United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 1994
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM to
Commission file number 0-15083
CAROLINA FIRST CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0824914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 South Main Street, Greenville, South Carolina 29601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 255-7900
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No
The number of outstanding shares of the issuer's $1.00 par value common
stock as of November 10, 1994 was 4,538,460.
<PAGE>
Consolidated Balance Sheets
Carolina First Corporation and Subsidiaries
(Unaudited)
($ in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1994 1993
<S> <C> <C>
Cash and due from banks.......................................... $ 43,444 27,320
Federal funds sold and securities
purchased under resale agreements.............................. 8,904 54,212
Securities
Trading....................................................... 722 250
Available for sale............................................ 54,904 64,871
Held for investment (market value $58,668 in 1994
and $50,024 in 1993).......................................... 60,912 49,605
Total securities............................................ 116,538 114,726
Loans............................................................ 817,404 567,379
Less unearned income.......................................... (1,063) (2,221)
Less allowance for loan losses................................ (5,029) (5,688)
Net loans................................................... 811,312 559,470
Premises and equipment........................................... 36,389 28,990
Accrued interest receivable...................................... 8,050 4,811
Other assets..................................................... 43,027 26,892
$1,067,664 816,421
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing.......................................... $ 108,575 67,776
Interest-bearing............................................. 831,700 656,809
Total deposits............................................. 940,275 724,585
Borrowed funds................................................. 31,926 17,993
Accrued interest payable....................................... 4,062 3,041
Other liabilities.............................................. 4,377 7,933
Total liabilities........................................... 980,640 753,552
Stockholders' Equity
Preferred stock-no par value; authorized 10,000,000 shares;
issued and outstanding 920,000 shares (Series 1994),
621,000 shares (Series 1993) and 60,000 shares (Series 1993B)
in 1994 and 621,000 shares (Series 1993) and 60,000 shares
(Series 1993B) in 1993; liquidation preference $25 per share
(Series 1994 and 1993) and $20 per share (Series 1993B)...... 37,063 15,662
Common stock-par value $1 per share; authorized 20,000,000
shares; issued and outstanding 4,524,361 shares in 1994
and 4,279,724 in 1993........................................ 4,524 4,280
Surplus........................................................ 38,247 35,412
Retained earnings.............................................. 8,591 8,400
Nonvested restricted stock..................................... (547) (709)
Guarantee of ESOP debt......................................... (176) (176)
Unrealized gain (loss) on securities available for sale........ (678) --
Total stockholders' equity.................................. 87,024 62,869
$1,067,664 816,421
</TABLE>
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Consolidated Statements of Income
Carolina First Corporation and Subsidiaries
($ in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans...........................$ 17,618 $ 11,186 $ 44,915 $ 30,193
Interest on securities
Taxable............................................ 1,206 1,681 3,760 4,514
Exempt from federal income taxes................... 279 147 710 328
Total interest on securities..................... 1,485 1,828 4,470 4,842
Interest on federal funds sold and securities
purchased under resale agreements.................. 40 29 343 330
Total interest income.............................. 19,143 13,043 49,728 35,365
Interest expense
Interest on deposits................................. 7,467 5,508 19,731 15,693
Interest on borrowed funds........................... 685 182 1,133 326
Total interest expense............................. 8,152 5,690 20,864 16,019
Net interest income................................ 10,991 7,353 28,864 19,346
Provision for loan losses.............................. 250 330 450 909
Net interest income after
provision for loan losses........................ 10,741 7,023 28,414 18,437
Noninterest income
Service charges on deposit accounts.................. 1,085 750 2,682 1,822
Mortgage banking income.............................. 533 436 1,583 924
Fees for trust services.............................. 185 174 681 412
Gain on sale of securities........................... 54 21 189 546
Sundry............................................... 403 211 1,068 515
Total noninterest income........................... 2,260 1,592 6,203 4,219
Noninterest expenses
Salaries and wages................................... 3,770 2,598 10,397 6,638
Employee benefits.................................... 921 623 2,697 1,738
Occupancy............................................ 942 544 2,597 1,435
Furniture and equipment.............................. 619 404 1,660 1,096
Sundry............................................... 3,820 2,674 9,835 6,742
Total noninterest expenses......................... 10,072 6,843 27,186 17,649
Income before income taxes......................... 2,929 1,772 7,431 5,007
Income taxes........................................... 928 466 2,184 1,599
Net income ........................................ 2,001 1,306 5,247 3,408
Dividends on preferred stock........................... 731 530 1,702 1,381
Net income applicable to common shareholders.......$ 1,270 $ 776 $ 3,545 $ 2,027
Net income per common share:
Primary*..........................................$ 0.28 $ 0.23 $ 0.79 $ 0.61
Fully diluted*.................................... 0.27 n/a 0.77 n/a
Average shares outstanding:
Primary*.......................................... 4,519,486 3,325,608 4,510,744 3,313,613
Fully diluted*.................................... 7,464,782 5,668,690 6,820,618 5,370,798
</TABLE>
*Share data have been restated to reflect 5% stock dividends.
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Consolidated Statements of Cash Flows
Carolina First Corporation and Subsidiaries
(Unaudited)
(All Amounts, Except Per Share Data, in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities
Net income..................................................... $ 5,247 $ 3,408
Adjustments to reconcile net income to net cash
provided by operations
Depreciation............................................... 1,899 1,184
Amortization of intangibles................................ 1,215 760
Provision for loan losses.................................. 450 909
Gain on sale of securities................................. (189) (546)
Proceeds from sale of trading securities................... 291,155 --
Proceeds from maturity of trading securities............... 24,480 --
Purchase of trading securities............................. (316,107) --
Originations of mortgage loans held for sale............... (31,663) --
Proceeds from sale of mortgage loans held for sale......... 38,127 39,042
Increase in interest receivable............................ (3,239) (609)
Increase in interest payable............................... 1,021 220
Increase in other assets................................... (15,933) (2,418)
Increase (decrease) in other liabilities................... (3,696) 322
FHLB stock dividend........................................ (50) (54)
Net cash used for operating activities....................... (7,283) 42,218
Cash Flows from Investing Activities
Proceeds from sale or maturity of securities................... -- 257,436
Proceeds from sale of securities available for sale............ 24,086 --
Proceeds from maturity of securities available for sale........ 154,840 --
Proceeds from maturity of securities held for investment....... 5,116 --
Purchase of securities......................................... -- (318,232)
Purchase of securities available for sale...................... (169,699) --
Purchase of securities held for investment..................... (16,373) --
Net decrease in federal funds sold and securities
purchased under resale agreements............................ 45,308 2,466
Net increase in loans.......................................... (216,571) (137,406)
Capital expenditures........................................... (9,298) (12,612)
Net cash used for investing activities ...................... (182,591) (208,348)
Cash Flows from Financing Activities
Acquired deposits (net)........................................ 97,735 156,145
Net increase (decrease) in deposits............................ 74,515 (29,134)
Increase in borrowed funds..................................... 13,933 30,729
Issuance of preferred stock.................................... 21,401 14,462
Dividends on preferred and common stock........................ (1,979) (851)
Other common stock activity.................................... 393 367
Net cash provided by financing activities.................... 205,998 171,718
Net change in cash and due from banks............................ 16,124 5,588
Cash and due from banks at beginning of year..................... 27,320 21,846
Cash and due from banks at end of period......................... $ 43,444 $ 27,434
</TABLE>
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of these policies is included in the 1993 Annual
Report to Stockholders.
(2) SECURITIES
The change in the net unrealized loss on securities
available for sale for the three months ended September 30,
1994 was $59,000.
(3) STATEMENTS OF CASH FLOWS
Cash includes currency and coin, cash items in process of
collection and due from banks. Interest paid, net of
interest capitalized as a part of the cost of construction,
amounted to $19,843,000 for the nine months ended September
30, 1994. Income tax payments of $3,077,000 were made for
the nine months ended September 30, 1994.
(4) COMMON STOCK
The Board of Directors of Carolina First Corporation (the
"Company") issued a five percent common stock dividend on
May 16, 1994 to common stockholders of record as of April
29, 1994. This dividend resulted in the issuance of 214,380
shares of the Company's $1.00 par value common stock. Per
share data of prior periods have been restated to reflect
this dividend.
(5) PREFERRED STOCK
On April 15, 1994, the Company issued 920,000 shares of
7.32% Noncumulative Convertible Preferred Stock Series 1994
("Series 1994 Preferred Stock"), which raised $21,442,000 in
equity. Dividends on the Series 1994 Preferred Stock will
be payable quarterly, when, as, and if declared by the Board
of Directors, at an annual rate of $1.83 per share.
Dividends on the Series 1994 Preferred Stock are not
cumulative. To date, all regular quarterly dividends have
been paid. A Series 1994 Preferred Stock share may be
converted at the option of the holder into 1.7931 shares of
common stock. In addition, the Company may redeem the
Series 1994 Preferred Stock at the redemption prices and in
accordance with the other terms set forth in the Company's
Articles of Amendment related to the Series 1994 Preferred
Stock.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
(Continued)
(6) ACQUISITIONS
On April 29, 1994, the Company purchased the insured
deposits of Citadel Federal Savings and Loan Association
("Citadel Federal") from the Resolution Trust Corporation,
as receiver for Citadel Federal. On May 2, 1994, the
Company acquired certain assets and deposits associated
principally with seven branches from Republic National Bank.
The branches are located in Columbia, Edgefield, Johnston,
Bennettsville, Lake City and McColl.
Effective October 13, 1994, the Company entered into a
definitive agreement with Aiken County National Bank ("Aiken
County National") for the merger of Aiken County National
into Carolina First Bank. The Company will acquire all the
outstanding common shares of Aiken County National in
exchange for approximately 453,000 shares of the Company's
common stock (assuming no dissenter's rights are exercised).
Aiken County National has assets of approximately $42
million, loans of $30 million and deposits of $38 million.
This transaction, which is subject to regulatory and Aiken
County National shareholder approval, is expected to be
completed in the first quarter of 1995.
Effective November 14, 1994, the Company entered into a
definitive agreement with Midlands National Bank
("Midlands") for the merger of Midlands into Carolina First
Bank. The Company will acquire all the outstanding common
shares of Midlands in exchange for approximately 584,000
shares of the Company's common stock (assuming no
dissenter's rights are exercised). Midlands has assets of
approximately $43 million, loans of $28 million and deposits
of $39 million. This transaction, which is subject to
regulatory and Midlands shareholder approval, is expected to
be completed in the first quarter of 1995.
(7) MANAGEMENT'S OPINION
The financial statements in this report are unaudited. In
the opinion of management, all adjustments necessary to
present a fair statement of the results for the interim
periods have been made. All such adjustments are of a
normal, recurring nature.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Carolina First Corporation (the "Company") is a bank and
thrift holding company which owns Carolina First Bank (the
"Bank"), a South Carolina-chartered commercial bank headquartered
in Greenville, South Carolina; Carolina First Savings Bank,
F.S.B. (the "Savings Bank"), a federally-chartered savings bank
headquartered in Georgetown, South Carolina; and Carolina First
Mortgage Company (the "Mortgage Company"), a mortgage banking
operation headquartered in Columbia, South Carolina. The
Company, which commenced operations in December 1986, currently
conducts business through 46 locations in South Carolina. At
September 30, 1994, the Company had approximately $1,067,664,000
in assets, $816,341,000 in loans, $940,275,000 in deposits and
$87,024,000 in stockholders' equity. At September 30, 1994, the
Company's nonperforming assets (which exclude loans which are 90
days or more past due and still accruing interest) totaled 0.12%
of total loans and other real estate owned.
The Company was formed principally in response to perceived
opportunities resulting from the takeovers of several South
Carolina-based banks by large southeastern regional bank holding
companies. A significant number of the Company's executive
officers and management personnel were previously employed by
certain of the larger South Carolina-based banks that were
acquired by these southeastern regional institutions.
Consequently, these officers and management personnel have
significant customer relationships and commercial banking
experience that have contributed to the Company's loan and
deposit growth. The Company targets individuals and small to
medium-sized businesses in South Carolina that require a full
range of quality banking services.
The Company currently serves three principal market areas:
the Greenville metropolitan area and surrounding counties
(located in the Upstate region of South Carolina); the Columbia
metropolitan area and surrounding counties (located in the
Midlands region of South Carolina); and Georgetown and Horry
counties (located in the Coastal region of South Carolina). The
Company's principal market areas represent three of the four
largest Metropolitan Statistical Areas in the state. In April
1994, the Company entered the Charleston market, the second
largest Metropolitan Statistical Area in the state, with the
purchase of the insured deposits of Citadel Federal Savings and
Loan Association ("Citadel Federal"). See "Growth Strategy and
Acquisitions." The Company also has branch locations in other
counties in South Carolina.
7
<PAGE>
The Company began its operations with the de novo opening of
Carolina First Bank in Greenville and has pursued a strategy of
growth through internal expansion and through the acquisition of
branch locations and financial institutions in selected market
areas.
For the first nine months of 1994, the Company had
consolidated net income of $5,247,000, an increase of 54% over
the $3,408,000 earned in the same period of 1993. Net income per
common share, adjusted to reflect the 5% common stock dividends,
was $0.79 for the nine months ended September 30, 1994, up 30%
from the $0.61 earned in the first nine months of 1993. Net
income per fully diluted share for the nine months ended
September 30, 1994 was $0.77. A higher level of average earning
assets, an increased net interest margin, good growth in
noninterest income and continued good credit quality were the
primary reasons for the growth in net income. Increases in
average earning assets resulted primarily from the acquisition of
branches, discussed in "Growth Strategy and Acquisitions", and
internal growth.
At September 30, 1994, assets totaled $1,067,664,000, an
increase of $313,015,000, or 41%, over September 30, 1993. Total
stockholders' equity increased 40% from September 30, 1993 to
September 30, 1994 to $87,024,000. Loans increased 52% to
$816,341,000 at September 30, 1994 compared with $536,890,000 at
September 30, 1993. Deposits at September 30, 1994 were
$940,275,000, up 44% from $651,997,000 at September 30, 1993.
On April 15, 1994, the Company issued 920,000 shares of the
Series 1994 Preferred Stock, which raised approximately
$21,442,000 in equity after deduction of expenses. See "Capital
Resources and Dividends."
The Board of Directors approved a 5% common stock dividend,
issued on May 16, 1994, to common stockholders of record as of
April 29, 1994. This dividend resulted in the issuance of
214,380 shares of the Company's $1.00 par value common stock.
Per share data of prior periods have been restated to reflect
this dividend. This is the sixth consecutive year that the
Company has issued a 5% common stock dividend. In addition to
the 5% common stock dividend, the Company began paying a regular
quarterly cash dividend of $0.05 per share in the first quarter
of 1994. See "Capital Resources and Dividends."
The Company is considering the merger of the Savings Bank
into the Bank. This merger is being considered because the
Company believes that there may be significant economic and
managerial benefits in such a combination. Such benefits would
include the elimination of duplicative administration, the
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consolidation of the Company's regulators, reduced regulatory
burdens and increased management focus. If such a merger occurs,
the Company would pay income taxes of approximately $1,000,000
due to the different tax treatment accorded the allowance for
loan losses at the Savings Bank. The Company will only proceed
with the merger of the Savings Bank into the Bank if management
believes that the long-term economic benefits would offset the
initial tax liability. The Company has preliminary indications
that such a merger could save up to $500,000 per year. However,
the Company has not at this time reached a final conclusion on
this issue. In the event that the Company elects to proceed with
such a merger, the Company expects that the tax liability would
be recorded in the fourth quarter of 1994 and that the merger
would be completed in the first quarter of 1995.
For certain information regarding the potential write-down
of assets in the fourth quarter and the sale or securitization of
credit cards, see the final 8 paragraphs of "Growth Strategy and
Acquisitions" below.
GROWTH STRATEGY AND ACQUISITIONS
Since its inception in 1986, the Company has pursued a
strategy of growth through internal expansion and through the
acquisition of branch locations and financial institutions in
selected market areas. The Company has emphasized internal
growth through the acquisition of market share from the large
out-of-state bank holding companies. It attempts to acquire
market share by
providing quality banking services and personal service to
individuals and business customers.
The Company's past acquisitions include the following: In
August 1990, the Company acquired the Savings Bank in a merger
transaction which resulted in the acquisition of approximately
$100,500,000 in deposit liabilities and $12,000,000 in capital.
