 2007 and acquired a state charter in 2008, which was accomplished through a de novo application with the Tennessee Department of Financial Institutions (“TDFI”) and the Federal Reserve Bank of Atlanta. Upon approval of its charter, CapStar Bank opened for business to the public on July 14, 2008. CapStar was incorporated in 2015 and, on February 5, 2016, completed a share exchange with CapStar Bank’s shareholders that resulted in CapStar Bank becoming a wholly owned subsidiary of the Company.

CapStar Bank is a bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. CapStar’s products and services include (i) commercial and industrial loans to small and medium sized businesses, (ii) commercial real estate loans, (iii) private banking and wealth management services for the owners and operators of its business clients and other high net worth individuals, (iv) correspondent banking services to meet the needs of Tennessee’s smaller community banks and (v) various retail and consumer products. CapStar’s operations are presently concentrated in Tennessee. As of December 31, 2019, on a consolidated basis, CapStar had total assets of $2.0 billion, total deposits of $1.7 billion, total net loans of $1.4 billion, and shareholders’ equity of $273 million. Additional information about CapStar is included in documents incorporated by reference into this proxy statements/prospectus. See the section titled “Where You Can Find More Information.”

FCB Corporation (see page 145)

FCB Corporation is a Tennessee corporation incorporated on March 24, 1983. FCB is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. FCB is headquartered in



 

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Manchester, Tennessee. FCB is the parent company for, and the sole shareholder of, The First National Bank of Manchester. FCB also owns 50.56% of the issued and outstanding common stock of The Bank of Waynesboro. FCB independently conducts no material business or operations apart from its operation and ownership of capital stock of FNBM and its ownership of capital stock of BOW. As a bank holding company, FCB is subject to supervision and regulation by the Federal Reserve Board.

The First National Bank of Manchester is a national banking association chartered in 1900. FNBM is headquartered in Manchester, Coffee County, Tennessee and has operated continuously in Coffee County, Tennessee since its inception. FNBM’s main office is located at 100 West High Street, Manchester, Tennessee 37355, and FNBM operates additional full-service branch offices at the following locations:

 

   

814 Hillsboro Boulevard, Manchester, Tennessee 37355

 

   

2230 Mercury Boulevard, Murfreesboro, Tennessee 37130

 

   

801 West Main Street, Woodbury, Tennessee 37190

FNBM is a full-service commercial bank that offers a full complement of traditional community banking products and services to individuals and small businesses within the communities that it serves. Products offered by FNBM include business and consumer checking accounts, savings accounts, certificates of deposit, individual retirement accounts, and mortgage, consumer, and business loans and lines of credit. Services offered by FNBM include telephone banking, online bill pay, and mobile banking. As a national bank, FNBM is subject to supervision and regulation by the Office of the Comptroller of the Currency.

As is the case with banking institutions generally, FNBM’s business and operations are influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Federal Reserve Board. Deposit gathering and cost of funds are influenced by, among other things, interest rates on competing investments and general market rates of interest. Lending activities are affected by, among other things, the demand for real estate financing and other types of loans, which in turn is affected by macro and micro economic conditions, business and consumer confidence, the interest rates at which such financing may be obtained, and other factors affecting local demand and availability of funds.

FNBM’s primary banking markets consist of Cannon, Coffee, and Rutherford counties, Tennessee. The commercial banking environment is highly competitive, and FNBM encounters robust competition both in making loans and in attracting deposits. In one or more aspects of its business, FNBM competes with other commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries. Many of these competitors have substantially greater resources and lending limits, have more extensive and established branch networks, and offer certain products or services that FNBM does not currently offer. Additionally, many of FNBM’s non-bank competitors are not subject to the same extensive federal regulations that govern federally insured banks. Recent federal and state legislation has heightened the competitive environment in which financial institutions must conduct their business, and the potential for competition among financial institutions of all types has increased significantly.

FNBM’s website is located at https://www.fnbmwm.com, and its telephone number is (931) 728-3518. The information on FNBM’s website is not part of this proxy statements/prospectus, and the foregoing reference to FNBM’s website address does not constitute incorporation by reference of any information on FNBM’s website into this proxy statements/prospectus.

As of December 31, 2019, FNBM had 49 full-time employees.



 

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As of December 31, 2019, FCB had total consolidated assets of approximately $463.2 million, total liabilities (including deposit liabilities) of approximately $402.2 million, and total shareholders’ equity of approximately $61.0 million.

FCB’s common stock is not listed or traded on any securities market or exchange and historically has traded only on a limited, infrequent basis in privately-negotiated transactions.

Additional information about FCB can be found in the section of this proxy statements/prospectus titled “FCB Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Bank of Waynesboro (see page 146)

The Bank of Waynesboro is a state bank chartered under the laws of the State of Tennessee in 1904. BOW is headquartered in Waynesboro, Tennessee. BOW is not a member of the Federal Reserve System. As a state-chartered bank not a member of the Federal Reserve System, BOW is subject to supervision and regulation by the FDIC and the TDFI. FCB owns 50.56% of the issued and outstanding common stock of BOW, with the remainder of the outstanding common stock of BOW being owned primarily by individuals within the communities served by the bank.

BOW’s main office is located at 201 South Main Street, Waynesboro, Tennessee 38485, and BOW operates four additional full-service branch offices at the following locations:

 

   

716 Highway 99, Waynesboro, Tennessee 38485

 

   

107 East Broadway Street, Collinwood, Tennessee 38450 (BOW operates at this location as “Bank of Collinwood”)

 

   

2102 North Locust Avenue, Lawrenceburg, Tennessee 38464 (BOW operates at this location as “Community Bank of Lawrence County”)

 

   

225 North Military Avenue, Lawrenceburg, Tennessee 38464 (BOW operates at this location as “Community Bank of Lawrence County”)

BOW is a full-service commercial bank that offers a full complement of traditional community banking products and services to individuals and small businesses within the communities that it serves. Products offered by BOW include business and consumer checking accounts, savings accounts, certificates of deposit, and consumer, agricultural, real estate (including mortgage), and commercial loans and lines of credit. Services offered by BOW include telephone banking, mobile deposit, notary services, and merchant card services.

As is the case with banking institutions generally, BOW’s business and operations are influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Federal Reserve Board. Deposit gathering and cost of funds are influenced by, among other things, interest rates on competing investments and general market rates of interest. Lending activities are affected by, among other things, the demand for real estate financing and other types of loans, which in turn is affected by macro and micro economic conditions, business and consumer confidence, the interest rates at which such financing may be obtained, and other factors affecting local demand and availability of funds.

BOW’s primary banking markets consist of Lawrence and Wayne counties, Tennessee. The commercial banking environment is highly competitive, and BOW encounters robust competition both in making loans and in attracting deposits. In one or more aspects of its business, BOW competes with other commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries. Many of these competitors have substantially



 

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greater resources and lending limits, have more extensive and established branch networks, and offer certain products or services that BOW does not currently offer. Additionally, many of BOW’s non-bank competitors are not subject to the same extensive federal and state regulations that govern federally insured banks such as BOW. Recent federal and state legislation has heightened the competitive environment in which financial institutions must conduct their business, and the potential for competition among financial institutions of all types has increased significantly.

BOW’s website is located at https://thebankofwaynesboro.com, and its telephone number is (931) 722-2265. The information on BOW’s website is not part of this proxy statements/prospectus, and the foregoing reference to BOW’s website address does not constitute incorporation by reference of any information on BOW’s website into this proxy statements/prospectus.

As of December 31, 2019, BOW had total consolidated assets of approximately $174.6 million, total liabilities (including deposit liabilities) of approximately $151.7 million, and total shareholders’ equity of approximately $22.9 million. As of December 31, 2019, BOW had 61 full-time employees.

BOW’s common stock is not listed or traded on any securities market or exchange and historically has traded only on a limited, infrequent basis in privately-negotiated transactions.

Additional information about BOW can be found in the section of this proxy statements/prospectus titled “BOW Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The FCB Merger (see page 58)

The terms and conditions of the FCB merger are contained in the FCB merger agreement, a copy of which is included as Appendix A to this proxy statements/prospectus and is incorporated by reference herein. You should read the FCB merger agreement carefully and in its entirety, as it is the legal document governing the FCB merger.

In the FCB merger, FCB will merge with and into CapStar, with CapStar as the surviving corporation in the FCB merger. Immediately following the effective time of the FCB merger, The First National Bank of Manchester will merge into CapStar Bank, with CapStar Bank as the surviving entity in the bank merger.

The BOW Merger (see page 58)

The terms and conditions of the BOW merger are contained in the BOW merger agreement, a copy of which is included as Appendix B to this proxy statements/prospectus and is incorporated by reference herein. You should read the BOW merger agreement carefully and in its entirety, as it is the legal document governing the BOW merger.

In the BOW merger, BOW will merge with and into CapStar Bank, with CapStar Bank as the surviving bank in the BOW merger.

Closing and Effective Time of the FCB Merger (see page 103)

The FCB merger is currently expected to close in the late second to early third quarter of 2020. On the closing date, CapStar will file articles of merger with the Secretary of State of the State of Tennessee. The FCB merger will become effective at such time as the articles of merger are filed or such later time as may be specified in the articles of merger (which we refer to as the “effective time” of the FCB merger). Neither CapStar nor FCB can predict the actual date on which the FCB merger will be completed because it is subject to factors



 

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beyond each company’s control, including whether or when the required regulatory approvals and the FCB shareholder approval will be received and whether or when each of the conditions to the consummation of the BOW merger (other than the completion of the FCB merger) will be satisfied or waived.

Closing and Effective Time of the BOW Merger (see page 122)

The BOW merger is currently expected to close in the late second to early third quarter of 2020, as soon as practicable after the completion of the FCB merger. On the closing date, CapStar will file articles of merger with the Secretary of State of the State of Tennessee. The BOW merger will become effective at such time as the articles of merger are filed or such later time as may be specified in the articles of merger (which we refer to as the “effective time” of the BOW merger). Neither CapStar nor BOW can predict the actual date on which the BOW merger will be completed because it is subject to factors beyond each company’s control, including whether or when the required regulatory approvals, the BOW shareholder and BOW minority shareholder approvals will be received and whether or when the FCB merger will be completed.

FCB Merger Consideration (see page 103)

Under the terms of the FCB merger agreement, all shares of FCB common stock issued and outstanding immediately prior to the completion of the FCB merger (other than (1) dissenting shares as described below and (2) shares of FCB common stock owned directly or indirectly by FCB, CapStar and their subsidiaries (in each case, other than shares of FCB common stock held in a fiduciary capacity or in connection with debts previously contracted) (together, the “FCB excluded shares”)) will be collectively converted into the right to receive 2,969,418 shares of CapStar common stock and $21,570,701 in cash, subject to adjustments in accordance with the terms of the FCB merger agreement. Based on 216,678 shares of FCB common stock issued and outstanding as of January 23, 2020 and assuming no adjustment to the FCB merger consideration pursuant to the terms of the FCB merger agreement, each issued and outstanding share of FCB common stock (other than the FCB excluded shares) will be converted into the right to receive approximately 13.70428931 shares of CapStar common stock (with cash in lieu of fractional shares) and $99.55 in cash. The FCB merger consideration is subject to adjustments for transaction expenses, real-estate valuations and the proceeds of sales of certain equity interests by FCB, BOW and their subsidiaries. See the section titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments” for a discussion of these adjustments to the FCB merger consideration. Consequently, the value of the per share FCB merger consideration FCB shareholders would receive in exchange for their shares of FCB common stock will not be known at the time they vote on the FCB merger agreement and the value and amount, respectively, of the actual per share FCB merger consideration they would receive may be different from that described in this proxy statements/prospectus.

CapStar will not issue any fractional shares of CapStar common stock in the FCB merger. Instead, an FCB shareholder who otherwise would have received a fraction of a share of CapStar common stock will receive an amount in cash rounded to the nearest whole cent. This cash amount will be determined by multiplying the fraction of a share of CapStar common stock to which the holder would otherwise be entitled by the CapStar common stock average closing price.

CapStar common stock trades on the NASDAQ under the symbol “CSTR.” Based on CapStar’s closing price of $16.23 per share on January 23, 2020, the last trading day before the announcement of the FCB merger agreement, and 216,678 shares of FCB common stock outstanding as of January 23, 2020, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, the per share FCB merger consideration represented approximately $321.97 for each share of FCB common stock. Based on CapStar’s closing price of $[●] per share on [●], 2020, the last practicable trading day before the mailing of this proxy statements/prospectus, and [●] shares of FCB common stock outstanding on that date, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement, the per share FCB merger consideration represented approximately $[●] for each share of FCB common stock.



 

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The value of the shares of CapStar common stock to be issued in the FCB merger will fluctuate between now and the closing date of the FCB merger. FCB shareholders should obtain current sale prices for CapStar common stock.

BOW Merger Consideration (see page 122)

Under the terms of the BOW merger agreement, all shares of BOW common stock issued and outstanding immediately prior to the completion of the BOW merger owned by the BOW minority shareholders (other than (1) dissenting shares as described below and (2) shares of BOW common stock owned directly or indirectly by CapStar, CapStar Bank, BOW and their subsidiaries (in each case, other than shares of BOW common stock held in a fiduciary capacity or in connection with debts previously contracted) (together, the “BOW excluded shares”)) will be collectively converted into the right to receive 664,800 shares of CapStar common stock and $4,829,299 in cash, subject to adjustments in accordance with the terms of the BOW merger agreement. Based on the number of shares of BOW common stock issued and outstanding as of January 23, 2020 and held by the BOW minority shareholders and assuming no adjustment to the BOW merger consideration pursuant to the terms of the BOW merger agreement, each issued and outstanding share of BOW common stock (other than the BOW excluded shares) held by the BOW minority shareholders will be converted into the right to receive approximately 44.82200647 shares of CapStar common stock (with cash in lieu of fractional shares) and $325.60 in cash. The BOW merger consideration is subject to adjustments for transaction expenses, real-estate valuations and the proceeds of sales of certain equity interests by BOW and its subsidiary. See the section titled “The BOW Merger Agreement—BOW Merger Consideration Adjustments” for a discussion of these adjustments to the BOW merger consideration. Consequently, the value of the per share BOW merger consideration the BOW minority shareholders would receive in exchange for their shares of BOW common stock will not be known at the time they vote on the BOW merger agreement and the value and amount, respectively, of the actual per share BOW merger consideration they would receive may be different from that described in this proxy statements/prospectus.

CapStar will not issue any fractional shares of CapStar common stock in the BOW merger. Instead, a BOW shareholder who otherwise would have received a fraction of a share of CapStar common stock will receive an amount in cash rounded to the nearest whole cent. This cash amount will be determined by multiplying the fraction of a share of CapStar common stock to which the holder would otherwise be entitled by the CapStar common stock average closing price.

CapStar common stock trades on the NASDAQ under the symbol “CSTR.” Based on CapStar’s closing price of $16.23 per share on January 23, 2020, the last trading day before the announcement of the BOW merger agreement, and 14,832 of shares of BOW common stock outstanding as of January 23, 2020 and owned by the BOW minority shareholders, and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the per share BOW merger consideration represented approximately $1053.06 for each share of BOW common stock owned by the BOW minority shareholders. Based on CapStar’s closing price of $[●] per share on [●], 2020, the last practicable trading day before the mailing of this proxy statements/prospectus, and [●] shares of BOW common stock outstanding on that date and owned by the BOW minority shareholders, and assuming no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the per share BOW merger consideration represented approximately $[●] for each share of BOW common stock.

The value of the shares of CapStar common stock to be issued in the BOW merger will fluctuate between now and the closing date of the BOW merger. BOW shareholders should obtain current sale prices for CapStar common stock.



 

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Conversion of FCB Shares; Exchange of FCB Certificates (see page 105)

Promptly after the effective time of the FCB merger, CapStar’s exchange agent will mail to each holder of record of FCB common stock that is converted into the right to receive the per share FCB merger consideration a letter of transmittal and instructions for the surrender of the holder’s FCB stock certificate(s) for the per share FCB merger consideration (including cash in lieu of any fractional CapStar shares) and any dividends or distributions to which such holder is entitled to pursuant to the FCB merger agreement.

Please do not send in your certificate until you receive these instructions.

Conversion of BOW Shares; Exchange of BOW Certificates (see page 124)

Promptly after the effective time of the BOW merger, CapStar’s exchange agent will mail to each holder of record of BOW common stock that is converted into the right to receive the per share BOW merger consideration a letter of transmittal and instructions for the surrender of the holder’s BOW stock certificate(s) for the per share BOW merger consideration (including cash in lieu of any fractional CapStar shares) and any dividends or distributions to which such holder is entitled to pursuant to the BOW merger agreement.

Please do not send in your certificate until you receive these instructions.

Material U.S. Federal Income Tax Consequences of the FCB Merger and the BOW Merger (see page 141)

The FCB merger and the BOW merger are each intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to the respective obligations of FCB and CapStar to complete the FCB merger that each of FCB and CapStar receives a legal opinion to that effect regarding the FCB merger, and it is a condition to the respective obligations of BOW and CapStar to complete the BOW merger that each of BOW and CapStar receives a legal opinion to that effect regarding the BOW merger. Accordingly, holders of FCB common stock and BOW common stock generally will recognize gain, but not loss, in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash and the fair market value of the CapStar common stock received pursuant to the applicable merger over that holder’s adjusted tax basis in its shares of FCB common stock or BOW common stock, as applicable, surrendered) and (2) the amount of cash received pursuant to the applicable merger. Further, holders of FCB common stock and BOW common stock generally will recognize gain or loss with respect to cash received instead of fractional shares of CapStar common stock that the holder would otherwise be entitled to receive. For further information, see the section titled “Material U.S. Federal Income Tax Consequences of the Mergers.”

The U.S. federal income tax consequences described above may not apply to all holders of FCB or BOW common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

Dissenters’ Rights for FCB and BOW Shareholders (see page 96 and Appendix E)

Under Tennessee law, FCB shareholders and BOW shareholders have the right to dissent from the FCB merger or BOW merger, as applicable, and receive a cash payment equal to the fair value of their shares of FCB common stock or the BOW commons stock appraised by a court instead of receiving the per share FCB merger consideration or per share BOW merger consideration, as applicable. To exercise appraisal rights, FCB and BOW shareholders must strictly follow the procedures established by Sections 48-23-201 through 48-23-209 of the TBCA, which include delivering a written notice to FCB prior to the FCB special meeting (in the case of FCB shareholders) or BOW prior to the BOW special meeting (in the case of BOW shareholders) stating, among



 

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other things, that the shareholder will exercise his or her right to dissent if the applicable merger is completed, and not voting for approval of the FCB merger agreement or BOW merger agreement, as applicable. A shareholder’s failure to vote against the FCB merger agreement or BOW merger agreement, as applicable, will not constitute a waiver of such shareholder’s dissenters’ rights.

Failure to strictly comply with the applicable TBCA provisions will result in the loss of the right of appraisal.

Opinion of FCB’s Financial Advisor (see page 66 and Appendix C)

On January 23, 2020, at the meeting of the FCB board of directors held that day for the purpose of the board to consider and evaluate the FCB merger agreement and the transactions contemplated thereby, ProBank Austin rendered an oral opinion to the FCB board of directors (which was subsequently confirmed in writing by ProBank Austin by delivery of its written opinion dated January 23, 2020) to the effect that, as of that date and based upon and subject to the various factors, assumptions, and limitations set forth in the opinion, the experience of ProBank Austin representatives as investment bankers, ProBank Austin’s work as described in the opinion, and other factors ProBank Austin deemed relevant, the per share merger consideration provided for in the FCB merger agreement was fair, from a financial point of view, to the shareholders of FCB. The full text of the written opinion of ProBank Austin is attached as Appendix C to this proxy statements/prospectus. FCB shareholders should read the entire opinion for a discussion of, among other things, the procedures followed, assumptions made, matters considered, and qualifications and limitations of the review undertaken by ProBank Austin in rendering its opinion.

The ProBank Austin opinion was for the information of, and was directed to, the FCB board of directors, in its capacity as such, in connection with its consideration of the financial terms of the FCB merger. The ProBank Austin opinion did not address the underlying business decision of FCB to engage in the FCB merger or enter into the FCB merger agreement or constitute a recommendation of ProBank Austin to the FCB board of directors in connection with the FCB merger, and the ProBank Austin opinion does not constitute a recommendation to any holder of FCB common stock as to how to vote with respect to the FCB merger agreement or any other matter.

For additional information, see the section titled “The Mergers—Opinion of FCB’s Financial Advisor.”

Opinion of BOW’s Financial Advisor (see page 80 and Appendix D)

The BOW special committee engaged Mercer Capital Management, Inc. (which we refer to as “Mercer”) as its financial advisor to assist the committee in reviewing and analyzing the financial terms of a business combination transaction with CapStar.

 

On January 23, 2020, at the meeting of the BOW board of directors held that day for the purpose of the board to consider and evaluate the BOW merger agreement and the transactions contemplated thereby, Mercer reviewed the financial aspects of the proposed BOW merger and rendered to the BOW special committee an oral opinion (subsequently confirmed in writing by Mercer in its written opinion dated January 23, 2020) that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Mercer as set forth in such opinion, the BOW merger consideration to be paid by CapStar to the BOW minority shareholders was fair, from a financial point of view, to the BOW minority shareholders. The full text of the written opinion of Mercer is attached as Appendix D to this proxy statements/prospectus. BOW shareholders should read the entire opinion for a discussion of, among other things, the procedures followed, assumptions made, matters considered, and qualifications and limitations of the review undertaken by Mercer in rendering its opinion.



 

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The Mercer opinion was for the information of, and was directed to, the BOW special committee in connection with its consideration of the financial terms of the BOW merger. The Mercer opinion did not address the underlying business decision of BOW to engage in the BOW merger or enter into the BOW merger agreement or constitute a recommendation of Mercer to the BOW special committee or BOW board of directors in connection with the BOW merger, and the Mercer opinion does not constitute a recommendation to any holder of BOW common stock as to how to vote with respect to the BOW merger agreement or any other matter.

For additional information, see the section titled “The Mergers—Opinion of BOW’s Financial Advisor.”

Recommendation of the FCB Board of Directors (see page 47)

The FCB board of directors recommends that FCB shareholders vote “FOR” the FCB merger proposal and “FOR” the FCB adjournment proposal.

The FCB board of directors has determined that the FCB merger agreement and the transactions contemplated by the FCB merger agreement are advisable and fair to and in the best interests of FCB and its shareholders and has approved the FCB merger agreement. For the factors considered by the FCB board of directors in reaching its decision to approve the FCB merger agreement, see the section titled “The Mergers—Recommendation of the FCB Board of Directors and FCB’s Reasons for the FCB Merger.”

Recommendation of the BOW Board of Directors (see page 52)

The BOW board of directors (based on the recommendation of the BOW special committee) recommends that BOW shareholders (including the BOW minority shareholders) vote “FOR” the BOW merger proposal and “FOR” the BOW adjournment proposal.

The board of directors of BOW established a special committee of the board of directors comprised solely of directors unaffiliated with FCB, CapStar, and CapStar Bank (which we refer to as the “BOW special committee”) and empowered the BOW special committee to, among other things, review and assess the proposed business combination proposal presented to the board of directors by CapStar, negotiate the terms of that proposal and a potential business combination transaction with CapStar, if and to the extent that the BOW special committee were to determine that the same is in the best interests of BOW and its shareholders, including the BOW minority shareholders, and recommend to the BOW board of directors the terms, if any, upon which the BOW special committee believed it would be in the best interests of BOW and its shareholders, including the BOW minority shareholders, for BOW to enter into a definitive agreement providing for a business combination transaction with CapStar.

The BOW special committee determined that the BOW merger agreement, including the terms thereof and the transactions contemplated thereby, including the BOW merger, were fair to and in the best interests of BOW and its shareholders, including the BOW minority shareholders, and that it was advisable and in the best interests of BOW and its shareholders, including the BOW minority shareholders, for BOW to enter into the BOW merger agreement. The BOW special committee recommended to the BOW board of directors that the board adopt and approve and declare advisable the BOW merger agreement and the transactions, including the BOW merger, contemplated thereby, and recommend to the shareholders of BOW the approval of the BOW merger agreement.

The BOW board of directors (based on the recommendation of the BOW special committee) has determined that the BOW merger agreement and the transactions contemplated by the BOW merger agreement are advisable and fair to and in the best interests of BOW and its shareholders (including the BOW minority shareholders) and



 

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has approved the BOW merger agreement. For the factors considered by the BOW board of directors in reaching its decision to approve the BOW merger agreement, see the section titled “The Mergers—Recommendation of the BOW Board of Directors and BOW’s Reasons for the Merger.”

Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger (see page 87)

In considering the recommendation of the FCB board of directors with respect to the FCB merger agreement, FCB shareholders should be aware that some of FCB’s and FNBM’s directors and executive officers have interests in the FCB merger that are different from, or in addition to, the interests of FCB shareholders generally. Theses interests include, among others:

 

   

One FCB director is the holder of a promissory note under which FCB is the obligor and which, if not earlier paid, will be paid in full in connection with the consummation of the FCB merger.

 

   

One FNBM executive officer is a party to a retention bonus agreement with FCB pursuant to which she will be entitled to a bonus payment in the event she remains employed by FNBM through the date of the FCB merger or her employment is terminated by FNBM without cause prior to the FCB merger.

 

   

Certain FCB directors have deferred compensation arrangements with FCB and FNBM which will be terminated, and pursuant to which the directors will receive payments, in connection with the consummation of the FCB merger.

 

   

Certain FNBM executive officers will be compensated for their accrued and unused sick time in connection with the consummation of the FCB merger.

 

   

Certain FNBM executive officers have entered into employment agreements with CapStar Bank that will be effective upon the effective time of the FCB merger.

 

   

One member of the board of directors of FCB, FNBM, or BOW will be appointed to the CapStar and CapStar Bank boards of directors in connection with the consummation of the FCB merger.

 

   

FCB’s and FNBM’s directors and executive officers are entitled to continued indemnification and insurance coverage under the FCB merger agreement.

These interests are discussed in more detail in the section titled “The Mergers—Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger.” The FCB board of directors was aware of these interests and considered them, among other matters, in adopting and approving the FCB merger agreement and in making its recommendation that FCB shareholders vote in favor of approval of the FCB merger proposal.

Interests of BOW Directors and Executive Officers in the BOW Merger (see page 91)

In considering the recommendation of the BOW board of directors with respect to the BOW merger agreement, BOW shareholders, particularly the BOW minority shareholders, should be aware that some of BOW’s directors and executive officers have interests in the BOW merger that are different from, or in addition to, the interests of BOW shareholders generally. Theses interests include, among others:

 

   

Certain BOW directors (and one such director’s spouse) are holders of promissory notes under which FCB is the obligor and which, if not earlier paid, will be paid in full in connection with the consummation of the FCB merger.

 

   

Certain BOW executive officers are parties to employment agreements with BOW pursuant to which they will, or may, be entitled to certain payments in the event of a change in control of BOW.

 

   

Certain BOW directors have deferred compensation arrangements with FCB and FNBM which will be terminated, and pursuant to which the directors will receive payments, in connection with the consummation of the FCB merger.



 

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Certain BOW executive officers have entered into employment agreements with CapStar Bank that will be effective upon the effective time of the BOW merger.

 

   

One member of the board of directors of FCB, FNBM, or BOW will be appointed to the CapStar and CapStar Bank boards of directors in connection with the consummation of the FCB merger.

 

   

BOW’s directors and executive officers are entitled to continued indemnification and insurance coverage under the BOW merger agreement.

These interests are discussed in more detail in the section titled “The Mergers—Interests of BOW Directors and Executive Officers in the BOW Merger.” The BOW board of directors was aware of these interests and considered them, among other matters, in adopting and approving the BOW merger agreement and in making its recommendation that BOW shareholders, including the BOW minority shareholders, vote in favor of approval of the BOW merger proposal.

Regulatory Approvals (see page 95)

Completion of the FCB merger, the BOW merger and the bank merger are subject to various regulatory approvals and notifications, including approvals from the Board of Governors of the Federal Reserve System (which we refer to as the “Federal Reserve Board”) and the TDFI. CapStar, FCB and BOW have agreed to use their reasonable best efforts to obtain all requisite regulatory approvals. CapStar, FCB and BOW and/or their respective subsidiaries are in the process of filing applications and notifications to obtain these regulatory approvals. Although the parties currently believe they should be able to obtain all regulatory approvals in a timely manner, they cannot be certain when or if they will obtain them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to or have a material adverse effect on the combined company after the completion of the merger. The regulatory approvals to which the completion of the FCB merger, the BOW merger and bank merger are subject are described in more detail under the section titled “The Mergers—Regulatory Approvals.”

Conditions to Completion of the FCB Merger (see page 117)

The completion of the FCB merger depends on a number of conditions being satisfied or, where permitted, waived, including:

 

   

the approval of the FCB merger agreement by FCB’s shareholders;

 

   

receipt of all required regulatory approvals, consents or waivers to permit the consummation of the transactions contemplated by the FCB merger agreement, and the expiration or termination of all statutory waiting periods;

 

   

the absence of any order, decree, injunction or proceeding by any governmental entity of competent jurisdiction prohibiting or enjoining the consummation of the FCB merger, BOW merger or the bank merger, and the absence of any statute, rule or regulation that prohibits or makes illegal the consummation of the FCB merger, BOW merger or the bank merger;

 

   

the effectiveness of the registration statement of which this proxy statements/prospectus is a part with respect to the CapStar common stock to be issued upon the consummation of the FCB merger under the Exchange Act, and the absence of any proceedings pending or threatened by the SEC to suspend the effectiveness of the registration statement;

 

   

the authorization of the listing of the CapStar common stock to be issued upon the consummation of the FCB merger on the NASDAQ, without objection to the listing from the NASDAQ;

 

   

receipt by each of CapStar and FCB of an opinion of its respective legal counsel as to certain tax matters;



 

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the satisfaction or waiver of each of the conditions for the consummation of the BOW merger (other than the completion of the FCB merger);

 

   

the accuracy of the representations and warranties of each other party in the FCB merger agreement as of January 23, 2020 and as of the closing date as though made at and as of the closing date, subject to the materiality standards provided in the FCB merger agreement (and the receipt by each party of certificates from the other party to such effect);

 

   

the performance by the other party in all material respects of all obligations required to be performed by it at or prior to the effective time of the FCB merger under the FCB merger agreement (and the receipt by each party of certificates from the other party to such effect); and

 

   

the absence of a material adverse effect on the other party.