In April 1991, the Bank purchased two branches in Anderson, South
Carolina which resulted in the acquisition of approximately
$20,127,000 in deposits, on which a premium of $1.2 million was
paid, and approximately $3,843,000 in loans. In December 1991,
the Savings Bank purchased four branches in Myrtle Beach which
resulted in the acquisition of approximately $36,768,000 in
deposits, on which a premium of $1.3 million was paid, and
approximately $10,000,000 in loans.
In March 1993, the Bank purchased the Piedmont, South
Carolina branch location from Republic National Bank ("Republic
Bank") which resulted in the acquisition of approximately
$15,378,000 in deposits, on which a premium of $600,000 was paid,
and approximately $2,334,000 in loans. On March 22, 1993, the
Bank purchased 12 branches principally located in central South
Carolina
9
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(the "12 Republic Branches") from Republic Bank. The
branches are located in Columbia (3), Irmo, Salley, Springfield,
Hardeeville, Barnwell, Williston, Blackville, Ridgeland and
Swansea, South Carolina. In this acquisition, the Bank assumed
$189,485,000 in deposits, on which a premium of $6,300,000 was
paid, and $28,905,000 in selected loans.
In five transactions during the period of time from December
1990 through November 1993, Carolina First Bank purchased an
aggregate of approximately $35 million in credit card receivables
and related accounts from Republic Bank.
In September 1993, the Company acquired First Sun Mortgage
Corporation (subsequently renamed Carolina First Mortgage
Company), which resulted in the acquisition of servicing rights
to a portfolio of approximately $250 million in mortgages and two
origination offices. The cost of the acquisition in excess of
the fair value of net assets acquired aggregated approximately
$3.1 million. This excess was assigned to goodwill and is being
amortized over 15 years. The Mortgage Company's principal
activities include the origination and servicing of one-to-four
family residential mortgage loans through 8 offices in South
Carolina. At September 30, 1994, the Mortgage Company was
servicing approximately 10,400 loans having an aggregate
principal balance of approximately $802 million. The servicing
portfolio includes purchased mortgage servicing rights for
approximately $680 million in mortgage loans; the related
intangible asset for excess and purchased mortgage servicing
rights totaled $9.2 million at September 30, 1994.
In December 1993, Carolina First Bank acquired the three
Columbia branches of Bay Savings Bank, F.S.B., which resulted in
the assumption of approximately $38,489,000 in deposits, on which
a premium of approximately $1.1 million was paid, and the
acquisition of approximately $143,000 in loans.
On April 29, 1994, the Company purchased the insured
deposits of Citadel Federal from the Resolution Trust
Corporation, as receiver for Citadel Federal. This acquisition
resulted in the acquisition of one branch office in Charleston
with deposits of approximately $5,849,000, on which a premium of
approximately $533,000 was paid.
On May 2, 1994, the Company acquired six branches from
Republic Bank. The acquired branches are located in Columbia,
Edgefield, Johnston, Bennettsville, Lake City and McColl. In
addition, Carolina First acquired the deposits and select loans
from Republic Bank's main office branch in Columbia, which was
not acquired. With this transaction, the Company acquired
deposits of approximately $135,326,000, on which a premium of
approximately $5.4 million was paid, and loans of approximately
$37,511,000.
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Effective October 13, 1994, the Company entered into a
definitive agreement with Aiken County National Bank ("Aiken
County National") for the merger of Aiken County National into
Carolina First Bank. The Company will acquire all the
outstanding common shares of Aiken County National in exchange
for approximately 453,000 shares of the Company's common stock
(assuming no dissenter's rights are exercised). Aiken County
National has assets of approximately $42 million, loans of $30
million and deposits of $38 million. This transaction, which is
subject to regulatory and Aiken County National shareholder
approval, is expected to be completed in the first quarter of
1995.
Effective November 14, 1994, the Company entered into a
definitive agreement with Midlands National Bank ("Midlands") for
the merger of Midlands into Carolina First Bank. The Company
will acquire all the outstanding common shares of Midlands in
exchange for approximately 584,000 shares of the Company's common
stock (assuming no dissenter's rights are exercised). Midlands
has assets of approximately $43 million, loans of $28 million and
deposits of $39 million. This transaction, which is subject to
regulatory and Midlands shareholder approval, is expected to be
completed in the first quarter of 1995.
The Company has entered into an agreement with Telepay,
Inc., a South Carolina corporation ("Telepay"), regarding the
delivery of certain home banking services. This agreement is
included as an exhibit hereto. The Company can give no assurance
regarding the probability of success of Telepay, or whether and
to what extent the Company will be involved with Telepay.
At September 30, 1994, the Company had $26,654,000 in
intangible assets which were generated principally in connection
with the acquisition of branch locations, credit card accounts
and receivables, the Mortgage Company and mortgage servicing
rights. As noted in previous Company filings, the Company has
undertaken a study to determine whether any adjustments in
intangible assets or the related amortization is appropriate.
This study has been substantially completed. Its preliminary
conclusion is that, except for certain intangible assets
associated with credit card receivables, the Company should not
make any adjustments to the amortization schedules. However,
approximately $3 million before taxes of intangible assets associated
with the origination of credit cards accounts should be written off.
In addition, in the event that the Company securitizes all or a
portion of its credit card portfolio (as discussed below), the
Company would be able to write off an additional $5 million before
taxes in intangible assets as a result of such securitization. Any
write-offs of intangible assets are expected to occur in the fourth
quarter of 1994.
Although any write-down of intangible assets would have a one-
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time material adverse effect on the Company's earnings, such
write-down of intangible assets would have a positive effect on
its net income on a going-forward basis. Furthermore, the
Company believes that in connection with the write-down, the
Company will be able to engage in either a securitization or sale
of the credit cards, which, if consummated, will improve the
Company's financial performance.
Concurrent with the contemplated securitization or possible
sale of the credit card portfolio, the Company is considering the
merger of its two subsidiaries (as discussed above). However,
at this time the Company has not determined the form or extent
of such restructuring or the total amounts of intangible assets
that will be written off.
In view of the foregoing and the other anticipated benefits
discussed below, the Company has determined to pursue, as its
first priority, the securitization of up to approximately
$100,000,000 of its credit card loans. As an alternative to
securitization, the Company has determined to pursue the sale of
such credit card loans. Either such alternative would improve
the Company's liquidity and provide the Company with significant
funds which could be used to fund loan demand.
The contemplated securitization would involve the transfer
of the Company's credit card accounts to a trust, in return for
which, the Company would be paid an amount equal to the principal
balance of the credit cards. The Company would use a portion of
such proceeds to purchase approximately a 25% interest in the
trust and the balance of the proceeds would be retained by the
Company. Interests in the balance of the trust would sold exclusively
to accredited investors in a private offering exempt from
registration under the federal securities laws. Such offering
would be made only pursuant to a private placement memorandum.
The Company believes that it will be successful in such regard;
however, there can be no assurance that such transaction will be
completed. In the event that the Company engages in such
securitization of the credit cards, the Company would be required
to write down approximately $5,000,000 before taxes in intangible
assets. Such write-down would be expected to occur in the fourth
quarter of 1994. The Company believes that the securitization would
provide substantial benefits to the Company, including the
provision of significant liquidity, the ability to retain a
portion of the expected earnings from the credit cards while
moving them off the balance sheet, and the continued ability to
service the credit cards and receive the related servicing
income. The Company expects in the near future to enter into a
preliminary agreement with an investment banking firm in which
the parties agree to use their best efforts to proceed with the
securitization of such credit cards.
Under the securitization arrangement, the Company retains
the obligation to guarantee a stated return to purchasers of the
trust
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interests. However, the Company believes that this
liability is not materially greater than the liability that would
exist if the Company retained its credit card portfolio.
As an alternative to securitization, the Company has also
engaged in preliminary negotiations with third parties regarding
the purchase of the credit cards. Based on these negotiations,
the Company believes that it could reach an agreement with a
third party which would result in the sale of such credit cards
on terms which are satisfactory to the Company. Based on current
market conditions, in the event that the Company sells all or a
portion of its credit card portfolio, the substantial portion of
the $3 million write-off for intangibles discussed above and
other credit card intangible assets would likely be offset by an
anticipated gain realized in such sale. Although the Company
believes that it would be able to effect such sale on
satisfactory terms, there can be no assurance of such fact.
The Company has built its credit card loan portfolio, in
part, through the acquisition of approximately $35,000,000 in
credit card accounts and receivables from Republic Bank in
several transactions since December 1990. In connection with
these acquisitions, Republic Bank escrowed funds to offset losses
in the purchased credit cards. Such escrowed funds were
exhausted by the end the second quarter of 1994. Accordingly,
absent a sale or securitization of the credit cards, any losses
in the credit card portfolio would have to be covered by the
allowance for loan losses as compared to escrowed funds (as was
the case in the past). Credit card losses have generally been
approximately 6.5% per year on a portfolio ranging from
approximately $25 million to $95 million.
EARNINGS REVIEW
Net Interest Income
The largest component of the Company's net income is the net
interest income of the Bank and the Savings Bank. Net interest
income is the difference between the interest earned on assets
and the interest paid for the liabilities used to support such
assets. Variations in the volume and mix of assets and
liabilities and their relative sensitivity to interest rate
movements determine changes in net interest income. As the
primary contributor to the Company's earnings, net interest
income constituted 82% of net
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revenues (net interest income plus
other income) for the first nine months of 1994 and for the same
period of 1993.
Fully tax-equivalent net interest income adjusts the yield
for assets earning tax-exempt income to a comparable yield on a
taxable basis. For the first nine months of 1994, the Company's
fully tax-equivalent net interest income was $29,405,000 compared
with $19,494,000 for the same period of 1993, for an increase of
$9,911,000, or 51%. The increase resulted from a higher level of
average earning assets and an improvement in the net interest
margin. The growth in average earning assets, which increased to
$827,444,000 for the first nine months of 1994 from $611,634,000
for the first nine months of 1993, resulted primarily from
internal loan growth and the acquisition of branches from
Republic Bank. The majority of this increase was in loans, which
averaged $216,139,000 higher in the first nine months of 1994
than in the same period of 1993. The improvement in net interest
margin, which increased to 4.71% in the first nine months of 1994
from 4.26% in the first nine months of 1993, primarily resulted
from lower deposit interest rates and a higher proportion of
noninterest-bearing deposits. In addition, the yield on loans
has risen due to increases in the prime interest rate and
increased consumer loan volume from the retail branch network.
Provision and Allowance for Loan Losses
Management maintains an allowance for loan losses which it
believes is adequate to cover possible losses in the loan
portfolio. However, management's judgment is based upon a number
of assumptions about future events which are believed to be
reasonable, but which may or may not prove valid. Thus, there
can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases
in the allowance for loan losses will not be required.
The allowance for loan losses is established through charges
in the form of a provision for loan losses and purchased loan
adjustments. Loan losses and recoveries are charged or credited
directly to the allowance. The amount charged to the provision
for loan losses by the Company is based on management's judgment
as to the amount required to maintain an allowance adequate to
provide for potential losses in the Company's loan portfolio.
The level of this allowance is dependent upon the total amount of
past due loans, general economic conditions and management's
assessment of potential losses.
The Company attempts to deal with repayment risks through
the establishment of, and adherence to, internal credit policies.
These policies include officer and customer limits, periodic
documentation examination and follow-up procedures for any
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exceptions to credit policies. A summary of the Company's
approach to managing credit risk is provided below in the "Asset
Quality" section.
At September 30, 1994, the Company had $397,000 in non-
accruing loans and $1,372,000 in loans greater than ninety days
past due on which interest was still being accrued. This
compares favorably with $905,000 and $1,335,000, respectively, at
September 30, 1993. Non-performing assets as a percentage of
loans and other real estate owned were 0.12% and 0.48% at
September 30, 1994 and 1993, respectively. Charge-offs as a
percentage of average loans have remained low during the first
nine months of 1994 at a 0.10% annual rate for the Company
compared with a 0.28% annual rate for the first nine months of
1993. These asset quality measures compare favorably to the
Company's FDIC peer group.
The allowance for loan losses totaled $5,029,000, or 0.62%
of total loans, at the end of September 1994, compared with
$5,352,000, or 1.0% of total loans, at the end of September 1993.
The allowance for loan losses as a percentage of non-performing
loans was 1,267% and 591% as of September 30, 1994 and 1993,
respectively. The Company made a $450,000 provision for loan
losses for the first nine months of 1994, compared with $909,000
for the comparable period of 1993.
In five transactions during the period of time from December
1990 through November 1993, the Bank purchased an aggregate of
approximately $35 million in credit card receivables and related
accounts from Republic Bank. In connection with these
transactions, a series of escrow agreements were established in
which portions of the various purchase prices were set aside by
Republic Bank to be used in absorbing credit losses in the
purchased credit card portfolio. The Company exhausted the
escrow balances in the second quarter of 1994. As set forth in
the final 8 paragraphs of "Growth Strategy and Acquisitions," the
Company is considering the sale or securitization of
substantially all of its credit card portfolio. Such discussion
is incorporated herein by reference. See also "Liquidity and
Interest Rate Sensitivity."
The Bank was examined in December 1993 by the Federal
Deposit Insurance Corporation, and the Savings Bank was examined
in February 1994 by the Office of Thrift Supervision. No
significant increases in reserves resulted from these
examinations. In the most recent Community Reinvestment Act
evaluations, the Bank received an "outstanding" rating, the
highest rating, and the Savings Bank received a "satisfactory"
rating, the second highest rating.
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Noninterest Income
Noninterest income, excluding securities transactions,
increased 64% to $6,014,000 for the nine months ended September
30, 1994 from $3,673,000 for the same period of 1993, for an
increase of $2,341,000. This increase resulted principally from
service charges on deposit accounts, fees for trust services and
mortgage banking income. The Company realized gains on the sale
of securities of $189,000 and $546,000 in the first nine months
of 1994 and 1993, respectively.
Service charges on deposit accounts, the largest contributor
to noninterest income, rose 47% to $2,682,000 for the first nine
months of 1994 from $1,822,000 for the first nine months of 1993.
The increase in service charges is attributable to acquiring
branches and new deposit accounts, increasing fee charges and
improving collection rates. Average deposits for the same period
increased 37%.
Mortgage banking income for the first nine months of 1994
increased $659,000, or 71%, to $1,583,000 from $924,000 in the
first nine months of 1993. Mortgage banking income includes
origination fees, profits from the sale of loans and servicing
fees (which started in 1993). Origination fees totaled $808,000
in the first nine months of 1994 and $642,000 in the first nine
months of 1993. Until the third quarter of 1992, mortgage loans
were originated primarily for the account of correspondent
financial institutions, with the Bank retaining an origination
fee. Beginning in the third quarter of 1992, the Company
expanded the activities of its mortgage loan operations and began
self-funding the loans through the Savings Bank prior to sale in
the secondary market. Mortgage loans totaling approximately $38
million and $39 million were sold during the first nine months of
1994 and 1993, respectively. Income from this activity totaled
$192,000 in the first nine months of 1994 and $259,000 in the
first nine months of 1993.
The Mortgage Company's mortgage servicing operations consist
of servicing loans that are owned by the Savings Bank and
subservicing loans, to which the right to service is owned by the
Savings Bank and other non-affiliated financial institutions.
Mortgage loans serviced are all one to four family residential
mortgage loans. At September 30, 1994, approximately 10,400
loans with an aggregate principal amount of approximately $802
million were being serviced or subserviced by the Mortgage
Company. Servicing income from non-affiliated companies, net of
the related amortization, was $583,000 for the first nine months
of 1994. Servicing income in 1993 was not significant.
Fees for trust services in the first nine months of 1994
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increased to $681,000, up 65% from the $412,000 earned in the
first nine months of 1993. Fees for trust services increased as
a result of the generation of new trust business and additional
assets under management. Assets under management of the trust
department increased to approximately $183 million at September
30, 1994 from approximately $68 million at September 30, 1993.
Sundry income items were $553,000 higher for the first nine
months of 1994 than the same period of 1993, primarily because of
higher customer service fees, appraisal fee income and insurance
commissions from increased lending and deposit activity. In
addition, during the first nine months of 1994, the Company
earned approximately $108,000 in real estate rental income, the
majority of which is not expected to continue.