In addition, CapStar’s obligation to complete the FCB merger is subject to a condition that none of the requisite governmental approvals will contain a requirement or non-standard condition that would have or would reasonably be expected to have a material adverse effect to the business, financial condition or results of operations of the CapStar (as the surviving corporation in the FCB merger) and its subsidiaries, measured on a scale relative to FCB and its subsidiaries, taken as a whole (except for any condition or requirement imposed by a governmental entity which is customarily imposed in published orders or approvals for transactions such as those contemplated by the FCB merger agreement).

No assurance is given as to when, or if, the conditions to the FCB merger will be satisfied or waived, or that the FCB merger will be completed.

Conditions to Completion of the BOW Merger (see page 136)

The completion of the BOW merger depends on a number of conditions being satisfied or, where permitted, waived, including:

 

   

the approval of the BOW merger agreement by BOW’s shareholders and the BOW minority shareholders;

 

   

receipt of all required regulatory approvals, consents or waivers to permit the consummation of the transactions contemplated by the BOW merger agreement, and the expiration or termination of all statutory waiting periods;

 

   

the absence of any order, decree, injunction or proceeding by any governmental entity of competent jurisdiction prohibiting or enjoining the consummation of the BOW merger, and the absence of any statute, rule or regulation that prohibits or makes illegal the consummation of the BOW merger;

 

   

the effectiveness of the registration statement of which this proxy statements/prospectus is a part with respect to the CapStar common stock to be issued upon the consummation of the BOW merger under the Exchange Act, and the absence of any proceedings pending or threatened by the SEC to suspend the effectiveness of the registration statement;

 

   

the authorization of the listing of the CapStar common stock to be issued upon the consummation of the BOW merger on the NASDAQ, without objection to the listing from the NASDAQ;

 

   

receipt by each of CapStar and BOW of an opinion of its respective legal counsel as to certain tax matters;

 

   

the completion of the FCB merger in accordance with the terms of the FCB merger agreement immediately prior to the BOW merger;



 

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the accuracy of the representations and warranties of each other party in the BOW merger agreement as of January 23, 2020 and as of the closing date as though made at and as of the closing date, subject to the materiality standards provided in the BOW merger agreement (and the receipt by each party of certificates from the other party to such effect);

 

   

the performance by the other party in all material respects of all obligations required to be performed by it at or prior to the effective time of the BOW merger under the BOW merger agreement (and the receipt by each party of certificates from the other party to such effect); and

 

   

the absence of a material adverse effect on the other party.

In addition, CapStar’s obligation to complete the BOW merger is subject to a condition that none of the requisite governmental approvals will contain a requirement or non-standard condition that would have or would reasonably be expected to have a material adverse effect to the business, financial condition or results of operations of CapStar (as the surviving corporation in the FCB merger) and its subsidiaries, including CapStar Bank, measured on a scale relative to BOW and its subsidiaries, taken as a whole (except for any condition or requirement imposed by a governmental entity which is customarily imposed in published orders or approvals for transactions such as those contemplated by the BOW merger agreement).

No assurance is given as to when, or if, the conditions to the BOW merger will be satisfied or waived, or that the BOW merger will be completed.

FCB Merger Agreement: Agreement Not to Solicit Other Offers (see page 116)

FCB has agreed to a number of limitations with respect to soliciting, negotiating and discussing acquisition proposals involving persons other than CapStar, and to certain related matters. The FCB merger agreement does not, however, prohibit FCB from considering an unsolicited bona fide acquisition proposal from a third party if certain specified conditions are met. FCB’s non-solicitation obligations are discussed in more detail in the section titled “The FCB Merger Agreement—Agreement Not to Solicit Other Offers.”

BOW Merger Agreement: Agreement Not to Solicit Other Offers (see page 134)

BOW has agreed to a number of limitations with respect to soliciting, negotiating and discussing acquisition proposals involving persons other than CapStar, and to certain related matters. The BOW merger agreement does not, however, prohibit BOW from considering an unsolicited bona fide acquisition proposal from a third party if certain specified conditions are met. BOW’s non-solicitation obligations are discussed in more detail in the section titled “The BOW Merger Agreement—Agreement Not to Solicit Other Offers.”

Termination of the FCB Merger Agreement (see page 118)

The FCB merger agreement can be terminated at any time prior to completion of the FCB merger by mutual consent, or by either party in the following circumstances:

 

   

FCB shareholders do not approve the FCB merger agreement at the FCB special meeting, except that this right to terminate is only available to FCB if it has materially complied with its obligation to use reasonable best efforts to obtain the FCB shareholders’ approval;

 

   

any required regulatory approval has been denied and such denial has become final and non-appealable, or a governmental authority or court has issued a final, unappealable order permanently prohibiting consummation of the FCB merger or BOW merger or bank merger, unless the failure to obtain the requisite approval was due to the failure of the party seeking to terminate the FCB merger agreement to perform or observe the covenants and agreements in the FCB merger agreement or the BOW merger agreement, as applicable;



 

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the FCB merger has not been consummated by September 30, 2020 (which we refer to as the “FCB outside date”), except that (1) if on the FCB outside date the conditions relating to requisite regulatory approval or absence of injunctions are not satisfied, then the outside date will be extended to December 31, 2020 and (2) this right to terminate will not be available to the party whose failure to perform or observe the covenants and agreements in the FCB merger agreement is the reason for the failure to complete the FCB merger by the FCB outside date; or

 

   

there is a breach by the other party of any covenant or agreement contained in the FCB merger agreement, or any representation or warranty of the other party becomes untrue, in each case such that the conditions to closing would not be satisfied and such breach or untrue representation or warranty has not been or cannot be cured by the earlier of the outside date or within 30 days after the giving of written notice to such party of such breach or untrue representation or warranty, except that this right to terminate will not be available to the party seeking to terminate if it is then in material breach of the FCB merger agreement.

CapStar may also terminate the FCB merger agreement if:

 

   

FCB breaches in any material respect its obligations not to solicit other acquisition proposals, or its obligation to submit the FCB merger agreement to FCB shareholders for approval and to use reasonable best efforts to obtain the FCB shareholders’ approval; or

 

   

if the FCB board of directors does not publicly recommend in this proxy statements/prospectus that FCB shareholders approve the FCB merger agreement or withdraws or revises its recommendation in a manner adverse to CapStar.

FCB may also terminate the FCB merger agreement if, within the five-day period commencing with the fifth day prior to the closing date of the FCB merger (or if the fifth day before the closing day is not a trading day for CapStar common stock, the date immediately preceding the fifth day before the closing day on which shares of CapStar common stock actually trade on the NASDAQ) (which we refer to as the “FCB determination date”), both of the following conditions are satisfied:

 

   

the number obtained by dividing (A) (x) 2,969,418 multiplied by the volume-weighted average closing price of CapStar common stock as reported on the NASDAQ for the ten consecutive full trading days ending on and including the trading day prior to the FCB determination date plus (y) 21,570,701 by (B) 69,526,801.70 (which we refer to as the “FCB parent ratio”) is less than 0.85; and

 

   

(1) the FCB parent ratio is less than (2) the number obtained by dividing the average of the closing prices of the NASDAQ Bank Index during the ten consecutive full trading days ending on and including the trading day prior to the FCB determination date by the closing price of the NASDAQ Bank Index on the last trading day immediately preceding the date of the first public announcement of the FCB merger agreement (which we refer to as the “FCB index ratio”) and subtracting 0.15 from the FCB index ratio.

However, if FCB chooses to exercise this termination right, CapStar has the option, within five business days of receipt of notice from FCB, to adjust the FCB merger consideration and prevent termination under this provision.

Termination of the BOW Merger Agreement (see page 137)

The BOW merger agreement can be terminated at any time prior to completion of the BOW merger by mutual consent of the parties to the BOW merger agreement, or by either BOW or CapStar in the following circumstances:

 

   

BOW shareholders and BOW minority shareholders do not approve the BOW merger agreement at the BOW special meeting, except that this right to terminate is only available to BOW if it has materially



 

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complied with its obligation to use reasonable best efforts to obtain the BOW shareholders’ and BOW minority shareholders’ approvals;

 

   

any required regulatory approval has been denied and such denial has become final and non-appealable, or a governmental authority or court has issued a final, unappealable order permanently prohibiting consummation of the BOW merger, unless the failure to obtain the requisite approval was due to the failure of the party seeking to terminate the BOW merger agreement to perform or observe the covenants and agreements in the BOW merger agreement or the FCB merger agreement, as applicable;

 

   

the BOW merger has not been consummated by September 30, 2020 (which we refer to as the “BOW outside date”), except that (1) if on the BOW outside date the conditions relating to requisite regulatory approval or absence of injunctions are not satisfied, then the BOW outside date will be extended to December 31, 2020 and (2) this right to terminate will not be available to the party whose failure to perform or observe the covenants and agreements in the BOW merger agreement (which in the case where CapStar is the terminating party includes failures by CapStar Bank) is the reason for the failure to complete the BOW merger by the BOW outside date; or

 

   

there is a breach by the other party of any covenant or agreement contained in the BOW merger agreement, or any representation or warranty of the other party becomes untrue, in each case such that the conditions to closing would not be satisfied and such breach or untrue representation or warranty has not been or cannot be cured by the earlier of the outside date or within 30 days after the giving of written notice to such party of such breach or untrue representation or warranty, except that this right to terminate will not be available to the party seeking to terminate if it is then in material breach of the BOW merger agreement (which in the case where CapStar is the terminating party includes material breaches by CapStar Bank).

CapStar may also terminate the BOW merger agreement if:

 

   

BOW breaches in any material respect its obligations not to solicit other acquisition proposals, or its obligation to submit the BOW merger agreement to BOW’s shareholders for approval and to use reasonable best efforts to obtain the BOW shareholders’ and BOW minority shareholders’ approvals; or

 

   

if the BOW board of directors and BOW special committee do not publicly recommend in this proxy statements/prospectus that BOW shareholders approve the BOW merger agreement or either withdraws or revises its recommendation in a manner adverse to CapStar.

BOW may also terminate the BOW merger agreement if, within the five-day period commencing with the fifth day prior to the closing date of the BOW merger (or if the fifth day before the closing day is not a trading day for CapStar common stock, the date immediately preceding the fifth day before the closing day on which shares of CapStar common stock actually trade on the NASDAQ) (which we refer to as the “BOW determination date”), both of the following conditions are satisfied:

 

   

the number obtained by dividing (A) (x) 664,800 multiplied by the volume-weighted average closing price of CapStar common stock as reported on the NASDAQ for the ten consecutive full trading days ending on and including the trading day prior to the BOW determination date plus (y) 4,829,299 by (B) 15,565,819 (which we refer to as the “BOW parent ratio”) is less than 0.85; and

 

   

(1) the BOW parent ratio is less than (2) the number obtained by dividing the average of the closing prices of the NASDAQ Bank Index during the ten consecutive full trading days ending on and including the trading day prior to the BOW determination date by the closing price of the NASDAQ Bank Index on the last trading day immediately preceding the date of the first public announcement of the BOW merger agreement (which we refer to as the “BOW index ratio”) and subtracting 0.15 from the BOW index ratio.



 

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However, if BOW chooses to exercise this termination right, CapStar has the option, within five business days of receipt of notice from BOW, to adjust the BOW merger consideration and prevent termination under this provision.

FCB Merger Agreement Termination Fee (see page 119)

FCB will pay CapStar a $2.8 million termination fee if the FCB merger agreement is terminated in the following circumstances:

 

   

CapStar terminates the FCB merger agreement because (1) FCB breaches its obligations in any material respect regarding the solicitation of other acquisition proposals or submission of the FCB merger agreement to FCB’s shareholders or (2) the FCB board of directors does not publicly recommend in this proxy statements/prospectus that FCB shareholders approve the FCB merger agreement or withdraws or revises its recommendation in a manner adverse to CapStar; and

 

   

if (1) the FCB merger agreement is terminated (A) by either party because the FCB shareholder approval has not been obtained at the FCB shareholders’ meeting, (B) by either party because the FCB merger has not occurred by the FCB outside date and FCB shareholder approval has not been obtained or (C) by CapStar because of an uncured material breach by FCB, (2) if before the FCB shareholder meeting (in the case of termination because of the failure to obtain FCB shareholder approval of the FCB merger agreement) or the date of termination of the FCB merger agreement (in the case of termination because the FCB merger is not consummated by the FCB outside date or because of material breach or untrue representation or warranty by FCB such that the conditions to closing the FCB merger would not be satisfied) an acquisition proposal has been publicly announced or communicated and not withdrawn and (3) within 12 months of such termination, FCB consummates or enters into a definitive agreement with respect to an acquisition proposal (whether or not it is the same acquisition proposal).

Except in the case of fraud or a willful and material breach of the FCB merger agreement, the payment of the termination fee will fully discharge FCB from any losses that may be suffered by CapStar arising out of the termination of the FCB merger agreement.

BOW Merger Agreement Termination Fee (see page 138)

BOW will pay CapStar a $625,000 termination fee if the BOW merger agreement is terminated in the following circumstances:

 

   

CapStar terminates the BOW merger agreement because (1) BOW breaches its obligations in any material respect regarding the solicitation of other acquisition proposals or submission of the BOW merger agreement to BOW’s shareholders or (2) the BOW board of directors and the BOW special committee do not publicly recommend in this proxy statements/prospectus that BOW shareholders approve the BOW merger agreement or either withdraws or revises its recommendation in a manner adverse to CapStar; and

 

   

if (1) the BOW merger agreement is terminated (A) by either party because the BOW shareholder and BOW minority shareholder approvals have not been obtained at the BOW shareholders’ meeting, (B) by either party because the BOW merger has not occurred by the BOW outside date and BOW shareholder and BOW minority shareholder approvals have not been obtained or (C) by CapStar because of an uncured material breach by BOW, (2) if before the BOW shareholder meeting (in the case of termination because of the failure to obtain BOW shareholder and BOW minority shareholder approvals of the BOW merger agreement) or the date of termination of the BOW merger agreement (in the case of termination because the BOW merger is not consummated by the BOW outside date or



 

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because of a material breach or untrue representation or warranty by BOW such that the conditions to closing the BOW merger would not be satisfied) an acquisition proposal has been publicly announced or communicated and not withdrawn and (3) within 12 months of such termination BOW consummates or enters into a definitive agreement with respect to an acquisition proposal (whether or not it is the same acquisition proposal).

Except in the case of fraud or a willful and material breach of the BOW merger agreement, the payment of the termination fee will fully discharge BOW from any losses that may be suffered by CapStar arising out of the termination of the BOW merger agreement.

Public Trading Markets (see page 94)

CapStar will cause the shares of CapStar common stock to be issued to the holders of FCB common stock in the FCB merger and to the holders of BOW common stock in the BOW merger to be authorized for listing on the NASDAQ, subject to official notice of issuance, prior to the effective time of the FCB merger and BOW merger.

FCB Special Meeting (see page 47)

The special meeting of FCB shareholders will be held at on [●], at [●] local time, at 100 West High Street, Manchester, Tennessee 37355. At the FCB special meeting, FCB shareholders will be asked to vote to:

 

   

approve the FCB merger proposal; and

 

   

approve the FCB adjournment proposal.

Only holders of record at the close of business on [●], 2020 will be entitled to vote at the FCB special meeting. Each share of FCB common stock is entitled to one vote on each proposal to be considered at the FCB special meeting.

As of the FCB record date, the directors and executive officers of FCB and their affiliates beneficially owned and were entitled to vote approximately [●] shares of FCB common stock representing approximately [●]% of the shares of FCB common stock outstanding on that date. As of the FCB record date, a certain number of shares of FCB common stock beneficially owned by the directors of FCB are subject to voting agreements. For more information regarding the FCB voting agreements, see the sections titled “Information About the FCB Special Meeting—Shares Subject to Voting Agreements” and “The FCB Merger Agreement—FCB Voting Agreements.”

Approval of the FCB merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of FCB common stock entitled to vote on the proposal. If an FCB shareholder marks “ABSTAIN” on the shareholder’s proxy card, fails to submit a proxy or vote in person at the FCB special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the FCB merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the FCB adjournment proposal requires that the votes cast by FCB shareholders in favor of the proposal at the FCB special meeting exceed the votes cast by FCB shareholders against the proposal. If an FCB shareholder marks “ABSTAIN” on the shareholder’s proxy card or abstains from voting in person, fails to submit a proxy or vote in person at the FCB special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the FCB adjournment proposal, it will have no effect on the voting for this proposal.



 

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BOW Special Meeting (see page 52)

The special meeting of BOW shareholders will be held on [●], at [●] local time, at the Griggs Building, 108 Public Square North, Waynesboro, Tennessee 38485. At the BOW special meeting, BOW shareholders will be asked to vote to:

 

   

approve the BOW merger proposal; and

 

   

approve the BOW adjournment proposal.

Only holders of record at the close of business on [●], 2020 will be entitled to vote at the BOW special meeting. Each share of BOW common stock is entitled to one vote on each proposal to be considered at the BOW special meeting. As of the BOW record date, there were [●] shares of BOW common stock entitled to vote at the BOW special meeting.

As of the BOW record date, the directors and executive officers of BOW and their affiliates beneficially owned and were entitled to vote approximately [●] shares of BOW common stock representing approximately [●]% of the shares of BOW common stock outstanding on that date. As of the BOW record date, all of the shares of BOW common stock owned by the directors of BOW are subject to voting agreements. For more information regarding the BOW voting agreements, see the sections titled “Information About the BOW Special Meeting—Shares Subject to Voting Agreements” and “The BOW Merger Agreement—BOW Voting Agreements.”

Under Tennessee law, approval of the BOW merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of BOW common stock entitled to vote on the proposal (which we refer to as the “BOW general shareholder approval”). Additionally, in adopting the BOW merger agreement, the BOW board of directors expressly conditioned the consummation of the BOW merger upon the approval of the BOW merger agreement by the shareholders of BOW other than FCB by the affirmative vote of holders of a majority of the BOW minority shares entitled to vote on the BOW merger agreement, voting together a separate voting group (which we refer to as the “BOW minority shareholder approval”). If a BOW shareholder marks “ABSTAIN” on the shareholder’s proxy card, fails to submit a proxy or vote in person at the BOW special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the BOW merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

As of the BOW record date, FCB owned [●] shares of BOW common stock representing 50.56% of the outstanding BOW common stock. We expect that FCB will vote all of the BOW common stock owned by FCB in favor of approval of the BOW merger proposal, which will be sufficient in and of itself for the BOW general shareholder approval. As it relates to the BOW minority shareholder approval, BOW directors owning approximately [●]% of the BOW minority shares entitled to vote on the BOW merger agreement have executed voting and support agreements with CapStar and BOW pursuant to which they have generally agreed to vote their shares of BOW common stock for the approval of the BOW merger proposal.

Approval of the BOW adjournment proposal requires that the votes cast by BOW shareholders in favor of the proposal at the BOW special meeting exceed the votes cast by BOW shareholders against the proposal. If a BOW shareholder marks “ABSTAIN” on the shareholder’s proxy card or abstains from voting in person, fails to submit a proxy or vote in person at the BOW special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the BOW adjournment proposal, it will have no effect on the voting for this proposal.

FCB Voting Agreements (see page 120)

Each of the directors of FCB, solely in his or her individual capacity as a shareholder of FCB, and a shareholder of FCB have entered into voting and support agreements (which we refer to collectively as the “FCB



 

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voting agreements”) with CapStar and FCB, in which each such person agreed, on the terms and subject to the conditions set forth therein, to vote the shares of FCB common stock beneficially owned by him or her in favor of the FCB merger and against any proposal made in competition with the FCB merger (subject to certain adjustments in the case of the directors of FCB such that the aggregate number of FCB common stock subject to the FCB voting agreements do not exceed 39.99% of FCB common stock outstanding as of the FCB record date), as well as certain other customary restrictions with respect to the voting and transfer of his or her shares of FCB common stock.

As of the FCB record date, a total of [●] shares of FCB common stock, representing approximately 39.99% of the outstanding shares of FCB common stock entitled to vote at the FCB special meeting, are subject to the FCB voting agreements.

For more information regarding the FCB voting agreements, see the sections titled “Information About the FCB Special Meeting—Shares Subject to Voting Agreements” and “The FCB Merger Agreement—FCB Voting Agreements.”

BOW Voting Agreements (see page 139)

Each of the directors of BOW, solely in his or her individual capacity as a shareholder of BOW, has entered into a voting and support agreement (which we refer to collectively as the “BOW voting agreements”) with CapStar and BOW, in which each such person agreed, on the terms and subject to the conditions set forth therein, to vote the shares of BOW common stock beneficially owned by him or her in favor of the BOW merger and against any proposal made in competition with the BOW merger, as well as certain other customary restrictions with respect to the voting and transfer of his or her shares of BOW common stock.

As of the BOW record date, a total of [●] shares of BOW common stock, representing approximately [●]% of the outstanding shares of BOW common stock entitled to vote at the BOW special meeting, are subject to the BOW voting agreements.

For more information regarding the BOW voting agreements, see the sections titled “Information About the BOW Special Meeting—Shares Subject to Voting Agreements” and “The BOW Merger Agreement—BOW Voting Agreements.”

Comparison of Shareholders’ Rights (see page 187)

The rights of FCB shareholders and the BOW minority shareholders who continue as CapStar shareholders after the FCB merger and BOW merger, respectively, will be governed by the charter and bylaws of CapStar rather than the charter and bylaws of FCB and the charter and amended and restated bylaws of BOW, respectively. For more information, see the section titled “Comparison of Shareholders’ Rights.”

Risk Factors (see page 39)

Before voting at the FCB or BOW special meeting, you should carefully consider all of the information contained or incorporated by reference into this proxy statements/prospectus, including the risk factors set forth in the section titled “Risk Factors” or described in CapStar’s reports filed with the SEC, which are incorporated by reference into this proxy statements/prospectus. For more information, see the sections titled “References to Additional Information” and “Where You Can Find More Information.”



 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

Presented below are CapStar’s historical per share data for the year ended December 31, 2019, as derived from the audited financial statements of CapStar. Also presented below are FCB’s and BOW’s historical per share data for the year ended December 31, 2019, as derived from audited financial statements of FCB and BOW. The pro forma combined per share data for the year ended December 31, 2019 and the per equivalent FCB and BOW share information provided in the table below are unaudited. The unaudited pro forma data and equivalent per share information give effect to the mergers as if the transactions had been effective on the dates presented, in the case of the book value data, and as if the transactions had become effective on the beginning of the fiscal year or period presented, in the case of the earnings per share and dividends declared data. For a discussion of the assumptions and adjustments made in preparing the pro forma financial information presented in this proxy statements/prospectus, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements.”

The information presented below should be read together with: (1) CapStar’s consolidated financial statements and related notes thereto filed by CapStar with the SEC, and incorporated by reference in this proxy statements/prospectus; (2) FCB’s consolidated financial statements and related notes thereto, which are included in this proxy statements/prospectus; (3) BOW’s consolidated financial statements and related notes thereto, which are included in this proxy statements/prospectus; and (4) the unaudited pro forma combined consolidated financial information included in this proxy statements/prospectus. See the sections entitled “Unaudited Pro Forma Combined Consolidated Financial Information,” “Index to Consolidated Financial Statements of FCB Corporation”, “Index to Consolidated Financial Statements of BOW” and “Where You Can Find More Information.”

The unaudited pro forma financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented. The unaudited pro forma financial information also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors.

 

    

 

Historical

     CapStar
Pro Forma
Combined
     Per
Equivalent
FCB
Share(1)
     Per
Equivalent
BOW
Share(2)
 
Per Common Share Data    CapStar      FCB      BOW  

For the year ended December 31, 2019:

                 

Net income per share (Basic)

   $ 1.25        32.21      $ 90.61      $ 1.34      $ 18.36      $ 60.06  

Net income per share (Diluted)

     1.20        31.21        90.61        1.30        17.82        58.27  

Cash dividends declared per share

     0.19        16.00        60.00        0.41        5.62        18.38  

Book value per share

   $ 14.87        281.67      $ 764.52      $ 15.16        207.76        679.50  

 

(1)

The per equivalent FCB share metric was computed by multiplying the CapStar pro forma combined amounts by 13.7042893141, i.e. the number of shares of CapStar common stock that each share of FCB common stock will be converted into, assuming (i) there are 216,678 shares of FCB common stock that will be converted into the per share FCB merger consideration and (ii) no adjustment, pursuant to the terms of the FCB merger agreement, to the number of shares of CapStar common stock that will be issued as FCB merger consideration.

(2)

The per equivalent BOW share metric was computed by multiplying the CapStar pro forma combined amounts by 44.8220064725, i.e. the number of shares of CapStar common stock that each share of BOW common stock held by the BOW minority shareholders will be converted into, assuming (i) there are 14,832 shares of BOW common stock that will be converted into the per share BOW merger consideration and (ii) no adjustment, pursuant to the terms of the BOW merger agreement, to the number of shares of CapStar common stock that will be issued as BOW merger consideration.



 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED

CONSOLIDATED FINANCIAL DATA

The following table shows selected unaudited pro forma condensed combined financial information about the financial condition and results of operations of CapStar giving effect to the mergers, as of and for the year ended December 31, 2019.

The selected unaudited pro forma condensed combined consolidated financial information has been prepared using the acquisition method of accounting, adjusted from CapStar’s audited financial statements for the year ended December 31, 2019 to give effect to the mergers and the estimated acquisition accounting adjustments resulting from the mergers. The selected unaudited pro forma condensed combined consolidated balance sheet as of December 31, 2019 in the tables below are presented as if the mergers had occurred on December 31, 2019, and the unaudited pro forma condensed combined consolidated statements of income statements for the year ended December 31, 2019 is presented as if the mergers had occurred on January 1, 2019. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the mergers and, with respect to the income statement only, expected to have a continuing impact on consolidated results of operations; as such, one-time merger costs are not included.

The selected unaudited pro forma condensed combined consolidated financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had CapStar, FCB and BOW actually been combined as of the dates indicated and at the beginning of the periods presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of the combined entities, which could differ materially from those shown in this information. The selected unaudited pro forma condensed combined consolidated financial information does not reflect the benefits of expected synergies or other factors that may result as a consequence of the mergers.

The selected unaudited pro forma condensed combined consolidated financial information has been derived from, and should be read in conjunction with, the unaudited pro forma combined consolidated financial information, including the notes thereto, which is included in this proxy statements/prospectus under the section titled “Unaudited Pro Forma Combined Consolidated Financial Information.”

 

(Dollars in thousands)    For the year
ended
December 31,
2019
 

Unaudited Pro Forma Condensed Consolidated Income Statement Information:

  

Net interest income

   $ 87,567  

Provision for loan losses

     1,482  

Income before provision for income taxes

     37,694  

Net income

     28,836  

 

(Dollars in thousands)    For the year
ended
December 31,
2019
 

Unaudited Pro Forma Condensed Combined Balance Sheet Information:

  

Total loans, net

   $ 1,738,639  

Total assets

     2,494,114  

Total deposits

     2,121,218  

Shareholders’ equity

     333,556  


 

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MARKET PRICES AND DIVIDEND INFORMATION

The following table sets forth the high and low reported trading prices per share of CapStar common stock, and the cash dividends declared per share for the periods indicated. CapStar common stock is listed and trades on the NASDAQ under the symbol “CSTR.” As of March 5, 2020, there were 18,457,537 shares of CapStar common stock outstanding, which were held by approximately 2,545 holders of record.

 

     CapStar  
     High      Low      Dividend(1)  

2020

        

First Quarter (through March 6, 2020)

   $ 16.79      $ 12.88      $ 0.05  

2019

        

First Quarter

   $ 17.33      $ 14.11      $ 0.04  

Second Quarter

   $ 16.20      $ 14.21      $ 0.05  

Third Quarter

   $ 17.21      $ 14.61      $ 0.05  

Fourth Quarter

   $ 17.48      $ 15.74      $ 0.05  

2018

        

First Quarter

   $ 21.90      $ 17.36         

Second Quarter

   $ 20.87      $ 17.39         

Third Quarter

   $ 19.98      $ 15.88      $ 0.04  

Fourth Quarter

   $ 17.4      $ 13.51      $ 0.04  

2017(2)

        

First Quarter

   $ 22.05      $ 18.52         

Second Quarter

   $ 19.53      $ 16.96         

Third Quarter

   $ 19.62      $ 16.00         

Fourth Quarter

   $ 22.22      $ 18.73         

 

(1)

A quarterly cash dividend of $0.05 per share on CapStar’s common stock was declared on January 23, 2020, and will be payable on or about February 21, 2020 to shareholders of record as of the close of business on February 7, 2020.

(2)

CapStar common stock has traded on the NASDAQ since September 22, 2016. Prior to that time, there was no established public trading market for CapStar common stock.



 

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Neither FCB common stock nor BOW common stock is actively traded on a securities exchange and there is no established trading market for either FCB common stock or BOW common stock and no broker currently makes a market in either FCB common stock or BOW common stock. The following table sets forth the cash dividends declared per share of FCB common stock and BOW common stock for the periods indicated.

 

     FCB      BOW  

2020

     

First Quarter (through March 6, 2020)

   $ 0.00      $ 0.00  

2019

     

First Quarter

   $ 0.00      $ 0.00  

Second Quarter

   $ 6.10      $ 30.00  

Third Quarter

   $ 0.00      $ 0.00  

Fourth Quarter

   $ 5.79      $ 30.00  

2018

     

First Quarter

   $ 0.00      $ 0.00  

Second Quarter

   $ 4.95      $ 25.00  

Third Quarter

   $ 0.00      $ 0.00  

Fourth Quarter

   $ 7.85      $ 30.00  

2017

     

First Quarter

   $ 0.00      $ 0.00  

Second Quarter

   $ 4.84      $ 20.00  

Third Quarter

   $ 0.00      $ 0.00  

Fourth Quarter

   $ 9.60      $ 35.00  

As of the FCB record date, there were [●] shares of FCB common stock outstanding, which were held by approximately [●] holders of record. As of the BOW record date, there were [●] shares of BOW common stock outstanding, which were held by approximately [●] holders of record.

The following table presents the closing price of CapStar common stock on January 23, 2020, the last trading day before the public announcement of the FCB merger agreement and the BOW merger agreement, and [●], the last practicable trading day prior to the mailing of this proxy statements/prospectus. FCB common stock and BOW common stock are not actively traded on a securities exchange, there is no established trading market for FCB common stock and BOW common stock and no broker currently makes a market in FCB common stock and BOW common stock. As a result, the closing sale prices of FCB common stock and BOW common stock on January 23, 2020, the last trading day before public announcement of the FCB merger agreement and the BOW merger agreement, and [●], the last practicable trading day prior to the mailing of this proxy statements/prospectus, are not available.

The table also shows the estimated equivalent per share consideration with respect to each share of FCB common stock and BOW common stock on the relevant date (assuming no adjustments to the merger considerations in the FCB merger and the BOW merger pursuant to the FCB merger agreement and the BOW merger agreement, respectively).