On August 18, 1993, the Bank entered into an investor
services agreement with Edgar M. Norris & Co., Inc. ("Norris &
Co."), a broker-dealer registered with the National Association
of Securities Dealers, Inc., to offer certain brokerage services
to the Bank's customers. Under this affiliate arrangement, the
Bank offers certain brokerage services to its customers through
dual employees (a Bank employee who is also employed by Norris &
Co.). The commissions or mark up charges on transactions will be
shared between the Bank and Norris & Co. as set forth in the
investor services agreement. Brokerage services activity for
1994 has been limited.
Noninterest Expenses
Noninterest expenses for the nine months ended September 30,
1994 were $27,186,000, compared with $17,649,000 for the same
period of 1993, for an increase of $9,537,000, or 54%. The
increased expenditures primarily reflect the costs of additional
personnel to support the Company's current and anticipated
growth.
Salaries and wages and benefits increased 56% to $13,094,000
for the first nine months of 1994 from $8,376,000 for the first
nine months of 1993. Full-time equivalent employees rose to 502
as of September 30, 1994 from 363 as of September 30, 1993.
Staff increases were attributable to the addition of 15 banking
offices, higher loan and deposit activity resulting from internal
growth and acquisitions, and the expansion of the mortgage
banking operations.
Occupancy and furniture and equipment expenses increased
$1,726,000, or 68%, to $4,257,000 for the nine months ended
September 30, 1994 due to the addition of 15 banking offices
including a new Myrtle Beach main office, the opening of a
regional headquarters office in Columbia for the Midlands region
of South Carolina, the establishment of the Mortgage Company and
the expansion of its administrative offices in Greenville to a
second
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location. In addition, the Company relocated its
operations center from Greenville, South Carolina to Columbia,
South Carolina, a location more central to its branches.
Federal deposit insurance premiums increased $454,000, or
48%, in the first nine months of 1994 to $1,398,000. This
increase was primarily due to a higher levels of deposits.
Intangibles amortization increased $455,000, or 60%, in the first
nine months of 1994 to $1,215,000, principally as a result of
intangibles relating to the acquisition of branches, credit card
receivables and the mortgage company. For information regarding
the review of the Company's intangible assets and the potential
write-down of such assets, see the final 8 paragraphs of "Growth
Strategy and Acquisitions" above.
Service charges for processing credit cards increased
$401,000 in the first nine months of 1994, principally as a
result of credit card solicitations by the Company and the
purchase of approximately $16.3 million in credit card
receivables in June 1993 and November 1993. Advertising and
public relations expenses increased $328,000, or 97%, due to the
Company's statewide expansion, advertising campaigns in key
markets and special deposit promotions. The increase in the
remaining sundry noninterest expense was primarily attributable
to the overhead and operating expenses associated with higher
lending and deposit activities. The largest sundry noninterest
expenses were stationery, supplies and printing, telephone,
postage, and professional fees.
BALANCE SHEET REVIEW
Loans
The Company's loan portfolio consists principally of
one-to-four family residential mortgage loans, commercial
mortgage loans and other commercial and consumer loans. A
substantial portion of these borrowers are located in South
Carolina and are concentrated in the Company's market areas. The
Company has no foreign loans or loans for highly leveraged
transactions. The loan portfolio does not contain any
concentrations of credit risk exceeding 10% of the portfolio. At
September 30, 1994, the Company had total loans outstanding of
$816,341,000 which equaled approximately 87% of the Company's
total deposits and approximately 76% of the Company's total
assets. The composition of the Company's loan portfolio at
September 30, 1994 was as follows: commercial 45%, residential
mortgage 26%, consumer 12%, credit card 12% and construction 5%.
The Company's loans increased $279,451,000, or 52%, to
$816,341,000 at September 30, 1994 from $536,890,000 at
September 30, 1993. Of this increase, $48,666,000 resulted from
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loans acquired in branch acquisitions and credit card purchases.
The balance was internal loan growth. This increase was net of
$79,263,000 of mortgage loans sold, which were predominantly
current production, fixed rate mortgage loans. During 1994, the
Bank began a mail campaign to solicit new credit card customers.
These solicitations resulted in approximately $46 million in new
credit card balances, which doubled the size of the Company's
credit card portfolio.
As noted above, the Company has experienced significant
growth in its commercial, multi-family mortgage and commercial
mortgage loans over the past several years. Furthermore, these
loans constitute approximately 45% of the Company's total loans
at September 30, 1994. These loans generally range in size from
$250,000 to $500,000 and are typically made to small to
medium-sized, owner-operated companies. There are certain risks
inherent in making all loans, including risks resulting from
uncertainties as to the future value of collateral, risks
resulting from changes in economic and industry conditions and
risks inherent in dealing with individual borrowers. However,
commercial, multi-family mortgage and commercial mortgage loans
are generally more risky than one-to-four family or consumer
loans because they are unique in character, are generally larger
in amount and are dependent upon the business' generating cash to
service the loan.
For the first nine months of 1994, the Company's loans
averaged $683,421,000 with a yield of 8.81%, compared with
$467,282,000 and a yield of 8.64% for the same period of 1993.
The interest rates charged on loans vary with the degree of risk
and the maturity and amount of the loan. Competitive pressures,
money market rates, availability of funds, and government
regulations also influence interest rates. The slight decline in
loan yield was more than offset by the downward repricing of
deposits which resulted in a higher net interest margin.
Securities
Debt securities held as assets are classified as investment
securities, securities available for sale or trading securities.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards 115, "Accounting for Certain
Investments in Debt and Equity Securities." Securities
classified as investments are carried at cost, adjusted for the
amortization of premiums and the accretion of discounts. In
order to qualify as an investment asset, the Company must have
the ability and a positive intention to hold them to maturity.
Securities available for sale are carried at market value with
unrealized gains or losses reported in stockholders' equity.
These securities may be disposed of if management believes that
the sale would provide the Company and its subsidiaries with
increased liquidity or, based
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upon prevailing or projected economic conditions, that such
sales would be a safe and sound banking practice and in the
best interest of the stockholders. Trading securities are carried
at market value with adjustments for unrealized gains or losses
reported in noninterest income. The Company's policy is to acquire
trading securities only to facilitate their sale to customers.
The Company's subsidiaries are generally limited to
investments in (i) United States Treasury securities or United
States Government guaranteed securities, (ii) securities of
United States Government agencies, (iii ) mortgage-backed
securities, (iv) general obligation municipal bonds and revenue
bonds which are investment grade rated and meet certain other
standards, and (v) money market instruments which are investment
grade rated and meet certain other standards.
During the first quarter of 1993, the Company received
approval to establish dealer bank operations to sell United
States Treasury, Federal agency and municipal bonds to
individuals, corporations and municipalities through its
investments division. Income from the Company's dealer activity
is not material.
At September 30, 1994, the Company's total investment
portfolio had a book value of $117,466,000 and a market value of
$114,293,000 for an unrealized loss of $3,173,000. The
investment portfolio has a weighted average duration of
approximately 2.14 years. Securities (i.e., investment
securities, securities available for sale and trading securities)
averaged $131,442,000 in the first nine months of 1994, 1% above
the 1993 average of $130,025,000. The average portfolio yield
declined from 5.13% for the first nine months of 1993 to 4.81%
for the first nine months of 1994. The portfolio yield declined
due to a declining interest rate environment in 1993 when the
Company increased the size of its investment portfolio.
At September 30, 1994, securities totaled $116,538,000, down
$23,200,000 from the $139,738,000 invested as of the third
quarter end 1993. This decrease in quarter-end investments
resulted from the deployment of the excess funds acquired in the
acquisition of the 12 Republic branches into loans during 1993.
To date, the Company and its subsidiaries have not engaged
in any derivative products or any structured notes.
Other Assets
At September 30, 1994, other assets included other real
estate owned of $600,000 and intangible assets of $26,654,000.
The intangible assets balance is attributable to goodwill of
$6,795,000, core deposit balance premiums of $9,496,000, excess
and
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purchased mortgage servicing rights of $9,211,000 and
purchased credit card premiums of $1,152,000.
For information regarding the review of the Company's
intangibles assets and the potential write-down of such assets,
see the final 8 paragraphs of "Growth Strategy and Acquisitions"
above.
Deposits
The Banks' primary source of funds for loans and investments
is its deposits which are gathered through the Bank's and the
Savings Bank's branch networks. Competition for deposit accounts
is primarily based on the interest rates paid thereon and the
convenience of and the services offered by the branch locations.
The Company's pricing policy with respect to deposits takes into
account the liquidity needs of the Company, the direction and
levels of interest rates, and local market conditions. The
Company does not believe that any of its deposits qualify as
brokered deposits. It is the Company's policy not to accept
brokered deposits.
During the first nine months of 1994, interest-bearing
liabilities averaged $765,060,000, compared with $543,274,000 for
the comparable period of 1993. This increase resulted
principally from branch acquisitions. The average interest rates
were 3.64% and 3.86% for the first nine months of 1994 and 1993,
respectively. At September 30, 1994, interest-bearing deposits
comprised approximately 88% of total deposits and 96% of
interest-bearing liabilities.
The Company uses its deposit base as its primary source of
funds. Deposits grew 30% to $940,275,000 at September 30, 1994
from $724,585,000 at September 30, 1993. Of the $215,690,000
increase in deposits, approximately $179,564,000 resulted from
the acquisition of branches. Internal growth generated the
remaining new deposits. During the first nine months of 1994,
total deposits averaged $814,394,000 with a rate of 3.42%,
compared with $596,018,000 with a rate of 3.44% in 1993. As the
level of interest rates continued to fall in 1993, the Company
was able to reprice deposits to more than recover declines in the
yields on earning assets. During the first half of 1994, which
was a period of rising interest rates, the Company generally kept
deposit interest rates unchanged. Beginning with the third
quarter of 1994, however, the Company raised deposit interest
rates, causing the Company's interest rate paid on deposits to
rise. In 1994, the Company has also maintained a higher level of
noninterest-bearing deposits, reducing the interest rate paid on
deposits.
The Company's core deposit base consists of consumer time
deposits, savings, NOW accounts, money market accounts and
checking
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accounts. Although such core deposits are becoming
increasingly interest sensitive for both the Company and the
industry as a whole, such core deposits continue to provide the
Company with a large and stable source of funds. Core deposits
as a percentage of average total deposits averaged approximately
86% for the first nine months of 1994. The Company closely
monitors its reliance on certificates of deposit greater than
$100,000, which are generally considered less stable and less
reliable than core deposits.
Generally, certificates of deposits greater than $100,000
have a higher degree of interest rate sensitivity than other
certificates of deposit. The percentage of Company deposits
represented by certificates of deposit greater than $100,000 is
higher than the percentage of such deposits held by the Company's
peers. However, the Company does not believe that this
higher-than-peer percentage of certificates of deposits greater
than $100,000 will have a material adverse effect on the Company
because such certificates are principally held by long-term
customers located in the Company's market areas.
As a result of the acquisition of deposits from the
purchased branches, increased commercial business and changes in
economic conditions, the deposit mix adjusted favorably. Average
noninterest-bearing deposits, which increased 67% during the
year, increased to 10.8% of average total deposits for the first
nine months of 1994 from 8.85% of average total deposits for the
first nine months of 1993. In addition, the relative level of
time deposits declined as customers, reluctant to lock in
deposits at the current low interest rates, switched to savings
or money market accounts.
Capital Resources and Dividends
The Company's capital needs have been met principally
through public offerings of common and preferred stock and
through the retention of earnings. In addition, the Company
issued both common and preferred stock in connection with the
acquisitions of the Savings Bank and the Mortgage Company.
The Company's initial public offering in 1986 raised
$15,316,000 in common equity and, to date, represents the largest
amount of initial equity raised in connection with the startup of
a financial institution in South Carolina. Other public
offerings of capital stock include the offering of the 8.32%
Cumulative Convertible Preferred Stock ("Series 1992 Preferred
Stock") in May 1992, which raised $10,319,000, the offering of
the 7.50% Noncumulative Convertible Preferred Stock Series
("Series 1993 Preferred Stock") in March 1993, which raised
$14,462,000, and the offering of the Series 1994 Preferred Stock
in April 1994, which raised $21,442,000. In December 1993, the
Company redeemed the
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Series 1992 Preferred Stock. In connection with such redemption,
substantially all of the outstanding shares of Series 1992
Preferred Stock were converted into 1,089,674 shares of Common
Stock.
On September 30, 1993, the Company completed the acquisition
of all of the outstanding stock of First Sun in exchange for
60,000 shares of Series 1993B Preferred Stock which added
$1,200,000 in equity. There is currently no market for the
Series 1993B Preferred Stock, and it is not expected that any
market for such stock will develop.
The Company completed the offering of its Series 1994
Preferred Stock on April 15, 1994. In connection with this
offering, the Company raised approximately $21,442,000 after
deduction of the related expenses. In the offering, the Company
issued 920,000 shares of its Series 1994 Preferred Stock. Each
share of Series 1993 Preferred Stock provides for cash dividends,
when, as, and if declared by the Board of Directors, at the
annual rate of $1.83 per share. Dividends on the Series 1994
Preferred Stock are not cumulative. A Series 1994 Preferred
Stock share may be converted at the option of the holder into
1.7931 shares of common stock. The conversion ratio has been
restated to reflect the 5% common stock dividend. In addition,
and upon compliance with certain conditions, the Company may
redeem the Series 1994 Preferred Stock at the redemption prices
set forth in the Company's Articles of Amendment related to the
Series 1994 Preferred Stock.
Total stockholders' equity increased $24,155,000, or 38%, to
$87,024,000 at September 30, 1994 from $62,869,000 at September
30, 1993. This change primarily reflects the capital raised in
connection with the Series 1994 Preferred Stock offering
discussed above, which was issued on April 15, 1994, and the
retention of earnings.
Book value per share increased to $10.45 at September 30,
1994 from $10.17 at September 30, 1993. Tangible book value per
share at September 30, 1994 was $6.85, up from $6.39 at September
30, 1993. Tangible book value is significantly below the
Company's book value as a result of the purchase premiums
associated with branch acquisitions and the purchase of the
Mortgage Company.
Risk-based capital guidelines for financial institutions
adopted by the regulatory authorities went into effect after
December 31, 1990. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), signed into law on December
19, 1991, provides authority for special assessments against
insured deposits and for development of a general risk-based
deposit insurance assessment system, which the Federal Deposit
Insurance Corporation ("FDIC") implemented on a transitional
basis effective January 1, 1993.
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Effective January 1, 1993, the FDIC replaced the uniform
insurance assessment rate with a transitional risk-based
assessment schedule (which is required by FDICIA to be fully
effective by January 1994), having assessments ranging from 0.23%
to 0.31% of an institution's average assessment base. The actual
assessment to be paid is based on the institution's assessment
risk classification, which will be determined based on (i)
whether the institution is considered "well capitalized,"
"adequately capitalized" or "undercapitalized," as such terms
have been defined in applicable federal regulations adopted to
implement prompt corrective action provisions of FDICIA, and (ii)
whether such institution is considered by its supervisory agency
to be financially sound or to have supervisory concerns.
At September 30, 1994, the Company and its subsidiaries were
in compliance with each of the applicable regulatory capital
requirements. In addition, the Company, Bank and the Savings
Bank exceeded the "adequately capitalized" regulatory guidelines.
The risk-based insurance assessments for the Bank and Savings
Bank have been set at 0.26% and 0.23%, respectively, of the
average assessment basis. The following table sets forth various
capital ratios for the Company and its subsidiaries.
Capital Ratios
Requirement as of 9/30/94 Actual
Well Adequately as of
Capitalized Capitalized 9/30/94
Company:
Total Risk-based 10.0% 8.0% 9.47%
Tier 1 Risk-based 6.0 4.0 8.84
Leverage Ratio 5.0 4.0 6.73
Carolina First Bank:
Total Risk-based 10.0 8.0 8.48
Tier 1 Risk-based 6.0 4.0 7.91
Leverage Ratio 5.0 4.0 6.36
Carolina First Savings Bank:
Total Risk-based 10.0 8.0 8.99
Tier 1 Risk-based 6.0 4.0 8.16
Leverage Ratio 5.0 4.0 5.25
The Company and its subsidiaries are subject to certain
regulatory restrictions on the amount of dividends they are
permitted to pay.
During each of the last six years, the Company issued 5%
common stock dividends to common stockholders. The Company has
paid all scheduled cash dividends on the Series 1993 Preferred
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Stock, the Series 1993B Preferred Stock and the Series 1994
Preferred Stock since their respective issuances.