 

     CapStar
Closing
Price
    FCB
Closing
Price
     BOW
Closing
Price
     FCB:
Estimated
Equivalent
Value per
Share
    BOW:
Estimated
Equivalent
Value per
Share
 

Date

            

January 23, 2020

   $ 16.23       N/A        N/A      $ 321.97     $ 1,053.06  

[●], 2020

   $ [●     N/A        N/A      $ [●   $ [●


 

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The above table shows only historical comparisons. These comparisons may not provide meaningful information to FCB and BOW shareholders in determining whether to approve the FCB merger agreement or BOW merger agreement, as applicable. FCB and BOW shareholders are urged to obtain current market quotations for shares of CapStar common stock and to review carefully the other information contained in this proxy statements/prospectus or incorporated by reference into this proxy statements/prospectus in considering whether to approve the FCB merger agreement or the BOW merger agreement, as applicable. The market price of CapStar common stock will fluctuate between the date of this proxy statements/prospectus and the date of completion of the mergers. No assurance can be given concerning the market price of CapStar common stock before or after the effective time of the mergers. Changes in the market price of CapStar common stock prior to the completion of the mergers will affect the market value of the merger consideration that FCB or BOW shareholders will receive upon completion of the respective mergers. Additionally, the FCB merger consideration and the BOW merger consideration are subject to certain pre-closing adjustments according to the terms of the FCB merger agreement and the BOW merger agreement, respectively, for transaction expenses, real-estate valuations and the proceeds of sales of certain equity interests by FCB, BOW and their subsidiaries. See the sections titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments and The BOW Merger Agreement—BOW Merger Consideration Adjustments for a discussion of these adjustments to the FCB merger consideration and the BOW merger consideration. Consequently, the value of the per share FCB merger consideration that FCB shareholders will receive in exchange for their shares of FCB common stock and the value of the per share BOW merger consideration that BOW minority shareholders will receive in exchange for their shares of BOW common stock will not be known at the time they vote on the FCB merger agreement or the BOW merger agreement, as applicable, and the value and amount, respectively, of the actual per share FCB merger consideration or per share BOW merger consideration, as applicable, that they will receive may be different from the amounts described in this proxy statements/prospectus.



 

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RISK FACTORS

In addition to the other information contained in, or incorporated by reference into, this proxy statements/prospectus, including CapStar’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and the matters addressed under the section titled “Cautionary Statement Regarding Forward-Looking Statements,” FCB and BOW shareholders should consider the matters described below carefully in determining whether to vote to approve the FCB merger agreement, the BOW merger agreement and the transactions contemplated thereby.

Risks Related to the Mergers and CapStar’s Business Upon Completion of the Mergers

Because the sale price of the CapStar common stock may fluctuate, you cannot be sure of the value of the FCB merger consideration that you will receive in the FCB merger or the BOW merger consideration you will receive in the BOW merger.

Under the terms of the FCB merger agreement and the BOW merger agreement, each share of FCB common stock or BOW common stock, as applicable, outstanding immediately prior to the effective time of the FCB merger (excluding the FCB excluded shares) or the BOW merger (excluding the BOW excluded shares), as applicable, will be converted into the right to receive a certain number of shares of CapStar common stock and cash. The market price of CapStar’s common stock could be subject to significant fluctuations due to changes in sentiment in the market regarding CapStar’s operations or business prospects, including market sentiment regarding CapStar’s entry into the FCB merger agreement or the BOW merger agreement. These risks may be affected by:

 

   

operating results that vary from the expectations of CapStar management or of securities analysts and investors;

 

   

developments in CapStar’s business or in the financial services sector generally;

 

   

regulatory or legislative changes affecting CapStar’s industry generally or its business and operations;

 

   

operating and securities price performance of companies that investors consider to be comparable to CapStar;

 

   

changes in estimates or recommendations by securities analysts or rating agencies;

 

   

announcements of strategic developments, acquisitions, dispositions, financings, and other material events by CapStar or its competitors; and

 

   

changes in global financial markets and economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.

Many of these factors are beyond the control of CapStar, FCB and BOW. We make no assurances as to whether or when the FCB merger or the BOW merger will be completed. FCB shareholders and BOW shareholders should obtain current sale prices for shares of CapStar common stock before voting their shares of FCB common stock or BOW common stock, as applicable, at their respective special meetings.

CapStar may fail to realize all of the anticipated benefits of the mergers.

CapStar, FCB and BOW have operated and, until the completion of the FCB merger and the BOW merger, as applicable, will continue to operate, independently. The success of the mergers, including anticipated benefits and cost savings, will depend, in part, on CapStar’s ability to successfully combine and integrate the businesses of CapStar, FCB (including The First National Bank of Manchester) and BOW in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of any of the company’s ongoing businesses or inconsistencies in standards, controls, procedures and

 

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policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the mergers. The loss of key employees could adversely affect CapStar’s ability to successfully conduct its business, which could have an adverse effect on CapStar’s financial results and the value of CapStar common stock. If CapStar experiences difficulties with the integration process, the anticipated benefits of the mergers may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause CapStar, FCB (including The First National Bank of Manchester) and/or BOW to lose customers or cause customers to remove their accounts from CapStar, FCB (including The First National Bank of Manchester) and/or BOW and move their business to competing financial institutions. Integration efforts among the three companies will also divert management attention and resources. These integration matters could have an adverse effect on each of CapStar, FCB (including The First National Bank of Manchester) and BOW during this transition period and for an undetermined period after completion of the mergers on the combined company. In addition, the actual cost savings of the mergers could be less than anticipated.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the FCB merger agreement and the BOW merger agreement, including the FCB merger, the BOW merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. In determining whether to grant these approvals the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under the section titled “The Mergers—Regulatory Approvals.” An adverse development in any party’s regulatory standing or these factors could result in an inability to obtain approval or delay their receipt. These regulators may impose conditions on the completion of the FCB merger, the BOW merger or the bank merger or require changes to the terms of the FCB merger, the BOW merger or the bank merger. Such conditions or changes could have the effect of delaying or preventing completion of the FCB merger, the BOW merger or the bank merger or imposing additional costs on or limiting the revenues of the combined company following the FCB merger, the BOW merger and the bank merger, any of which might have an adverse effect on the combined company following the mergers. See the section titled “The Mergers—Regulatory Approvals.”

The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the mergers that are not anticipated or cannot be met. If the consummations of the mergers are delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.

The FCB merger consideration and the BOW merger consideration may be reduced pursuant to certain adjustments for transaction expenses, real-estate valuations and the proceeds of sales of certain equity interests.

The FCB merger consideration and the BOW merger consideration are subject to adjustments for transaction expenses, real-estate valuations and the proceeds of sales of certain equity interests by FCB, BOW and their subsidiaries. These adjustments could reduce the per share FCB merger consideration and the per share BOW merger consideration paid after the closing of the mergers. See the sections titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments” and “The BOW Merger Agreement—BOW Merger Consideration Adjustments.”

The combined company may be unable to retain CapStar, FCB and/or BOW personnel successfully after the mergers are completed.

The success of the mergers will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by CapStar, FCB (including The First National Bank of

 

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Manchester) and BOW. It is possible that these employees may decide not to remain with CapStar, FCB (including The First National Bank of Manchester) or BOW, as applicable, while the mergers are pending or with the combined company after the mergers are consummated. If key employees terminate their employment, or if an insufficient number of employees is retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating FCB (including The First National Bank of Manchester) and BOW to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, CapStar, FCB (including The First National Bank of Manchester) and BOW may not be able to locate suitable replacements for any key employees who leave either company, or to offer employment to potential replacements on reasonable terms.

The unaudited pro forma combined consolidated financial information included in this proxy statements/prospectus are preliminary and the actual financial condition and results of operations of CapStar after the mergers may differ materially.

The unaudited pro forma combined consolidated financial information in this proxy statements/prospectus are presented for illustrative purposes only and are not necessarily indicative of what CapStar’s actual financial condition or results of operations would have been had the mergers been completed on the dates indicated. The unaudited pro forma combined consolidated financial information reflect adjustments, which are based upon preliminary estimates, to record the FCB and BOW identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this proxy statements/prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of FCB and BOW as of the date of the completion of the mergers. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statements/prospectus. For more information, see the section titled “Unaudited Pro Forma Combined Consolidated Financial Information.”

FCB’s and BOW’s directors and executive officers have interests in the mergers that may differ from the interests of FCB and BOW shareholders.

FCB shareholders should be aware that some of FCB’s directors and executive officers have interests in the FCB merger that are different from, or in addition to, those of FCB shareholders generally. The FCB board of directors was aware of these interests and considered these interests, among other matters, when making its decision to approve the FCB merger agreement, and in recommending that FCB shareholders vote in favor of approving the FCB merger agreement.

For a more complete description of these interests, see the section titled “The Mergers—Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger.”

Similarly, BOW shareholders should be aware that some of BOW’s directors and executive officers have interests in the BOW merger that are different from, or in addition to, those of BOW shareholders generally and the BOW minority shareholders. The BOW board of directors and the BOW special committee were aware of these interests and considered these interests, among other matters, when making their decision to approve the BOW merger agreement, and in recommending that BOW shareholders (including the BOW minority shareholders) vote in favor of approving the BOW merger agreement.

For a more complete description of these interests, see the section titled “The Mergers—Interests of BOW Directors and Executive Officers in the BOW Merger.”

Termination of the FCB merger agreement or the BOW merger agreement could negatively impact CapStar, FCB and BOW.

The FCB merger agreement or the BOW merger agreement may be terminated as a result of factors beyond CapStar’s, FCB’s and BOW’s control. See the sections titled “The FCB Merger Agreement—Termination of the

 

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FCB Merger Agreement” and “The BOW Merger Agreement—Termination of the BOW Merger Agreement” for a complete discussion of the circumstances under which the FCB merger agreement or BOW merger agreement may be terminated. If the FCB merger agreement or BOW merger agreement are terminated, there may be various consequences. For example, CapStar’s, FCB’s or BOW’s businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the FCB merger or BOW merger, as applicable, without realizing any of the anticipated benefits of completing the FCB merger or BOW merger. Additionally, if the FCB merger agreement or BOW merger agreement is terminated, the market price of the CapStar common stock could decline to the extent that the current market prices reflect a market assumption that the FCB merger and BOW merger will be completed. If the FCB merger agreement is terminated under certain circumstances, subject to conditions and exceptions, FCB may be required to pay to CapStar a termination fee of $2.8 million. See the section titled “The FCB Merger Agreement—Termination Fee” for a complete discussion of the circumstances under which any such termination fee will be required to be paid. If the BOW merger agreement is terminated under certain circumstances, subject to conditions and exceptions, BOW may be required to pay to CapStar a termination fee of $625,000. See the section titled “The BOW Merger Agreement—Termination Fee” for a complete discussion of the circumstances under which any such termination fee will be required to be paid.

If the FCB merger agreement or BOW merger agreement is terminated and a party’s board of directors seeks another merger or business combination, such party’s shareholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the FCB merger or the BOW merger, as applicable.

CapStar, FCB and BOW will be subject to business uncertainties and contractual restrictions while the mergers are pending.

Uncertainty about the effect of the mergers on employees, customers, suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of CapStar, FCB and BOW. These uncertainties may impair CapStar’s, FCB’s or BOW’s ability to attract, retain and motivate key personnel, depositors and borrowers pending the consummation of the mergers, as such personnel, depositors and borrowers may experience uncertainty about their future roles following the consummation of the mergers. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with us to seek to change existing business relationships with us or fail to extend an existing relationship with us. In addition, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the mergers.

CapStar, FCB and BOW have a small number of key personnel. The pursuit of the mergers and the preparation for the integration may place a burden on each company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on each company’s business, financial condition and results of operations.

In addition, the FCB merger agreement and the BOW merger agreement restrict the parties thereto from taking certain actions without the other party’s consent while the applicable merger is pending. These restrictions may, among other matters, prevent such party from pursuing otherwise attractive business opportunities, selling assets, incurring indebtedness, engaging in significant capital expenditures in excess of certain limits set forth in the FCB merger agreement or BOW merger agreement, as applicable, entering into other transactions or making other changes to such party’s business prior to consummation of the FCB merger or BOW merger or termination of the FCB merger agreement or BOW merger agreement, as applicable. These restrictions could have a material adverse effect on each party’s business, financial condition and results of operations. See the sections titled “The FCB Merger Agreement—Conduct of Business Pending the Completion of the FCB Merger” and “The BOW Merger Agreement—Conduct of Business Pending the Completion of the BOW Merger” for a description of the restrictive covenants applicable to CapStar, FCB and BOW.

 

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If the mergers are not completed, CapStar, FCB and BOW will have incurred substantial expenses without realizing the expected benefits of the mergers.

Each of CapStar, FCB and BOW has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the FCB merger agreement or the BOW merger agreement, as applicable, as well as the costs and expenses of filing, printing, and mailing this proxy statements/prospectus, and all filing and other fees paid to the SEC in connection with the mergers. If the mergers are not completed, CapStar, FCB and BOW would have to recognize these expenses without realizing the expected benefits of the mergers.

The FCB merger agreement limits FCB’s ability to pursue alternative acquisition proposals and requires FCB to pay a termination fee of $2.8 million under limited circumstances, including circumstances relating to acquisition proposals. The BOW merger agreement limits BOW’s ability to pursue alternative acquisition proposals and requires BOW to pay a termination fee of $625,000 under limited circumstances, including circumstances relating to acquisition proposals.

The FCB merger agreement prohibits FCB from soliciting, initiating, inducing or encouraging, or taking any action to facilitate certain third party acquisition proposals. See the section titled “The FCB Merger Agreement—Agreement Not to Solicit Other Offers.” The FCB merger agreement also provides that FCB will be required to pay a termination fee in the amount of $2.8 million in the event that the FCB merger agreement is terminated under certain circumstances, including an adverse recommendation change by the FCB board of directors. See the sections titled “The FCB Merger Agreement—Termination of the FCB Merger Agreement” and “The FCB Merger Agreement—Termination Fee.” These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of FCB from considering or proposing such an acquisition.

The BOW merger agreement prohibits BOW from soliciting, initiating, inducing or encouraging, or taking any action to facilitate certain third party acquisition proposals. See the section titled “The BOW Merger Agreement—Agreement Not to Solicit Other Offers.” The BOW merger agreement also provides that BOW will be required to pay a termination fee in the amount of $625,000 in the event that the BOW merger agreement is terminated under certain circumstances, including an adverse recommendation change by the BOW board of directors or the BOW special committee. See the sections titled “The BOW Merger Agreement—Termination of the BOW Merger Agreement” and “The BOW Merger Agreement—Termination Fee.” These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of BOW from considering or proposing such an acquisition.

The shares of CapStar common stock to be received by FCB shareholders as a result of the FCB merger and by the BOW minority shareholders as a result of the BOW merger will have different rights from the shares of FCB common stock or BOW common stock.

Upon completion of the FCB merger and the BOW merger, FCB shareholders and the BOW minority shareholders will become CapStar shareholders and their rights as shareholders will be governed by the CapStar charter and bylaws. The rights associated with FCB common stock and BOW common stock are different from the rights associated with CapStar common stock. See the section titled “Comparison of Shareholders’ Rights” for a discussion of the different rights associated with CapStar common stock.

FCB shareholders and the BOW minority shareholders will have a reduced ownership and voting interest in the combined company after the mergers and will exercise less influence over management, as compared to their ownership and voting interests in FCB and BOW, respectively.

FCB shareholders and the BOW minority shareholders currently have the right to vote in the election of the board of directors and on other matters affecting FCB and BOW, respectively. Upon completion of the mergers,

 

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each FCB shareholder who receives shares of CapStar common stock will become a CapStar shareholder, with a percentage ownership of CapStar that is smaller than such shareholder’s percentage ownership of FCB. Based on [●] shares of CapStar common stock outstanding on [●], 2020, the record date for the FCB special meeting, and assuming 2,969,418 shares of CapStar common stock are issued by CapStar as FCB merger consideration and that 664,800 shares of CapStar common stock are issued by CapStar to shareholders of BOW other than FCB as consideration for the BOW merger, current FCB shareholders would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (not taking into account for this purpose shares of BOW common stock owned by FCB shareholders and without giving effect to any shares of CapStar common stock held by FCB shareholders prior to the FCB merger). Upon completion of the mergers, each BOW minority shareholder who receives shares of CapStar common stock will become a CapStar shareholder, with a percentage ownership of CapStar that is smaller than such shareholder’s percentage ownership of BOW. Based on [●] shares of CapStar common stock outstanding on [●], 2020, the record date for the BOW special meeting, and assuming 664,800 shares of CapStar common stock are issued by CapStar as BOW merger consideration and that 2,969,418 shares of CapStar common stock are issued by CapStar to shareholders of FCB as consideration for the FCB merger, current BOW minority shareholders would upon the completion of the FCB merger and the BOW merger own, in the aggregate, approximately [●]% of the outstanding shares of CapStar common stock (not taking into account for this purpose shares of FCB common stock owned by BOW minority shareholders and without giving effect to any shares of CapStar common stock held by BOW minority shareholders prior to the BOW merger). Because of this, FCB shareholders and the BOW minority shareholders may have less influence on the management and policies of CapStar than they now have on the management and policies of FCB and BOW, respectively.

The opinions of FCB’s and BOW’s financial advisors delivered to the parties’ respective boards of directors prior to the signing of the FCB merger agreement and the BOW merger agreement and will not reflect changes in circumstances following the dates of the opinions.

Each of the FCB board of directors and the BOW special committee received opinions (in each case, initially rendered verbally and confirmed in a written opinion, dated January 23, 2020) from the parties’ respective financial advisors regarding the fairness of the FCB merger consideration or the BOW merger consideration, as applicable, from a financial point of view as of the date of such opinions. Subsequent changes in the operation and prospects of CapStar or FCB or BOW, general market and economic conditions and other factors that may be beyond the control of CapStar or FCB or BOW may significantly alter the value of CapStar or FCB or BOW or the prices of the shares of CapStar common stock or FCB common stock or BOW common stock by the time the mergers are completed. The opinions of CapStar’s, FCB’s and BOW’s financial advisors did not address the fairness of the FCB merger consideration or the BOW merger considerations, as applicable, from a financial point of view at the time the mergers are completed, or as of any other date other than the date of such opinions. For a description of the opinions of the parties’ respective financial advisors, see the sections titled “The Mergers—Opinion of FCB’s Financial Advisor” and “The Mergers—Opinion of BOW’s Financial Advisor.”

Risks Relating to CapStar’s Business

You should read and consider risk factors specific to CapStar’s business that will also affect the combined company after the mergers. These risks are described in the sections titled “Risk Factors” in CapStar’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in other documents incorporated by reference into this proxy statements/prospectus. See the section titled “Where You Can Find More Information” of this proxy statements/prospectus for the location of information incorporated by reference into this proxy statements/prospectus.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statements/prospectus, including information included in, or incorporated by reference into, this proxy statements/prospectus, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to: (1) statements about the benefits of the mergers, including future financial and operating results and cost savings that may be realized from the mergers; (2) statements about our respective plans, objectives, expectations and intentions and other statements that are not historical facts; and (3) other statements identified by words such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based upon current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond CapStar’s, FCB’s and BOW’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Accordingly, actual results may differ materially from those expressed in, or implied by, the forward-looking statements.

Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed under the section titled “Risk Factors” and those discussed in the filings of CapStar with the SEC that are incorporated by reference into this proxy statements/prospectus, as well as the following:

 

   

the inability to close the mergers and the bank merger in a timely manner;

 

   

the failure to complete the mergers due to the failure of FCB’s shareholder to approve the FCB merger or of BOW’s shareholders and the BOW minority shareholder’s to approve the BOW merger;

 

   

failure to obtain the requisite regulatory approvals and meet other closing conditions to the mergers on the expected terms and schedule;

 

   

the potential impact of announcement or consummation of the mergers on relationships with third parties, including customers, employees and competitors;

 

   

business disruption following the mergers;

 

   

CapStar’s potential exposure to unknown or contingent liabilities of FCB or BOW;

 

   

the challenges of integrating, retaining, and hiring key personnel;

 

   

failure to attract new customers and retain existing customers in the manner anticipated;

 

   

the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the mergers;

 

   

changes in CapStar’s share price before closing, including as a result of the financial performance of CapStar, FCB or BOW prior to closing, or more generally due to broader stock market movements and the performance of financial companies and peer group companies;

 

   

the expected cost savings, synergies and other financial benefits from the mergers might not be realized within the expected time frames or at all as a result of, among other things, changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the markets in which CapStar, FCB and BOW operate;

 

   

prior to the completion of the mergers or thereafter, CapStar’s, FCB’s and BOW’s respective businesses may not perform as expected due to transaction-related uncertainty or other factors

 

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FCB’s or BOW’s business may not be integrated into CapStar’s business successfully, or such integration may take longer to accomplish than expected;

 

   

operating costs, customer losses and business disruption following the mergers, including adverse developments in relationships with employees, may be greater than expected; and

 

   

management time and effort may be diverted to the resolution of issues related to the mergers.

Because these forward-looking statements are subject to assumptions and uncertainties, CapStar’s and the combined company’s actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statements/prospectus or the date of any document incorporated by reference into this proxy statements/prospectus. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us.

All subsequent written and oral forward-looking statements concerning the mergers or other matters addressed in this proxy statements/prospectus, and attributable to CapStar, FCB, BOW or any person acting on their behalf, respectively, are expressly qualified in their entirety by the cautionary statements contained or referred to in this “Cautionary Statement Regarding Forward-Looking Statements.” Neither CapStar, FCB nor BOW undertakes any obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statements/prospectus or to reflect the occurrence of unanticipated events, unless obligated to do so under the federal securities laws.

 

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INFORMATION ABOUT THE FCB SPECIAL MEETING

This section contains information about the special meeting that FCB has called to allow FCB shareholders to vote on the FCB merger agreement and the transactions contemplated thereby. The FCB board of directors is mailing this proxy statements/prospectus to you, as an FCB shareholder, on or about [●], 2020. Together with this proxy statements/prospectus, the FCB board of directors is also sending to you a notice of the special meeting of FCB shareholders and a form of proxy that the FCB board of directors is soliciting for use at the FCB special meeting and at any adjournments or postponements of the FCB special meeting.

Time, Date, and Place

The special meeting is scheduled to be held on [●], at [●] local time, at the main office of The First National Bank of Manchester, 100 West High Street, Manchester, Tennessee 37355, Tennessee.

Matters to Be Considered at the Special Meeting

At the FCB special meeting, FCB shareholders will be asked to consider and vote on:

 

   

a proposal to approve the Agreement and Plan of Merger, dated as of January 23, 2020, by and between CapStar Financial Holdings, Inc. (which we refer to as “CapStar”) and FCB Corporation, as more fully described in the enclosed proxy statements/prospectus (which we refer to as the “FCB merger proposal”); and

 

   

a proposal to adjourn the FCB special meeting, if necessary or appropriate, including for the purpose of permitting further solicitation of additional proxies in favor of the FCB merger proposal (which we refer to as the “FCB adjournment proposal”).

At this time, the FCB board of directors is unaware of any other matters that may be presented for action at the FCB special meeting. If any other matters are properly presented, however, and you have completed, signed and submitted your proxy, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. A copy of the FCB merger agreement is included in this proxy statements/prospectus as Appendix A, and we encourage you to read it carefully in its entirety.

Recommendation of the FCB Board of Directors

The FCB board of directors has determined that the FCB merger agreement and the transactions contemplated by the FCB merger agreement, including the FCB merger, are advisable and fair to and in the best interests of FCB and its shareholders and has adopted and approved the FCB merger agreement. The FCB board of directors recommends that FCB shareholders vote “FOR” approval of the FCB merger proposal and “FOR” approval of the FCB adjournment proposal. See the section titled “The Mergers—Recommendation of the FCB Board of Directors and FCB’s Reasons for the FCB Merger.”

Record Date and Quorum

[●], 2020 has been fixed as the record date for the determination of FCB shareholders entitled to notice of, and to vote at, the FCB special meeting and any adjournment or postponement thereof. At the close of business on the FCB record date, there were [●] shares of FCB common stock outstanding and entitled to vote at the FCB special meeting, held by [●] holders of record.

The presence at the FCB special meeting, in person or by proxy, of holders of a majority of the outstanding shares of FCB common stock entitled to vote at the FCB special meeting will constitute a quorum for the transaction of business. All shares of FCB common stock present in person or represented by proxy, including abstentions and broker non-votes, if any, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the FCB special meeting.

 

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Required Vote

Approval of the FCB merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of FCB common stock entitled to vote on the proposal. If an FCB shareholder marks “ABSTAIN” on the shareholder’s proxy card, fails to submit a proxy or vote in person at the FCB special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the FCB merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the FCB adjournment proposal requires that the votes cast by FCB shareholders in favor of the proposal at the FCB special meeting exceed the votes cast by FCB shareholders against the proposal. If an FCB shareholder marks “ABSTAIN” on the shareholder’s proxy card or abstains from voting in person, fails to submit a proxy or vote in person at the FCB special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the FCB adjournment proposal, it will have no effect on the voting for this proposal.

Each share of FCB common stock you own as of the FCB record date entitles you to one vote at the FCB special meeting on all matters properly presented at the FCB special meeting.

How to Vote

Each copy of this proxy statements/prospectus mailed to holders of FCB common stock is accompanied by a form of proxy with instructions for voting.

If you hold stock in your name as a shareholder of record, you should complete and return the proxy card accompanying this proxy statements/prospectus, regardless of whether you plan to attend the FCB special meeting.

 

   

Voting by Proxy. Your proxy card includes instructions on how to vote by mailing in the proxy card. If you choose to vote by proxy, please mark each proxy card you receive, sign and date it, and promptly return it in the envelope enclosed with the proxy card. If you sign and return your proxy without instruction on how to vote your shares, your shares will be voted “FOR” the FCB merger proposal and “FOR” the FCB adjournment proposal.

 

   

Voting in Person. If you are a shareholder of record, you can vote in person by submitting a ballot at the FCB special meeting. Nevertheless, we recommend that you vote by proxy as promptly as possible, even if you plan to attend the FCB special meeting. This will ensure that your vote is received. If you attend the FCB special meeting, you may vote by ballot, thereby canceling any proxy previously submitted.

If you hold your stock in “street name” through a bank, broker or other nominee, you must direct your bank, broker or other nominee how to vote in accordance with the instructions you have received from your bank, broker or other nominee.

All shares represented by valid proxies that FCB receives through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the FCB merger proposal and “FOR” the FCB adjournment proposal.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. SHAREHOLDERS WHO ATTEND THE FCB SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

 

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Shares Held in “Street Name”; Broker Non-Votes

If your bank, broker or other nominee holds your shares of FCB common stock in “street name,” your bank, broker or other nominee will vote your shares of FCB common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your bank, broker or other nominee with this proxy statements/prospectus. Any such shares for which you do not give voting instructions will constitute a broker non-vote, and will have the effect of a vote “AGAINST” the merger proposal. Broker non-votes will have no effect on the outcome of the FCB adjournment proposal.

Revocation of Proxies

You can revoke your proxy at any time before your shares are voted. If you are a shareholder of record, then you can revoke your proxy by:

 

   

submitting another valid proxy card bearing a later date;

 

   

attending the FCB special meeting and voting your shares in person; or

 

   

delivering prior to the FCB special meeting a written notice of revocation to FCB at the following address: 100 West High Street, Manchester, Tennessee 37355, Attention: Tim Spry, FNBM’s President and Chief Executive Officer.

If you choose to send a completed proxy card bearing a later date or a notice of revocation, the new proxy card or notice of revocation must be received by [●], 2020. Attendance at the FCB special meeting will not, in and of itself, constitute revocation of a proxy. If you hold your shares in street name with a bank, broker or other nominee, you must follow the directions you receive from your bank, broker or other nominee to change your vote.

Shares Subject to Voting Agreements

As of the FCB record date, a total of [●] shares of FCB common stock, representing approximately [●]% of the outstanding shares of FCB common stock entitled to vote at the FCB special meeting, are subject to voting and support agreements between FCB, CapStar and each of FCB’s directors and a shareholder of FCB (which we refer to collectively as the “FCB voting agreements”). Pursuant to the FCB voting agreements, each director and a shareholder, Marion W. “Chip” Hickerson III, agreed, on the terms and subject to the conditions set forth therein, to vote the shares of FCB common stock beneficially owned by him or her in favor of the FCB merger and against any proposal made in competition with the FCB merger (subject to certain adjustments in the case of the directors of FCB such that the aggregate number of FCB common stock subject to the FCB Voting Agreements do not exceed 39.99% of FCB common stock outstanding as of the FCB record date), as well as certain other customary restrictions with respect to the voting and transfer of his or her shares of FCB common stock.

The foregoing description of the FCB voting agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the FCB voting agreements, forms of which for directors of FCB and a shareholder of FCB are included as Exhibit A-1 and Exhibit A-2, respectively, to the FCB merger agreement attached to this proxy statements/prospectus as Appendix A.

Shares Held by Directors and Executive Officers

As of the FCB record date, FCB’s directors and executive officers and their affiliates beneficially owned and were entitled to vote, in the aggregate, a total of [●] shares of FCB common stock (excluding shares issuable upon the exercise of outstanding options or warrants), representing approximately [●]% of the outstanding shares of FCB common stock entitled to vote at the FCB special meeting. For more information about the beneficial ownership of FCB common stock by each greater than 5% beneficial owner of FCB common stock, each director and executive officer of FCB and all FCB directors and executive officers as a group, see the section titled “Security Ownership of Certain Beneficial Owners and Management of FCB.”

 

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Solicitation of Proxies

The proxy for the FCB special meeting is being solicited on behalf of the FCB board of directors. FCB will bear the entire cost of soliciting proxies from you. FCB will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of FCB common stock. Proxies will be solicited principally by mail, but may also be solicited by the directors, officers, and other employees of FCB in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees will receive no compensation for these activities in addition to their regular compensation, but may be reimbursed for out-of-pocket expenses in connection with such solicitation. No person is authorized to give any information or to make any representation not contained in this proxy statements/prospectus and, if given or made, such information or representation should not be relied upon as having been authorized by FCB, FNBM, BOW, CapStar, CapStar Bank, or any other person.

Attending the FCB Special Meeting

All holders of FCB common stock, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the FCB special meeting. Shareholders of record can vote in person at the FCB special meeting. If you are not a shareholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the FCB special meeting. If you plan to attend the FCB special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. FCB reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the FCB special meeting is prohibited without FCB’s express written consent.