In November 1993, the Board of Directors initiated a regular
quarterly cash dividend of $0.05 per share payable on the common
stock, the first of which was paid on February 1, 1994. Cash
dividends of $0.05 have been paid on a quarterly basis since the
initiation of the cash dividend. The Company presently intends
to continue to pay this quarterly cash dividend on the common
stock; however, future dividends will depend upon the Company's
financial performance and capital requirements.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Asset/liability management is the process by which the
Company monitors and controls the mix and maturities of its
assets and liabilities. The essential purposes of
asset/liability management are to ensure adequate liquidity and
to maintain an appropriate balance between interest sensitive
assets and liabilities. Liquidity management involves meeting
the cash flow requirements of the Company. These cash flow
requirements primarily involve withdrawals of deposits,
extensions of credit, payment of operating expenses and repayment
of purchased funds. The Company's principal sources of funds for
liquidity purposes are customer deposits, principal and interest
payments on loans, maturities and sales of debt securities,
temporary investments and earnings. Temporary investments
averaged 2.20% and 3.16% of earning assets in the first half of
1994 and 1993, respectively. Management believes that the
Company maintains an adequate level of liquidity by retaining
liquid assets and other assets that can easily be converted into
cash, and by maintaining access to alternate sources of funds,
including federal funds purchased from correspondent banks and
borrowings from the Federal Home Loan Bank.
The liquidity ratio is an indication of a company's ability
to meet its short-term funding obligations. FDIC examiners
suggest that a commercial bank maintain a liquidity ratio of
between 20% and 25%. At September 30, 1994, Carolina First
Bank's liquidity ratio was approximately 13%, a level below FDIC
guidelines. At September 30, 1994, the Bank and Savings Bank had
unused short-term lines of credit with correspondent banks of $26
million. All of the lenders have reserved the right to withdraw
these lines of credit at their option. In addition, the Company,
through its subsidiaries, has access to borrowings from the
Federal Home Loan Bank. At September 30, 1994, unused borrowing
capacity from the Federal Home Loan Bank totaled $47 million.
The Company believes that these sources are adequate to meet its
liquidity needs.
To provide additional liquidity, the Company is considering
the sale or securitization of a significant portion of its credit
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card loans, which, at September 30, 1994, totaled approximately
$97 million. The sale or securitization of credit card loans
would provide the Company with funds to make additional
commercial and consumer loans in its market areas. The Company
has experienced steady loan demand in its market areas and wants
to be able to meet this demand without impairing its liquidity,
which is currently below FDIC guidelines. Selling or securitizing the
majority of its credit card receivables, which are largely outside of
the Company's market area, would provide funds for this in-market
lending activity and improve the Company's liquidity. The
Company expects to complete the sale or securitization of credit card
receivables during the remainder of 1994. However, the Company can
give no assurance that such a sale will, in fact, occur. See the
final 8 paragraphs of "Growth Strategy and Acquisitions" above.
As reported in the Consolidated Statements of Cash Flows,
increases in deposits, borrowed funds, investments and equity
provided cash in the first nine months of 1994 of $172,250,000,
$13,933,000, $43,278,000 and $21,794,000, respectively. The
Company used this cash to increase loans by $216,571,000, capital
expenditures by $9,298,000, cash balances by $16,124,000,
operating activities by $7,283,000 and dividends by $1,979,000.
The Bank is building a branch office in Lexington, which is
currently open in temporary offices, at an estimated cost of
approximately $1.4 million. The Lexington branch is expected to
be completed in the fourth quarter of 1994.
The Company plans to meet its future cash needs through the
proceeds of stock offerings, liquidation of temporary
investments, maturities or sales of loans and investment
securities and generation of deposits. By increasing the rates
paid on deposits, the Company would be able to raise deposits.
The interest sensitivity gap is the difference between total
interest sensitive assets and liabilities in a given time period.
The objective of interest sensitivity management is to maintain
reasonably stable growth in net interest income despite changes
in market interest rates by maintaining the proper mix of
interest sensitive assets and liabilities. Management seeks to
maintain a general equilibrium between interest sensitive assets
and liabilities in order to insulate net interest income from
significant adverse changes in market rates.
The Company's Asset/Liability Management Committee uses a
variety of tools to analyze the Company's interest sensitivity.
A "static gap" presentation reflects the difference between total
interest- sensitive assets and liabilities within certain time
periods. While the static gap is a widely-used measure of
interest sensitivity, it is not, in management's opinion, a true
indicator of the Company's sensitivity position. It presents a
static view
26
<PAGE>
of the timing of maturities and repricing
opportunities, without taking into consideration that changes in
interest rates do not affect all assets and liabilities equally.
For example, rates paid on a substantial portion of savings and
core time deposits may contractually change within a relatively
short time frame, but those rates are significantly less
interest-sensitive than market based rates such as those paid on
non-core deposits. Accordingly, a liability sensitive gap
position is not as indicative of the Company's true interest
sensitivity as would be the case for an organization which
depends to a greater extent on purchased funds to support earning
assets. Net interest income would also be impacted by other
significant factors in a given interest rate environment,
including the spread between the prime rate and the incremental
borrowing cost and the volume and mix of earning asset growth.
Accordingly, the Company uses an asset/liability simulation model
which quantifies balance sheet and earnings variations under
different interest rate environments to measure and manage
interest rate risk.
ASSET QUALITY
Prudent risk management involves assessing risk and managing
it effectively. Certain credit risks are inherent in making
loans, particularly commercial, real estate and consumer loans.
The Company attempts to manage credit risks by adhering to
internal credit policies and procedures. These policies and
procedures include a multi-layered loan approval process, officer
and customer limits, periodic documentation examination and
follow-up procedures for any exceptions to credit policies.
Loans are assigned a grade and those that are determined to
involve more than normal credit risk are placed in a special
review status. Loans that are placed in special review status
are required to have a plan under which they will be either
repaid or restructured in a way that reduces credit risk. Loans
in this special review status are reviewed monthly by the loan
committee of the Board of Directors.
As demonstrated by the following key analytical measures of
asset quality, management believes the Company has effectively
managed its credit risk. Net loan charge-offs totaled $517,000
in the first nine months of 1994 and $997,000 in the first nine
months of 1993, or 0.10% and 0.28%, respectively, as a percentage
of average loans. Non-performing assets as a percentage of loans
and other real estate owned were 0.12% and 0.48% as of September
30, 1994 and 1993, respectively.
27
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INDUSTRY DEVELOPMENTS
Certain recently-enacted and proposed legislation could have
an effect on both the costs of doing business and the competitive
factors facing the financial institutions industry. The Company
is unable at this time to assess the impact of this legislation
on its financial condition or operations. See "Capital Resources
and Dividends."
28
<PAGE>
PART II
ITEM 1 LEGAL PROCEEDINGS
On October 31, 1994, JW Charles Clearing Corp. filed a
lawsuit against the Bank in the Court of Common Pleas
in Lexington County, South Carolina. Such action, in
general, claims that the Bank improperly paid
approximately $600,000 in checks to Harold McCarley
and/or McCarley and Associates, Inc. The complaint
seeks actual and punitive damages in an amount to be
determined by a jury, plus interest on the damages and
other costs. Unless an extension is received, the Bank
must answer the complaint on or before December 1,
1994. The Bank intends to answer and vigorously defend
such complaint. The Bank believes that there are valid
defenses available to it. In connection with the
litigation, the Bank also expects to make a claim under
insurance policies for any losses it may suffer which,
if determined to cover the loss, could pay for
substantially all of the actual damages, if any,
determined to be appropriate by a jury. However, no
assurance can be given at this time regarding whether
it will be determined that any losses suffered in this
litigation will be covered by the insurance policy.
Furthermore, the Company is not in a position at this
time to assess the likely outcome of the litigation or
any damages for which it may become liable.
ITEM 2 CHANGE IN SECURITIES
On July 1, 1994, the Company filed Articles of
Correction with the South Carolina Secretary of State.
Such Articles of Correction corrected a typographical
error which erroneously listed the premium on the
Company's Noncumulative Convertible Preferred Stock
Series 1993 as 8% over $25 on July 1, 1993 instead of
7% as referenced in all public offering documents used
in connection with the sale of the Noncumulative
Convertible Preferred Stock Series 1993. See
Prospectus of Carolina First Corporation dated February
26, 1993 filed with the Securities and Exchange
Commission.
29
<PAGE>
Part II
(continued)
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5 OTHER INFORMATION
Proposed Merger
On October 13, 1994, the Company signed a definitive
agreement with Aiken County National Bank ("Aiken
County National") for the merger of Aiken County
National into Carolina First Bank. The Company will
acquire all the outstanding common shares of Aiken
County National in exchange for approximately 453,000
shares of the Company's common stock (assuming no
dissenter's rights are exercised). Aiken County
National has assets of approximately $42 million, loans
of $30 million and deposits of $38 million. This
transaction, which is subject to regulatory and Aiken
County National shareholder approval, is expected to be
completed in the first quarter of 1995.
On November 14, 1994, the Company signed a definitive
agreement with Midlands National Bank ("Midlands") for
the merger of Midlands into Carolina First Bank. The
Company will acquire all the outstanding common shares
of Midlands in exchange for approximately 584,000
shares of the Company's common stock (assuming no
dissenter's rights are exercised). Midlands has assets
of approximately $43 million, loans of $28 million and
deposits of $39 million. This transaction, which is
subject to regulatory and Midlands shareholder
approval, is expected to be completed in the first
quarter of 1995.
30
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PART II
(continued)
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Reorganization Agreement By and Between Carolina First
Corporation, Carolina First Bank, and Aiken County
National Bank
2.2 Reorganization Agreement By and Between Carolina First
Corporation, Carolina First Bank, and Midlands National
Bank
4.1 Articles of Correction filed with the Secretary of
State on July 1, 1994
10.1 All material contracts in the December 31, 1993 Form
10-K, March 31, 1994 Form 10-Q and June 30, 1994 Form
10-Q plus the following:
10.2 Agreement Between Carolina First Corporation, Richard
E. Greer, William Graham and Telepay, Inc.
11.1 Computation of Primary and Fully Diluted Earnings Per
Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K: None.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Carolina First Corporation
/S/ William S. Hummers, III
William S. Hummers, III
Executive Vice President,
Secretary
(Principal Financial and
Accounting Officer)
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Carolina First Corporation
William S. Hummers, III
Executive Vice President,
Secretary
(Principal Financial and
Accounting Officer)
32
<PAGE>
Exhibit 2.1
REORGANIZATION AGREEMENT
BY AND BETWEEN
CAROLINA FIRST CORPORATION,
CAROLINA FIRST BANK,
AND
AIKEN COUNTY NATIONAL BANK
Dated as of October 13, 1994
<PAGE>
TABLE OF CONTENTS
SECTION I. DEFINITIONS . . . . . . . . . . . . . . . . . . . 5
1.1. Agreement. . . . . . . . . . . . . . . . . . . . . 5
1.2. Articles of Merger. . . . . . . . . . . . . . . . 5
1.3. CFC. . . . . . . . . . . . . . . . . . . . . . . . 5
1.4. CFC Common Stock. . . . . . . . . . . . . . . . . 5
1.5. CFB. . . . . . . . . . . . . . . . . . . . . . . . 5
1.7. Confidential Information. . . . . . . . . . . . . 5
1.8. Code. . . . . . . . . . . . . . . . . . . . . . . 5
1.9. Merger. . . . . . . . . . . . . . . . . . . . . . 5
1.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . 5
1.11. Effective Time. . . . . . . . . . . . . . . . . . 6
1.12. FDIC. . . . . . . . . . . . . . . . . . . . . . . 6
1.13. ACNB Common Stock. . . . . . . . . . . . . . . . . 6
1.14. OCC. . . . . . . . . . . . . . . . . . . . . . . . 6
1.15. OTS. . . . . . . . . . . . . . . . . . . . . . . . 6
1.16. Plan of Merger. . . . . . . . . . . . . . . . . . 6
1.17. Proxy Statement. . . . . . . . . . . . . . . . . . 6
1.18. Registration Statement. . . . . . . . . . . . . . 6
1.19. SEC. . . . . . . . . . . . . . . . . . . . . . . . 6
1.20. Securities Act. . . . . . . . . . . . . . . . . . 6
1.21. State Board. . . . . . . . . . . . . . . . . . . . 6
1.22. Stockholder Approvals. . . . . . . . . . . . . . . 6
1.23. Stockholders' Meeting. . . . . . . . . . . . . . . 6
1.24. Surviving Corporation. . . . . . . . . . . . . . . 6
SECTION II. THE MERGER . . . . . . . . . . . . . . . . . . . 6
2.1. General Provisions. . . . . . . . . . . . . . . . 6
2.2. The Closing. . . . . . . . . . . . . . . . . . . . 6
2.3. Consideration for the Merger. . . . . . . . . . . 6
2.4. Approval of ACNB Stockholders. . . . . . . . . . . 6
2.5. Tax Treatment. . . . . . . . . . . . . . . . . . . 7
SECTION III. REPRESENTATIONS AND WARRANTIES OF ACNB . . . . 7
3.1. Organization, Good-Standing and Conduct of
Business. . . . . . . . . . . . . . . . . . . . . . 7
3.2. Corporate Authority. . . . . . . . . . . . . . . . 7
3.3. Binding Effect. . . . . . . . . . . . . . . . . . 7
3.4. Capitalization of ACNB. . . . . . . . . . . . . . 7
3.5. Absence of Defaults. . . . . . . . . . . . . . . . 7
3.6. Non-Contravention and Defaults; No Liens. . . . . 8
3.7. Necessary Approvals. . . . . . . . . . . . . . . . 8
3.8. Financial Statements. . . . . . . . . . . . . . . 8
3.9. Tax Returns. . . . . . . . . . . . . . . . . . . . 8
3.10. Undisclosed Liabilities. . . . . . . . . . . . . . 9
3.11. Title to Properties, Encumbrances. . . . . . . . . 9
3.12. Litigation. . . . . . . . . . . . . . . . . . . . 9
2
<PAGE>
3.13. Reports. . . . . . . . . . . . . . . . . . . . . . 9
3.14. Brokers. . . . . . . . . . . . . . . . . . . . . . 9
3.15. Expenditures. . . . . . . . . . . . . . . . . . . 9
3.16. Insurance. . . . . . . . . . . . . . . . . . . . . 9
3.17. Contracts and Commitments. . . . . . . . . . . . . 9
3.18. Employee Benefit Plans . . . . . . . . . . . . . . 10
3.19. ACNB Information. . . . . . . . . . . . . . . . . 10
3.20. Due Diligence. . . . . . . . . . . . . . . . . . . 11
3.21. Resale of CFC Common Stock. . . . . . . . . . . . 11
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB . 11
4.1. Organization, Good-Standing and Conduct of
Business. . . . . . . . . . . . . . . . . . . . . . 11
4.2. Corporate Authority. . . . . . . . . . . . . . . . 11
4.3. Binding Effect. . . . . . . . . . . . . . . . . . 11
4.4. Capitalization of CFC. . . . . . . . . . . . . . . 11
4.5. Subsidiaries of CFC. . . . . . . . . . . . . . . . 12
4.6. Absence of Defaults. . . . . . . . . . . . . . . . 12
4.7. Non-Contravention and Defaults; No Liens. . . . . 12
4.8. Necessary Approvals. . . . . . . . . . . . . . . . 12
4.9. Financial Statements. . . . . . . . . . . . . . . 13
4.10. Tax Returns. . . . . . . . . . . . . . . . . . . . 13
4.11. Undisclosed Liabilities. . . . . . . . . . . . . . 13
4.12. Litigation. . . . . . . . . . . . . . . . . . . . 13
4.13. Reports. . . . . . . . . . . . . . . . . . . . . . 13
4.14. CFC Information. . . . . . . . . . . . . . . . . . 14
4.15. Due Diligence. . . . . . . . . . . . . . . . . . . 14
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING . . . . . . 14
5.1. Conduct of ACNB Pending Closing. . . . . . . . . . 14
5.2. Conduct of CFC Pending Closing. . . . . . . . . . 15
SECTION VI. COVENANTS OF THE PARTIES . . . . . . . . . . . . 15
6.1. Access to Properties and Records. . . . . . . . . 15
6.2. Regulatory Filings. . . . . . . . . . . . . . . . 16
6.3. Registration Statement/Proxy Statement. . . . . . 16
6.4. Affiliates' Letters. . . . . . . . . . . . . . . . 16
6.5. Listing of CFC Common Stock. . . . . . . . . . . . 16
6.6. Letters from Accountants. . . . . . . . . . . . . 16
6.7. Tax Treatment/Accounting Treatment. . . . . . . . 17
6.8. Expenses. . . . . . . . . . . . . . . . . . . . . 17
6.9. Material Events . . . . . . . . . . . . . . . . . 17
6.10. Public Announcements . . . . . . . . . . . . . . . 17
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE . . . 17
7.1. Performance of Acts and Representations by ACNB. . 17
7.2. Opinion of Counsel for ACNB. . . . . . . . . . . . 17
7.3. Conduct of Business. . . . . . . . . . . . . . . . 18
7.4. Consents. . . . . . . . . . . . . . . . . . . . . 18
3
<PAGE>
7.5. Certificate. . . . . . . . . . . . . . . . . . . . 18
7.6. Limit on Dissent. . . . . . . . . . . . . . . . . 18
7.7. Pooling of Interests. . . . . . . . . . . . . . . 18
7.8. Affiliates' Letters. . . . . . . . . . . . . . . . 18
7.9. Due Diligence. . . . . . . . . . . . . . . . . . . 18
SECTION VIII. CONDITIONS TO THE OBLIGATION OF ACNB TO CLOSE . 18
8.1. Performance of Acts and Representations by CFC
and CFB. . . . . . . . . . . . . . . . . . . . . . 18
8.2. Opinion of Counsel for CFC. . . . . . . . . . . . 18
8.3. Conduct of Business. . . . . . . . . . . . . . . . 19
8.4. Consents. . . . . . . . . . . . . . . . . . . . . 19
8.5. Certificate. . . . . . . . . . . . . . . . . . . . 19
8.6. Tax Opinion. . . . . . . . . . . . . . . . . . . . 19
8.7. Fairness Opinion. . . . . . . . . . . . . . . . . 19
8.8. Stockholder Approvals. . . . . . . . . . . . . . . 19
SECTION IX. TERMINATIONS . . . . . . . . . . . . . . . . . 19
9.1. Termination. . . . . . . . . . . . . . . . . . . . 19
9.2. Effect of Termination. . . . . . . . . . . . . . . 20
SECTION X. INDEMNIFICATION . . . . . . . . . . . . . . . . 20
10.1. Information for Application and Statements. . . . 20
10.2. Indemnication of Officers and Directors. . . . . 21
SECTION XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . 21
11.1. Survival of Representations and Warranties. . . . 21
11.2. Entire Agreement. . . . . . . . . . . . . . . . . 21
11.3. Binding Agreement. . . . . . . . . . . . . . . . 21
11.4. Notices. . . . . . . . . . . . . . . . . . . . . 21
11.5. Counterparts. . . . . . . . . . . . . . . . . . . 22
11.6. Headings. . . . . . . . . . . . . . . . . . . . . 22
11.7. Law Governing. . . . . . . . . . . . . . . . . . 22
11.8. Amendment. . . . . . . . . . . . . . . . . . . . 22
11.9. Waiver. . . . . . . . . . . . . . . . . . . . . . 22
APPENDICES
Appendix A Plan of Merger
4
<PAGE>
This REORGANIZATION AGREEMENT is entered into as of this
13th day of October, 1994 among Carolina First Corporation
("CFC"), a corporation organized and existing under the laws of
the State of South Carolina, Carolina First Bank ("CFB"), a
corporation organized and existing under the laws of the State of
South Carolina, and Aiken County National Bank ("ACNB"), a
national banking association organized and existing under the
laws of the United States of America.
WHEREAS, CFC desires to acquire ACNB through the merger of
ACNB with and into CFB (the "Merger");
WHEREAS, the respective Boards of Directors of CFC, CFB and
ACNB have approved such Merger pursuant to the terms and
conditions of this Agreement and the Plan of Merger attached
hereto as Appendix A (the "Plan of Merger");
WHEREAS, for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended; and
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties and agreements herein
contained, CFC, CFB and ACNB hereby agree as follows:
SECTION I. DEFINITIONS
1.1. Agreement. This Reorganization Agreement between CFC,
CFB and ACNB, together with all schedules, exhibits and
appendices attached hereto.
1.2. Articles of Merger. The Articles of Merger to be
executed by CFC, CFB and ACNB and in a form appropriate for
filing with the Secretary of State of South Carolina and the OCC,
and relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.3. CFC. Carolina First Corporation, a bank holding
company headquartered in Greenville, South Carolina, which term
shall include, when the context permits, CFC and all CFC
subsidiaries.
1.4. CFC Common Stock. The common stock, par value $1.00
per share, of CFC.
1.5. CFB. Carolina First Bank, a South Carolina
corporation and a wholly-owned subsidiary of CFC.
1.6. Closing Date. The term Closing Date shall have the
meaning ascribed to it in Section 2.2 hereof.
1.7. Confidential Information. The term "Confidential
Information" shall mean all information of any kind concerning a
party hereto that is furnished by such party or on its behalf
pursuant to Section 6.2 hereof and designated in writing as
"Confidential Information", except information (i) ascertainable
or obtained from public or published information, (ii) received
from a third party not known to the recipient of Confidential
Information to be under an obligation to keep such information
confidential, (iii) which is or becomes known to the public
(other than through a breach of this Agreement), (iv) of which
the recipient was in possession prior to disclosure thereof in
connection with the Merger, or (v) which was independently
developed by the recipient without the benefit of Confidential
Information.
1.8. Code. The Internal Revenue Code of 1986, as amended.
1.9. Merger. The merger of ACNB with and into CFB as more
particularly set forth herein and in the Plan of Merger.
1.10. ERISA. The Employee Retirement Income Security Act of
1974, as amended.
5
<PAGE>
1.11. Effective Time. The date and time which the Merger
becomes effective as more particularly set forth in Section 2.2
of the Plan of Merger.
1.12. FDIC. The Federal Deposit Insurance Corporation.
1.13. ACNB Common Stock. The common stock, par value $5.00
per share, of ACNB.
1.14. OCC. The Office of Comptroller of the Currency.
1.15. OTS. The Office of Thrift Supervision.
1.16. Plan of Merger. The Plan of Merger attached to this
Reorganization Agreement as Appendix A.
1.17. Proxy Statement. The proxy statement included in the
Registration Statement which shall be furnished to the ACNB
stockholders in connection with the solicitation by the ACNB
Board of Directors of proxies for the approval of this Agreement
and the matters contemplated hereby.
1.18. Registration Statement. The Registration Statement on
Form S-4 to be filed with the SEC registering the CFC Common
Stock to be issued to the ACNB shareholders in connection with
the Merger.
1.19. SEC. The Securities and Exchange Commission.
1.20. Securities Act. The Securities Act of 1933, as
amended.
1.21. State Board. The South Carolina State Board of
Financial Institutions.
1.22. Stockholder Approvals. This term shall mean, as the
context may require, the written consent (duly authorized) of CFC
to the Merger of ACNB with and into CFB and the approval by the
requisite vote of the stockholders of ACNB at the Stockholders'
Meeting of the Merger of ACNB with and into CFB, all in
accordance with the Reorganization Agreement and this Plan of
Merger.
1.23. Stockholders' Meeting. The meeting of the
stockholders of ACNB at which the Merger shall be voted upon.
1.24. Surviving Corporation. The surviving corporation
after consummation of the Merger, which shall be CFB.
SECTION II. THE MERGER
2.1. General Provisions. Subject to the terms and
conditions of this Agreement, including the Plan of Merger, at
the Effective Time, ACNB shall be merged with and into CFB, which
shall be the Surviving Corporation and remain a wholly-owned
subsidiary of CFC. At the Effective Time, the separate corporate
existence of ACNB shall cease. CFC and ACNB hereby agree that
the Merger will be effected pursuant to the terms set forth in
the Plan of Merger.
2.2. The Closing. The Closing of the transaction
contemplated herein shall be held as soon as reasonably
practicable after fulfillment of all conditions set forth in
Section VII and Section VIII hereof (the "Closing Date"), at the
offices of Wyche, Burgess, Freeman & Parham, P.A. or at such
other place and time as the parties hereto may mutually agree;
provided, however, that in the event that Closing has not
occurred by April 30, 1995, either party hereto shall have the
right to terminate this Agreement.
2.3. Consideration for the Merger. The manner of
converting the shares of ACNB into shares of CFC shall be as set
forth in Articles II and III of the Plan of Merger.
2.4. Approval of ACNB Stockholders. CFC, CFB and ACNB
shall jointly prepare the Proxy Statement, which shall be
reasonably acceptable to all parties. The Proxy Statement shall
be mailed to ACNB shareholders as soon as reasonably practicable
after the SEC's declaration of effectiveness of the Registration
Statement, with due consideration given to the anticipated length
of time that will be required to obtain the necessary regulatory
approvals.
6
<PAGE>
2.5. Tax Treatment. CFC and ACNB intend that the Merger
shall qualify as a tax-free reorganization under Section 368(a)
of the Code.
SECTION III. REPRESENTATIONS AND WARRANTIES OF ACNB
ACNB hereby represents and warrants to CFC the following
matters on and as of the date of this Agreement and at the
Effective Time; provided, however, that before any breach of or
inaccuracy in any of the representations or warranties given in
this Section III shall be actionable or shall constitute grounds
for termination of or failure to perform under the terms of this
Agreement by CFC, such breach or inaccuracy must be materially
adverse in the aggregate with respect to the business of ACNB.
3.1. Organization, Good-Standing and Conduct of Business.
ACNB is a corporation, duly organized, validly existing and in
good standing under the laws of the United States of America, and
has full power and authority and all necessary governmental and
regulatory authorization to own all of its properties and assets
and to carry on its business as it is presently being conducted,
and is properly licensed, qualified and in good standing as a
foreign corporation in all jurisdictions wherein the character of
the properties or the nature of the business transacted by ACNB
makes such license or qualification necessary.
3.2. Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the
Board of Directors of ACNB. Other than approval of the Merger by
the shareholders of ACNB, no other corporate acts or proceedings
on the part of ACNB are required or necessary to authorize this
Agreement or the Merger.
3.3. Binding Effect. Subject to receipt of Stockholder
Approval and any required regulatory approvals, when executed,
this Agreement will constitute a valid and legally binding
obligation of ACNB, enforceable against ACNB in accordance with
its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to rights of creditors of FDIC-insured
institutions or the relief of debtors generally, (ii) laws
relating to the safety and soundness of depository institutions,
and (iii) general principles of equity. Each document and
instrument contemplated by this Agreement, when executed and
delivered by ACNB in accordance with the provisions hereof, shall
be duly authorized, executed and delivered by ACNB and
enforceable against ACNB in accordance with its terms, subject to
the exceptions in the previous sentence.
3.4. Capitalization of ACNB. The authorized capital stock
of ACNB consists solely of (i) 500,000 authorized shares of
common stock ($5.00 par value), of which 402,500 shares are
issued and outstanding. All of the issued and outstanding shares
of ACNB are validly issued and fully paid and, except as provided
in 12 U.S.C.A. (section mark)55, nonassessable. Except for the items
set forth on Schedule 3.4 attached hereto, there are no outstanding
obligations, options, warrants or commitments of any kind or
nature or any outstanding securities or other instruments
convertible into shares of any class of capital stock of ACNB, or
pursuant to which ACNB is or may become obligated to issue any
shares of its capital stock. None of the shares of the ACNB
Common Stock is subject to any restrictions as to the transfer
thereof, except as set forth in ACNB's Articles of Association or
Bylaws and except for restrictions on account of applicable
federal or state securities laws. ACNB does not hold 10% of any
class of equity securities of any other company or legal entity.
3.5. Absence of Defaults. ACNB is not in default under, or
in violation of, any provision of its Articles of Association or
Bylaws. ACNB is not in default under, or in violation of, any
agreement to which ACNB is a party, the effect of which default
or violation would have a material adverse effect on ACNB or its
business operations or prospects. Except as disclosed in
Schedule 3.5, ACNB is not in violation of any applicable law,
rule or regulation, the effect of which would have a material
adverse effect on ACNB or its business operations or prospects.
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3.6. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of,
or compliance with, the terms and provisions hereof, will (i)
result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in a violation of,
termination of or acceleration of the performance provided by the
terms of, any agreement to which ACNB is a party or by which it
may be bound, (ii) violate any provision of any law, rule or
regulation, (iii) result in the creation or imposition of any
lien, charge, restriction, security interest or encumbrance of
any nature whatsoever on any asset of ACNB, or (iv) violate any
provisions of ACNB's Articles of Association or Bylaws. To the
best of ACNB's knowledge, no other party to any material
agreement to which ACNB is a party is in default thereunder or in
breach of any provision thereof. To the best of ACNB's
knowledge, there exists no condition or event which, after notice
or lapse of time or both, would constitute a default by any party
to any such agreement.
3.7. Necessary Approvals. ACNB has obtained all
certificates of authority, licenses, permits, franchises,
registrations of foreign ownership or other regulatory approvals
in every jurisdiction necessary for the continuing conduct of its
business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no
such certificate, license, permit, franchise, registration or
other approval is about to expire, lapse, has been threatened to
be revoked or has otherwise become restricted by its terms which
would, upon such expiration, lapse, revocation or restriction,
have a material adverse effect on the financial circumstances of
ACNB. Further, there is no reasonable basis for any such
expiration, lapse, revocation, threat of revocation or
restriction. Except for any necessary filings with, and
approvals and authorizations of the OCC, the FDIC, no consent,
approval, authorization, registration, or filing with or by any
governmental authority, foreign or domestic, is required on the
part of ACNB in connection with the execution and delivery of
this Agreement or the consummation by ACNB of the transactions
contemplated hereby. Except for the agencies in the preceding
sentence or as disclosed in Schedule 3.7 attached hereto, ACNB is
not required to procure the approval of any person, firm,
corporation, or other entity, foreign or domestic, in order to
prevent the termination of any right, privilege, license or
contract of ACNB as a result of this Agreement.
3.8. Financial Statements. The audited financial
statements of ACNB for each of the fiscal years 1991, 1992 and
1993, the unaudited financial statements of ACNB at and for the
six month period ending June 30, 1994 and the unaudited monthly
statements subsequent to June 30, 1994 (the "ACNB Financial
Statements") all of which have been provided to CFC, are true,
correct and complete in all material respects and present fairly,
in conformity with generally accepted accounting principles
consistently applied, the financial position of ACNB at the dates
indicated and the results of its operations for each of the
periods indicated, except as otherwise set forth in the notes
thereto. The books and records of ACNB have been kept, and will
be kept to the Closing Date, in reasonable detail, and will
fairly and accurately reflect in all material respects to the
Closing Date, the transactions of ACNB.
3.9. Tax Returns. ACNB files its income tax returns and
maintains its tax books and records on the basis of a taxable
year ending December 31. ACNB has duly filed all tax reports and
returns required to be filed by any federal, state or local
taxing authorities (including, without limitation, those due in
respect of its properties, income, franchises, licenses, sales
and payrolls) through the date hereof, and ACNB has duly paid all
taxes with respect to the periods covered thereby and has
established adequate reserves in accordance with generally
accepted accounting principles consistently applied for the
payment of all income, franchises, property, sales, employment or
other taxes anticipated to be payable after the date hereof.
ACNB is not delinquent in the payment of any taxes, assessments
or governmental charges and no deficiencies have been asserted or
assessed, which have not been paid or for which adequate reserves
have not been established. ACNB does not have in effect any
waiver relating to any statute of limitations for assessment of
taxes with respect to any federal, state or local income,
property, franchise, sales, license or payroll tax. ACNB does
not know, or have reason to know, of any questions
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which have been raised or which may be raised by any taxing authority
relating to taxes or assessments of ACNB which, if determined
adversely, would result in the assertion of any deficiency.
3.10. Undisclosed Liabilities. Except for the liabilities
which are disclosed in the ACNB Financial Statements or as set
forth on Schedule 3.10, ACNB has no material liabilities or
material obligations of any nature, whether absolute, accrued,
contingent or otherwise, and whether due or to become due. Since
December 31, 1993, there has been (i) no material adverse change
in the business or operations of ACNB, (ii) no incurrence by or
subjection of ACNB to any obligation or liability (whether fixed,
accrued or contingent) or commitment material to ACNB not
referred to in this Agreement, except such obligations or
liabilities as were or may be incurred in the ordinary course of
business and which are reflected on the ACNB Financial Statements
at and for the periods subsequent to December 31, 1993.