Questions and Additional Information

If you have more questions about the FCB merger or how to submit your proxy or vote, or if you need additional copies of this proxy statements/prospectus or the enclosed proxy card or voting instructions, please contact FCB at:

FCB Corporation

100 West High Street

Manchester, Tennessee 37355

Telephone: (615) 563-8011

Attn: Tim Spry, FNBM’s President and Chief Executive Officer

 

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FCB PROPOSALS

PROPOSAL NO. 1: FCB MERGER PROPOSAL

FCB is asking its shareholders to approve the FCB merger agreement and the transactions contemplated thereby. Holders of FCB common stock should read this proxy statements/prospectus carefully and in its entirety, including the appendixes to and the documents incorporated by reference into this proxy statements/prospectus, for more detailed information concerning the FCB merger agreement and the transactions contemplated by the FCB merger agreement, including the FCB merger. A copy of the FCB merger agreement is attached to this proxy statements/prospectus as Appendix A.

The FCB board of directors has determined that the FCB merger agreement and the transactions contemplated by the FCB merger agreement are advisable and in the best interests of FCB and its shareholders and has adopted and approved the FCB merger agreement.

The FCB board of directors recommends a vote “FOR” the FCB merger proposal. See the section titled “The Mergers—Recommendation of the FCB Board of Directors and FCB’s Reasons for the FCB Merger” for a more detailed discussion of the recommendation of the FCB board of directors.

PROPOSAL NO. 2: FCB ADJOURNMENT PROPOSAL

The FCB special meeting may be adjourned to another time or place, if necessary or appropriate, including for the purpose of permitting further solicitation of proxies if necessary to obtain additional votes in favor of the FCB merger proposal.

If at the FCB special meeting the number of shares of FCB common stock represented in person or by proxy and voting in favor of the FCB merger proposal is insufficient to approve such proposal, FCB intends to move to adjourn the FCB special meeting in order to solicit additional proxies for the approval of the FCB merger proposal. Additionally, in accordance with FCB’s bylaws, in the absence of a quorum, the FCB special meeting may be adjourned from time to time by the vote of a majority of the shares represented in person or by proxy and entitled to vote at the FCB special meeting.

In this proposal, FCB is asking its shareholders to authorize the holder of any proxy solicited by the FCB board of directors on a discretionary basis to vote in favor of adjourning the FCB special meeting to another time or place, if necessary or appropriate, including for the purpose of permitting the solicitation of additional proxies in favor of approval of the FCB merger proposal, including the solicitation of proxies from FCB shareholders who have previously voted against the FCB merger proposal.

Except as required by the Tennessee Business Corporation Act, the FCB board of directors is not required to fix a new record date to determine those FCB shareholders entitled to vote at any adjourned FCB special meeting. At an adjourned FCB special meeting, any business may be transacted which might have been transacted at the FCB special meeting at which the adjournment was taken. If the FCB board of directors does not fix a new record date, it is not necessary to give any notice of the time and place of the adjourned FCB special meeting other than an announcement at the FCB special meeting at which the adjournment is taken, unless the adjournment is for more than four months after the date fixed for the original FCB special meeting. If a new record date is fixed, notice of the adjourned FCB special meeting must be given as in the case of the original FCB special meeting.

The FCB board of directors recommends a vote “FOR” the FCB adjournment proposal.

 

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INFORMATION ABOUT THE BOW SPECIAL MEETING

This section contains information about the special meeting that BOW has called to allow BOW shareholders to vote on the approval of the BOW merger agreement. The BOW board of directors is mailing this proxy statements/prospectus to you, as a BOW shareholder, on or about [●], 2020. Together with this proxy statements/prospectus, the BOW board of directors is also sending to you a notice of the special meeting of BOW shareholders and a form of proxy that the BOW board of directors is soliciting for use at the BOW special meeting and at any adjournments or postponements of the BOW special meeting.

Time, Date, and Place

The special meeting is scheduled to be held [●], at [●] local time, at the Griggs Building, 108 Public Square North, Waynesboro, Tennessee 38485.

Matters to Be Considered at the Special Meeting

At the BOW special meeting, BOW shareholders will be asked to consider and vote on:

 

   

a proposal to approve the Plan of Bank Merger, dated as of January 23, 2020, by and among BOW, CapStar Financial Holdings, Inc. (which we refer to as “CapStar”) and CapStar Bank, as more fully described in the enclosed proxy statements/prospectus (which we refer to as the “BOW merger proposal”); and

 

   

a proposal to adjourn the BOW special meeting, if necessary or appropriate, including for the purpose of permitting further solicitation of additional proxies in favor of the BOW merger proposal (which we refer to as the “BOW adjournment proposal”).

At this time, the BOW board of directors is unaware of any other matters that may be presented for action at the BOW special meeting. If any other matters are properly presented, however, and you have completed, signed and submitted your proxy, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. A copy of the BOW merger agreement is included in this proxy statements/prospectus as Appendix B, and we encourage you to read it carefully in its entirety.

Recommendation of the BOW Board of Directors and the Special Committee of the BOW Board of Directors

A special committee of the BOW board of directors, comprised of directors unaffiliated with each of FCB Corporation, CapStar and CapStar Bank (which we refer to as the “BOW special committee”), determined that that the BOW merger agreement, including the terms thereof and the transactions contemplated thereby, including the BOW merger, were fair to and in the best interests of BOW and its shareholders, including shareholders of BOW other than its majority shareholder, FCB Corporation (whom we refer to as the “BOW minority shareholders”), and that it was advisable and in the best interests of BOW and its shareholders, including the BOW minority shareholders, for BOW to enter into the BOW merger agreement. The BOW special committee recommended to the BOW board of directors to adopt and approve and declare advisable the BOW merger agreement and the transactions, including the BOW merger, contemplated thereby, and recommend to the shareholders of BOW to approve the BOW merger agreement.

The BOW board of directors (based on the recommendation of the BOW special committee) has determined that the BOW merger agreement and the transactions contemplated by the BOW merger agreement are advisable and fair to and in the best interests of BOW and its shareholders (including the BOW minority shareholders) and has approved the BOW merger agreement. The BOW board of directors (based on the recommendation of the BOW special committee) recommends that BOW shareholders (including the BOW minority shareholders) vote “FOR” the BOW merger proposal and “FOR” the BOW adjournment proposal. See the section titled “The Mergers—Recommendation of the BOW Board of Directors and BOW’s Reasons for the BOW Merger.”

 

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Record Date and Quorum

[●], 2020 has been fixed as the record date for the determination of BOW shareholders entitled to notice of, and to vote at, the BOW special meeting and any adjournment or postponement thereof. At the close of business on the BOW record date, there were [●] shares of BOW common stock outstanding and entitled to vote at the BOW special meeting, held by approximately [●] holders of record.

The presence at the BOW special meeting, in person or by proxy, of holders of a majority of the outstanding shares of BOW common stock entitled to vote at the BOW special meeting will constitute a quorum for the transaction of business. All shares of BOW common stock present in person or represented by proxy, including abstentions and broker non-votes, if any, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the BOW special meeting.

Required Vote

Under Tennessee law, approval of the BOW merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of BOW common stock entitled to vote on the proposal (which we refer to as the “BOW general shareholder approval”). Additionally, in adopting the BOW merger agreement, the BOW board of directors expressly conditioned the consummation of the BOW merger upon the approval of the BOW merger agreement by the shareholders of BOW other than FCB by the affirmative vote of holders of a majority of the BOW minority shares entitled to vote on the BOW merger agreement, voting together a separate voting group (which we refer to as the “BOW minority shareholder approval”). If a BOW shareholder marks “ABSTAIN” on the shareholder’s proxy card, fails to submit a proxy or vote in person at the BOW special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the BOW merger proposal, it will have the same effect as a vote “AGAINST” the BOW merger proposal.

As of the BOW record date, FCB owned [●] shares of BOW common stock representing [●]% of the outstanding BOW common stock. We expect that FCB will vote all of the BOW common stock owned by FCB in favor of approval of the BOW merger proposal, which will be sufficient in and of itself for the BOW general shareholder approval. As it relates to the BOW minority shareholder approval, BOW directors owning approximately [●]% of the BOW minority shares entitled to vote on the BOW merger agreement have executed voting and support agreements with CapStar and BOW pursuant to which they have generally agreed to vote their shares of BOW common stock for the approval of the BOW merger proposal.

Approval of the BOW adjournment proposal requires that the votes cast by BOW shareholders in favor of the proposal at the BOW special meeting exceed the votes cast by BOW shareholders against the proposal. If a BOW shareholder marks “ABSTAIN” on the shareholder’s proxy card or abstains from voting in person, fails to submit a proxy or vote in person at the BOW special meeting, or fails to instruct the shareholder’s bank, broker, or other nominee with respect to the BOW adjournment proposal, it will have no effect on the voting for this proposal.

Each share of BOW common stock you own as of the BOW record date entitles you to one vote at the BOW special meeting on all matters properly presented at the BOW special meeting.

How to Vote

Each copy of this proxy statements/prospectus mailed to holders of BOW common stock is accompanied by a form of proxy with instructions for voting.

If you hold stock in your name as a shareholder of record, you should complete and return the proxy card accompanying this proxy statements/prospectus, regardless of whether you plan to attend the BOW special meeting.

 

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Voting by Proxy. Your proxy card includes instructions on how to vote by mailing in the proxy card. If you choose to vote by proxy, please mark each proxy card you receive, sign and date it, and promptly return it in the envelope enclosed with the proxy card. If you sign and return your proxy without instruction on how to vote your shares, your shares will be voted “FOR” the BOW merger proposal and “FOR” the BOW adjournment proposal.

 

   

Voting in Person. If you are a shareholder of record, you can vote in person by submitting a ballot at the BOW special meeting. Nevertheless, we recommend that you vote by proxy as promptly as possible, even if you plan to attend the BOW special meeting. This will ensure that your vote is received. If you attend the BOW special meeting, you may vote by ballot, thereby canceling any proxy previously submitted.

If you hold your stock in “street name” through a bank, broker or other nominee, you must direct your bank, broker or other nominee how to vote in accordance with the instructions you have received from your bank, broker or other nominee.

All shares represented by valid proxies that BOW receives through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the BOW merger proposal and “FOR” the BOW adjournment proposal. No matters other than the matters described in this proxy statements/prospectus are anticipated to be presented for action at the BOW special meeting or at any adjournment or postponement of the BOW special meeting.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. SHAREHOLDERS WHO ATTEND THE BOW SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

Shares Held in “Street Name”; Broker Non-Votes

If your bank, broker or other nominee holds your shares of BOW common stock in “street name,” your bank, broker or other nominee will vote your shares of BOW common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your bank, broker or other nominee with this proxy statements/prospectus. Any such shares for which you do not give voting instructions will constitute a broker non-vote, and will have the effect of a vote “AGAINST” the BOW merger proposal. Broker non-votes will have no effect on the outcome of the BOW adjournment proposal.

Revocation of Proxies

You can revoke your proxy at any time before your shares are voted. If you are a shareholder of record, then you can revoke your proxy by:

 

   

submitting another valid proxy card bearing a later date;

 

   

attending the BOW special meeting and voting your shares in person; or

 

   

delivering prior to the BOW special meeting a written notice of revocation to BOW at the following address: The Bank of Waynesboro, 201 South Main Street, Waynesboro, Tennessee 38485, Attention: William (“Bill”) Bryant, President and Chief Executive Officer.

If you choose to send a completed proxy card bearing a later date or a notice of revocation, the new proxy card or notice of revocation must be received by [●], 2020. Attendance at the BOW special meeting will not, in and of itself, constitute revocation of a proxy. If you hold your shares in street name with a bank, broker or other nominee, you must follow the directions you receive from your bank, broker or other nominee to change your vote.

 

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Shares Subject to Voting Agreements

A total of [●] shares of BOW common stock, representing approximately [●]% of the outstanding shares of BOW common stock entitled to vote at the BOW special meeting, are subject to voting and support agreements among CapStar, BOW and each of BOW’s directors (which we refer to collectively as the “BOW voting agreements”). Pursuant to the BOW voting agreements, each director has agreed to, on the terms and subject to the conditions set forth therein, vote the shares of BOW common stock beneficially owned by him or her in favor of the BOW merger and against any proposal made in competition with the BOW merger, as well as certain other customary restrictions with respect to the voting and transfer of his or her shares of BOW common stock.

The foregoing description of the BOW voting agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the BOW voting agreements, a form of which is included as Exhibit A to the BOW merger agreement attached to this proxy statements/prospectus as Appendix B.

Shares Held by Directors and Executive Officers

As of the BOW record date, BOW’s directors and executive officers and their affiliates beneficially owned and were entitled to vote, in the aggregate, a total of [●] shares of BOW common stock (excluding shares issuable upon the exercise of outstanding options or warrants), representing approximately [●]% of the outstanding shares of BOW common stock entitled to vote at the BOW special meeting. For more information about the beneficial ownership of BOW common stock by each greater than 5% beneficial owner of BOW common stock, each director and executive officer of BOW and all BOW directors and executive officers as a group, see the section titled “Security Ownership of Certain Beneficial Owners and Management of BOW.”

Solicitation of Proxies

The proxy for the BOW special meeting is being solicited on behalf of the BOW board of directors. BOW will bear the entire cost of soliciting proxies from you. BOW will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of BOW common stock. Proxies will be solicited principally by mail, but may also be solicited by the directors, officers, and other employees of BOW in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees will receive no compensation for these activities in addition to their regular compensation, but may be reimbursed for out-of-pocket expenses in connection with such solicitation. No person is authorized to give any information or to make any representation not contained in this proxy statements/prospectus and, if given or made, such information or representation should not be relied upon as having been authorized by BOW, FCB, FNBM, CapStar, CapStar Bank, or any other person.

Attending the BOW Special Meeting

All holders of BOW common stock, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the BOW special meeting. Shareholders of record can vote in person at the BOW special meeting. If you are not a shareholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the BOW special meeting. If you plan to attend the BOW special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. BOW reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the BOW special meeting is prohibited without BOW’s express written consent.

 

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Questions and Additional Information

If you have more questions about the BOW merger or how to submit your proxy or vote, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card or voting instructions, please contact BOW at:

The Bank of Waynesboro

201 South Main Street

Waynesboro, Tennessee 38485

Telephone: (931) 722-2265

Attention: William (“Bill”) Bryant

 

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BOW PROPOSALS

PROPOSAL NO. 1: BOW MERGER PROPOSAL

BOW is asking its shareholders to approve the BOW merger agreement. Holders of BOW common stock should read this proxy statements/prospectus carefully and in its entirety, including the appendixes to and the documents incorporated by reference into this proxy statements/prospectus, for more detailed information concerning the BOW merger agreement and the transactions contemplated by the BOW merger agreement, including the BOW merger. A copy of the BOW merger agreement is attached to this proxy statements/prospectus as Appendix B.

The BOW board of directors (based on the recommendation of the BOW special committee) has determined that the BOW merger agreement and the transactions contemplated by the BOW merger agreement are advisable and fair to and in the best interests of BOW and its shareholders (including the BOW minority shareholders) and has approved the BOW merger agreement.

The BOW board of directors (based on the recommendation of the BOW special committee) recommends a vote “FOR” the BOW merger proposal. See the section titled “The Mergers—Recommendation of the BOW Board of Directors and BOW’s Reasons for the BOW Merger” for a more detailed discussion of the recommendation of the BOW board of directors.

PROPOSAL NO. 2: BOW ADJOURNMENT PROPOSAL

The BOW special meeting may be adjourned to another time or place, if necessary or appropriate, including for the purpose of permitting further solicitation of proxies if necessary to obtain additional votes in favor of the BOW merger proposal.

If at the BOW special meeting the number of shares of BOW common stock represented in person or by proxy and voting in favor of the BOW merger proposal is insufficient to approve such proposal, BOW intends to move to adjourn the BOW special meeting in order to solicit additional proxies for the approval of the BOW merger proposal. Additionally, in accordance with applicable law, in the absence of a quorum, the BOW special meeting may be adjourned from time to time by the vote of a majority of the shares represented in person or by proxy and entitled to vote at the BOW special meeting.

In this proposal, BOW is asking its shareholders to authorize the holder of any proxy solicited by the BOW board of directors on a discretionary basis to vote in favor of adjourning the BOW special meeting to another time or place, if necessary or appropriate, including for the purpose of permitting the solicitation of additional proxies in favor of approval of the BOW merger proposal, including the solicitation of proxies from BOW shareholders who have previously voted against the BOW merger proposal.

Except as required by the Tennessee Business Corporation Act, the BOW board of directors is not required to fix a new record date to determine those BOW shareholders entitled to vote at any adjourned BOW special meeting. At an adjourned BOW special meeting, any business may be transacted which might have been transacted at the BOW special meeting at which the adjournment was taken. If the BOW board of directors does not fix a new record date, it is not necessary to give any notice of the time and place of the adjourned BOW special meeting other than an announcement at the BOW special meeting at which the adjournment is taken, unless the adjournment is for more than four months after the date fixed for the original BOW special meeting. If a new record date is fixed, notice of the adjourned BOW special meeting must be given as in the case of the original BOW special meeting.

The BOW board of directors recommends a vote “FOR” the BOW adjournment proposal.

 

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THE MERGERS

Terms of the FCB Merger

Each of the CapStar board of directors and the FCB board of directors has approved the FCB merger agreement. The FCB merger agreement provides for the merger of FCB with and into CapStar, with CapStar continuing as the surviving corporation. Immediately following the completion of the FCB merger, The First National Bank of Manchester will merge with and into CapStar Bank, with CapStar Bank continuing as the surviving entity.

In the FCB merger, each share of FCB common stock issued and outstanding immediately prior to the completion of the FCB merger (other than the FCB excluded shares) will be converted into the right to receive the per share FCB merger consideration, subject to certain pre-closing adjustments pursuant to the terms of the FCB merger agreement. See the sections titled “The FCB Merger Agreement—FCB Merger Consideration Adjustments” for a discussion of these adjustments to the FCB merger consideration.

CapStar will not issue any fractional shares of CapStar common stock in the FCB merger. Instead, an FCB shareholder who otherwise would have received a fraction of a share of CapStar common stock will receive an amount in cash rounded to the nearest whole cent. This cash amount will be determined by multiplying the fraction of a share of CapStar common stock to which the holder would otherwise be entitled by the CapStar average closing price.

FCB shareholders are being asked to approve the FCB merger agreement. See the section titled “The FCB Merger Agreement” for additional and more detailed information regarding the legal documents that govern the FCB merger, including information about the conditions to the completion of the FCB merger and the provisions for terminating or amending the FCB merger agreement.

Terms of the BOW Merger

Each of the CapStar board of directors, CapStar Bank board of directors and the BOW board of directors (at the recommendation of the BOW special committee) has approved the BOW merger agreement. The BOW merger agreement provides for the merger of BOW with and into CapStar Bank, with CapStar Bank continuing as the surviving bank, as soon as practicable following the FCB merger.

In the BOW merger, each share of BOW common stock issued and outstanding immediately prior to the completion of the BOW merger held by the BOW minority shareholders (other than the BOW excluded shares) will be converted into the right to receive the per share BOW merger consideration, subject to certain pre-closing adjustments pursuant to the terms of the BOW merger agreement. See the section titled “The BOW Merger Agreement—BOW Merger Consideration Adjustments” for a discussion of these adjustments to the BOW merger consideration.

CapStar will not issue any fractional shares of CapStar common stock in the BOW merger. Instead, a BOW shareholder who otherwise would have received a fraction of a share of CapStar common stock will receive an amount in cash rounded to the nearest whole cent. This cash amount will be determined by multiplying the fraction of a share of CapStar common stock to which the holder would otherwise be entitled by the CapStar average closing price.

BOW shareholders are being asked to approve the BOW merger agreement. See the section titled “The BOW Merger Agreement” for additional and more detailed information regarding the legal documents that govern the BOW merger, including information about the conditions to the completion of the BOW merger and the provisions for terminating or amending the BOW merger agreement.

 

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Background of the Mergers

As part of the ongoing oversight and management of their respective companies, the FCB board of directors and the BOW board of directors have periodically reviewed and assessed their respective company’s strategic opportunities and challenges and considered ways to enhance their respective company’s performance and prospects in light of competitive, regulatory, and other relevant developments, all with the goal of enhancing shareholder value. The board of directors of each company routinely reviews and assesses the state of the banking industry generally, including the economic, interest rate, and regulatory environment; the competitive landscape for community banks; and bank merger and acquisition activity. For each company, these reviews have included periodic discussions with respect to strategic alternatives, including partnering with another financial institution and remaining independent and the prospects of doing so, including the likelihood of profitable growth under current economic and competitive conditions and in light of increasing regulatory costs that disproportionately burden smaller banks like FNBM and BOW.

In early 2018, FCB received two unsolicited expressions of interest with regard to a potential acquisition of FCB. As a result, each of the FCB board of directors and the BOW board of directors began to discuss exploring different market opportunities that might be available to FCB and BOW, respectively, including a potential transaction involving the merger of FCB with or the sale of FCB to another financial institution, inclusive of FCB’s interest in BOW and potentially the BOW minority interest.

Starting in June 2018, FCB and BOW, with the assistance of their financial adviser, ProBank Austin, and legal adviser, Butler Snow LLP (which we refer to as “Butler Snow”), solicited interest from several parties (including CapStar) about a possible acquisition of or other business combination transaction involving FCB and BOW. A number of potential transaction partners (including CapStar and two other financial institutions, which we refer to as “Bank A” and “Bank B”) submitted nonbinding indications of interest. FCB and BOW subsequently engaged in discussions with Bank A concerning a potential acquisition of FCB and BOW by Bank A but did not reach agreement with Bank A and ultimately determined not to proceed with a transaction.

Subsequently, FCB and BOW had discussions with several parties, including CapStar, regarding a potential transaction, but none of the discussions advanced beyond the preliminary stage.

On August 16, 2019, “Bank B” submitted to ProBank Austin a revised nonbinding indication of interest outlining the terms of a proposed transaction in which Bank B would acquire FCB and the BOW minority interest for cash and stock consideration then valued in the aggregate at approximately $87.0 million. Subsequently, FCB and BOW executed a negotiated nonbinding indication of interest with Bank B on these terms, which provided for exclusivity through October 31, 2019.

On November 8, 2019, CapStar submitted to FCB an unsolicited nonbinding indication of interest outlining the terms of a proposed transaction in which CapStar would acquire FCB and the BOW minority interest for an aggregate consideration of $90 - $93 million, with up to 40% of the consideration to be in cash and the remainder in the form of CapStar common stock, subject to the satisfactory completion of diligence.

During the period from FCB’s receipt of the CapStar November 8, 2019 nonbinding indication of interest to December 3, 2019, members of the board of directors and management of FCB, FNBM, and BOW, assisted by FCB’s and BOW’s legal and financial advisors, continued to consider, discuss, and evaluate both the ongoing transaction with Bank B and the proposal from CapStar, respectively.

On November 15, 2019, FCB, FNB, BOW, CapStar, and CapStar Bank entered into a customary mutual confidentiality agreement.

On November 16, 2019, ProBank Austin, on behalf of FCB and BOW, granted access to the electronic data room containing information about FCB, FNBM, and BOW to CapStar, its legal advisor, Wachtell, Lipton,

 

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Rosen & Katz (which we refer to as “Wachtell”), and its financial advisor, Keefe Bruyette & Woods (which we refer to as “KBW”). During the week of November 18, 2019, representatives of CapStar conducted in-person diligence meetings with representatives of FCB and BOW in Columbia, Tennessee, and Murfreesboro, Tennessee.

On November 19, 2019, the FCB board of directors, along with representatives from Butler Snow and ProBank Austin, met with representatives of CapStar and received a presentation about CapStar. Following the departure of CapStar representatives from the meeting, the FCB board of directors discussed generally the status of a potential transaction with Bank B as well as the prospects for a transaction with CapStar.

On November 21, 2019, the CapStar board of directors held a regularly scheduled meeting to discuss and review, among other things, a possible merger with FCB and BOW. The CapStar board of directors received an

update from CapStar management, KBW and Wachtell on the progress made on the potential transaction with FCB and BOW.

On November 24, 2019 and November 27, 2019, senior members of the management teams of CapStar, FCB and BOW met to discuss the potential acquisition of FCB and BOW by CapStar.

On December 3, 2019, CapStar submitted to FCB a revised nonbinding indication of interest outlining the terms of a proposed transaction in which CapStar would acquire FCB and the BOW minority interest for aggregate consideration consisting of 3,634,218 shares of CapStar common stock and $26.4 million in cash, subject to certain adjustments and the satisfactory completion of diligence and confirmation of certain assumptions. The nonbinding indication of interest also indicated that FCB and BOW shareholders would be permitted to elect either cash or stock consideration, subject to not more than 30% of the aggregate consideration being in the form of cash.

In December 2019, the chairman of the FCB board of directors and the then-chairman of the BOW board of directors contacted the president and chief executive officer of Bank B to inform him that FCB and BOW intended to explore an alternative business combination transaction with another party.

During the period from December 11, 2019 to January 23, 2020, representatives from FCB and BOW, assisted by FCB’s and BOW’s legal and financial advisors, and representatives from CapStar, assisted by CapStar’s legal and financial advisors, negotiated the terms of the FCB merger, the FCB merger agreement, and related ancillary documents, and the BOW merger, the BOW merger agreement, and related ancillary documents. Additionally, the parties continued with their respectively previously initiated due diligence reviews of the other.

On December 18, 2019, CapStar submitted to FCB and BOW a revised nonbinding indication of interest outlining the terms of a proposed transaction in which CapStar would acquire FCB and the BOW minority interest. CapStar offered 2,969,418 shares of CapStar common stock and $21.6 million in cash as consideration for the outstanding shares of FCB common stock and offered 664,800 shares of CapStar common stock and $4.8 million in cash as consideration for the BOW minority shares, in each case subject to certain adjustments and the satisfactory completion of diligence and confirmation of certain assumptions. This equated to total, aggregate consideration for FCB and the BOW minority interest of 3,634,218 shares of CapStar common stock and $26.4 million in cash.

On December 19, 2019, at a meeting of the BOW board of directors, the BOW board of directors established the BOW special committee. BOW directors William (“Bill”) Bryant, Harold Pope, and Alton Turnbo, each of whom the BOW board of directors determined was independent and disinterested from FCB, CapStar and CapStar Bank as it related to the proposed transaction with CapStar, were appointed to the BOW special committee. The BOW special committee was generally empowered to review and assess the proposed business combination transaction with CapStar, negotiate the terms of the proposed business combination transaction with CapStar, if and to the extent that the BOW special committee were to determine that the same

 

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was in the best interests of BOW and its shareholders (including the BOW minority shareholders), and recommend to the BOW board of directors the terms, if any, upon which the BOW special committee believed it would be in the best interests of BOW and its shareholders (including the BOW minority shareholders) to enter into definitive agreement for a business combination transaction with CapStar.

On December 20, 2019, the BOW special committee engaged Mercer Capital Management, Inc., which we refer to as “Mercer,” to act as its financial advisor in evaluating a potential business combination transaction with CapStar, including the fairness, from a financial point of view, of any proposed consideration to the BOW minority shareholders.

On December 23, 2019, the BOW special committee met with representaives from Mercer to have preliminary discussions about the proposed CapStar transaction.

On January 21, 2020, the members of the BOW special committee convened for a meeting, which meeting representatives from Mercer and Butler Snow attended in person or by telephone. In advance of this meeting, committee members were provided with information prepared by Mercer with respect to the financial terms of the BOW merger as well as drafts of the relevant transaction documents. At the meeting, Mercer representatives reviewed with the BOW special committee a presentation addressing the financial terms of the BOW merger, including the fairness of the same to the BOW minority shareholders, and provided to the BOW special committee Mercer’s preliminary oral opinion that the consideration to be paid by CapStar to the BOW minority shareholders was fair, from a financial point of view, to the BOW minority shareholders. Also, at this meeting, a representative from Butler Snow discussed with the committee members their fiduciary obligations as members of the committee and reviewed with the committee the terms of, and answered questions of committee members regarding, the BOW merger and the BOW merger agreement. After considering the proposed terms of the BOW merger and the BOW merger agreement and the presentations made to the BOW special committee at the meeting, the BOW special committee resolved to declare the BOW merger agreement and the BOW merger fair to and in the best interests of BOW and its shareholders, including the BOW minority shareholders, and to declare it advisable and in the best interests of BOW and its shareholders, including the BOW minority shareholders, for BOW to enter into the BOW merger agreement; to recommend to the BOW board of directors that the BOW board of directors approve and declare advisable the BOW merger agreement and the BOW merger and recommend to BOW’s shareholders that they approve the BOW merger agreement; and to recommend to the BOW board of directors that the BOW merger be conditioned upon the approval of the BOW merger agreement both (i) by the shareholders of BOW, generally, and (ii) by the affirmative vote of the holders of a majority of the outstanding shares of BOW common stock held by the BOW minority shareholders and entitled to vote on the BOW merger agreement. The voting approval condition had previously been communicated by representatives of CapStar as a necessary, non-waivable precondition to any potential transaction.

Also on January 21, 2020, the FCB board of directors convened for a meeting, which meeting representatives from ProBank Austin and Butler Snow attended in person or by telephone. In advance of this meeting, board members were provided with drafts of the FCB merger agreement, a plan of bank merger providing for the merger of CapStar Bank and FNBM, and related ancillary agreements. At this meeting, management and ProBank Austin provided to the FCB board of directors an update as to the status of the proposed merger with CapStar. A representative from Butler Snow reviewed with the board members their fiduciary duties in the context of the board’s consideration of and decisions and actions with respect to the FCB merger agreement and the FCB merger and reviewed with the board the terms of, and answered questions of board members regarding, the FCB merger, the FCB merger agreement, the proposed merger of CapStar Bank and FNBM and the plan of bank merger providing for the same, and related ancillary agreements, including the form of voting agreement to be executed by FCB board members.