3.11. Title to Properties, Encumbrances. All real property
and depreciable tangible personal property owned by ACNB is set
forth on Schedule 3.11. ACNB has good and marketable title to
all of the real property and depreciable tangible personal
property set forth on Schedule 3.11, free and clear of any liens,
claims, charges, options or other encumbrances, except for any
lien for (i) current taxes not yet due and payable, (ii) pledges
to secure deposits and other liens incurred in the ordinary
course of the banking business, and (iii) such imperfections of
title, easements and other encumbrances, if any, as are not
material in character, amount or extent.
3.12. Litigation. Except as set forth on Schedule 3.12,
there are no claims, actions, suits or proceedings pending or
threatened against ACNB, or to its knowledge affecting ACNB, at
law or in equity, before or by any Federal, state, municipal,
administrative or other court, governmental department,
commission, board, or agency, an adverse determination of which
could have a material adverse effect on the business or
operations of ACNB, and ACNB knows of no basis for any of the
foregoing. There is no order, writ, injunction, or decree of any
court, domestic or foreign, or any Federal or state agency
affecting ACNB or to which ACNB is subject.
3.13. Reports. ACNB has duly made all reports and filings
required to be made pursuant to applicable law, except for
failures to file or reports which would not have a material
adverse effect on the business or financial condition of ACNB.
3.14. Brokers. ACNB has not incurred any liability for any
commission or fee in the nature of a finder's, originator's or
broker's fee in connection with the transaction contemplated
herein.
3.15. Expenditures. Schedule 3.15 sets forth any single
expenditure of $25,000 or more proposed to be made by ACNB after
the date hereof and a summary of the terms and conditions
pertaining thereto. At least 20 business days prior to the
Closing Date, ACNB will advise CFC of any changes to Schedule
3.15 reflecting additions or deletions thereto since the date
hereof.
3.16. Insurance. Attached hereto as Schedule 3.16 is a true
and complete summary of the policies of fire, liability, life and
other type of insurance held by ACNB, setting forth with respect
to each such policy, the policy number, name of the insured
party, type of insurance, insurance company, annual premium,
expiration date, deductible amount, if any, and amount of
coverage. Each such policy is in an amount reasonably sufficient
for the protection of the assets and business covered thereby,
and, in the aggregate, all such policies are reasonably adequate
for the protection of all the assets and business of ACNB taking
into account the availability and cost of such coverage. All
such policies shall remain in full force and effect for a period
of at least 90 days following the Closing Date. There is no
reason known to ACNB that any such policy will not be renewable
on terms and conditions as favorable as those set forth in such
policy.
3.17. Contracts and Commitments. Schedule 3.17 attached
hereto sets forth each contract or other commitment of ACNB which
requires an aggregate payment by ACNB after the date hereof of
more than $25,000, and any other contract or commitment that in
the opinion of the ACNB management
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materially affects the business of ACNB. Except for the contracts
and commitments described in this Agreement or as set forth in
Schedule 3.17, ACNB is not party to or subject to:
1. Any contracts or commitments which are
material to its business, operations or financial condition;
2. Any employment contract or arrangement,
whether oral or written, with any officer, consultant,
director or employee which is not terminable on 30 day's
notice without penalty or liability to make any payment
thereunder for more than 30 days after such termination;
3. Any plan or contract or other arrangement,
oral or written, providing for insurance for any officer or
employee or members of their families;
4. Any plan or contract or other arrangement,
oral or written, providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit-sharing
or other benefits for employees;
5. Any contract or agreement with any labor
union;
6. Any contract or agreement with customers for
the sale of products or the furnishing of services, or any
sales agency, broker, distribution or similar contract,
except contracts made in the ordinary course of business;
7. Any contract restricting ACNB from carrying on
its business anywhere in the United States;
8. Any instrument or arrangement evidencing or
related to indebtedness for money borrowed or to be
borrowed, whether directly or indirectly, by way of purchase
money obligation, guaranty, conditional sale, lease-
purchase, or otherwise;
9. Any joint venture contract or arrangement or
any other agreement involving a sharing of profits;
10. Any license agreement in which ACNB is the
licensor or licensee;
11. Any material contract or agreement, not of the
type covered by any of the other items of this Section 3.17,
which by its terms is either (i) not to be performed prior
to 30 days from the date hereof, or (ii) does not terminate,
or is not terminable without penalty to ACNB, or any
successors or assigns prior to 30 days from the date hereof.
3.18. Employee Benefit Plans.
(a) Except as described on Schedule 3.18, ACNB does
not sponsor or maintain and is not otherwise a party to or
liable under, any plan, program, fund or arrangement
(whether or not qualified for Federal income tax purposes,
whether benefiting a single individual or multiple
individuals, and whether funded or not) that is an "employee
pension benefit plan", or an "employee welfare benefit
plan", as such terms are defined in ERISA, or any incentive
or other benefit arrangement for its employees, their
dependents and beneficiaries.
(b) ACNB has, for all periods ending on or prior to
the date hereto, administered each employee welfare benefit
plan described on Schedule 3.18 in material compliance with
the reporting, disclosure and all other requirements
applicable under ERISA, the Code or any other applicable
law.
(c) All amounts required to be accrued under generally
accepted accounting principles applied consistently by ACNB
under any incentive or other compensation plan have been
accrued and are reflected in the balance sheet contained in
the December 31, 1993 ACNB Financial Statements.
3.19. ACNB Information. The written information with
respect to ACNB, and its officers, directors, and affiliates
which shall be used in soliciting approval of the Merger by
shareholders of ACNB will not, on the date the Proxy Statement is
first mailed to shareholders of ACNB or on the date of the
Stockholders' Meeting, as amended or supplemented, contain any
untrue statement of a material fact, or omit to state any materi-
al fact required to be stated therein or necessary in order to
make the statements
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therein, in light of the circumstances under
which they were made, not misleading, or necessary to correct any
statement in any earlier communication to ACNB shareholders with
respect to the Merger.
3.20. Due Diligence. All information provided by ACNB in
connection with the due diligence investigation by CFC was, at
the time that such information was provided, fair, accurate and
complete in all material respects. ACNB has not failed to
provide or make available to CFC all material information
regarding ACNB.
3.21. Resale of CFC Common Stock. ACNB knows of no present
plan or intention on the part of its shareholders to sell,
assign, transfer or otherwise dispose of shares of CFC Common
Stock to be received by such shareholders in connection with the
Merger which would reduce said shareholders' holdings of CFC
common stock to a number of shares having, in the aggregate, a
value of less than 50% of the value of ACNB Common Stock
outstanding as of the Effective Time. For purposes of this
representation, the number of shares of CFC Common Stock which
would have been received by any dissenting shareholders of ACNB
had they not dissented, and shares of ACNB Common Stock sold,
redeemed or otherwise disposed of prior or subsequent to and as
part of the Merger, will be considered as shares received by
shareholders of ACNB and then disposed of by shareholders of
ACNB.
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SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB
CFC and CFB hereby represent and warrant to ACNB the
following matters on and as of the date of this Agreement and at
the Effective Time; provided, however, that before any breach of
or inaccuracy in any of the representations or warranties given
in this Section IV shall be actionable or shall constitute
grounds for termination of or failure to perform under the terms
of this Agreement by ACNB, such breach or inaccuracy must be
materially adverse in the aggregate with respect to the
businesses of CFC and CFB.
4.1. Organization, Good-Standing and Conduct of Business.
CFC and CFB are corporations, duly organized, validly existing
and in good standing under the laws of the State of South
Carolina, and have full power and authority and all necessary
governmental and regulatory authorization to own all of their
properties and assets and to carry on their business as they are
presently being conducted, and are properly licensed, qualified
and in good standing as foreign corporations in all jurisdictions
wherein the character of the properties or the nature of the
business transacted by CFC and CFB makes such license or
qualification necessary.
4.2. Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the
Boards of Directors of CFC and CFB. No further corporate acts or
proceedings on the part of CFC or CFB are required or necessary
to authorize this Agreement or the Merger.
4.3. Binding Effect. When executed, this Agreement will
constitute a valid and legally binding obligation of CFC and CFB,
enforceable against CFC and CFB in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to rights of creditors of FDIC-insured institutions or
the relief of debtors generally, (ii) laws relating to the safety
and soundness of depository institutions, and (iii) general
principles of equity. Each document and instrument contemplated
by this Agreement, when executed and delivered by CFC and/or CFB
in accordance with the provisions hereof, shall be duly
authorized, executed and delivered by CFC and/or CFB and
enforceable against CFC and/or CFB in accordance with its terms,
subject to the exceptions in the previous sentence.
4.4. Capitalization of CFC. The authorized capital stock
of CFC consists solely of (i) 20,000,000 authorized shares of
common stock ($1.00 par value), of which 4,523,784 shares are
issued and outstanding and (ii) 10,000,000 shares of preferred
stock, of which 621,000 shares of 7.50% Noncumulative Convertible
Preferred Stock Series 1993, 60,000 shares of Convertible
Preferred Stock Series 1993B, and 920,000 shares of 7.32%
Noncumulative Convertible Preferred Stock Series 1994, are
outstanding. All of the issued and outstanding shares of CFC are
validly issued and fully paid and nonassessable. Except for (i)
stock or options to purchase shares of CFC Common Stock granted
under employee benefit plans, (ii) the 621,000 shares of 7.50%
Noncumulative Convertible Preferred Stock Series 1993, (iii) the
60,000 shares of Convertible Preferred Stock Series 1993B, and
(iv) the 920,000 shares of 7.32% Noncumulative Convertible Pre-
ferred Stock Series 1994, (v) shares which may be issued pursuant
to CFC's Shareholders' Rights Plan entered into as of November 9,
1993 between CFC and CFB, (vi) existing dividend reinvestment
plans, or (vii) as otherwise set forth on Schedule 4.4, there are
no outstanding obligations, options, warrants or commitments of
any kind or nature or any outstanding securities or other instru-
ments convertible into shares of any class of capital stock of
CFC, or pursuant to which CFC is or may become obligated to issue
any shares of its capital stock. None of the shares of the CFC
Common Stock is subject to any restrictions as to the transfer
thereof, except as set forth in CFC's Articles of Incorporation
or Bylaws and except for restrictions on account of applicable
federal or state securities laws. The Common Stock to be issued
in connection with this Agreement and the
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Merger will, when issued, be validly issued, fully paid and
nonassessable and issued pursuant to an effective registration
statement.
4.5. Subsidiaries of CFC. CFC owns 100% of the issued and
outstanding shares of CFB, Carolina First Savings Bank, F.S.B and
Carolina First Mortgage Company. Other than CFC, no individual
or entity has rights to acquire shares of CFB, Carolina First
Savings Bank, F.S.B or Carolina First Mortgage Company. CFC does
not hold 10% of any class of equity securities of any other
company or legal entity other than CFB, Carolina First Savings
Bank, F.S.B. and Carolina First Mortgage Company.
4.6. Absence of Defaults. Neither CFC nor CFB is in
default under, or in violation of any provision of their Articles
of Incorporation or Bylaws. Neither CFC nor CFB is in default
under, or in violation of, any agreement to which they are a
party, the effect of which default or violation would have a
material adverse effect on CFC or CFB or their business
operations or prospects. Neither CFC nor CFB is in violation of
any applicable law, rule or regulation the effect of which would
have a material adverse effect on CFC or CFB or their business
operations or prospects.
4.7. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of,
or compliance with, the terms and provisions hereof, will (i)
result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in a violation of,
termination of or acceleration of the performance provided by the
terms of, any agreement to which CFC or CFB is a party or by
which they may be bound, (ii) violate any provision of any law,
rule or regulation, (iii) result in the creation or imposition of
any lien, charge, restriction, security interest or encumbrance
of any nature whatsoever on any asset of CFC or CFB, or (iv)
violate any provisions of CFC's or CFB's Articles of
Incorporation or Bylaws. To the best of CFC's and CFB's
knowledge, no other party to any material agreement to which CFC
or CFB is a party is in default thereunder or in breach of any
provision thereof. To the best of CFC's and CFB's knowledge,
there exists no condition or event which, after notice or lapse
of time or both, would constitute a default by any party to any
such agreement.
4.8. Necessary Approvals. CFC and CFB have obtained all
certificates of authority, licenses, permits, franchises,
registrations of foreign ownership or other regulatory approvals
in every jurisdiction necessary for the continuing conduct of its
business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no
such certificate, license, permit, franchise, registration or
other approval is about to expire, lapse, has been threatened to
be revoked or has otherwise become restricted by their terms
which would, upon such expiration, lapse, revocation or
restriction, have a material adverse effect on the financial
circumstances of CFC or CFB. Further, there is no basis for any
such expiration, lapse, revocation, threat of revocation or re-
striction. Except for (i) any necessary filings with, and
approvals and authorizations of the OCC, the FDIC and the State
Board, and (ii) the filing with the SEC of the Registration
Statement and filings with blue sky authorities, no consent,
approval, authorization, registration, or filing with or by any
governmental authority, foreign or domestic, is required on the
part of CFC or CFB in connection with the execution and delivery
of this Agreement or the consummation by CFC and CFB of the
transactions contemplated hereby. Except for the agencies and
other entities in the preceding sentence, neither CFC nor CFB is
required to procure the approval of any person, firm, corpora-
tion, or other entity, foreign or domestic, in order to prevent
the termination of any right, privilege, license or contract of
CFC or CFB as a result of this Agreement.
4.9. Financial Statements. The audited financial
statements of CFC for each of the fiscal years 1991, 1992 and
1993, the unaudited financial statements of CFC at and for the
six month period ending June 30, 1994 and the unaudited monthly
statements subsequent to June 30, 1994 (the "CFC Financial
Statements") all of which have been provided to ACNB, are true,
correct and complete in all material respects and present fairly,
in conformity with generally accepted accounting principles
consistently applied, the financial position of CFC at the dates
indicated and the results of its operations for each of
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the periods indicated, except as otherwise set forth in the notes
thereto. The books and records of CFC have been kept, and will
be kept to the Closing Date, in reasonable detail, and will
fairly and accurately reflect in all material respects to the
Closing Date, the transactions of CFC.
4.10. Tax Returns. CFC files its income tax returns and
maintains its tax books and records on the basis of a taxable
year ending December 31. CFC has duly filed all tax reports and
returns required to be filed by any federal, state or local
taxing authorities (including, without limitation, those due in
respect of its properties, income, franchises, licenses, sales
and payrolls) through the date hereof, and CFC has duly paid all
taxes with respect to the periods covered thereby and has
established adequate reserves in accordance with generally
accepted accounting principles consistently applied for the
payment of all income, franchises, property, sales, employment or
other taxes anticipated to be payable in respect of the period
subsequent to the period ending after the date hereof. CFC is
not delinquent in the payment of any taxes, assessments or
governmental charges and no deficiencies have been asserted or
assessed, which have not been paid or for which adequate reserves
have not been established and which are not being contested in
good faith. CFC does not have in effect any waiver relating to
any statute of limitations for assessment of taxes with respect
to any federal, state or local income, property, franchise,
sales, license or payroll tax. Except as set forth on Schedule
4.10, CFC does not know, or have reason to know, of any questions
which have been raised or which may be raised by any taxing
authority relating to taxes or assessments of CFC which, if
determined adversely, would result in the assertion of any
deficiency.
4.11. Undisclosed Liabilities. Except for the liabilities
which are disclosed in the CFC Financial Statements or as set
forth on Schedule 4.11, CFC has no material liabilities or
material obligations of any nature, whether absolute, accrued,
contingent or otherwise, and whether due or to become due. Since
December 31, 1993, there has been no material adverse change in
the business or operations of CFC.
4.12. Litigation. There are no claims, actions, suits or
proceedings pending or threatened against or, to its knowledge,
affecting CFC at law or in equity, before or by any Federal,
state, municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse
determination of which could have a material adverse effect on
the business or operations of CFC, and CFC knows of no basis for
any of the foregoing. There is no order, writ, injunction, or
decree of any court, domestic or foreign, or any Federal or state
agency affecting CFC or to which CFC is subject, except for a
dividend agreement between CFC and the OTS which regulates the
payment of dividends from Carolina First Savings Bank, F.S.B. to
CFC.
4.13. Reports. CFC has duly made all reports and filings
required to be made pursuant to applicable law, except for
failures to file or reports which would not have a material
adverse effect on the business or financial condition of CFC.