On January 23, 2020, the FCB board of directors convened for a special meeting of the board. This meeting was attended by representatives from Butler Snow and ProBank Austin. In advance of the meeting, board

 

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members were provided with information prepared by ProBank Austin with respect to ProBank Austin’s reverse due diligence review of CapStar and CapStar Bank and the financial terms of the FCB merger, as well as drafts of the FCB merger agreement and related ancillary agreements. At this meeting, a representative from ProBank Austin reviewed with the FCB board of directors the results of ProBank Austin’s reverse due diligence review of CapStar and CapStar Bank. Another ProBank Austin representative then reviewed with the FCB board of directors a presentation addressing the financial terms of the FCB merger and rendered to the FCB board of directors ProBank Austin’s oral opinion (which was subsequently confirmed in writing by ProBank Austin by delivery of its written opinion dated January 23, 2020) to the effect that, as of January 23, 2020, and based upon and subject to the various factors, assumptions, and limitations set forth in the opinion, the experience of ProBank Austin representatives as investment bankers, ProBank Austin’s work as described in the opinion, and other factors ProBank Austin deemed relevant, the per share merger consideration provided for in the FCB merger agreement was fair, from a financial point of view, to the shareholders of FCB. Next, a representative from Butler Snow again reviewed with the FCB board members their fiduciary duties in the context of the board’s consideration of and decisions and actions with respect to the FCB merger and the FCB merger agreement. Additionally, the Butler Snow representative summarized for the FCB board of directors Butler Snow’s due diligence review of CapStar and CapStar Bank and reviewed with the FCB board the revisions that had been made to the FCB merger agreement and other transaction documents since those documents were reviewed with the FCB board on January 21, 2020. After considering the proposed terms of the FCB merger agreement and the FCB merger and the various presentations made to the FCB board of directors by FCB’s financial and legal advisors, and taking into consideration the matters discussed during the meeting and prior meetings of the FCB board of directors, including consideration of the factors described under “—Recommendation of the FCB Board of Directors and FCB’s Reasons for the FCB Merger,” the FCB board of directors determined that the FCB merger agreement and the transactions contemplated by the FCB merger agreement are advisable, fair to and in the best interests of FCB and its shareholders and resolved to adopt and approve the FCB merger agreement, to approve the execution, delivery, and performance of the FCB merger agreement by FCB, and to recommend to FCB’s shareholders that they approve the FCB merger agreement.

On January 23, 2020, the BOW board of directors also convened for a special meeting of the board. This meeting was attended by representatives from Butler Snow and Mercer. In advance of the meeting, BOW board members were provided with information prepared by Mercer with respect to the financial terms of the BOW merger, as well as drafts of the BOW merger agreement and related ancillary agreements. At the meeting, a representative from Mercer reviewed the financial aspects of the proposed BOW merger and rendered to the BOW special committee an oral opinion (subsequently confirmed in writing by Mercer in its written opinion dated January 23, 2020) that, as of January 23, 2020, and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Mercer as set forth in such opinion, the BOW merger consideration to be paid by CapStar to the BOW minority shareholders was fair, from a financial point of view, to the BOW minority shareholders. A representative from Butler Snow reviewed with the BOW board members their fiduciary duties in the context of the BOW board’s consideration of and decisions and actions with respect to the BOW merger agreement and the BOW merger. The Butler Snow representative also summarized for the BOW board of directors Butler Snow’s due diligence review of CapStar and CapStar Bank and reviewed with the BOW board the terms of, and answered questions of the BOW board members regarding, the BOW merger, the BOW merger agreement, and the form of voting agreement to be executed by the BOW board members. After considering the proposed terms of the BOW merger agreement and the BOW merger and the various presentations made to the BOW board of directors by BOW’s advisors, and taking into consideration the matters discussed during the meeting and prior meetings of the BOW board of directors, including consideration of the factors described under “—Recommendation of the BOW Board of Directors and BOW’s Reasons for the BOW Merger,” the BOW board of directors determined that the BOW merger agreement and the transactions contemplated by the BOW merger agreement are advisable and fair to and in the best interests of BOW and its shareholders, including the BOW minority shareholders, and, at the recommendation of the BOW special committee, resolved to adopt and approve the BOW merger agreement, to approve the execution, delivery, and performance of the BOW merger agreement by BOW, to recommend to BOW’s shareholders that they approve the BOW merger agreement, and to condition the consummation of the

 

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transactions contemplated by the BOW merger agreement upon the approval of the BOW merger agreement both (i) by the shareholders of BOW, generally, and (ii) by the affirmative vote of the holders of a majority of the outstanding shares of BOW common stock held by the BOW minority shareholders and entitled to vote on the BOW merger agreement.

Also on January 23, 2020, the board of directors of FNBM (the members of which are the same as the members of the FCB board of directors) adopted and approved a plan of bank merger (which we refer to as the “bank merger agreement”) providing for the merger of FNBM with and into CapStar Bank following the FCB merger and authorized the execution, delivery, and performance of the plan of bank merger by FNBM.

On January 23, 2020, the CapStar and the CapStar Bank boards of directors held a special meeting to review the terms of the FCB merger agreement and the BOW merger agreement. At this meeting, representatives of KBW reviewed the financial aspects of the proposed acquisition of FCB and BOW and representatives of Wachtell then reviewed the fiduciary duties of the directors in the context of this strategic transaction, and summarized and discussed the material terms and conditions set forth in the draft FCB merger agreement and the draft BOW merger agreement. After considering the proposed terms of the FCB merger agreement, the BOW merger agreement and the various presentations of its financial and legal advisors, and taking into consideration the matters discussed during the meeting, the CapStar board of directors unanimously voted to adopt and approve the FCB merger agreement and the BOW merger agreement. At that same meeting, the CapStar Bank board of directors unanimously voted to adopt and approve the bank merger agreement and the BOW merger agreement.

On January 23, 2020, CapStar and FCB executed the FCB merger agreement, and CapStar, CapStar Bank and BOW executed the BOW merger agreement. CapStar issued a press release after the close of the financial markets that day to publicly announce the execution of the FCB merger agreement and the BOW merger agreement.

Recommendation of the FCB Board of Directors and FCB’s Reasons for the FCB Merger

The FCB board of directors has determined that the FCB merger agreement and the transactions contemplated by the FCB merger agreement, including the FCB merger, are in the best interests of FCB and its shareholders. In reaching its determination, the FCB board of directors considered numerous factors affecting the business, operations, financial condition, earnings, and future prospects of FCB, including the positive and negative factors described elsewhere in this proxy statements/prospectus. In reaching their conclusion, the members of the FCB board of directors relied on, among other things, their personal knowledge of FCB, CapStar, and the banking industry, information provided by senior management of FCB and FNBM, and their evaluation of the FCB merger agreement and FCB merger in consultation with senior management of FCB and FNBM and FCB’s legal and financial advisors.

The FCB board of directors considered numerous factors, including, among other things, the factors set forth below, which are not intended to be exhaustive and are not presented in any relative order of importance. In reviewing these factors, the FCB board of directors considered its view that CapStar’s financial condition and asset quality are sound, that CapStar’s business and operations complement those of FCB, and that the transactions contemplated by the FCB merger agreement, including the FCB merger, would result in a combined company with a larger market presence and more diversified revenue stream and a well-balanced loan portfolio. The FCB board of directors further considered that CapStar’s earnings and prospects, and the synergies potentially available in the FCB merger, create the opportunity for the combined company to have superior future earnings and prospects compared to FCB’s earnings and prospects on a stand-alone basis. In particular, the FCB board of directors considered the following:

 

   

the business strategy and strategic plan of FCB, its prospects for the future, and its projected financial results;

 

   

a review of the risks and prospects of FCB remaining independent, including the challenges of the current financial, operating, and regulatory environment;

 

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FCB’s stand-alone financial projections, which estimated that FCB would not generate through organic growth a level of shareholder value comparable to that expected to be created in connection with the FCB merger;

 

   

FCB management’s assessment of the execution risks involved in attaining the performance levels assumed by FCB’s financial projections;

 

   

the anticipated costs and necessary investments associated with continuing to develop and enhance FCB’s and its subsidiaries’ business capabilities;

 

   

the purchase price per share of FCB common stock to be paid by CapStar as consideration for the FCB merger and the valuation multiples implied by this per share purchase price;

 

   

the employment prospects for employees of FCB and its subsidiaries within a larger combined company;

 

   

the favorable results of FCB’s due diligence investigation of CapStar;

 

   

FCB’s and CapStar’s shared corporate values and commitment to serve their customers and communities;

 

   

CapStar’s historical financial condition and results of operations;

 

   

the perceived ability of CapStar to complete the FCB merger and the BOW merger from a business, financial, and regulatory perspective;

 

   

the fact that the proposed transaction would combine three established banking franchises to create a well-positioned community bank with total consolidated assets of approximately $2.5 billion;

 

   

the scale, scope, strength, and diversity of operations, product lines, and delivery systems that could be achieved by the combined company;

 

   

the complimentary geographic dispersion of FNBM’s and BOW’s branch offices compared to CapStar’s current branch network;

 

   

the FCB board of directors’ favorable view of the likelihood of successful integration of the business of FNBM and BOW with that of CapStar Bank;

 

   

the expanded possibilities, including organic growth and future acquisitions, that would be available to the combined company given its larger size, asset base, capital, lending capacity, and footprint;

 

   

the FCB board of directors’ understanding of the current and prospective environment in which FCB operates, including national and local economic conditions, the interest rate environment, operating costs resulting from regulatory initiatives and compliance mandates, the competitive environment for financial institutions generally, and the likely effect of these factors on FCB both as a standalone company and assuming a merger with CapStar;

 

   

the fact that FCB’s shareholders will have a chance to vote on the FCB merger agreement;

 

   

the FCB board of directors’ favorable view of the likelihood that the regulatory approvals necessary to complete the proposed transactions will be obtained;

 

   

the ability of the FCB board of directors to change its recommendation that FCB shareholders vote in favor of approval of the FCB merger agreement, subject to the terms and conditions set forth in the FCB merger agreement;

 

   

the financial information and analyses presented by ProBank Austin to the FCB board of directors, and the opinion, dated January 23, 2020, delivered by ProBank Austin to the FCB board of directors to the

 

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effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations of the review undertaken by ProBank Austin in connection with the opinion, the per share merger consideration provided for in the FCB merger agreement was fair, from a financial point of view, to the shareholders of FCB; and

 

   

the fact that the FCB merger is expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for federal income tax purposes.

The FCB board of directors also considered several potential risks and uncertainties with respect to the FCB merger, including without limitation the following:

 

   

the challenges of integrating FCB’s and its subsidiaries’ business, operations, and employees with those of CapStar and its subsidiaries;

 

   

the risk that regulatory and other approvals required to complete the proposed transactions will not be received in a timely manner, or at all, or may contain burdensome conditions;

 

   

the risks and costs associated with entering into the FCB merger agreement and the restrictions in the FCB merger agreement on the conduct of FCB’s and its subsidiaries’ business before the FCB merger is completed, which could delay or prevent FCB or its subsidiaries from undertaking business opportunities that may arise pending completion of the FCB merger;

 

   

the form and amount of the FCB merger consideration, including the increased volatility associated with stock consideration and the risk that the consideration to be paid to FCB shareholders could be adversely affected by a decrease in the trading price of CapStar common stock during the pendency of the FCB merger;

 

   

the fact that a termination fee of $2.8 million would have to be paid by FCB to CapStar if the FCB merger agreement is terminated under certain circumstances described in the FCB merger agreement and discussed further under the section titled “The FCB Merger Agreement—Termination Fee”;

 

   

the possibility that certain provisions of the FCB merger agreement prohibiting FCB from soliciting, and limiting its ability to respond to, proposals with respect to alternative transactions could have the effect of discouraging an alternative acquisition proposal;

 

   

the potential costs associated with consummating the transactions contemplated by the FCB merger agreement, including contract termination fees and expenses, personnel costs, and fees of legal, financial, and other advisors;

 

   

the potential for diversion of management and employee attention, and for employee attrition, during the pendency of the FCB merger, and the potential corresponding effect on FCB’s and its subsidiaries’ business and relations with customers, service providers, and other stakeholders, regardless whether the FCB merger is completed;

 

   

the possibility of litigation relating to the FCB merger;

 

   

the interests of certain of FCB’s and FNBM’s directors and executive officers in the FCB merger that are different from or in addition to those of FCB shareholders generally, as more fully described under the section titled “—Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger”; and

 

   

the possibility that the FCB merger may not be completed, or that completion of the FCB merger may be delayed, for reasons beyond the control of FCB or CapStar.

The foregoing discussion of information and factors considered by the FCB board of directors is not intended to be exhaustive. In reaching its determination to adopt the FCB merger agreement and recommend that FCB’s shareholders approve the FCB merger agreement, the FCB board of directors considered the totality of the information presented to it and did not consider it practicable to, and did not, quantify or otherwise assign

 

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any relative or specific weights to any of the individual factors considered, although individual directors applied their own personal judgement to the process and may have given different weights to different factors. The FCB board of directors considered all of the information and factors presented, including the potential risks, uncertainties, and disadvantages associated with the FCB merger, in the aggregate rather than separately and determined the benefits of the FCB merger to outweigh the potential risks, uncertainties, and disadvantages associated with the FCB merger and to be favorable to and support its determination.

This discussion of the FCB board of directors’ reasoning and all other information presented in this section are forward-looking in nature and, therefore, should be read in the context of the factors discussed under “Cautionary Statement Concerning Forward-Looking Statements.”

The FCB board of directors determined that the FCB merger agreement and the transactions contemplated thereby are advisable and in the best interests of FCB and its shareholders and has adopted the FCB merger agreement and approved the transactions, including the FCB merger, contemplated thereby. The FCB board of directors recommends that FCB shareholders vote “FOR” approval of the FCB merger agreement and “FOR” approval of the FCB adjournment proposal.

Opinion of FCB’s Financial Advisor

On June 26, 2018, FCB retained ProBank Austin to serve as its exclusive financial advisor in connection with evaluating and implementing a potential transaction involving the sale or merger of FCB and its wholly owned subsidiary The First National Bank of Manchester, Manchester, Tennessee, and its 50.56% majority ownership in The Bank of Waynesboro, Waynesboro, Tennessee. ProBank Austin is an investment banking and consulting firm specializing in community bank mergers and acquisitions. FCB selected ProBank Austin as its financial advisor on the basis of its experience and expertise in representing community banks in similar transactions and its familiarity with FCB.

In its capacity as financial advisor, ProBank Austin rendered a fairness opinion to the board of directors of FCB in connection with the board’s consideration and evaluation of the FCB merger agreement and the transactions contemplated thereby. At the meeting of the FCB board of directors held on January 23, 2020, ProBank Austin rendered its oral opinion (which was subsequently confirmed in writing by ProBank Austin’s delivery of its written opinion dated January 23, 2020) that, based upon and subject to the various factors, assumptions, and limitations set forth in such opinion, the experience of ProBank Austin representatives as investment bankers, ProBank Austin’s work as described in such opinion, and other factors ProBank Austin deemed relevant, as of such date, the per share merger consideration provided for in the FCB merger agreement was fair, from a financial point of view, to the shareholders of FCB. We refer to the ProBank Austin written opinion, dated January 23, 2020, as the “ProBank Austin opinion.”

The full text of the ProBank Austin opinion, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and limitations on the review undertaken in rendering its opinion, is attached as Appendix C to this proxy statements/prospectus and is incorporated herein by reference. The summary of the ProBank Austin opinion set forth herein is qualified in its entirety by reference to the full text of the opinion. FCB shareholders should read the full text of the opinion carefully and in its entirety. The ProBank Austin opinion is addressed to the FCB board of directors, is directed only to the fairness, from a financial point of view, of the per share merger consideration provided for in the FCB merger agreement to the holders of FCB common stock, and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the FCB merger.

The ProBank Austin opinion was reviewed and approved by the fairness opinion committee of ProBank Austin. ProBank Austin provided its oral opinion to the FCB board of directors on January 23, 2020, in connection with and for the purposes of the FCB board of directors’ evaluation of the FCB merger agreement and the transactions contemplated thereby. ProBank Austin expressed no view or opinion as to any of the legal,

 

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accounting, or tax matters relating to the FCB merger or any other transactions contemplated by the FCB merger agreement or any terms or other aspects of the FCB merger agreement or the FCB merger. ProBank Austin expressed no opinion as to the fairness of any consideration paid or to be paid in connection with the FCB merger to the holders of any other class of securities, creditors, or other constituencies of FCB or as to the underlying decision by FCB to engage in the FCB merger or enter into the FCB merger agreement. ProBank Austin did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the FCB merger by FCB officers, directors, or employees, or any class of such persons, relative to the consideration to be received in the FCB merger by the holders of FCB common stock.

The description of the ProBank Austin opinion set forth below is qualified in its entirety by reference to the full text of the opinion. You should consider the following when reading the discussion of the ProBank Austin opinion in this document:

 

   

The opinion letter details the procedures followed, assumptions made, matters considered, and qualifications and limitations of the review undertaken by ProBank Austin in connection with its opinion, and should be read in its entirety;

 

   

ProBank Austin expressed no opinion as to the price at which FCB’s or CapStar’s common stock would actually trade at any given time;

 

   

The ProBank Austin opinion does not address the relative merits of the FCB merger and the other business strategies considered by FCB’s board of directors, nor does it address the board’s decision to proceed with the FCB merger; and

 

   

The ProBank Austin opinion does not constitute a recommendation to any FCB shareholder as to how the shareholder should vote at the FCB special meeting.

The preparation of a fairness opinion involves various determinations as to the most appropriate methods of financial analysis and the application of those methods to the particular circumstances. It is, therefore, not readily susceptible to partial analysis or summary description. In performing its analyses, ProBank Austin made numerous assumptions with respect to industry performance, business and economic conditions, and other matters, many of which are beyond the control of FCB and CapStar and may not be realized. Any estimates contained in ProBank Austin’s analyses are not necessarily predictive of future results or values which may be significantly more or less favorable than the estimates. Estimates of values of companies do not purport to be appraisals or necessarily reflect the prices at which the companies or their securities may actually be sold. Unless specifically noted, none of the analyses performed by ProBank Austin was assigned a greater significance by ProBank Austin than any other. The relative importance or weight given to these analyses is not affected by the order of the analyses or the corresponding results. The summaries of financial analyses include information presented in tabular format. The tables should be read together with the text of those summaries.

With respect to projections and estimates for FCB and CapStar, and the expected transaction costs, purchase accounting adjustments, and cost savings, ProBank Austin relied on its knowledge and experience with FCB and familiarity with the markets in which it operates in the preparation of FCB future earnings projections which FCB management confirmed were reasonable. ProBank Austin utilized 2020 and 2021 consensus earnings estimates for CapStar from the equity analysts which cover CapStar in its analyses regarding future performance of CapStar. ProBank Austin assumed that such performance would be achieved. ProBank Austin expresses no opinion as to such financial projections and estimates or the assumptions on which they are based. ProBank Austin also assumed that there has been no material change in FCB’s or CapStar’s assets, financial condition, results of operations, business, or prospects since the date of the most recent financial statements made available to ProBank Austin. ProBank Austin assumed in all respects material to its analyses that FCB and CapStar will remain as going concerns for all periods relevant to the analyses, that all of the representations and warranties contained in the FCB merger agreement are true and correct, that each party to the FCB merger agreement will perform all of the covenants required to be performed by such party under the FCB merger agreement, and that the closing conditions in the FCB merger agreement will not be waived. Finally, ProBank Austin relied upon the

 

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advice FCB received from its legal, accounting, and tax advisors (to the extent made know to ProBank Austin) as to all legal, accounting, and tax matters relating to the FCB merger and the other transactions contemplated by the FCB merger agreement.

ProBank Austin relied, without independent verification, upon the accuracy and completeness of the information it reviewed for the purpose of rendering its opinion. ProBank Austin did not undertake any independent evaluation or appraisal of the assets and liabilities of FCB or CapStar, nor was it furnished with any appraisals. ProBank Austin did not review any individual credit files of FCB or CapStar and assumed that FCB’s and CapStar’s loan loss allowances are, in the aggregate, adequate to cover inherent credit losses. The ProBank Austin opinion is based on economic, market, and other conditions and consideration as existing and as they could be evaluated on the date of the opinion. Events occurring after the date of the ProBank Austin opinion, including, but not limited to, changes affecting the securities markets or the results of operations of either CapStar or FCB, or material changes in the financial condition of either CapStar or FCB, could materially affect the assumptions used in preparing the ProBank Austin opinion. No limitations were imposed by FCB’s board of directors or its management on ProBank Austin with respect to the investigations made or the procedures followed by ProBank Austin in rendering its opinion.

In rendering its opinion, ProBank Austin made the following assumptions:

 

   

all material governmental, regulatory, and other consents and approvals necessary for the consummation of the FCB merger would be obtained without any adverse effect on FCB, CapStar, or the anticipated benefits of the FCB merger;

 

   

FCB and CapStar have provided all of the information that might be material to ProBank Austin in its review; and

 

   

any financial projections it reviewed were reasonably prepared on a basis reflecting the best currently available estimates and judgment of the management of FCB and CapStar as to the future operating and financial performance of FCB and CapStar, respectively.

In connection with its opinion, ProBank Austin reviewed:

 

  (i)

the execution version of the FCB merger agreement, dated as of January 23, 2020;

 

  (ii)

certain publicly available financial statements and other historical financial information of CapStar, FCB, FNBM, and BOW deemed relevant as filed by CapStar, FCB, FNBM, and BOW with the SEC (in the case of CapStar), FDIC, OCC (in the case of FNBM), and Federal Reserve;

 

  (iii)

information communicated to ProBank Austin by senior management of FCB regarding the estimated and projected financial performance and earnings potential of FCB for the year ending December 31, 2020, together with estimated long-term annual earnings growth rates and dividends per share for FCB;

 

  (iv)

information communicated to ProBank Austin by representatives of CapStar regarding the estimated and projected financial performance and earnings potential of CapStar for the year ending December 31, 2020, together with estimated long-term annual earnings growth rates and dividends per share for CapStar;

 

  (v)

the estimated pro forma financial impact of the FCB merger and the BOW merger on CapStar, based on assumptions relating to transaction expenses and acquisition accounting adjustments;

 

  (vi)

publicly reported historical stock price and trading activity for CapStar common stock, including an analysis of certain stock trading information of certain other publicly traded companies deemed comparable to CapStar;

 

  (vii)

a comparison of certain financial information for FCB, BOW, and CapStar with that of similar institutions for which comparable information is publicly available;

 

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  (viii)

the financial terms of certain recent business combinations in the commercial banking industry, to the extent publicly available, deemed comparable to the FCB merger and BOW merger;

 

  (ix)

the current market environment generally and the banking environment in particular; and

 

  (x)

such other information, financial studies, analyses and investigations, and financial, economic, and market criteria ProBank Austin considered relevant.

ProBank Austin also discussed with certain members of senior management of FCB the business, financial condition, results of operations, and prospects of FCB, including certain operating, regulatory, and other financial matters. ProBank Austin held similar discussions with senior management of CapStar regarding the business, financial condition, results of operations, and prospects of CapStar.

The following is a summary of the material factors considered and analyses performed by ProBank Austin in connection with the ProBank Austin opinion. This summary does not purport to be a complete description of the analyses performed by ProBank Austin.

Summary of Financial Terms of Agreement. The financial terms of the FCB merger agreement provide for 100% of the issued and outstanding common stock of FCB to be converted into and exchanged for the right to receive (i) $21,570,701 in cash (which we refer to as the “FCB cash consideration”) and (ii) 2,969,418 shares of CapStar common stock (which we refer to as the “FCB stock consideration”), or approximately 13.70429 shares of CapStar common stock and $99.55 in cash per FCB common share based on 216,678 shares of FCB common stock issued and outstanding (which we refer to as the “FCB per share merger consideration”). However, the FCB cash consideration will be reduced dollar for dollar on an after-tax basis in an amount equal to any negative difference between: (a) total estimated net pre-tax expenses/adjustments of $1,943,000 and (b) an amount equal to the sum of certain adjustments related to the proceeds of sales of certain equity interests by FCB, BOW, and their subsidiaries, real estate valuations, and transaction expenses. Further, the FCB cash consideration will be increased by 50% of the dollar amount of any positive difference between (a) and (b) above on an after-tax basis. Fractional shares will not be issued, but, in lieu thereof, will be settled in cash based on the volume-weighted average closing price of CapStar common stock as reported on NASDAQ for the ten (10) consecutive full trading days ending on and including the trading day prior to the closing date of the FCB merger.

Based on 216,678 common shares of FCB outstanding as of January 23, 2020, and the closing price for CapStar’s common stock on January 17, 2020, of $16.26 per share, the implied transaction value per share equaled $322.38 and the aggregate transaction value approximated $69.9 million (calculated by multiplying the per share transaction value of $322.38 by the total number of FCB common shares outstanding as of January 23, 2020, or 216,678). ProBank Austin calculated that the implied transaction value of $322.38 per share represented:

 

   

141% of FCB’s December 31, 2019 tangible book value per share; and

 

   

13.41 times FCB’s December 31, 2019 last twelve months core earnings per share.

The FCB merger agreement further provides that FCB has the right to terminate the agreement in the event that both (i) the number obtained by dividing (A) (x) 2,969,418 multiplied by the volume-weighted average closing price of CapStar common stock as reported on the NASDAQ for the ten consecutive full trading days ending on and including the trading day prior to the fifth day prior to the closing date of the FCB merger (or if the fifth day before the closing date is not a trading day for CapStar common stock, the date immediately preceding the fifth day before the closing date on which shares of CapStar common stock actually trade on the NASDAQ) (which date we refer to as the “FCB determination date”) plus (y) 21,570,701 by (B) 69,526,801.70 (which we refer to as the “FCB parent ratio”) is less than 0.85; and (ii) (1) the FCB parent ratio is less than (2) the number obtained by dividing the average of the closing prices of the NASDAQ Bank Index during the ten consecutive full trading days ending on and including the trading day prior to the FCB determination date by the closing price of the NASDAQ Bank Index on the last trading day immediately preceding the date of the first

 

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public announcement of the FCB merger agreement (which we refer to as the “FCB index ratio”) and subtracting 0.15 from the FCB index ratio. CapStar can cure FCB’s termination right by increasing either the FCB stock consideration or FCB cash consideration such that the total FCB merger consideration equals $69,526,801.70.

CapStar Bank Peer Analysis. ProBank Austin compared selected results of CapStar’s operating performance and market trading characteristics to that of 28 selected NASDAQ traded commercial banks headquartered throughout the United States with total assets between $1.0 billion and $5.0 billion, which like CapStar had a year-to-date core return on average assets (“ROAA”) between 1.0% and 1.5%, tangible common equity to tangible asset ratio greater than 10.0%, and non-performing assets plus loans 90+ days past due and still accruing to total asset ratio of less than 1.00%. ProBank Austin considered this group of financial institutions comparable to CapStar based on these financial performance metrics. This peer group consisted of the following banks:

 

Bank Name

  Ticker   State  

Bank Name

  Ticker   State

Ames National Corporation

  ATLO   IA   Level One Bancorp, Inc.   LEVL   MI

Atlantic Capital Bancshares, Inc.

  ACBI   GA   MainStreet Bancshares, Inc.   MNSB   VA

Bank of Marin Bancorp

  BMRC   CA   Meridian Corporation   MRBK   PA

BayCom Corp

  BCML   CA   National Bankshares, Inc.   NKSH   VA

Bridgewater Bancshares, Inc.

  BWB   MN   Norwood Financial Corp.   NWFL   PA

Business First Bancshares, Inc.

  BFST   LA   OP Bancorp   OPBK   CA

CBTX, Inc.

  CBTX   TX   Peoples Bancorp of NC, Inc.   PEBK   NC

Central Valley Community Bancorp

  CVCY   CA   Peoples Financial Services Corp.   PFIS   PA

Coastal Financial Corporation

  CCB   WA   RBB Bancorp   RBB   CA

Eagle Bancorp Montana, Inc.

  EBMT   MT   Red River Bancshares, Inc.   RRBI   LA

Fidelity D & D Bancorp, Inc.

  FDBC   PA   SB Financial Group, Inc.   SBFG   OH

First Mid Bancshares, Inc.

  FMBH   IL   Sierra Bancorp   BSRR   CA

FVCBankcorp, Inc.

  FVCB   VA   Silvergate Capital Corporation   SI   CA

LCNB Corp.

  LCNB   OH   Southern National Bancorp of VA, Inc.   SONA   VA

 

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ProBank Austin noted the following selected financial measures for the peer group as compared to CapStar:

 

Ticker

   State    Total Assets
YTD
     Tang. Equity /
Tang. Assets
YTD
     Core
ROAA
YTD
     Core
ROAE
YTD
     Efficiency
Ratio YTD
     NPAS + 90
PD / Assets
YTD
     Price Per
Share
01/17/2020
 

ATLO

   IA      1,499,976        11.70        1.21        9.82        54.60        0.36        27.13  

ACBI

   GA      2,410,198        12.80        1.12        8.74        55.95        0.77        17.92  

BMRC

   CA      2,592,071        11.65        1.37        10.70        55.08        0.48        44.43  

BCML

   CA      1,770,710        11.96        1.39        10.23        55.87        0.30        22.55  

BWB

   MN      2,232,339        10.43        1.44        13.07        46.12        0.05        13.17  

BFST

   LA      2,220,840        10.39        1.19        9.28        61.98        0.74        24.73  

CBTX

   TX      3,431,585        13.13        1.43        9.38        58.82        0.28        31.23  

CVCY

   CA      1,584,127        11.60        1.13        7.82        63.25        0.26        20.78  

CCB

   WA      1,090,060        11.05        1.25        10.97        62.79        0.12        17.33  

EBMT

   MT      1,022,221        10.14        1.31        11.54        69.09        0.37        22.50  

FDBC

   PA      1,011,424        10.34        1.21        11.94        62.08        0.55        61.00  

FMBH

   IL      3,837,729        10.50        1.43        11.00        56.18        0.75        34.86  

FVCB

   VA      1,565,196        10.72        1.16        9.92        55.28        0.91        16.89  

LCNB

   OH      1,644,447        10.27        1.19        8.74        63.30        0.64        18.15  

LEVL

   MI      1,509,463        10.55        1.04        9.70        68.05        0.85        25.38  

MNSB

   VA      1,234,276        10.79        1.20        10.88        56.71        0.23        22.96  

MRBK

   PA      1,126,937        10.04        1.06        9.40        77.76        0.61        20.37  

NKSH

   VA      1,272,721        14.22        1.33        9.08        54.33        0.60        42.11  

NWFL

   PA      1,215,856        10.24        1.16        10.82        58.46        0.24        37.15  

OPBK

   CA      1,151,934        11.91        1.42        11.58        60.80        0.29        9.90  

PEBK

   NC      1,223,199        10.85        1.30        11.03        69.57        0.27        30.45  

PFIS

   PA      2,372,699        10.01        1.21        9.80        60.25        0.49        49.70  

RBB

   CA      2,820,302        11.98        1.38        10.13        49.31        0.39        20.71  

RRBI

   LA      1,938,854        12.59        1.28        10.90        59.84        0.50        55.29  

SBFG

   OH      1,042,761        10.07        1.11        8.51        71.26        0.44        19.16  

BSRR

   CA      2,635,960        10.39        1.41        12.46        57.15        0.63        27.82  

SI

   CA      2,136,844        10.79        1.09        10.80        62.02        0.35        15.58  

SONA

   VA      2,698,915        10.09        1.32        10.04        53.61        0.26        15.81  

Median

        1,614,287        10.76        1.23        10.18        59.33        0.41        22.76  

CapStar

   TN      2,033,911        11.23        1.34        10.22        61.55        0.29        16.26  

This comparison indicated that CapStar is above the median of the peer group in terms of tangible equity to tangible assets, ROAA, and ROAE and below the median in terms of the level of non-performing and past due assets to total assets.

 

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The following table demonstrates CapStar’s publicly traded stock pricing multiples and average trading volume relative to the CapStar peer group as of January 17, 2020:

 

Ticker

   State    Price Per Share
01/17/2020
     Price / Tangible
Book Value
01/17/2020
     Price / EPS
01/17/2020
     Dividend Yield
01/17/2020
     Avg. 3-Month
Daily Vol.
(1 Year)
 

ATLO

   IA      27.13        143.66        15.41        3.54        8,907  

ACBI

   GA      17.92        130.11        12.44        NA        103,407  

BMRC

   CA      44.43        202.88        16.10        1.89        30,844  

BCML

   CA      22.55        130.86        12.26        NA        27,144  

BWB

   MN      13.17        163.01        12.19        NA        80,848  

BFST

   LA      24.73        145.85        15.46        1.62        13,646  

CBTX

   TX      31.23        177.23        15.01        1.28        37,393  

CVCY

   CA      20.78        155.85        12.37        2.12        20,043  

CCB

   WA      17.33        171.43        14.94        NA        20,598  

EBMT

   MT      22.50        141.56        8.93        1.69        8,956  

FDBC

   PA      61.00        220.57        19.06        1.84        3,710  

FMBH

   IL      34.86        149.30        12.45        2.29        25,049  

FVCB

   VA      16.89        140.37        15.08        NA        29,945  

LCNB

   OH      18.15        144.40        12.60        3.97        21,463  

LEVL

   MI      25.38        123.72        11.33        0.63        9,690  

MNSB

   VA      22.96        142.37        12.76        NA        15,000  

MRBK

   PA      20.37        115.91        9.79        NA        6,060  

NKSH

   VA      42.11        152.00        16.20        3.42        11,487  

NWFL

   PA      37.15        189.83        14.98        2.69        5,822  

OPBK

   CA      9.90        113.38        10.31        2.02        35,823  

PEBK

   NC      30.45        135.68        12.48        1.84        7,129  

PFIS

   PA      49.70        158.93        12.81        2.82        7,000  

RBB

   CA      20.71        125.85        13.28        1.93        42,306  

RRBI

   LA      55.29        165.66        14.86        NA        12,126  

SBFG

   OH      19.16        118.06        9.98        1.98        8,468  

BSRR

   CA      27.82        157.29        11.99        2.73        28,419  

SI

   CA      15.58        120.55        10.82        NA        125,850  

SONA

   VA      15.81        146.34        10.98        2.28        51,273  

Median

        22.76        145.13        12.54        2.02        20,321  

CapStar

   TN      16.26        133.58        11.61        1.23        54,449  

As the table above demonstrates, as of January 17, 2020, CapStar’s common stock traded at a discount to the median of the peer group in terms of both a multiple of tangible book value and a multiple of earnings per share. In addition, based on recent trading activity, the average daily volume in CapStar’s common shares was above the median of the peer group.

Comparable Transaction Analysis. ProBank Austin compared the financial performance of certain selling institutions and the prices paid in selected transactions to FCB’s financial performance and the implied transaction multiples to be paid by CapStar for FCB. Specifically, ProBank Austin reviewed certain information relating to select bank and thrift transactions throughout the United States announced between October 31, 2018 and January 10, 2020 in which the seller had total assets under $1.0 billion. There were 109 transactions in this group. Further, this group was disaggregated based on seller attributes similar to FCB, including: sellers with assets between $100 million to $400 million (61 transactions); sellers with tangible equity to tangible asset ratios greater than 10% (60 transactions); sellers with a last twelve month ROAA greater than 1.00% (56 transactions); sellers with a last twelve month ROAE between 8.00% and 16.00% (56 transactions); transactions in which the

 

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sellers received some buyer stock as consideration but not 100% stock (50 transactions); and transactions where the seller had assets under $1.0 billion headquartered in the Southeast region excluding Florida but also including Kentucky (35 transactions).

The following tables demonstrate the results of such analyses:

FCB Corporation

Multiple of Tangible Book Value

 

     Number of
Transactions
     25th
Percentile
(%)
     Median
(%)
     75th
Percentile
(%)
 

Proposed Transaction (%)                                140.57

           

Comparable Group

           

All U.S. Bank Transactions Since 10/31/18, Sellers Under $1.0 Billion Assets

     109        138.71        162.69        183.27  

Total Assets Between $100 Million—$400 Million

     61        141.46        161.62        179.00  

Tangible Equity/Tangible Assets > 10.00%

     60        131.10        157.28        176.55  

ROA > 1.00%

     56        148.00        170.51        184.92  

ROE Between 8.00%—16.00%

     56        147.19        165.98        180.50  

Transaction Consideration Includes Buyer Stock but not all Stock

     50        135.28        157.19        178.49  

Southeast Region Plus KY Excluding FL

     35        138.49        151.03        171.46  

FCB Corporation

Deal Value to Earnings

 

     Number of
Transactions
     25th
Percentile
(X)
     Median
(X)
     75th
Percentile
(X)
 

Proposed Transaction (X)                            13.41(1)

           

Comparable Group

           

All U.S. Bank Transactions Since 10/31/18, Sellers Under $1.0 Billion Assets

     109        13.97        16.77        22.52  

Total Assets Between $100 Million—$400 Million

     61        13.20        16.46        24.16  

Tangible Equity/Tangible Assets > 10.00%

     60        14.30        16.64        21.62  

ROA > 1.00%

     56        12.94        15.15        16.73  

ROE Between 8.00%—16.00%

     56        13.97        15.61        17.34  

Transaction Consideration Includes Buyer Stock but not all Stock

     50        14.13        16.05        22.33  

Southeast Region Plus KY Excluding FL

     35        13.56        17.25        25.17  

 

(1)

Based on PCO 12/31/19 Net Income Excluding Gain on Life Insurance at BOW

 

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FCB Corporation

Premium Over Tangible Equity to Core Deposits

 

     Number of
Transactions
     25th
Percentile
(X)
     Median
(X)
     75th
Percentile
(X)
 

Proposed Transaction (X)                                6.79

           

Comparable Group

           

All U.S. Bank Transactions Since 10/31/18, Sellers Under $1.0 Billion Assets

     109        6.23        8.99        11.42  

Total Assets Between $100 Million—$400 Million

     61        6.10        9.11        11.52  

Tangible Equity/Tangible Assets > 10.00%

     60        6.92        9.45        14.09  

ROA > 1.00%

     56        7.72        10.09        14.09  

ROE Between 8.00%—16.00%

     56        7.72        9.24        11.52  

Transaction Consideration Includes Buyer Stock but not all Stock

     50        5.21        8.48        10.69  

Southeast Region Plus KY Excluding FL

     35        6.22        8.30        9.67  

Proposed Transaction Percentile Ranking

FCB Corporation

Multiple of Tangible Book Value

 

     Percentile
Ranking
 

Proposed Transaction (%)                                140.57

  

Comparable Group

  

All U.S. Bank Transactions Since 10/31/18, Sellers Under $1.0 Billion Assets

     25

Total Assets Between $100 Million—$400 Million

     24

Tangible Equity/Tangible Assets > 10.00%

     31

ROA > 1.00%

     15

ROE Between 8.00%—16.00%

     17

Transaction Consideration Includes Buyer Stock but not all Stock

     30

Southeast Region Plus KY Excluding FL

     25

Proposed Transaction Percentile Ranking

FCB Corporation

Deal Value to Earnings

 

     Percentile
Ranking
 

Proposed Transaction (X)                                 13.41(1)

  

Comparable Group

  

All U.S. Bank Transactions Since 10/31/18, Sellers Under $1.0 Billion Assets

     21

Total Assets Between $100 Million—$400 Million

     28

Tangible Equity/Tangible Assets > 10.00%

     22

ROA > 1.00%

     30

ROE Between 8.00%—16.00%

     20

Transaction Consideration Includes Buyer Stock but not all Stock

     16

Southeast Region Plus KY Excluding FL

     22

 

(1)

Based on PCO 12/31/19 Net Income Excluding Gain on Life Insurance at BOW

 

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Proposed Transaction Percentile Ranking

FCB Corporation

Premium Over Tangible Equity to Core Deposits

 

     Percentile
Ranking
 

Proposed Transaction (X)                                6.79

  

Comparable Group

  

All U.S. Bank Transactions Since 10/31/18, Sellers Under $1.0 Billion Assets

     26

Total Assets Between $100 Million—$400 Million

     28

Tangible Equity/Tangible Assets > 10.00%

     23

ROA > 1.00%

     13

ROE Between 8.00%—16.00%

     13

Transaction Consideration Includes Buyer Stock but not all Stock

     30

Southeast Region Plus KY Excluding FL

     29

Discounted Cash Flow Analysis. ProBank Austin estimated the value of FCB common stock by calculating the present value of FCB’s projected future dividends, earnings stream, and projected future equity. For the purposes of its analysis, ProBank Austin estimated FCB core net income would increase from $5.1 million to $6.0 million over the five-year period 2020 through 2024. Further, dividends were projected to equal 50% of net income over the period presented.

ProBank Austin applied a price to tangible book value multiple ranging from 131% to 171% of FCB’s estimated tangible book value in 2024 and applied a price to earnings multiple ranging from 16.3 to 18.3 times FCB’s 2024 estimated earnings to derive two unique sets of terminal values. The present value of these terminal amounts was calculated based on a range of discount rates of 12% to 14%. The discount rates selected by ProBank Austin were intended to reflect different assumptions regarding the required rates of return for holders of FCB common stock. The present value of the terminal values was added to the present value of the projected dividend stream from 2020 through 2024 to derive a total value based on discounted cash flows. The two analyses and the underlying assumptions yielded a range of values for FCB common stock.

ProBank Austin assigned the greatest significance to the terminal values represented by 151% of 2024 estimated tangible book value and 17.25 times 2024 estimated earnings. The terminal value multiples represent the median multiples of tangible book value and earnings of the acquisition comparable group in which the seller was headquartered in the Southeast region excluding Florida but including Kentucky identified above in the Comparable Transaction Analysis. The indicated value of FCB’s common shares based on the tangible book value multiple of 151% was $284.61 per common share. The indicated value of FCB’s common shares based on the price to earnings multiple of 17.25 was $302.21 per common share. The nominal implied value of the FCB per share merger consideration of $322.38 to be paid by CapStar to FCB shareholders is above both values determined in the discounted cash flow analysis.

 

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Contribution Analysis. ProBank Austin prepared a contribution analysis demonstrating percentages of total assets, total loans, total deposits, tangible common equity, and net income as of year-end 2019 for FCB and CapStar to be contributed to the combined company on a pro forma basis. This analysis assumed that 50.56% of the assets, loans, and deposits of BOW were contributed to FCB’s total assets, loans, and deposits and that FCB shareholders will receive aggregate FCB merger consideration of 2,969,418 shares of CapStar common stock and cash in the amount of $21,570,701.

 

     FCB  
     Contribution  
     to CapStar  

Total assets

     15.7

Total loans

     14.2

Total deposits

     16.0

Total tangible common equity

     17.9

LTM core net income

     18.2

Pro forma ownership

     13.9

Pro forma ownership if 100% stock

     19.0

Pro Forma Merger Analysis. ProBank Austin analyzed the potential pro forma effect of the FCB merger on CapStar’s performance metrics. Assumptions were made regarding the fair value accounting adjustments, cost savings, and other acquisition adjustments based on ProBank Austin’s familiarity with such matters as well as discussions with management of FCB and CapStar and their representatives. Assuming CapStar’s stock price remains static until the closing of the FCB merger, the pro forma merger analysis indicated that the FCB merger is expected to be dilutive to CapStar’s tangible book value per share by approximately 4.0% at closing and such dilution will be recovered within approximately three years. The FCB merger is expected to be 13.7% accretive to CapStar’s earnings per share for the year ending 2021 with fully phased-in cost savings. Utilizing these estimates as a base, as well as ProBank Austin’s estimates of FCB’s stand-alone earnings per share and tangible book value for FCB shareholders for the year ending 2021, ProBank Austin calculated the estimated per share financial impact on FCB’s common shares on an “as if 100% stock” basis as follows:

 

     Pro Forma for FCB Shareholders  
     Assuming 100% Stock  
     Amount      Accretion /
Dilution
 

Pro Forma FCB Core 2021 EPS

   $ 30.21        22.2

Pro Forma FCB Tangible Book Value

   $ 285.96        6.0

ProBank Austin’s Compensation and Other Relationships with FCB and CapStar. ProBank Austin and its wholly owned broker/dealer subsidiary, Investment Bank Services, Inc. (which we refer to collectively as “ProBank Austin”), were engaged by FCB to serve as its financial advisor in connection with a possible sale or merger of FCB. In addition, ProBank Austin was engaged by BOW to serve as its financial advisor in connection with the possible sale or other disposition of the BOW minority interest. Pursuant to the terms of ProBank Austin’s engagement letter with FCB, ProBank Austin received a $10,000 fee upon signing of the engagement letter, received a fee of $15,000 upon the signing of the FCB merger agreement and delivery of the ProBank Austin opinion, and will receive a fee equal to one percent of the aggregate FCB merger consideration at the closing of the FCB merger. Pursuant to the terms of ProBank Austin’s engagement letter with BOW, ProBank Austin received a fee of $15,000 upon the signing of the BOW merger agreement and will receive a fee equal to one percent of the aggregate BOW merger consideration (to be paid for the BOW minority shares) at the closing of the BOW merger. The exact amount of the fees to be paid to ProBank Austin at the closing of the FCB merger and the BOW merger will vary based on CapStar’s common stock price directly prior to closing. Utilizing the January 17, 2020 CapStar closing stock price of $16.26 per share, and assuming no adjustments to the FCB merger consideration pursuant to the terms of the FCB merger agreement and no adjustments to the BOW merger consideration pursuant to the terms of the BOW merger agreement, the fee to be paid by FCB to ProBank Austin

 

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at the closing of the FCB merger would be approximately $698,534 and the fee to be paid by BOW to ProBank Austin at the closing of the BOW merger would be approximately $156,400. In addition, FCB and BOW have agreed to indemnify ProBank Austin from and against certain liabilities.

In the two years preceding the date of the ProBank Austin Opinion, ProBank Austin or certain of its affiliates or predecessors provided loan review services to FCB or its subsidiaries for which it or its predecessors or affiliates received customary fees and expense reimbursement. The fees paid to ProBank Austin for these services are not considered to be material. In addition, in the two years preceding the date of the ProBank Austin Opinion, ProBank Austin or certain of its affiliates or predecessors provided certain services to CapStar or its subsidiaries for which it or its predecessors or affiliates received customary fees and expense reimbursement. These services included providing compliance consulting to CapStar or its subsidiaries. The fees paid to ProBank Austin for these services are not considered to be material.

Recommendation of the BOW Board of Directors and BOW’s Reasons for the BOW Merger

The BOW board of directors has determined that the BOW merger agreement and the transactions contemplated by the BOW merger agreement, including the BOW merger, are in the best interests of BOW and its shareholders, including the BOW minority shareholders. In reaching its determination, the BOW board of directors considered numerous factors affecting the business, operations, financial condition, earnings, and future prospects of BOW, including the positive and negative factors described elsewhere in this proxy statements/prospectus. In reaching their conclusion, the members of the BOW board of directors relied on, among other things, their personal knowledge of BOW, CapStar, CapStar Bank, and the banking industry, information provided by senior management of BOW, and their evaluation of the BOW merger agreement and BOW merger in consultation with senior management of BOW and BOW’s professional advisors, and also gave particular consideration to the recommendation of the BOW special committee that the BOW board of directors adopt and approve and declare advisable the BOW merger agreement and the transactions contemplated thereby and recommend to the shareholders of the BOW their approval of the BOW merger agreement.

The BOW board of directors considered numerous factors, including, among other things, the factors set forth below, which are not intended to be exhaustive and are not presented in any relative order of importance. In reviewing these factors, the BOW board of directors considered its view that CapStar’s and CapStar Bank’s financial condition and asset quality are sound, that CapStar Bank’s business and operations complement those of BOW, and that the transactions contemplated by the BOW merger agreement, including the BOW merger, would result in a combined company with a larger market presence and more diversified revenue stream and a well-balanced loan portfolio. The BOW board of directors further considered that CapStar’s earnings and prospects, and the synergies potentially available in the BOW merger, create the opportunity for the combined company to have superior future earnings and prospects compared to BOW’s earnings and prospects on a stand-alone basis. In particular, the BOW board of directors considered the following:

 

   

the BOW special committee’s determination that the BOW merger agreement and the transactions contemplated thereby, including the BOW merger, are fair to and in the best interests of BOW and its shareholders, including the BOW minority shareholders, and the BOW special committee’s recommendation that the BOW board of directors adopt and approve and declare advisable the BOW merger agreement and the transactions contemplated thereby and recommend to the shareholders of BOW the approval of the BOW merger agreement by BOW’s shareholders;

 

   

the business strategy and strategic plan of BOW, its prospects for the future, and its projected financial results;

 

   

a review of the risks and prospects of BOW remaining independent, including the challenges of the current financial, operating, and regulatory environment;

 

   

BOW’s stand-alone financial projections, which estimated that BOW would not generate through organic growth a level of shareholder value comparable to that expected to be created in connection with the BOW merger;

 

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BOW management’s assessment of the execution risks involved in attaining the performance levels assumed by BOW’s financial projections;

 

   

the anticipated costs and necessary investments associated with continuing to develop and enhance BOW’s business capabilities;

 

   

the purchase price per share of BOW common stock to be paid by CapStar as consideration for the BOW merger and the valuation multiples implied by this per share purchase price;

 

   

the employment prospects for employees of BOW within a larger combined company;

 

   

the favorable results of BOW’s due diligence investigation of CapStar and CapStar Bank;

 

   

BOW’s and CapStar Bank’s shared corporate values and commitment to serve their customers and communities;

 

   

CapStar’s historical financial condition and results of operations;

 

   

the perceived ability of CapStar and CapStar Bank to complete the BOW merger and the FCB merger from a business, financial, and regulatory perspective;

 

   

the fact that the proposed transaction would combine three established banking franchises to create a well-positioned community bank with total consolidated assets of approximately $2.5 billion;

 

   

the scale, scope, strength, and diversity of operations, product lines, and delivery systems that could be achieved by the combined company;

 

   

the complimentary geographic dispersion of and BOW’s and FNBM’s branch offices compared to CapStar’s current branch network;

 

   

the BOW board of directors’ favorable view of the likelihood of successful integration of the business of BOW and FNBM with that of CapStar Bank;

 

   

the expanded possibilities, including organic growth and future acquisitions, that would be available to the combined company given its larger size, asset base, capital, lending capacity, and footprint;

 

   

the BOW board of directors’ understanding of the current and prospective environment in which BOW operates, including national and local economic conditions, the interest rate environment, operating costs resulting from regulatory initiatives and compliance mandates, the competitive environment for financial institutions generally, and the likely effect of these factors on BOW both as a standalone company and assuming a merger with CapStar Bank;

 

   

the fact that BOW’s shareholders will have a chance to vote on the BOW merger agreement, and particularly the fact that the completion of the BOW merger is conditioned on the approval of the BOW merger agreement by the affirmative vote of holders of a majority of the BOW minority shares entitled to vote on the BOW merger agreement voting together as a separate voting group;

 

   

the BOW board of directors’ favorable view of the likelihood that the regulatory approvals necessary to complete the proposed transactions will be obtained;

 

   

the ability of the BOW board of directors or the BOW special committee to change its recommendation that BOW shareholders vote in favor of approval of the BOW merger agreement, subject to the terms and conditions set forth in the BOW merger agreement;

 

   

the belief of the BOW board of directors that BOW’s relative size and resources make BOW more susceptible to another economic downturn and other industry challenges; and

 

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the fact that the BOW merger is expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for federal income tax purposes.

The BOW board of directors also considered several potential risks and uncertainties with respect to the BOW merger, including without limitation the following:

 

   

the challenges of integrating BOW’s business, operations, and employees with those of CapStar Bank;

 

   

the risk that regulatory and other approvals required to complete the proposed transactions will not be received in a timely manner, or at all, or may contain burdensome conditions;

 

   

the risks and costs associated with entering into the BOW merger agreement and the restrictions in the BOW merger agreement on the conduct of BOW’s business while the BOW merger is pending, which could delay or prevent BOW from undertaking business opportunities that may arise pending completion of the BOW merger;

 

   

the form and amount of the BOW merger consideration, including the increased volatility associated with stock consideration and the risk that the consideration to be paid to BOW shareholders could be adversely affected by a decrease in the trading price of CapStar common stock during the pendency of the BOW merger;

 

   

the fact that a termination fee of $625,000 would have to be paid by BOW to CapStar if the BOW merger agreement is terminated under certain circumstances described in the BOW merger agreement and discussed further under the section titled “The BOW Merger Agreement—Termination Fee”;

 

   

the possibility that certain provisions of the BOW merger agreement prohibiting BOW from soliciting, and limiting its ability to respond to, proposals with respect to alternative transactions could have the effect of discouraging an alternative acquisition proposal;

 

   

the potential costs associated with consummating the transactions contemplated by the BOW merger agreement, including contract termination fees and expenses, change in control payments, personnel costs, and fees of legal, financial, and other advisors;

 

   

the potential for diversion of management and employee attention, and for employee attrition, during the pendency of the BOW merger, and the potential corresponding effect on BOW’s business and relations with customers, service providers, and other stakeholders, regardless whether the BOW merger is completed;

 

   

the possibility of litigation relating to the BOW merger;

 

   

the interests of certain of BOW’s directors and executive officers in the BOW merger that are different from or in addition to those of BOW shareholders generally, as more fully described under the section titled “—Interests of BOW Directors and Executive Officers in the BOW Merger”;

 

   

the fact that FCB owns 50.56% of the outstanding BOW common stock and is expected to vote all of this stock in favor of approval of the BOW merger agreement; and

 

   

the possibility that the BOW merger may not be completed, or that completion of the BOW merger may be delayed, for reasons beyond the control of BOW, CapStar, or CapStar Bank.

The foregoing discussion of information and factors considered by the BOW board of directors is not intended to be exhaustive. In reaching its determination to adopt the BOW merger agreement and recommend that BOW’s shareholders approve the BOW merger agreement, the BOW board of directors considered the totality of the information presented to it and did not consider it practicable to, and did not, quantify or otherwise assign any relative or specific weights to any of the individual factors considered, although individual directors applied their own personal judgement to the process and may have given different weights to different factors. The BOW board of directors considered all of the information and factors presented, including the potential risks, uncertainties, and disadvantages associated with the BOW merger, in the aggregate rather than separately and

 

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determined the benefits of the BOW merger to outweigh the potential risks, uncertainties, and disadvantages associated with the BOW merger and to be favorable to and support its determination.

This discussion of the BOW board of directors’ reasoning and all other information presented in this section are forward-looking in nature and, therefore, should be read in the context of the factors discussed under “Cautionary Statement Concerning Forward-Looking Statements.”

The BOW board of directors (based on the recommendation of the BOW special committee) has determined that the BOW merger agreement and the transactions contemplated by the BOW merger agreement are advisable and fair to and in the best interests of BOW and its shareholders (including the BOW minority shareholders) and has approved the BOW merger agreement. The BOW board of directors (based on the recommendation of the BOW special committee) recommends that BOW shareholders (including the BOW minority shareholders) vote “FOR” the BOW merger proposal and “FOR” the BOW adjournment proposal.

Opinion of BOW’s Financial Advisor

On December 19, 2019, the BOW special committee engaged Mercer to provide financial advisory services to the BOW special committee, including the delivery of a written opinion to the BOW special committee as to the fairness, from a financial point of view, to the BOW minority shareholders of the BOW merger consideration. The BOW minority shareholders collectively own 14,832 common shares (49.44%) of BOW. The BOW special committee selected Mercer because Mercer is a nationally recognized valuation and financial advisory firm with substantial experience in transactions similar to the BOW merger. As part of its financial advisory business, Mercer is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

On January 23, 2020, at the meeting of the BOW board of directors held that day for the purpose of the board to consider and evaluate the BOW merger agreement and the transactions contemplated thereby, Mercer reviewed the financial aspects of the proposed BOW merger and rendered to the BOW special committee an oral opinion (subsequently confirmed in writing by Mercer in its written opinion dated January 23, 2020) that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Mercer as set forth in such opinion, the BOW merger consideration to be paid by CapStar to the BOW minority shareholders was fair, from a financial point of view, to the BOW minority shareholders. The BOW board of directors voted to adopt and approve the BOW merger agreement at this meeting. We refer to the Mercer written opinion, dated January 23, 2020, as the “Mercer opinion.”

The description of the Mercer opinion set forth herein is qualified in its entirety by reference to the full text of the Mercer opinion, which is attached as Appendix D to this proxy statements/prospectus and is incorporated herein by reference and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations of the review undertaken by Mercer in preparing the opinion. The Mercer opinion with supporting financial analyses was reviewed and approved by Mercer’s Fairness Committee.

The Mercer opinion speaks only as of the date of the opinion, and Mercer has undertaken no obligation to update or revise its opinion. The Mercer opinion was for the information of, and was directed to, the BOW special committee in connection with its consideration of the financial terms of the BOW merger. The Mercer opinion addressed only the fairness, from a financial point of view, of the BOW merger consideration to the BOW minority shareholders. The Mercer opinion did not address the underlying business decision of BOW to engage in the BOW merger.

The Mercer opinion did not and does not constitute a recommendation to the BOW special committee in connection with the BOW merger, and it does not constitute a recommendation to any BOW shareholder as to how to vote with respect to the BOW merger agreement or any other matter. Mercer expressed no opinion as to the price at which CapStar, FCB, or BOW common stock might trade in the future. FCB, BOW, and CapStar determined the BOW merger consideration through the negotiation process without the assistance of Mercer.

 

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In rendering the Mercer opinion, Mercer reviewed, among other things:

 

   

The Plan of Bank Merger by and among CapStar, CapStar Bank, and BOW, dated January 23, 2020;

 

   

The Agreement and Plan of Merger by and between CapStar and FCB, dated January 23, 2020;

 

   

Audited financial statements for BOW for the fiscal years ended December 31, 2016, 2017 and 2018;

 

   

The Form 10-Ks for CapStar for the fiscal years ended December 31, 2016, 2017 and 2018 and Form 10-Qs for CapStar for the quarters ended March 31, June 30, and September 30, 2019;

 

   

Internally-prepared financial statements for BOW for the fiscal years ended December 31, 2017, 2018, and 2019 and the interim period ended November 30, 2019;

 

   

CapStar’s third quarter 2019 earnings report disseminated to the public, dated October 25, 2019;

 

   

Regulatory Call Report data for FCB, BOW, and CapStar as compiled by S&P Global Market Intelligence (which we refer to as “S&P Global”) for the fiscal years ended December 31, 2014, 2015, 2016, 2017, 2018, and 2019 and the quarters ended March 31, June 30, and September 30, 2019;

 

   

Consensus earnings per share and other financial estimates for CapStar for fiscal years 2019, 2020, and 2021 as calculated by the sell-side analysts who cover CapStar and compiled by S&P Global; and

 

   

Certain other materials provided by management or otherwise obtained by Mercer deemed relevant to prepare the Mercer opinion.

The Mercer opinion was necessarily based upon conditions as they existed and could be evaluated on the date of the Mercer opinion and the information made available to Mercer through the date of the Mercer opinion. In providing its opinion, Mercer assumed that BOW and CapStar provided all information that might be material to Mercer in its review. In conducting its review and arriving at its opinion, Mercer relied on its knowledge and experience of community banks and markets such as those in which BOW operates in the preparation of BOW’s earnings projections, which BOW management confirmed were reasonable. Mercer did not independently verify the accuracy or completeness of any such information or assume any responsibility for such verification or accuracy. Projections are inherently uncertain due to a multitude of factors, including factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections.

Mercer did not examine BOW’s loan portfolio or the adequacy of its loan loss reserve. Mercer did not make or obtain any evaluation or appraisal of the assets or liabilities of BOW or CapStar or their respective affiliates, nor did Mercer examine any individual credit files. Mercer was not asked to and did not undertake any independent verification of any such information, and Mercer did not assume any responsibility or liability for the accuracy and completeness thereof.

The following is a summary of the material analyses delivered by Mercer to the BOW special committee on January 23, 2020, in connection with the rendering of the Mercer opinion. The summary is not a complete description of the analyses underlying the Mercer opinion, or the presentation, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Mercer did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. Accordingly, Mercer’s analyses and the summary of its analyses must be considered as a whole and selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

 

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Summary of the Proposed Merger. Under the terms of the BOW merger agreement, the BOW minority shareholders will receive, in the aggregate, 664,800 CapStar common shares and $4,829,299 in cash (subject to certain adjustments provided for in the BOW merger agreement) for their 14,832 BOW common shares. Under the terms of the FCB merger agreement, FCB shareholders will receive, in the aggregate, 2,969,418 CapStar common shares and $21,570,701 in cash (subject to certain adjustments provided for in the FCB merger agreement) for all of their FCB common shares. All BOW minority shareholders will receive the same allocation of CapStar common shares and cash because the BOW merger agreement does not provide for an election option. Mercer calculated the implied aggregate value of the consideration to be paid to BOW minority shareholders to be $15.6 million based upon the closing price of $16.15 per share for CapStar’s common stock on January 22, 2020.

Using this implied aggregate value, Mercer calculated the following multiples applicable to the BOW minority shareholders:

 

   

137% of total tangible book value as of December 31, 2019;

 

   

154% of total core tangible book value as of December 31, 2019, based upon an 9.0% core equity ratio with excess capital valued dollar-for-dollar; and

 

   

11.6 times reported net income for the fiscal year 2019 and 12.3 times adjusted fiscal year 2019 net income.

Mercer calculated the implied merger consideration to be paid to FCB shareholders and BOW minority shareholders as of January 22, 2020, to equate to:

 

   

139% of tangible book value as of December 31, 2019;

 

   

158% of core tangible book value as of December 31, 2019, based upon an 9.0% core equity ratio with excess capital valued dollar-for-dollar; and

 

   

12.6 times net income for the fiscal year 2019.

Guideline Transactions Analysis. Mercer reviewed acquisition multiples for banks with similar characteristics to BOW as reported by S&P Global, which tracks public market and M&A pricing in the financial services industry. The database was screened by Mercer for the following characteristics to derive two guideline groups of banks that had agreed to be acquired, which were then subdivided based upon asset size of $100-$300 million (relevant for BOW) and $300-$600 million (relevant for the combined FNBM/BOW).

 

  (a)

Tennessee Group consisting of banks that were domiciled in Tennessee which had agreed to be acquired since year-end 2013 in which pricing was disclosed.