4.14. CFC Information. The written information with respect
to CFC, and its officers, directors, and affiliates which shall
have been supplied by CFC (or any of its accountants, counsel or
other authorized representatives) specifically for use in
soliciting approval of the Merger by shareholders of ACNB, or
which shall be contained in the Registration Statement, will not,
on the date the Proxy Statement is first mailed to shareholders
of ACNB or on the date of the Stockholders' Meeting, or in the
case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, or
necessary to correct any statement in any earlier communication
to ACNB stockholders with respect to the Merger. The
Registration Statement will comply as to form with all applicable
laws, including the provisions of the Securities Act.
4.15. Due Diligence. All information provided by CFC in
connection with the due diligence investigation by ACNB was, at
the time that such information was provided, fair, accurate and
complete
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in all material respects. CFC has not failed to provide
or make available to ACNB all material information regarding CFC.
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING
5.1. Conduct of ACNB Pending Closing. During the period
commencing on the date hereof and continuing until the Closing
Date, ACNB covenants and agrees to the following (except to the
extent that CFC shall otherwise expressly consent in writing,
which consent shall not be unreasonably delayed or withheld);
provided, however, that any breach of or inaccuracy in any of the
covenants given in this Section 5.1 must be material in the
aggregate with respect to the business of ACNB before such breach
shall be actionable or shall constitute grounds for termination
or failure to perform under this Agreement.
(a) ACNB will carry on its business only in the
ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its
business organization, maintain the services of its present
officers and employees and preserve its relationships with
customers, suppliers and others having business dealings
with it so that its goodwill and going business shall be
unimpaired at the Closing Date. ACNB shall not purchase or
otherwise acquire or enter into a contract to acquire
servicing or subservicing rights without the written consent
of CFC, which consent shall not be unreasonably withheld.
(b) ACNB will not amend its Articles of Association or
Bylaws as in effect on the date hereof.
(c) Except for the issuance of capital stock in
connection with items set forth on Schedule 3.4, ACNB will
not issue, grant, pledge or sell, or authorize the issuance
of, reclassify or redeem, purchase or otherwise acquire, any
shares of its capital stock of any class or any securities
convertible into shares of any class, or any rights,
warrants or options to acquire any such shares (except for
employee stock options in the ordinary course in accordance
with past practice and only upon prior notice to CFC); nor
will it enter into any arrangement or contract with respect
to the issuance of any such shares or other convertible
securities; nor will it declare, set aside or pay any
dividends (of any type) or make any other change in its
equity capital structure.
(d) ACNB will promptly advise CFC orally and in
writing of any change in the businesses of ACNB which is or
may reasonably be expected to be materially adverse to the
business of ACNB.
(e) ACNB will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to
be done anything in the conduct of the business of ACNB, or
otherwise, which would be contrary to or in breach of any of
the terms or provisions of this Agreement, or which would
cause any of the representations of ACNB contained herein to
be or become untrue in any material respect.
(f) ACNB will not incur any indebtedness for borrowed
money, issue or sell any debt securities, or assume or
otherwise become liable, whether directly, contingently or
otherwise, for the obligation of any other party, other than
in the ordinary course of business.
(g) Except for expenses attendant to the Merger and
current contractual obligations, ACNB will not incur any
expense in an amount in excess of $25,000 after the
execution of this Agreement without the prior written
consent of CFC.
(h) ACNB will not grant any executive officers any
increase in compensation (except in the ordinary course in
accordance with past practice and only upon prior notice to
CFC), or enter into any employment agreement with any
executive officer without the consent of CFC
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except as may be required under employment or termination
agreements in effect on the date hereof which have
been previously disclosed to CFC in writing.
(i) ACNB will not acquire or agree to acquire by
merging or consolidating with, purchasing substantially all
of the assets of or otherwise, any business or any
corporation, partnership, association or other business
organization or division thereof.
5.2. Conduct of CFC Pending Closing. During the period
commencing on the date hereof and continuing until the Closing
Date, CFC covenants and agrees to the following (except to the
extent that ACNB shall otherwise expressly consent in writing,
which consent shall not be unreasonably delayed or withheld);
provided, however, that any breach of or inaccuracy in any of the
covenants given in this Section 5.2 must be material in the
aggregate with respect to the business of CFC before such breach
shall be actionable or shall constitute grounds for termination
or failure to perform under this Agreement.
(a) CFC shall carry on its business in substantially
the same manner as heretofore conducted.
(b) CFC will not amend its Articles of Incorporation
or Bylaws as in effect on the date hereof in any manner that
will adversely affect the ACNB stockholders in any material
respect.
(c) Except for the issuance of stock (i) in connection
with the Convertible Preferred Stock, (ii) in connection
with the items set forth on Schedule 4.4, (iii) in
connection with acquisitions (including, but not limited to,
the acquisitions listed on Schedule 4.4), or (iv) in the
ordinary course in accordance with past practice (such as
employee stock grants or options), CFC will not authorize,
create or issue any shares of capital stock.
(d) CFC will promptly advise ACNB orally and in
writing of any change in its business which is or may
reasonably be expected to be materially adverse to CFC.
(e) CFC will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to
be done anything in the conduct of its business or
otherwise, which would be contrary to or in breach of any of
the terms or provisions of this Agreement, or which would
cause any of the representations of CFC contained herein to
be or become untrue in any material respect.
SECTION VI. COVENANTS OF THE PARTIES
6.1. Access to Properties and Records. Between the date of
this Agreement and the Closing Date, the parties will provide to
each other and to their respective accountants, counsel and other
authorized representatives reasonable access (with due
consideration being given to the fact that CFC is a company
traded on the Nasdaq National Market, that CFC is acquiring all
of ACNB and that ACNB will constitute only a small portion of CFC
after the consummation of the transactions herein), during
reasonable business hours and upon reasonable notice, to their
respective premises, properties, contracts, commitments, books,
records and other information and will cause their respective
officers to furnish to the other party and its authorized
representatives such financial, technical and operating data and
other information pertaining to their respective businesses, as
the parties shall from time to time reasonably request. Each
party will and will cause its employees and agents to hold in
strict confidence, unless disclosure is compelled by judicial or
administrative process, or in the opinion of its counsel, by
other requirements of law, all Confidential Information and will
not disclose the same to any person. Confidential Information
shall be used only for the purpose of and in connection with
consummating the transaction contemplated herein. If this
Agreement is terminated, each party hereto will promptly return
all documents received by it from each other party containing
Confidential Information. The covenants in this Section 6.1
shall survive the Closing Date forever.
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6.2. Regulatory Filings. The parties hereto will use their
respective best efforts and cooperate with each other to obtain
promptly all such regulatory approvals and to make such filings
as, in the opinion of their respective counsels, may be necessary
or advisable in connection with this transaction. CFC shall be
responsible for all filings fees required in connection with such
approvals or filings.
6.3. Registration Statement/Proxy Statement. CFC shall
file the Registration Statement with the SEC and shall pay the
required filing fees. The parties will use their respective best
efforts and cooperate with each other to obtain promptly the
effectiveness of the Registration Statement. CFC shall also take
any reasonable action required to be taken under the blue sky
laws in connection with the issuance of CFC Common Stock in the
Merger. ACNB shall mail, at its expense, the Proxy Statement to
its shareholders.
6.4. Affiliates' Letters. ACNB shall deliver to CFC a
letter identifying all persons who are, at the time the Merger is
submitted to a vote of the shareholders of ACNB, "affiliates" of
ACNB for purposes of Rule 145 of the General Rules and
Regulations under the Securities Act. ACNB shall use its best
efforts to cause each person who is identified as an "affiliate"
in the letter referred to above to deliver to CFC on or prior to
the Effective Time a written agreement, in form reasonably
satisfactory to CFC, (a) that such person will not offer to sell,
transfer or otherwise dispose of any of the shares of CFC Common
Stock issued to such person pursuant to the Merger in such a
manner so as to destroy the tax-free status of the Merger or the
qualification by the Merger as a pooling of interests
transaction, and (b) that such person will not offer to sell,
transfer or otherwise dispose of any of the shares of CFC Common
Stock issued to such person pursuant to the Merger, except in
accordance with the applicable provisions of Rule 145.
6.5. Listing of CFC Common Stock. CFC shall cause the
shares of CFC Common Stock to be issued in the transactions
contemplated by this Reorganization Agreement to be approved for
quotation on the Nasdaq National Market, subject to official
notice of issuance, prior to the Effective Time. CFC shall give
such notice to Nasdaq as may be required to permit the listing of
the CFC Common Stock issued in connection with the Merger.
6.6. Letters from Accountants. Prior to the date the
Registration Statement is declared effective and prior to the
Effective Time, ACNB will deliver to CFC letters from Elliott
Davis & Co. addressed to CFC and dated not more than two business
days before the date on which such Registration Statement shall
have become effective and not more than two business days prior
to the Effective Time, respectively, in form and substance
satisfactory to CFC, and CFC will deliver to ACNB letters from
Elliott Davis & Co., addressed to ACNB and dated not more than
two business days before the Registration Statement shall have
become effective and not more than two business days prior to the
Effective Time, respectively, in form and substance satisfactory
to ACNB, in each case with respect to the financial condition of
the other party and such other matters as are customary in
accountants' comfort letters.
6.7. Tax Treatment/Accounting Treatment. ACNB and CFC
shall each take such acts within their power as may be reasonably
necessary to cause the Merger to qualify (i) as a
"reorganization" within the meaning of Section 368(a) of the Code
and (ii) as a "pooling of interests" under general accepted
accounting practices, except to the extent such performance or
failure would be prohibited by law. Such reasonable acts shall
include, without limitation, the abstention from resales of CFC
Common Stock received in connection herewith.
6.8. Expenses. The parties shall pay their own fees and
expenses (including legal and accounting fees) incurred in
connection with this transaction.
6.9. Material Events. At all times prior to the Closing
Date, each party shall promptly notify the other in writing of
the occurrence of any event which will or may result in the
failure to satisfy the conditions specified in Section VI or
Section VII of this Agreement.
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6.10. Public Announcements. At all times until after the
Closing Date, neither ACNB nor CFC shall issue or permit any of
its respective subsidiaries, affiliates, officers, directors or
employees to issue any press release or other information to the
press with respect to this Agreement, without the express prior
consent of the other party, except as may be required by law or
the policies of NASDAQ.
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE
The obligation of CFC and CFB to consummate the transactions
contemplated in this Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
7.1. Performance of Acts and Representations by ACNB. Each
of the acts and undertakings of ACNB to be performed on or before
the Closing Date pursuant to the terms of this Agreement shall
have been duly authorized and duly performed, and each of the
representations and warranties of ACNB set forth in this
Agreement shall be true on the Closing Date, except as to
transactions contemplated by this Agreement.
7.2. Opinion of Counsel for ACNB. ACNB shall have
furnished CFC with an opinion of its counsel, dated as of the
Closing Date, and in form and substance reasonably satisfactory
to CFC and its counsel, to the effect that, except as disclosed
herein: (i) ACNB is duly organized, validly existing and in good
standing under the laws of the United States of America; (ii) the
consummation of the transactions contemplated by this Agreement
will not (A) violate any provision of ACNB's Articles of Assoc-
iation or Bylaws, (B) violate any provision of, result in the
termination of, or result in the acceleration of any obligation
under, any mortgage, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or
decree known to counsel to which ACNB is a party, or by which it
is bound, except as such would not, in the aggregate, have a
material adverse effect on the business or financial condition of
ACNB, or (C) violate or conflict with any other restriction of
any kind or character of which such counsel has knowledge and to
which ACNB is subject; (iii) all of the shares of ACNB Common
Stock are validly authorized and issued, fully paid and, except
as provided by 12 U.S.C.A. (section mark)55, non-assessable; (iv)
ACNB has the legal right and power, and all authorizations and
approvals required by law, to enter into this Agreement, and to
consummate the transactions contemplated herein; (v) ACNB has full
corporate power and authority to enter into this Agreement, and this
Agreement has been duly authorized, executed and delivered by
ACNB and constitutes a valid and legally binding obligation of
ACNB enforceable against ACNB in accordance with its terms,
except as such enforceability may be limited by (x) applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to rights of
creditors of FDIC-insured institutions or the relief of debtors
generally, (y) laws relating to the safety and soundness of
depository institutions, and (z) general principles of equity;
(vi) to the best knowledge of such counsel, no material suit or
proceeding is pending or threatened against ACNB or other parties
which would have a material adverse effect on ACNB's business or
properties or its abilities to make the representations and
warranties and perform the obligations set forth herein.
7.3. Conduct of Business. The business of ACNB shall have
been conducted in the usual and customary manner, and there shall
have been no material casualty or material adverse change in the
business or financial condition of ACNB from the date hereof
through the Closing Date.
7.4. Consents. All permits, orders, consents, or other
authorizations necessary, in the reasonable opinion of counsel
for CFC, to the consummation of the transactions contemplated
hereby shall have been obtained, and no governmental agency or
department or judicial authority shall have issued any order,
writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable
regulatory agencies shall have been obtained without the
imposition of any
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condition or requirements that, in the reasonable judgment
of CFC, renders the consummation of this transaction unduly
burdensome.
7.5. Certificate. CFC shall have been furnished with such
certificates of officers of ACNB and/or such certificates of ACNB
stockholders, in form and substance reasonably satisfactory to
CFC, dated as of the Closing Date, certifying to such matters as
CFC may reasonably request, including but not limited to the
fulfillment of the conditions specified in this Section VII.
7.6. Limit on Dissent. The holders of 10% or more of the
ACNB Common Stock outstanding at the time of the Stockholders'
Meeting shall not have dissented to the Merger by demanding
payment for fair value of their shares in the manner provided by
12 U.S.C.A. (section mark)214a.
7.7. Pooling of Interests. CFC shall have received
reasonable assurance from Elliott, Davis & Co. that the Merger
will qualify for pooling of interests accounting treatment under
general accepted accounting practices.
7.8. Affiliates' Letters. CFC shall have received letters
from all affiliates of ACNB as contemplated in Section 6.4
hereof.
7.9. Due Diligence. CFC shall have completed a due
diligence investigation of ACNB by October 27, 1994, the results
of which shall be reasonably satisfactory to CFC.
SECTION VIII. CONDITIONS TO THE OBLIGATION OF ACNB TO CLOSE
The obligation of ACNB to consummate the transactions
contemplated in this Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
8.1. Performance of Acts and Representations by CFC and
CFB. Each of the acts and undertakings of CFC and CFB to be
performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly authorized and duly
performed, and each of the representations and warranties of CFC
and CFB set forth in this Agreement shall be true on the Closing
Date, except as to transactions contemplated by this Agreement.
8.2. Opinion of Counsel for CFC. CFC shall have furnished
ACNB with an opinion of its counsel, dated as of the Closing
Date, and in form and substance reasonably satisfactory to ACNB
and its counsel, to the effect that, except as disclosed herein:
(i) CFC and CFB are duly organized, validly existing and in good
standing under the laws of the State of South Carolina; (ii) the
consummation of the transactions contemplated by this Agreement
will not (A) violate any provision of CFC's or CFB's Articles of
Incorporation or Bylaws, (B) violate any provision of, result in
the termination of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, franchise, license,
permit, agreement, instrument, order, arbitration award, judgment
or decree known to counsel to which CFC or CFB is a party, or by
which it is bound, except as such would not, in the aggregate,
have a material adverse effect on the business or financial
condition of CFC, or (C) violate or conflict with any other re-
striction of any kind or character of which such counsel has
knowledge and to which CFC or CFB is subject; (iii) all of the
shares of CFC Common Stock to be issued in connection with the
Merger will be, when issued, validly authorized and issued, fully
paid and non-assessable; (iv) CFC and CFB have the legal right
and power, and all authorizations and approvals required by law,
to enter into this Agreement, and to consummate the transactions
contemplated herein; (v) CFC and CFB have full corporate power
and authority to enter into this Agreement, and this Agreement
has been duly authorized, executed and delivered by CFC and CFB
and constitutes a valid and legally binding obligation of CFC and
CFB enforceable against CFC and CFB in accordance with its terms,
except as such enforceability may be limited by (x) applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to rights of
creditors of FDIC-insured institutions or the relief of debtors
generally, (y) laws relating to the safety and soundness of
depository institutions, and (z) general
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principles of equity; (vi) to the best knowledge of such
counsel, no material suit or proceeding is pending or threatened
against CFC or other parties which would have a material adverse
effect on CFC's business or properties or its abilities to
make the representations and warranties and perform the
obligations set forth herein.
8.3. Conduct of Business. There shall have been no
material casualty or material adverse change in the business or
financial condition of CFC from the date hereof through the
Closing Date.