 

  (b)

National Group consisting of banks that had agreed to be acquired since year-end 2014 with assets between $100 million and $300 million and $300 million to $600 million, a return on assets of at least 1.25%, and a tangible equity ratio of at least 10% in which pricing was disclosed.

Mercer developed a range of value based upon the median multiples observed for the guideline transactions and the pending acquisitions of FNB Financial Corp. (“FNB Financial”) by FB Financial Corporation and Tennessee Community Bank Holdings, Inc. (“TCB Holdings”) by Reliant Bancorp, Inc. as follows:

 

  (a)

Equity Value to LTM Earnings: The multiples applied were based upon the range of 13.4x to 16.4x calculated from the two ($100-$300M) transaction groups and transactions of note described previously. The range of value for the BOW minority shares was $18.0 to $22.0 million and was derived from the product of BOW’s reported LTM net income and the guideline transactions multiples.

 

  (b)

Equity Value to Core Tangible Equity at 9.0%: The multiples applied were based upon the range of 1.51x to 1.65x calculated from the two ($100-$300M) transaction groups and transactions of note described previously. The range of value for the BOW minority shares was $15.3 to $16.4 million and

 

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  was derived from the product of BOW’s December 31, 2019 tangible book value (normalized to a tangible equity ratio of 9.0%) and the guideline transactions multiples with the excess equity valued dollar-for-dollar added at the end.

 

  (c)

Core Deposit Premium Plus Tangible Book Value: The premiums applied were based upon the range of 6.9% to 9.0% calculated from the two ($100-$300M) transaction groups and transactions of note described previously. The range of value for the BOW minority shares was $16.3 to $17.7 million and was derived from the product of BOW’s December 31, 2019 core deposits and the guideline core deposit premiums (%) plus tangible book value.

 

Median Multiples

   BOW/CapStar    Tennessee    National    FNB
Financial
   TCB Holdings

P/E LTM

   11.6x    15.4x    13.4x    16.4x    15.4x

P/Core TBV

   155%    153%    165%    151%    152%

Core Dep. Prem.

   6.1%    7.6%    9.0%    6.9%    7.3%

Median Value

   $15.6M    $31.8M    $30.2M    $51.9M    $38.4M

Indicated Values ($000s)

              

P/E LTM

      $20,735    $17,966    $21,998    $20,735

P/Core TBV

      $15,477    $16,363    $15,307    $15,367

Core Dep. Prem.

      $16,763    $17,736    $16,259    $16,487

Discounted Cash Flow Analysis. Mercer performed a discounted cash flow (“DCF”) analysis to estimate a range of present values of after-tax cash flows that would accrue to BOW shareholders if certain projection assumptions are met. The DCF analysis is a widely used valuation method that relies upon numerous assumptions, including asset and earnings growth rates, minimum tangible common equity ratios, terminal values, and discount rates. The analysis did not purport to be indicative of the actual values or expected values of BOW.

In performing this analysis, Mercer relied on its knowledge of community banks generally and its analysis of BOW to develop projected cash flows available to BOW minority shareholders for fiscal years 2020 through 2024. Underlying assumptions were subsequently confirmed by BOW management as reasonable. The analysis examined two scenarios:

 

  (a)

Sell Later: This scenario was based upon management’s assessment that 5% earnings and asset growth with dividend distributions geared to maintain an approximate 13% equity-to-asset ratio were reasonable assumptions for the forecast.

 

  (b)

Distribute Excess Capital and Sell Later: This scenario uses the same growth assumptions as the first scenario but distributable cash flow is measured as excess capital that exists now and is created in future years that is in excess of the amount necessary to maintain a 10.0% equity-to-asset ratio.

Mercer derived discount rates of 13.8% and 14.8% based upon the sum of (i) 2.09% for the risk-free rate derived from the yield on 20-year U.S. Treasuries; (ii) the product of the estimated small cap bank industry beta of 0.81x and the common stock premium of 5.50% based upon Mercer’s review of long-term market return data; (iii) a 5.22% small capitalization stock equity premium based on the comparability of FCB to similarly-sized companies in the micro-capitalization size category of the Duff & Phelps Cost of Capital Navigator database (the micro-capitalization size category in the Duff & Phelps Cost of Capital Navigator database includes companies with equity market capitalizations in the range of $2.5 to $322 million); and (iv) a 2.0% to 3.0% incremental risk premium Mercer deemed to be appropriate given company specific risk associated with BOW for its lack of geographic diversity and small size. The terminal value reflects an average of capitalized earnings and tangible book value based upon the implied multiples derived from the CapStar transaction.

Mercer derived a discount rate of 13.8% for use in the Sell Later scenario. A discount rate of 14.8% was used in the Distribute Excess Cash and Sell Later scenario to reflect additional risk via reduced margin of safety from distributing excess capital.

 

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The DCF analysis resulted in the following:

 

  (a)

Sell Later: An indicated value of $14.2 million based upon annual earnings growth of 5.0% and a discount rate of 13.8% and a range of $13.2 to $15.1 million based upon a discount rate of 13.0% to 15.0% and a range of annual earnings growth of 3.0% to 7.0%.

 

  (b)

Distribute Excess Capital and Sell Later: An indicated value of $15.8 million based upon annual earnings growth of 5.0% and a discount rate of 14.8% and a range of $15.4 to $16.4 million based upon a discount rate of 14.0% to 15.5% and a range of annual earnings growth of 3.0% to 7.0%.

Pro Forma Merger Analysis. Mercer performed pro forma merger analyses that combined projected income statement and balance sheet information of FNBM, BOW, and CapStar. Assumptions regarding the accounting treatment, acquisition adjustments, and cost savings were used to calculate the financial impact that the FCB merger and BOW merger would have on certain projected financial results of CapStar. In the course of this analysis, Mercer used earnings estimates for CapStar for 2020 through 2022 based upon consensus analyst estimates as compiled by S&P Global. The analysis indicated that CapStar would incur dilution to tangible book value per share of approximately 4% assuming a mid-year 2020 closing with dilution fully recovered in approximately three years. Mercer calculated projected accretion to CapStar’s consensus 2021 earnings per share of approximately 15% assuming expense savings are fully realized with partial offset from purchase accounting adjustments and foregone income attributed to excess capital used to finance the cash consideration.

From the perspective of the BOW minority shareholders, Mercer calculated that shareholders will realize dilution to tangible book value and earnings per share because the consideration to be paid entails CapStar common stock and cash. However, Mercer noted that if 100% of the consideration consisted of CapStar common stock then BOW minority shareholders would experience an increase in tangible book value per share and earnings per share in 2021 given the assumption that expense saves will be fully realized. Mercer noted that BOW minority shareholders will realize significant dilution to dividends per share given the high payout ratio at BOW on the order of 65% compared to a modest payout ratio employed by CSTR.

Contribution Analysis. Mercer performed an analysis of the allocation of the purchase price between FCB and the BOW minority shareholders and concluded that it was reasonable from the perspective of the BOW minority shareholders. Mercer calculated that the BOW minority shareholders would receive approximately 18.3% of the total transaction consideration compared to their contribution of 19.3% of operating income, 18.6% of 2019 core net income, 18.1% of three-year average core net income, and 18.7% of total capital to the total combined FCB/BOW company. Mercer also calculated that the combined seller entities (FCB and BOW) would contribute 24.9% of operating income, 23.8% of net income, 30.3% of pro forma net income (including expense saves), and 21.0% of tangible common equity to the combined income statement and balance sheet of FCB, BOW, and CapStar.

CapStar Review and Peer Analysis. Mercer reviewed the historical financial performance of CapStar and the market for CapStar common shares. Mercer noted that BOW minority shareholders that receive CapStar common shares will benefit from shares that are listed on NASDAQ and which have average daily trading volume of 53,000 shares. Mercer also noted that BOW minority shareholders will benefit from greater potential growth given CapStar’s Nashville base and ongoing efforts to expand through M&A and organic means.

 

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Mercer compared selected results of CapStar’s operating performance and market trading characteristics to that of two guideline groups of selected publicly traded commercial banks headquartered throughout the United States—a regional group of banks domiciled in Kentucky, Tennessee, and Alabama, and a national group of banks with total assets between $1.5 billion and $3.0 billion. The two peer groups are as follows:

Kentucky, Tennessee, and Alabama Banks

 

Bank Name

   Ticker    State   

Bank Name

   Ticker    State

Auburn National Bancorp

   AUBN    AL   

Limestone Bancorp

   LMST    KY

CapStar Financial Holdings

   CSTR    TN   

Pinnacle Financial Partners

   PNFP    TN

Citizens First Corporation

   CZFC    KY   

Regions Financial Corporation

   RF    AL

Community Trust Bancorp

   CTBI    KY   

Reliant Bancorp

   RBNC    TN

FB Financial Corporation

   FBK    TN   

Republic Bancorp

   RBCAA    KY

First Horizon National Corporation

   FHN    TN   

ServisFirst Bancshares

   SFBS    AL

First US Bancshares

   FUSB    AL   

SmartFinancial

   SMBK    TN

Franklin Financial Network

   FSB    TN   

Stock Yards Bancorp

   SYBT    KY

 

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National Banks ($1.5B—$3.0B)

 

Bank Name

   Ticker    State   

Bank Name

   Ticker    State

ACNB Corporation

   ACNB    PA   

Home Bancorp

   HBCP    LA

Alerus Financial Corporation

   ALRS    ND   

Howard Bancorp

   HBMD    MD

American National Bankshares

   AMNB    VA   

Investar Holding Corporation

   ISTR    LA

Atlantic Capital Bancshares

   ACBI    GA   

LCNB Corp

   LCNB    OH

Bank First Corporation

   BFC    WI   

Level One Bancorp

   LEVL    MI

Bank of Marin Bancorp

   BMRC    CA   

Mid Penn Bancorp

   MPB    PA

Bankwell Financial Group

   BWFG    CT   

MutualFirst Financial Corp

   MFSF    IN

BayCom Corp

   BCML    CA   

MVB Financial Corp

   MVBF    WV

BCB Bancorp

   BCBP    NJ   

Old Second Bancorp

   OSBC    IL

Bridgewater Bancshares

   BWB    MN   

Orrstown Financial Services

   ORRF    PA

Business First Banschares

   BFST    LA   

PCB Bancorp

   PCB    CA

C&F Financial Corporation

   CFFI    VA   

PCSB Financial Corporation

   PCSB    NY

Cambridge Bancorp

   CATC    MA   

Penns Woods Bancorp

   PWOD    PA

Capital City Bank Group

   CCBG    FL   

Peoples Financial Services Corp

   PFIS    PA

CapStar Financial Holdings

   CSTR    TN   

People’s Utah Bancorp

   PUB    UT

Central Valley Community Bancorp

   CVCY    CA   

RBB Bancorp

   RBB    CA

Chemung Financial Corporation

   CHMG    NY   

Red River Bancshares

   RRBI    LA

Citizens & Northern Corporation

   CZNC    PA   

Reliant Bancorp

   RBNC    TN

Civista Bancshares

   CIVB    OH   

SB One Bancorp

   SBBX    NJ

Codorus Valley Bancorp

   CVLY    PA   

Shore Bancshares

   SHBI    MD

Community Financial Corporation

   TCFC    MD   

Sierra Bancorp

   BSRR    CA

ESSA Bancorp

   ESSA    PA   

Silvergate Capital Corporation

   SI    CA

Farmers & Merchants Bancorp

   FMAO    OH   

SmartFinancial

   SMBK    TN

Farmers National Banc Corp

   FMNB    OH   

Southern First Bancshares

   SFST    SC

First Bancorp

   FNLC    ME   

Southern Missouri Bancorp

   SMBC    MO

First Bank

   FRBA    NJ   

Southern National Bancorp of Virginia

   SONA    VA

First Business Financial Services

   FBIZ    WI   

Spirit of Texas Bancshares

   STXB    TX

First Choice Bancorp

   FCBP    CA   

Summit Financial Group

   SMMF    WV

First Community Bankshares

   FCBC    VA   

Territorial Bancorp

   TBNK    HI

First Guaranty Bancshares

   FGBI    LA   

United Community Financial Corp

   UCFC    OH

FS Bancorp

   FSBW    WA   

Waterstone Financial

   WSBF    WI

FVCBankcorp

   FVCB    VA   

West Bancorporation

   WTBA    IA

Guaranty Bancshares

   GNTY    TX   

Western New England Bancorp

   WNEB    MA

Hingham Institution for Savings

   HIFS    MA         

 

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Summary of Guideline Public Company Median Pricing Multiples & Financial Measures

 

     P/E
LTM
EPS
     Price /
2020(E)
EPS
     Price /
2021(E)
EPS
     P/BV     P/TBV     Dividend
Yield
 

TN, KY, and AL Banks

     13.4x        13.0x        12.0x        124     150     1.6

National Banks

     12.9x        12.5x        11.5x        121     145     2.3

CapStar

     13.3x        13.0x        12.0x        111     133     1.2

 

     Assets
($M)
     Tang Equity
/ Tang
Assets
    Core LTM
ROE
    Core
LTM
ROTCE
    Core
LTM
ROA
    Efficiency
Ratio
    NPAs /
Loans
 

TN, KY, and AL Banks

   $ 3,818        9.81     10.2     12.5     1.28     61.6     0.56

National Banks

   $ 2,093        10.01     10.4     12.3     1.18     61.4     0.69

CapStar

   $ 2,034        11.23     9.8     11.1     1.21     62.6     0.35

Process Considerations. Mercer was retained by the BOW special committee to provide financial advisory services to the BOW special committee and render a fairness opinion. Mercer was not asked to, and did not, seek alternative bidders for BOW. FCB and BOW were the subject of an extensive marketing process conducted by FCB’s financial advisor that began in the second quarter of 2018 and eventually culminated in the proposed FCB merger and BOW merger.

Compensation and Other Considerations. Pursuant to Mercer’s engagement letter with the BOW special committee, Mercer was paid a fee of $50,000 to render the Mercer opinion. No part of Mercer’s fee was contingent upon the conclusion of Mercer’s analysis or the consummation of the BOW merger. Additionally, BOW has agreed to indemnify Mercer against certain claims and obligations arising out of Mercer’s engagement. Mercer does not own or make a market in any security that has been issued by FCB, BOW, or CapStar. Mercer has not been retained by FCB, BOW, or CapStar within the past three years to provide any other services.

Interests of FCB and FNBM Directors and Executive Officers in the FCB Merger

In the FCB merger, the directors and executive officers of FCB and FNBM will receive the same consideration for their shares of FCB common stock as other FCB shareholders receive. However, in considering the recommendation of the FCB board of directors that FCB shareholders vote in favor of approval of the FCB merger agreement, FCB shareholders should be aware that FCB’s directors and executive officers may have interests in, or arrangements related to, the FCB merger that are different from, or in addition to, those of FCB shareholders generally. The FCB board of directors was aware of these interests and considered them, among other matters, when adopting and approving the FCB merger agreement and determining to recommend to FCB shareholders that they vote in favor of approval of the FCB merger proposal. See the sections titled “—Background of the Mergers” and “—Recommendation of the FCB Board of Directors and FCB’s Reasons for the Merger.” FCB shareholders should take these interests and arrangements into account when deciding how to vote with respect to the FCB merger proposal. These interests are described in more detail below, and certain of them are quantified.

FCB Promissory Note

FCB director Edith Hickerson Johnson is the holder of a promissory note dated December 31, 2011, in the original principal amount of $140,436, under which FCB is the obligor. The promissory note has a floating interest rate tied to the New York Prime rate of interest that adjusts monthly. The promissory note is payable on demand, as well as on the death of the holder, the sale of FCB’s ownership interest in BOW, or the sale or transfer of ownership interest in FCB. The promissory note is secured by 2,115 shares of BOW common stock. As of March 4, 2020, the outstanding principal and accrued and unpaid interest under the promissory note was $141,587.38. If not earlier paid, the promissory note will be paid in full in connection with the consummation of the FCB merger.

 

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Clay Retention Bonus Agreement

Carla Clay, the Chief Financial Officer of FCB and FNBM, is a party to a retention bonus agreement with FCB. Under this agreement, Ms. Clay is entitled to a retention bonus of $90,000 in the event she remains employed by FNBM through the date of a change in control (as defined in the retention bonus agreement) of FCB or FNBM. The retention bonus increases to $125,000 in the event Ms. Clay is not offered a position with the surviving company on terms substantially similar to the terms of her current employment. The retention bonus is payable in one lump sum payment not later than five days following the change in control. Additionally, if Ms. Clay’s employment is terminated by FNBM without cause (as defined in the retention bonus agreement) prior to a change in control, she is entitled to receive $125,000 in one lump sum payment payable not later than 45 days following the termination of her employment, subject to her execution and non-revocation of a general release of claims. The retention bonus agreement will terminate automatically on March 31, 2021, if a change in control of FCB or FNBM has not occurred by that date. The FCB merger would constitute a change in control for purposes of Ms. Clay’s retention bonus agreement.

Director Deferred Compensation Arrangements

George M. Brown, a member of the FCB and BOW boards of directors, is a party to a director deferred compensation plan arrangement with FNBM, and Gerald Ewell, Jr., a member of the FCB board of directors, is a party to a director deferred fee agreement with FNBM. As of December 31, 2019, the total outstanding liability under Mr. Brown’s director deferred compensation plan was $489,877. This plan will be terminated, and the then-total outstanding plan liability will be paid to Mr. Brown in one lump sum payment, in connection with the consummation of the FCB merger. As of December 31, 2019, the total outstanding liability under Mr. Ewell’s director deferred fee agreement was $219,202. This agreement will be terminated, and the then-total outstanding liability under the agreement will be paid to Mr. Ewell in one lump sum payment, in connection with the consummation of the FCB merger.

Brown Director Supplemental Retirement Plan

Mr. Brown is also a party to a director supplemental retirement plan arrangement with FNBM. Mr. Brown received $38,967 under this director supplemental retirement plan in 2019. As of December 31, 2019, the total outstanding liability under the plan was $300,844. This plan will be terminated, and the then-total outstanding plan liability will be paid to Mr. Brown in one lump sum payment, in connection with the consummation of the FCB merger.

Brown Split Dollar Agreement

Mr. Brown is a party to a split dollar agreement with FNBM. As of December 31, 2019, the total outstanding liability under the agreement was $16,495. This agreement will be terminated, and the then-total outstanding liability under the agreement will be paid to Mr. Brown in one lump sum payment, in connection with the consummation of the FCB merger.

Accrued Sick Time

The FNBM employee handbook provides that FNBM employees that have 25 years of service with FNBM or retire at age 65 will be paid out their accrued and unused sick time, up to 100 days, in the event they separate or retire from full time employment and do not go to work for another financial institution with offices located in any county where FNBM has an office. The FCB merger agreement provides that, in connection with the closing of the FCB merger, FNBM employees who would be entitled to be paid their accrued and unused sick time upon termination of employment in accordance with the terms of the FNBM employee handbook will be paid for their sick time accrued and unused through the closing date (up to a maximum of 100 days).

 

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If the FCB merger were to close on May 31, 2020, the following executive officers of FCB and FNBM, assuming they are employed by FCB or FNBM on, and use no sick time prior to, May 31, 2020, would be paid the stated estimated amounts in respect of their accrued and unused sick time.

 

Name/Title    Estimated Sick Time Payment Amount  

Tim Spry, President and CEO

   $ 66,799.36  

Carla Clay, CFO

   $ 36,213.84  

Brent Parsley, Manchester Community President

   $ 40,799.72  

Mike Bailey, SVP and Senior Loan Officer

   $ 0.00  

BOW Board Service

George M. Brown currently serves on the board of directors of each of FCB, FNBM, and BOW.

CapStar Employment Agreements

CapStar has entered into an employment agreement with Tim Spry (the “Spry Employment Agreement”) which will be effective for a term of up to two years commencing on the effective time of the FCB merger. If the FCB merger agreement is terminated without consummation of the FCB merger or Mr. Spry’s employment with FCB and its subsidiaries terminates at any time prior ot the effective time of the FCB merger, then the Spry Employment Agreement will be void. Under the Spry Employment Agreement, Mr. Spry will receive an annual base salary of $188,790 and will be eligible to receive a discretionary annual incentive award. The Spry Employment Agreement also provides that Mr. Spry will receive a cash retention award of $100,000, payable in full within 10 days following the effective time of the FCB merger, and a retention award consisting of shares of restricted CapStar common stock with an aggregate grant date fair value of $100,000, vesting in two equal installments on each of the first two anniversaries of the effective time of the FCB merger, subject to Mr. Spry’s continued employment with CapStar or one of its affiliates through each applicable vesting date. Upon Mr. Spry’s termination of employment by CapStar without cause or due to his resignation for Good Reason during the term of the Spry Employment Agreement, Mr. Spry will receive, subject to his timely execution and nonrevocation of a release of claims in the form requested by Capstar and continued compliance with the covenants set forth in the Spry Employment Agreement, (i) continued payment of his base salary for a period of one year following his date of termination and (ii) if Mr. Spry is eligible for and timely elects COBRA coverage, a cash payment equal to the monthly employer medical premium subsidy provided to active employees until the earlier of 12 months following Mr. Spry’s date of termination and the date on which Mr. Spry ceases such COBRA coverage. The Spry Employment Agreement also includes one-year post-termination noncompeition and employee and customer nonsolication covenants and perpetual confidentiality and nondisparagement covenants.

CapStar has entered into an employment agreement with Brent Parsley (the “Parsley Employment Agreement”) which will be effective for a term of up to two years commencing on the effective time of the FCB merger. If the FCB merger agreement is terminated without consummation of the FCB merger or Mr. Parsley’s employment with FCB and its subsidiaries terminates at any time prior ot the effective time of the FCB merger, then the Parsley Employment Agreement will be void. Under the Parsley Employment Agreement, Mr. Parsley will receive an annual base salary of $150,000 and will be eligible to receive a discretionary annual incentive award. The Parsley Employment Agreement also provides that Mr. Parsley will receive a cash retention award of $150,000, payable in full within 10 days following the effective time of the FCB merger, and a retention award consisting of shares of restricted CapStar common stock with an aggregate grant date fair value of $50,000, vesting in two equal installments on each of the first two anniversaries of the effective time of the FCB merger, subject to Mr. Parsley’s continued employment with CapStar or one of its affiliates through each applicable vesting date. Upon Mr. Parsley’s termination of employment by CapStar without cause or due to his resignation for Good Reason during the term of the Parsley Employment Agreement, Mr. Parsley will receive, subject to his timely execution and nonrevocation of a release of claims in the form requested by Capstar and continued

 

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compliance with the covenants set forth in the Parsley Employment Agreement, (i) continued payment of his base salary for a period of one year following his date of termination and (ii) if Mr. Parsley is eligible for and timely elects COBRA coverage, a cash payment equal to the monthly employer medical premium subsidy provided to active employees until the earlier of 12 months following Mr. Parsley’s date of termination and the date on which Mr. Parsley ceases such COBRA coverage. The Parsley Employment Agreement also includes one-year post-termination noncompeition and employee and customer nonsolication covenants and perpetual confidentiality and nondisparagement covenants.

CapStar and CapStar Bank Board Seat

CapStar and CapStar Bank have agreed to appoint to the CapStar and CapStar Bank boards of directors one member of the board of directors of FCB, FNBM, or BOW selected by FCB in consultation with CapStar and otherwise meeting the general requirements for service on the CapStar and CapStar Bank boards of directors. These appointments will be effective as of the effective of the FCB merger. Provided this individual continues to satisfy the requirements for service on the CapStar and CapStar Bank boards of directors, CapStar and CapStar Bank have agreed to nominate this individual for reelection to the boards of directors of CapStar and CapStar Bank at the first annual meeting of CapStar shareholders following the FCB merger.

As of the date of this proxy statements/prospectus, the individual to serve on the CapStar and CapStar Bank boards of directors following the FCB merger has not been selected.

Indemnification and Insurance

As described under the section titled “The FCB Merger Agreement—Director and Officer Indemnification and Insurance,” from and after the completion of the FCB merger, CapStar generally will indemnify and hold harmless, and advance expenses to, each current and former director, officer, and employee of FCB or any of its subsidiaries against all liabilities arising out of matters existing or occurring at or before the effective time of the FCB merger (including the FCB merger and the other transactions contemplated by the FCB merger agreement) and based on or arising out of the fact that such person is or was a director, officer, or employee of FCB or any of its subsidiaries, regardless of whether claims associated therewith are asserted before, at, or after the effective time of the FCB merger, to the fullest extent such person would have been titled to be indemnified or would have had the right to advancement of expenses under the charter and bylaws or similar organizational documents of FCB or its subsidiaries as in effect on January 23, 2020, and as permitted by applicable law.

The FCB merger agreement requires CapStar to maintain for a period of six years after the completion of the FCB merger FCB’s and its subsidiaries’ currently existing directors’ and officers’ liability insurance, or policies of at least the same coverage and amounts and containing terms and conditions that are no less favorable in any material respect to the insured persons, with respect to claims arising from facts or events that occurred prior to the completion of the FCB merger, and covering such persons as are currently covered by FCB’s and its subsidiaries’ currently existing directors’ and officers’ liability insurance. However, CapStar is not required to spend for this insurance in the aggregate an amount in excess of 200% of the annual premium currently paid by FCB and its subsidiaries for their current directors’ and officers’ liability insurance and, if CapStar is unable to maintain this insurance as described for such amount, CapStar is obligated to obtain as much comparable insurance as is available for that amount. In lieu of the foregoing, CapStar may instead (i) request that FCB and its subsidiaries obtain an extended reporting period endorsement under their currently existing directors’ and officers’ liability insurance policies or (ii) substitute six-year “tail” policies with terms, including coverage and amount, no less favorable in any material respect to the indemnified parties than FCB’s and its subsidiaries’ existing directors’ and officers’ liability insurance policies as of January 23, 2020.

If CapStar (or any of its successors or assigns) consolidates or merges with another person and is not the continuing entity or if CapStar liquidates, dissolves, or transfers or conveys all or substantially all of its properties and assets to another person, then CapStar will ensure that its successors and assigns assume CapStar’s indemnification and insurance obligations.

 

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Interests of BOW Directors and Executive Officers in the BOW Merger

In the BOW merger, the directors and executive officers of BOW will receive the same consideration for their shares of BOW common stock as other BOW minority shareholders receive. However, in considering the recommendation of the BOW board of directors that BOW shareholders vote in favor of approval of the BOW merger agreement, BOW shareholders, particularly the BOW minority shareholders, should be aware that BOW’s directors and executive officers may have interests in, or arrangements related to, the BOW merger that are different from, or in addition to, those of BOW shareholders generally. The BOW board of directors was aware of these interests and considered them, among other matters, when adopting and approving the BOW merger agreement and determining to recommend to the BOW shareholders, including the BOW minority shareholders, that they vote in favor of approval of the BOW merger proposal. See the sections titled “—Background of the Merger” and “—Recommendation of the BOW Board of Directors and BOW’s Reasons for the Merger.” BOW shareholders should take these interests and arrangements into account when deciding how to vote with respect to the BOW merger proposal. These interests are described in more detail below, and certain of them are quantified.

FCB Promissory Notes

BOW director Marion Wright (“Chip”) Hickerson III is the holder of a promissory note dated December 31, 2011, in the original principal amount of $140,436, under which FCB is the obligor. BOW director Claus Thormaehlen, through an individual retirement account, is the holder of a promissory note dated October 21, 2013, in the original principal amount of $140,000, under which FCB is the obligor. Mr. Thormaehlen’s spouse, also through an individual retirement account, is the holder of a promissory note dated May 1, 2012, in the original principal amount of $140,000, under which FCB is the obligor. Each of these promissory notes has a floating interest rate tied to the New York Prime rate of interest that adjusts monthly. Each promissory note is payable on demand, as well as on the death of the holder, the sale of FCB’s ownership interest in BOW, or the sale or transfer of ownership interest in FCB. Mr. Hickerson’s promissory note is secured by 2,115 shares of BOW common stock; Mr. Thormaehlen’s promissory note is secured by 4,230 shares of BOW common stock; and Ms. Thormaehlen’s promissory note is secured by 4,230 shares of BOW common stock. As of March 4, 2020, the outstanding principal and accrued and unpaid interest under the promissory notes was as follows: Mr. Hickerson: $141,587.38; Mr. Thormaehlen: $141,147.81; Ms. Thormaehlen: $141,147.81. The promissory notes will be paid in full in connection with the consummation of the FCB merger.

BOW Employment Agreements

William B. (“Bill”) Bryant, BOW’s President and Chief Executive Officer, is a party to an Employment Agreement with BOW dated November 16, 2011. The employment agreement has a two-year term but provides for automatic one-year extensions each year unless either party timely gives notice the term will not be so extended. The current term of the agreement expires November 15, 2021. The agreement provides that, in the event of a change in control of BOW, Mr. Bryant is entitled to receive, upon the consummation of the change in control, an amount equal to his then current base compensation and health insurance benefit under the agreement for the remainder of the term of the agreement. The BOW merger would constitute a change in control for purposes of Mr. Bryant’s employment agreement. If the BOW merger were to be consummated effective May 31, 2020, Mr. Bryant would be entitled to a lump sum payment of approximately $232,171. The agreement also provides that, if Mr. Bryant leaves the employment of BOW for any reason, he will not compete with BOW in Wayne or Lawrence county, Tennessee, or in any other county in which BOW has a physical presence, or any county contiguous thereto, for a period of two years.

Misty G. Rogers, Executive Vice President and Controller of BOW, is a party to an Employment Agreement with BOW dated April 9, 2019. The employment agreement has a two-year term that is automatically extended for one additional year on each anniversary of the agreement’s effective date. The current term of the agreement expires April 8, 2021, but on April 9, 2020, the term automatically will be extended to April 8, 2022. The

 

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agreement provides that, in the event of a change in control (as defined in the agreement) of BOW or FCB, if Ms. Rogers remains employed with BOW or its successor until the earlier of (i) the date that is 30 days immediately following the conversion of the legacy BOW data processing core system and (ii) the date that is 120 days immediately following the change in control (the earlier of these dates we refer to as the “Rogers retention date”), she will be entitled to receive an amount equal to the aggregate base salary and medical insurance stipend that would be payable to her under the agreement during the period beginning on the calendar day immediately following the Rogers retention date and running through the end of the current term of the agreement, such amount to be payable in one lump sum payment not later than five days following the Rogers retention date. In the event Ms. Rogers’ employment is terminated following a change in control (as defined in the agreement) of BOW or FCB but prior to the Rogers retention date, by Ms. Rogers for good reason (as defined in the agreement) or by BOW or its successor without cause (as defined in the agreement), Ms. Rogers will be entitled to receive an amount equal to the aggregate base salary and medical insurance stipend that would be payable to her under the agreement for the remainder of the current term of the agreement, such amount to be payable in one lump sum payment upon termination of Ms. Rogers’ employment. The BOW merger would constitute a change in control for purposes of Ms. Rogers’ employment agreement. If the BOW merger were to be consummated effective May 31, 2020, and Ms. Rogers’ employment were to be terminated on that date without cause, Ms. Rogers would be entitled to a payment of approximately $195,888. The agreement also provides that, if Ms. Rogers’ employment is terminated during the term of the agreement by Ms. Rogers for good reason or by BOW without cause, she will not, for the period of time remaining in the current term of the agreement, solicit employees of BOW or its affiliates with whom she had material contact during the last two years of her employment.

Split Dollar Agreements

Mr. Bryant is also party to a split dollar life insurance agreement maintained by BOW. BOW paid a one-time premium of $324,000.00 for the underlying life insurance policy. If Mr. Bryant dies prior to the termination of his employment with BOW other than for reason of death or disability, Mr. Bryant’s designated beneficiaries receive the lesser of $250,000 and the underlying policy’s cash surrender value less the one-time premium paid. If Mr. Bryant dies after the termination of his employment with BOW other than for reason of death or disability, Mr. Bryant’s designated beneficiaries receive the lesser of $250,000 and the underlying policy’s cash surrender value less the one-time premium paid. Mr. Bryant’s beneficiaries will receive no amount if Mr. Bryant’s employment is terminated by BOW for cause. CapStar will assume Mr. Bryant’s split dollar life insurance agreement and underlying policy in connection with the consummation of the BOW merger.

Claus Thormaehlen, who previously served on the board of directors of FCB, is party to a split dollar life insurance agreement with FNBM. As of December 31, 2019, the total outstanding liability under the agreement was $22,722. This agreement will be terminated, and the then-total outstanding liability under the agreement will be paid to Mr. Thormaehlen in one lump sum payment, in connection with the consummation of the FCB merger.

Hickerson Director Deferred Compensation Plan

Mr. Hickerson, who previously served on the board of directors of FCB, is party to a director deferred compensation plan arrangement with FCB. As of December 31, 2019, the total outstanding liability under Mr. Hickerson’s director deferred compensation plan was $328,861. This plan will be terminated, and the then-total outstanding plan liability will be paid to Mr. Hickerson in one lump sum payment, in connection with the consummation of the FCB merger.

Director Supplemental Retirement Plan Arrangements

Mr. Hickerson is also party to a director supplemental retirement plan arrangement with FCB. Mr. Hickerson received $26,997 under this director supplemental retirement plan in 2019. As of December 31, 2019, the total outstanding liability under the plan was $320,959. This plan will be terminated, and the then-total outstanding plan liability will be paid to Mr. Hickerson in one lump sum payment, in connection with the consummation of the FCB merger.

 

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Mr. Thormaehlen is party to a director supplemental retirement plan arrangement with FNBM. Mr. Thormaehlen received $35,187 under this director supplemental retirement plan in 2019. As of December 31, 2019, the total outstanding liability under the plan was $299,972. This plan will be terminated, and the then-total outstanding plan liability will be paid to Mr. Thormaehlen in one lump sum payment, in connection with the consummation of the FCB merger.

FCB and FNBM Board Service

George M. Brown currently serves on the board of directors of each of BOW, FCB, and FNBM.

CapStar Employment Agreements

CapStar has entered into an employment agreement with Tim Williams (the “Williams Employment Agreement”) which will be effective for a term of up to two years commencing on the effective time of the BOW merger. If the BOW merger agreement is terminated without consummation of the BOW merger or Mr. Williams’s employment with BOW and its subsidiaries terminates at any time prior ot the effective time of the BOW merger, then the Williams Employment Agreement will be void. Under the Williams Employment Agreement, Mr. Williams will receive an annual base salary of $115,000 and will be eligible to receive a discretionary annual incentive award. The Williams Employment Agreement also provides that Mr. Williams will receive a cash retention award of $25,000, payable in full within 10 days following the effective time of the BOW merger, and a retention award consisting of shares of restricted CapStar common stock with an aggregate grant date fair value of $25,000, vesting in two equal installments on each of the first two anniversaries of the effective time of the BOW merger, subject to Mr. Williams’s continued employment with CapStar or one of its affiliates through each applicable vesting date. Upon Mr. Williams’s termination of employment by CapStar without cause or due to his resignation for Good Reason during the term of the Williams Employment Agreement, Mr. Williams will receive, subject to his timely execution and nonrevocation of a release of claims in the form requested by Capstar and continued compliance with the covenants set forth in the Williams Employment Agreement, (i) continued payment of his base salary for a period of one year following his date of termination and (ii) if Mr. Williams is eligible for and timely elects COBRA coverage, a cash payment equal to the monthly employer medical premium subsidy provided to active employees until the earlier of 12 months following Mr. Williams’s date of termination and the date on which Mr. Williams ceases such COBRA coverage. The Williams Employment Agreement also includes one-year post-termination noncompeition and employee and customer nonsolication covenants and perpetual confidentiality and nondisparagement covenants.

CapStar and CapStar Bank Board Seat

CapStar and CapStar Bank have agreed to appoint to the CapStar and CapStar Bank boards of directors one member of the board of directors of FCB, FNBM, or BOW selected by FCB in consultation with CapStar and otherwise meeting the general requirements for service on the CapStar and CapStar Bank boards of directors. These appointments will be effective as of the effective of the FCB merger. Provided this individual continues to satisfy the requirements for service on the CapStar and CapStar Bank boards of directors, CapStar and CapStar Bank have agreed to nominate this individual for reelection to the boards of directors of CapStar and CapStar Bank at the first annual meeting of CapStar shareholders following the FCB merger.

As of the date of this proxy statements/prospectus, the individual to serve on the CapStar and CapStar Bank boards of directors following the FCB merger has not been selected.

Indemnification and Insurance

As described under the section titled “The BOW Merger Agreement—Director and Officer Indemnification and Insurance,” from and after the completion of the BOW merger, CapStar and CapStar Bank generally will indemnify and hold harmless, and advance expenses to, each current and former director, officer, and employee of BOW or any of its subsidiaries against all liabilities arising out of matters existing or occurring at or before the effective time of the BOW merger (including the BOW merger and the other transactions contemplated by the BOW merger agreement) and based on or arising out of the fact that such person is or was a director, officer, or

 

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employee of BOW or any of its subsidiaries, regardless of whether claims associated therewith are asserted before, at, or after the effective time of the BOW merger, to the fullest extent such person would have been titled to be indemnified or would have had the right to advancement of expenses under the charter and bylaws or similar organizational documents of BOW or its subsidiaries as in effect on January 23, 2020, and as permitted by applicable law.

The BOW merger agreement requires CapStar or one of its subsidiaries to maintain for a period of six years after the completion of the BOW merger BOW’s and its subsidiaries’ currently existing directors’ and officers’ liability insurance, or policies of at least the same coverage and amounts and containing terms and conditions that are no less favorable in any material respect to the insured persons, with respect to claims arising from facts or events that occurred prior to the completion of the BOW merger, and covering such persons as are currently covered by BOW’s and its subsidiaries’ currently existing directors’ and officers’ liability insurance. However, CapStar or its subsidiary is not required to spend for this insurance in the aggregate an amount in excess of 200% of the annual premium currently paid by BOW and its subsidiaries for their current directors’ and officers’ liability insurance and, if CapStar or its subsidiary is unable to maintain this insurance as described for such amount, CapStar or its subsidiary is obligated to obtain as much comparable insurance as is available for that amount. In lieu of the foregoing, CapStar may instead (i) request that BOW and its subsidiaries obtain an extended reporting period endorsement under their currently existing directors’ and officers’ liability insurance policies or (ii) substitute six-year “tail” policies with terms, including coverage and amount, no less favorable in any material respect to the indemnified parties than BOW’s and its subsidiaries’ existing directors’ and officers’ liability insurance policies as of January 23, 2020.

If CapStar or CapStar Bank (or any of their successors or assigns) consolidates or merges with another person and is not the continuing entity or if CapStar or CapStar Bank liquidates, dissolves, or transfers or conveys all or substantially all of its properties and assets to another person, then CapStar or CapStar Bank, as applicable, will ensure that its successors and assigns assume its indemnification and insurance obligations.

Public Trading Markets

The CapStar common stock is listed for trading on the NASDAQ under the symbol “CSTR”. Neither FCB common stock nor BOW common stock is actively traded on a securities exchange and there is no established trading market for either FCB common stock or BOW common stock and no broker currently makes a market in either FCB common stock or BOW common stock. Following the mergers, shares of CapStar common stock will continue to be traded on the NASDAQ.

Under the FCB merger agreement and the BOW merger agreement, CapStar will cause the shares of CapStar common stock to be issued or reserved for issuance in the mergers to be approved for listing on the NASDAQ, subject to notice of issuance. The FCB merger agreement provides that neither CapStar nor FCB will be required to complete the FCB merger if such shares are not authorized for listing on the NASDAQ, subject to notice of issuance. The BOW merger agreement provides that neither CapStar nor BOW will be required to complete the BOW merger if such shares are not authorized for listing on the NASDAQ, subject to notice of issuance.

CapStar’s Dividend Policy

On January 23, 2020, CapStar announced that the CapStar board of directors has approved the declaration of a quarterly cash dividend of $0.05 per share on CapStar’s common stock, payable on or about February 21, 2020 to shareholders of record as of the close of business on February 7, 2020.

No assurances can be given that any dividends will be paid by CapStar or that dividends, if paid, will not be reduced or eliminated in future periods. Special cash dividends, stock dividends or returns of capital may, to the extent permitted by the policies and regulations of the Federal Reserve Board, be paid in addition to, or in lieu of,

 

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regular cash dividends. Dividends from CapStar will depend, in large part, upon receipt of dividends from CapStar Bank, and any other banks which CapStar acquires, because CapStar will have limited sources of income other than dividends from CapStar Bank and earnings from the investment of proceeds from the sale of shares of common stock retained by CapStar. The CapStar board of directors may change its dividend policy at any time, and the payment of dividends by financial holding companies is generally subject to legal and regulatory limitations. For further information, see the section titled “Comparative Historical and Unaudited Pro Forma Per Share Data.”

Regulatory Approvals

CapStar, FCB and BOW have agreed to use their reasonable best efforts to take promptly all actions and to do promptly all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the FCB merger agreement and the BOW merger agreement. However, in no event will CapStar or CapStar Bank or their affiliates be required, or will FCB, BOW and their subsidiaries be permitted (without CapStar’s prior written consent), to agree to any non-standard condition or restriction that would have or would reasonably be expected to have a material adverse effect to the business, financial condition or results of operations of CapStar (as the surviving corporation) and its subsidiaries, measured on a scale relative to FCB and its subsidiaries in the case of the FCB merger and on a scale relative to BOW and its subsidiaries in the case of the BOW merger, taken as a whole (we refer to such condition as a “burdensome condition”). However, any condition or requirement imposed by a government entity which is customarily imposed in published orders or approvals for transactions such as those contemplated by the FCB merger agreement or BOW merger agreement will not be deemed to be a burdensome condition. CapStar, FCB and BOW are in the process of filing the applications, notices, requests and letters necessary to obtain the required regulatory determinations.

Federal Reserve Board. The transactions contemplated by the FCB merger agreement require approval by the Federal Reserve Board pursuant to Section 3 of the Bank Holding Company Act of 1956, as amended (12 U.S.C. § 1842(c)) (which we refer to as the “BHC Act”) and the federal Bank Merger Act (12 U.S.C. § 1828(c)). The Federal Reserve Board takes into consideration a number of factors when acting on applications under Section 3 of the BHC Act and section 225.13 of Regulation Y (12 CFR 225.13) and the Bank Merger Act. These factors include the financial condition of the bank holding companies and banks involved and the future prospects of the combined organization (including consideration of the current and projected capital positions and the levels of indebtedness) and the managerial resources (including the competence, experience, and integrity of the officers, directors, and principal shareholders, as well as their record of compliance with laws and regulations). The Federal Reserve Board also considers the effectiveness of the applicant in combatting money laundering, the convenience and needs of the communities to be served, as well as the extent to which the proposal would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. The Federal Reserve Board may not approve a proposal that would have significant adverse effects on competition or on the concentration of resources in any banking market.

Additionally, as required by the Community Reinvestment Act (which we refer to as the “CRA”), and in reviewing the convenience and needs of the communities to be served, the Federal Reserve Board will consider the records of performance of the relevant insured depository institutions under the CRA. As of their last respective CRA examinations, each of CapStar Bank, The First National Bank of Manchester and BOW received an overall “satisfactory” regulatory rating with respect to CRA compliance.

Tennessee Department of Financial Institutions. To complete the bank merger and BOW merger, CapStar is required to submit an application to, and receive approval from, the TDFI. The TDFI will review the application to determine whether the bank merger and the BOW merger comply with Tennessee law. The criteria considered by the TDFI are similar to those considered by the Federal Reserve Board.

Public Notice and Comments. The BHC Act, the Bank Merger Act, Tennessee law and applicable regulations require published notice of, and the opportunity for public comment on these applications. Federal

 

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law also authorizes the Federal Reserve Board to hold a public hearing or meeting if either agency determines that a hearing or meeting would be appropriate. The Federal Reserve Board takes into account the views of third party commenters, particularly on the subject of the merging parties’ CRA performance and record of service to their respective communities, and any hearing, meeting or comments provided by third parties could prolong the period during which the applications are under review by these agencies.

Waiting Periods. Transactions approved under Section 3 of the BHC Act or the Bank Merger Act generally may not be completed until 30 days after the approval of the applicable federal agency is received, during which time the Department of Justice (which we refer to as the “DOJ”) may challenge the transaction on antitrust grounds. With the approval of the applicable federal agency and the concurrence of the DOJ, the waiting period may be reduced to no less than 15 days. The commencement of an antitrust action would stay the effectiveness of such an approval unless a court specifically ordered otherwise. In reviewing the FCB merger, bank merger or the BOW merger, the DOJ could analyze the applicable merger’s effect on competition differently than the Federal Reserve Board, and thus it is possible that the DOJ could reach a different conclusion than the Federal Reserve Board regarding the applicable merger’s effects on competition. A determination by the DOJ not to object to the FCB merger, bank merger or BOW merger may not prevent the filing of antitrust actions by private persons or state attorneys general. There can be no assurance if and when DOJ clearance will be obtained, or as to the conditions or limitations that such DOJ approval may contain or impose.

Additional Regulatory Approvals and Notices. Notifications and/or applications requesting approval may be submitted to various other federal and state regulatory authorities and self-regulatory organizations, including the Office of the Comptroller of the Currency.

Based on information available to us as of the date hereof, CapStar, FCB and BOW believe that the mergers do not raise significant regulatory concerns and that we will be able to obtain all requisite regulatory approvals. However, neither CapStar, FCB nor BOW can assure you that all of the regulatory approvals described above will be obtained and, if obtained, we cannot assure you as to the timing of any such approvals, CapStar’s ability to obtain the approvals on satisfactory terms, or the absence of any litigation challenging such approvals. In addition, there can be no assurance that such approvals will not impose conditions or requirements that would reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets, or business of the surviving corporation and its subsidiaries, taken as a whole, after giving effect to the mergers.

Neither CapStar, FCB nor BOW is aware of any material governmental approvals or actions that are required for completion of the mergers other than those described above. It is presently contemplated that if any such additional governmental approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

If there is an adverse development in either party’s regulatory standing, CapStar may be required to withdraw some or all of the applications for approval of the mergers and the bank merger and, if possible, resubmit the applications after the applicable supervisory concerns have been resolved.

Dissenters’ Rights for FCB Shareholders

Under the TBCA, holders of FCB common stock as of the FCB record date have the right to dissent from the FCB merger and to receive payment in cash for the fair value of such holders’ shares of FCB common stock in lieu of the consideration such holders would otherwise be entitled to pursuant to the FCB merger agreement. These rights are known as “appraisal rights”. FCB shareholders electing to exercise appraisal rights must comply with the provisions of Section 48-23-201 to Section 48-23-209 of the TBCA in order to perfect their rights. Strict compliance with the statutory procedures is required to perfect appraisal rights under the TBCA.

The following is intended as a brief summary of the material provisions of the Tennessee statutory procedures required to be followed by a shareholder in order to dissent from the FCB merger and perfect

 

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appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 48-23-101 to Section 48-23-302 of the TBCA, the full text of which appears in Appendix E to this proxy statements/prospectus. Failure to precisely follow any of the statutory procedures set forth in the TBCA may result in the loss or waiver of your appraisal rights. All references in this summary to a “shareholder” are to the holder of shares of FCB common stock as of the FCB record date unless otherwise indicated.

In order to perfect dissenters’ rights with respect to the FCB merger, an FCB shareholder must satisfy each of the following conditions:

 

   

deliver to FCB before the vote at the FCB special meeting is taken, written notice of his or her intent to demand payment for his or her shares of FCB common stock if the FCB merger is consummated; and

 

   

not vote, or cause to be voted, his or her shares of FCB common stock in favor of the FCB merger agreement.

Such written notification should be delivered either in person or by mail (certified mail, return receipt requested, being the recommended form of transmittal) to:

 

FCB Corporation

100 West High Street

Manchester, Tennessee 37355

Attn: Tim Spry, FNBM’s President and Chief Executive Officer

If the FCB merger is completed, a shareholder who fails to satisfy these requirements will have no appraisal rights with respect to such holders’ shares of FCB common stock.

Within ten days after the completion of the FCB merger, CapStar, as the surviving corporation of the FCB merger, must provide to each FCB shareholder who filed a notice of intent to demand payment for his or her shares a written appraisal notice and an election form that specifies, among other things:

 

   

the first date of any public announcement of CapStar’s and FCB’s intent to merge;

 

   

that the dissenting shareholder is required to certify whether beneficial ownership of their shares of FCB common stock was acquired before the date of the public announcement regarding the FCB merger;

 

   

that the dissenting shareholder is required to certify that such shareholder did not vote in favor of or consent to the FCB merger;

 

   

where to return the completed appraisal election form and the shareholder’s stock certificates and the date by which each must be received by CapStar or its agent;

 

   

CapStar’s estimate of the fair value of shares of FCB common stock;

 

   

that, if requested in writing, CapStar will provide to the shareholder so requesting, within ten days after the date set for receipt by CapStar of the appraisal election form, the number of shareholders who return the forms by such date and the total number of shares owned by them; and

 

   

the date by which any notice regarding the shareholder’s decision to withdraw its demand for payment must be received by CapStar.

Upon receipt of such notice, dissenting FCB shareholders would become entitled to receive payment of their shares of FCB common stock, as applicable, when they:

 

   

demand payment;

 

   

certify whether they acquired their shares of FCB common stock prior to the date of the first public announcement of CapStar’s and FCB’s intent to merge; and

 

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deposit with CapStar certificates representing their shares of FCB common stock, in accordance with the instructions set forth in the notice.

A demand for payment filed by a shareholder may not be withdrawn without FCB’s or, after the completion of the FCB merger, CapStar’s consent. Upon valid withdrawal from the appraisal process, the right of the dissenting shareholder to be paid the fair value of his or her shares will cease, and he or she will be reinstated as a shareholder and will be entitled to receive the per share FCB merger consideration.

A shareholder who is dissatisfied with CapStar’s estimate of the fair value of the shares of FCB common stock must notify CapStar of such shareholder’s estimate of the fair value of the shares and demand payment of that estimate plus interest in the appraisal election form within one month after CapStar made or offered payment for the dissenter’s shares. A shareholder who fails to notify CapStar in writing of the shareholder’s demand to be paid its stated estimate of the fair value of the shares plus interest within the required time period waives the right to demand payment and will be entitled only to the payment offered by CapStar in the appraisal election form.

If a dissenting shareholder refuses to accept CapStar’s estimated value of their shares of FCB common stock and CapStar fails to comply with the demand of the dissenting shareholder to pay such shareholder’s estimated value of the shares, plus interest, then within two months after receipt of a written payment demand from any dissenting shareholder, CapStar must file an action in any court of record having equity jurisdiction in the county where CapStar’s principal office is located, requesting that the fair value of such shares be determined by the court. If CapStar does not commence the proceeding within the two-month period, it must pay each dissenter whose demand remains unsettled the amount demanded by such dissenter.

All dissenting shareholders whose demands remain unsettled will be made parties to the proceeding and a copy of the petition will be served on each dissenting shareholder as provided by law.

The costs of a court appraisal proceeding, including reasonable compensation for, and expenses of, appraisers appointed by the court, will be determined by the court and assessed against CapStar, except that the court may assess costs against all or some of the dissenting shareholders, in amounts the court finds equitable, to the extent that the court finds such shareholders acted arbitrarily, vexatiously or not in good faith with respect to their appraisal rights. The court also may assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable, against: (i) CapStar and in favor of any or all dissenting shareholders if the court finds CapStar did not substantially comply with the notification provisions set forth in Section 48-23-201 to Section 48-23-309 of the TBCA; or (ii) either CapStar or a dissenting shareholder, in favor of the other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the appraisal rights. If the court in an appraisal proceeding finds that the services of counsel for any dissenting shareholder were of substantial benefit to other dissenting shareholders, and that the fees for those services should not be assessed against CapStar, the court may award to such counsel reasonable fees to be paid out of the amounts awarded the dissenting shareholders who were benefited.

Failure to strictly comply with the applicable TBCA provisions will result in the loss of the right of appraisal.

Dissenters’ Rights for BOW Shareholders

Under the TBCA, holders of BOW common stock as of the BOW record date have the right to dissent from the BOW merger and to receive payment in cash for the fair value of such holders’ shares of BOW common stock in lieu of the consideration such holders would otherwise be entitled to pursuant to the BOW merger agreement. These rights are known as “appraisal rights”. BOW shareholders electing to exercise appraisal rights must comply with the provisions of Section 48-23-201 to Section 48-23-209 of the TBCA in order to perfect their rights. Strict compliance with the statutory procedures is required to perfect appraisal rights under the TBCA.

 

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The following is intended as a brief summary of the material provisions of the Tennessee statutory procedures required to be followed by a shareholder in order to dissent from the BOW merger and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 48-23-101 to Section 48-23-302 of the TBCA, the full text of which appears in Appendix E to this proxy statements/prospectus. Failure to precisely follow any of the statutory procedures set forth in the TBCA may result in the loss or waiver of your appraisal rights. All references in this summary to a “shareholder” are to the holder of shares of BOW common stock as of the BOW record date unless otherwise indicated.

In order to perfect dissenters’ rights with respect to the BOW merger, a BOW shareholder must satisfy each of the following conditions:

 

   

deliver to BOW before the vote is taken, written notice of his or her intent to demand payment for his or her shares of BOW common stock if the BOW merger is consummated; and

 

   

not vote, or cause to be voted, his or her shares of BOW common stock in favor of the BOW merger agreement.

Such written notification should be delivered either in person or by mail (certified mail, return receipt requested, being the recommended form of transmittal) to:

 

The Bank of Waynesboro

201 South Main Street

Waynesboro, Tennessee 38485

Attn: William (“Bill”) Bryant

President and Chief Executive Officer

If the BOW merger is completed, a shareholder who fails to satisfy these requirements will have no appraisal rights with respect to such holders’ shares of BOW common stock.

Within ten days after the completion of the BOW merger, CapStar Bank, as the surviving bank in the BOW merger, must provide to each BOW shareholder who filed a notice of intent to demand payment for his or her shares a written appraisal notice and an election form that specifies, among other things:

 

   

the first date of any public announcement of CapStar Bank’s and BOW’s intent to merge, as applicable;

 

   

that the dissenting shareholder is required to certify whether beneficial ownership of their shares of BOW common stock was acquired before the date of the public announcement regarding the BOW merger;

 

   

that the dissenting shareholder is required to certify that such shareholder did not vote in favor of or consent to the BOW merger;

 

   

where to return the completed appraisal election form and the shareholder’s stock certificates and the date by which each must be received by CapStar Bank or its agent;

 

   

CapStar Bank’s estimate of the fair value of shares of BOW common stock;

 

   

that, if requested in writing, CapStar Bank will provide to the shareholder so requesting, within ten days after the date set for receipt by CapStar Bank of the appraisal election form, the number of shareholders who return the forms by such date and the total number of shares owned by them; and

 

   

the date by which any notice regarding the shareholder’s decision to withdraw its demand for payment must be received by CapStar Bank.

Upon receipt of such notice, dissenting BOW shareholders would become entitled to receive payment of their shares of BOW common stock, as applicable, when they:

 

   

demand payment;

 

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certify whether they acquired their shares of BOW common stock prior to the date of the first public announcement of CapStar Bank’s and BOW’s intent to merge; and

 

   

deposit with CapStar bank certificates representing their shares of BOW common stock, in accordance with the instructions set forth in the notice.

A demand for payment filed by a shareholder may not be withdrawn without BOW’s or, after the completion of the BOW merger, CapStar Bank’s consent. Upon valid withdrawal from the appraisal process, the right of the dissenting shareholder to be paid the fair value of his or her shares will cease, and he or she will be reinstated as a shareholder and will be entitled to receive the per share BOW merger consideration, as applicable.

A shareholder who is dissatisfied with CapStar Bank’s estimate of the fair value of the shares of BOW common stock must notify CapStar Bank of such shareholder’s estimate of the fair value of the shares and demand payment of that estimate plus interest in the appraisal election form within one month after CapStar Bank made or offered payment for the dissenter’s shares. A shareholder who fails to notify CapStar Bank in writing of the shareholder’s demand to be paid its stated estimate of the fair value of the shares plus interest within the required time period waives the right to demand payment and will be entitled only to the payment offered by CapStar Bank in the appraisal election form.

If a dissenting shareholder refuses to accept CapStar Bank’s estimated value of their shares of BOW common stock and CapStar Bank fails to comply with the demand of the dissenting shareholder to pay such shareholder’s estimated value of the shares, plus interest, then within two months after receipt of a written payment demand from any dissenting shareholder, CapStar Bank must file an action in any court of record having equity jurisdiction in the county where CapStar Bank’s principal office is located, requesting that the fair value of such shares be determined by the court. If CapStar Bank does not commence the proceeding within the two-month period, it must pay each dissenter whose demand remains unsettled the amount demanded by such dissenter.

All dissenting shareholders whose demands remain unsettled will be made parties to the proceeding and a copy of the petition will be served on each dissenting shareholder as provided by law.

The costs of a court appraisal proceeding, including reasonable compensation for, and expenses of, appraisers appointed by the court, will be determined by the court and assessed against CapStar Bank, except that the court may assess costs against all or some of the dissenting shareholders, in amounts the court finds equitable, to the extent that the court finds such shareholders acted arbitrarily, vexatiously or not in good faith with respect to their appraisal rights. The court also may assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable, against: (i) CapStar Bank and in favor of any or all dissenting shareholders if the court finds CapStar Bank, as applicable, did not substantially comply with the notification provisions set forth in Section 48-23-201 to Section 48-23-309 of the TBCA; or (ii) either CapStar Bank or a dissenting shareholder, in favor of the other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the appraisal rights. If the court in an appraisal proceeding finds that the services of counsel for any dissenting shareholder were of substantial benefit to other dissenting shareholders, and that the fees for those services should not be assessed against CapStar Bank, the court may award to such counsel reasonable fees to be paid out of the amounts awarded the dissenting shareholders who were benefited.

Failure to strictly comply with the applicable TBCA provisions will result in the loss of the right of appraisal.

Board of Directors and Management of CapStar Following the Mergers

Under the FCB merger agreement, CapStar has agreed, prior to the closing date, to appoint one member of the current board of directors of FCB, First National Bank of Manchester or BOW, selected by FCB in

 

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consultation with CapStar (which we refer to as the “FCB designee”), to the boards of directors of CapStar and CapStar Bank. The directors of CapStar holding office immediately prior to the effective time, as well as the FCB designee, will serve as the directors of the surviving corporation from and after the effective time of the FCB merger and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. Provided the FCB designee continues to satisfy the requirements for service as a member of the board of directors of CapStar and CapStar Bank, as applicable, each of CapStar and CapStar Bank must take all required action to nominate the FCB designee for reelection to the board of directors of CapStar and CapStar Bank at or in connection with the first annual meeting of the shareholders of the surviving corporation following the effective time of the FCB merger.

The executive officers of CapStar immediately prior to the effective time of the FCB merger will be the executive officers of the surviving corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

Information regarding the executive officers and directors of CapStar is contained in documents filed by CapStar with the SEC and incorporated by reference into this proxy statements/prospectus, including CapStar’s Annual Report on Form 10-K for the year ended December 31, 2019 and its definitive proxy statement on Schedule 14A for its 2019 annual meeting, filed with the SEC on March 6, 2020 and March 20, 2019, respectively. See the section titled “Where You Can Find More Information.”

 

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THE FCB MERGER AGREEMENT

The following describes certain aspects of the FCB merger, including certain material provisions of the FCB merger agreement. The following description of the FCB merger agreement is subject to, and qualified in its entirety by reference to, the FCB merger agreement, which is attached to this proxy statements/prospectus as Appendix A and is incorporated by reference into this proxy statements/prospectus. We urge you to read the FCB merger agreement carefully and in its entirety, as it is the legal document governing the FCB merger.

Explanatory Note Regarding the FCB Merger Agreement

The FCB merger agreement and this summary of terms are included to provide you with information regarding the terms of the FCB merger agreement. Factual disclosures about CapStar and FCB contained in this proxy statements/prospectus or in the public reports of CapStar filed with the SEC may supplement, update or modify the factual disclosures about CapStar and FCB contained in the FCB merger agreement. The FCB merger agreement contains representations and warranties by CapStar, on the one hand, and by FCB, on the other hand. The representations, warranties and covenants made in the FCB merger agreement by CapStar and FCB were qualified and subject to important limitations agreed to by CapStar and FCB in connection with negotiating the terms of the FCB merger agreement. In particular, in your review of the representations and warranties contained in the FCB merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing circumstances in which a party to the FCB merger agreement may have the right not to consummate the FCB merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the FCB merger agreement, rather than establishing matters as facts. The representations and warranties also may be subject to a contractual standard of materiality different from that generally applicable to shareholders and reports and documents filed with the SEC and some were qualified by the matters contained in the confidential disclosure schedules that CapStar and FCB each delivered in connection with the FCB merger agreement and certain documents filed with the SEC. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statements/prospectus, may have changed since January 23, 2020.

For the foregoing reasons, the representations and warranties or any descriptions of those provisions should not be read alone or relied upon as characterizations of the actual state of facts or condition of CapStar or FCB or any of their respective subsidiaries or affiliates. Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this proxy statements/prospectus or incorporated by reference into this proxy statements/prospectus. See the section titled “Where You Can Find More Information.”

Terms of the FCB Merger