8.4. Consents. All permits, orders, consents, or other
authorizations necessary, in the reasonable opinion of counsel
for ACNB, to the consummation of the transactions contemplated
hereby shall have been obtained, and no governmental agency or
department or judicial authority shall have issued any order,
writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable
regulatory agencies shall have been obtained without the
imposition of any condition or requirements that, in the
reasonable judgment of ACNB, renders the consummation of this
transaction unduly burdensome.
8.5. Certificate. ACNB shall have been furnished with such
certificates of officers of CFC, in form and substance reasonably
satisfactory to ACNB, dated as of the Closing Date, certifying to
such matters as ACNB may reasonably request, including but not
limited to the fulfillment of the conditions specified in this
Section VIII.
8.6. Tax Opinion. ACNB shall have received from Wyche,
Burgess, Freeman & Parham, P.A. a tax opinion, reasonably
satisfactory to ACNB, opining, subject to reasonable
qualifications, that the Merger shall, upon compliance with
reasonable conditions, qualify as a tax-free reorganization under
Section 368(a) of the Code.
8.7. Fairness Opinion. The Board of Directors of ACNB
shall have received a fairness opinion from a reputable
investment banking firm, which opinion is reasonably acceptable
to ACNB.
8.8. Stockholder Approvals. The Stockholder Approvals
shall have been obtained.
SECTION IX. TERMINATIONS
9.1. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of the parties;
(b) by either CFC or ACNB, at that party's option, if
a permanent injunction or other order (including any order
denying any required regulatory consent or approval) shall
have been issued by any Federal or state court of competent
jurisdiction in the United States or by any United States
Federal or state governmental or regulatory body, which
order prevents the consummation of the transactions
contemplated herein;
(c) by either CFC or ACNB if the other party has
failed to comply with the agreements or fulfill the
conditions contained herein, provided, however, that any
such failure of compliance or fulfillment must be material
to the consolidated businesses of either CFC or ACNB and the
breaching must be given notice of the failure to comply and
a reasonable period of time to cure;
(d) by either CFC or ACNB as set forth in Section 2.2
hereof.
(e) by ACNB if the average of the closing sales price
of CFC Common Stock for any period of ten consecutive
trading days from the date hereof through the day before the
Closing Date is less than $12.00 per share.
9.2. Effect of Termination. In the event of termination of
this Agreement by either CFC or ACNB as provided above, this
Agreement shall forthwith become void and there shall be no
liability hereunder on the part of CFC or ACNB, or their
respective officers or directors, except for intentional breach;
provided, however, that in the event of termination by CFC for
any reason other than one set
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forth in Section 9.1(c) above or one which is beyond the
reasonable control of CFC, then CFC shall reimburse ACNB
for all reasonable costs and fees incurred in
connection with the transactions contemplated by this Agreement.
In the event this Agreement is terminated, any agreements between
the two parties as to Confidential Information shall survive such
termination.
SECTION X. INDEMNIFICATION
10.1. Information for Application and Statements. Each of
CFC and ACNB represents and warrants that all information
concerning it which is or will be included in any statement and
application made to any governmental agency (including the
Registration Statement) in connection with the transactions
contemplated by the Agreement shall be true and correct in all
material respects and shall not omit any material fact required
to be stated therein or necessary to make the statements made, in
light of the circumstances under which they were made, not
misleading. Each of CFC and ACNB so representing and warranting
will indemnify and hold harmless the other, each of its directors
and officers, who controls the other within the meaning of the
Securities Act, from and against any and all losses, claims,
damages, expenses or liabilities to which any of them may become
subject under applicable laws and rules and regulations
thereunder and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any actions whether or not resulting
in liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any such application or statement or arise out of or
are based upon the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary in
order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance
upon and in conformity with information furnished in writing by
the representing and warranting party expressly for use therein.
Each of CFC and ACNB agrees, at any time upon the request of the
other, to furnish to the other a written letter or statement
confirming the accuracy of the information contained in any proxy
statement, registration statement, report or other application or
statement, or in any draft of any such document, and confirming
that the information contained in such document or draft was
furnished expressly for use therein or, if such is not the case,
indicating the inaccuracies contained in such document or draft
or indicating the information not furnished expressly for use
therein. The indemnity agreement contained in this Section X
shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the other party.
10.2. Indemnication of Officers and Directors. CFC
covenants and agrees that it will cause each person who is an
officer or director of ACNB on the Closing Date to be indemnified
for any and all claims and liabilities arising out of such
person's service as an officer or director of ACNB to the maximum
extent that a South Carolina corporation is permitted by law to
indemnify its officers and directors, including indemnification
for the cost of defending such claims as well as any liability
resulting therefrom. The indemnification provided in this
Section shall also apply to each former director of ACNB named as
a defendant in the litigation set forth on Schedule 3.12 with
respect to such litigation. The provisions of this Section X
shall survive the closing and shall be enforceable directly by
each officer and director of ACNB benefited by this Section X.
SECTION XI. MISCELLANEOUS
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11.1. Survival of Representations and Warranties. The
representations, warranties and covenants contained in this
Agreement or in any other documents delivered pursuant hereto,
shall survive the Closing of the transactions contemplated
hereby. Notwithstanding any investigation made by or on behalf
of the parties, whether before or after Closing Date, the parties
shall be entitled to rely upon the representations and warranties
given or made by the other party(ies) herein.
11.2. Entire Agreement. This Agreement, including any
schedules, exhibits, lists and other documents referred to herein
which form a part hereof, contains the entire agreement of the
parties with respect to the subject matter contained herein and
there are no agreements, warranties, covenants or undertakings
other than those expressly set forth herein.
11.3. Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that
the Agreement shall not be assigned by either of the parties
hereto without the prior written consent of the other party
hereto.
11.4. Notices. Any notice given hereunder shall be in
writing and shall be deemed delivered and received upon
reasonable proof of receipt. Unless written designation of a
different address is filed with each of the other parties hereto,
notice shall be transmitted to the following addresses:
For CFC: William S. Hummers III
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Copy to: William P. Crawford, Jr.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602
For ACNB: Michael L. Laughlin
Aiken County National Bank
Post Office Box 1546
Aiken, South Carolina 29802
Copies to: James R. Barber III
Todd & Barber
Post Office Box 1549
Columbia, South Carolina 29202
George S. King, Jr.
Sinkler & Boyd, P.A.
Post Office Box 11889
Columbia, South Carolina 29211
11.5. Counterparts. This Agreement may be executed in one
or more Counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
11.6. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretations of
this Agreement.
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11.7. Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of South
Carolina.
11.8. Amendment. This Agreement may not be amended except
by an instrument in writing signed on behalf of all of the
parties.
11.9. Waiver. Any term, provision or condition of this
Agreement (other than that required by law) may be waived in
writing at any time by the party which is entitled to the
benefits thereof.
END OF PAGE
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IN WITNESS WHEREOF, this Agreement has been duly entered as
of the date first written above.
Witnesses CAROLINA FIRST CORPORATION
_________________________ By: ___________________________
Mack I. Whittle, Jr.
_________________________ President and CEO
Witnesses CAROLINA FIRST BANK
_________________________ By: ___________________________
Mack I. Whittle, Jr.
_________________________ Chairman
AIKEN COUNTY NATIONAL BANK
_________________________ By: ___________________________
Michael L. Laughlin
_________________________ Chairman of the Board
of Directors
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APPENDIX A
PLAN OF MERGER
OF
AIKEN COUNTY NATIONAL BANK
WITH AND INTO
CAROLINA FIRST BANK
Pursuant to this Plan of Merger (the "Plan of Merger"),
Aiken County National Bank ("ACNB"), a national banking
association existing under the laws of the United States of
America, shall be acquired by Carolina First Corporation ("CFC"),
a corporation existing under the laws of the State of South
Carolina, by the merger of ACNB with and into Carolina First Bank
("CFB"), a banking corporation existing under the laws of the
State of South Carolina and a wholly-owned subsidiary of CFC.
ARTICLE I. DEFINITIONS
The capitalized terms set forth below shall have the
following meanings:
1.1. "Articles of Merger" shall mean the Articles of Merger
to be executed by CFC, CFB and ACNB and in a form appropriate for
filing with the Secretary of State of South Carolina, and
relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.2. "CFC Common Stock" shall mean the common stock, par
value $1.00 per share, of CFC.
1.3. "Conversion Ratio" shall mean the number of shares of
CFC Common Stock issuable in exchange for one share of ACNB
Common Stock, as calculated pursuant to Section 3.1 hereof.
1.4. "Dissenting Stockholder" shall mean the holder of
shares of ACNB Common Stock who has made a timely demand for
payment of the fair value of his or her shares by the effective
exercise of dissenters' rights in the manner provided in 12
U.S.C.A. (section mark)214a.
1.5. "Effective Time" shall mean the date and time which
the Merger becomes effective as more particularly set forth in
Section 2.2 hereof.
1.6. "Merger" shall mean the merger of ACNB with and into
CFB as more particularly set forth herein and in the
Reorganization Agreement.
1.7. "Fair Market Value" shall mean, with respect to the
CFC Common Stock for a particular day in question, the average of
the high and low sale prices as quoted on the Nasdaq National
Market for that particular day and the immediately preceding four
business days.
1.8. "OCC" shall mean the Office of Comptroller of the
Currency.
1.9. "Reorganization Agreement" shall mean the Agreement
and Plan of Reorganization among CFC, CFB and ACNB dated the date
hereof, to which this Plan of Merger is attached as Appendix A.
1.10. "Stockholder Approvals" shall mean, as the context
may require, the written consent (duly authorized) of CFC to the
merger of ACNB with and into CFB and the approval by the
requisite vote of the stockholders of ACNB at the Stockholders'
Meeting of the merger of ACNB with and into CFB, all in
accordance with the Reorganization Agreement and this Plan of
Merger.
1.11. "Stockholders' Meeting" shall mean the meeting of the
stockholders of ACNB at which the Merger shall be voted upon.
1.12. "Surviving Corporation" shall mean CFB after
consummation of the Merger.
ARTICLE II. THE MERGER
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2.1. Merger. Subject to the terms and conditions set forth
in the Reorganization Agreement, unless effectively waived as
provided therein, and in accordance with all applicable laws,
regulations and regulatory requirements, at the Effective Time,
ACNB shall be merged with and into CFB. CFB shall be the
Surviving Corporation of the Merger and shall continue to be
governed by the laws of the State of South Carolina.
2.2. Effective Time. The Merger shall become effective on
the date and at the time specified in the Articles of Merger, and
in the form to be filed with the Secretary of State of the State
of South Carolina as applicable.
2.3. Capitalization The number of authorized shares of
capital stock of the Surviving Corporation shall be the same as
immediately prior to the Merger.
2.4. Charter. The charter of CFB as in effect at the
Effective Time shall be and remain the charter of the Surviving
Corporation.
2.5. Bylaws. The Bylaws of CFB, as in effect at the
Effective Time, shall continue in full force and effect as the
bylaws of the Surviving Corporation until otherwise amended as
provided by law or by such bylaws.
2.6. Properties and Liabilities of ACNB and CFB. At the
Effective Time, the separate existence and corporate organization
of ACNB shall cease, and CFB shall thereupon and thereafter, to
the extent consistent with its charter and the changes, if any,
provided by the Merger, possess all the rights, privileges,
immunities, liabilities and franchises, of a public as well as a
private nature, of ACNB without further act or deed.
ARTICLE III. MANNER OF CONVERTING SHARES
3.1. ACNB Common Stock. Each share of ACNB Common Stock
issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part
of the holder thereof, be exchanged for and converted into one
and one/eighth share (1.125 shares) of CFC Common Stock.
3.2. CFB Common Stock. None of the shares of CFB shall
be converted in the Merger and the capitalization of CFB after
the Merger shall remain unchanged.
3.3. Treasury Shares. Any and all shares of ACNB Common
Stock held as treasury shares by ACNB shall be cancelled and
retired at the Effective Time, and no consideration shall be
issued or given in exchange therefor.
3.4. Fractional Shares. No fractional shares of CFC Common
Stock will be issued as a result of the Merger. In lieu of the
issuance of fractional shares pursuant to Section 3.1 hereof,
cash will be paid to the holders of the ACNB Common Stock in
respect of any fractional share that would otherwise be issuable
based on the Fair Market Value of the CFC Common Stock on the
last trading day immediately preceding the Effective Time.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. Issuance of CFC Certificates; Cash for Fractional
Shares. After the Effective Time, each holder of shares of ACNB
Common Stock issued and outstanding at the Effective Time shall
surrender the certificate or certificates representing such
shares to CFC or its transfer agent, and shall promptly upon
surrender receive in exchange therefor the consideration provided
in Section 3.1 of this Plan of Merger. The certificate or
certificates of ACNB Common Stock so surrendered shall be duly
endorsed
26
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as CFC or its transfer agent may require. To the extent
required by Section 3.4 of this Plan of Merger, each holder of
shares of ACNB Common Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the
certificate or certificates representing such shares, cash in
lieu of any fractional share of CFC Common Stock to which such
holder might be entitled.
4.2. Authorized Withholdings. CFC shall not be obligated to
deliver the consideration to which any former holder of ACNB
Common Stock is entitled as a result of the Merger until such
holder surrenders his or her certificate or certificates
representing the shares of ACNB Common Stock for exchange as
provided in this Article IV, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a
bond as may be reasonably required in each case by CFC or ACNB.
In addition, no dividend or other distribution payable to the
holders of record of CFC Common Stock as of any time subsequent
to the Effective Time shall be paid to the holder of any
certificate representing shares of ACNB Common Stock issued and
outstanding at the Effective Time until such holder surrenders
such certificate for exchange as provided in Section 4.1 above.
However, upon surrender of the ACNB Common Stock certificate both
the CFC Common Stock certificate, together with all such withheld
dividends or other distributions and any withheld cash payments
in respect of fractional share interest, but without any
obligation for payment of interest by such withholding, shall be
delivered and paid with respect to each share represented by such
certificate.
4.3. Limited Rights of Former ACNB Stockholders. After the
Effective Time, each outstanding certificate representing shares
of ACNB Common Stock prior to the Effective Time shall be deemed
for all corporate purposes (other than the payment of dividends
and other distributions to which the former stockholder of ACNB
Common Stock may be entitled) to evidence only the right of the
holder thereof to surrender such certificate and receive the
requisite number of shares of CFC Common Stock in exchange
therefor as provided in this Plan of Merger.
ARTICLE V. STOCK OPTIONS
5.1. Options. At the Effective Time, all outstanding
obligations, commitments, options, warrants or other securities
set forth on Schedule 3.4 of the Reorganization Agreement which
are exercisable for or convertible into, or which require the
issuance of, shares of any class of capital stock of ACNB, shall,
after the Effective Date, represent only the right to receive
shares of CFC Common Stock based on the Conversion Ratio.
ARTICLE VI. MISCELLANEOUS
6.1. Conditions Precedent. Consummation of the Merger is
conditioned upon receipt of the Stockholder Approvals. In
addition, consummation of the Merger is conditioned upon the
fulfillment of the conditions precedent set forth in Section VII
and Section VIII of the Reorganization Agreement, subject to
waiver of any such conditions, if appropriate, as provided
thereunder.
6.2. Termination. This Plan of Merger may be terminated at
any time prior to the Effective Time as provided in Section IX of
the Reorganization Agreement.
6.3. Amendments. To the extent permitted by law, this Plan
of Merger may be amended by a subsequent writing signed by all of
the parties hereto upon the approval of the board of directors of
each of the parties hereto; provided, however, that this Plan of
Merger may not be amended after the Stockholders' Meeting except
in accordance with applicable law.
Dated as of this _____ day of October, 1994.
27
<PAGE>
SCHEDULES
The schedules are omitted. The Company will provided such
schedules upon request of the Commission.
28
<PAGE>
Exhibit 2.2
REORGANIZATION AGREEMENT
BY AND BETWEEN
CAROLINA FIRST CORPORATION,
CAROLINA FIRST BANK,
AND
MIDLANDS NATIONAL BANK
Dated as of November 14, 1994
<PAGE>
TABLE OF CONTENTS
SECTION I. DEFINITIONS . . . . . . . . . . . . . . . . . . . 5
1.1. Agreement. . . . . . . . . . . . . . . . . . . . . 5
1.2. Articles of Merger. . . . . . . . . . . . . . . . 5
1.3. CFC. . . . . . . . . . . . . . . . . . . . . . . . 5
1.4. CFC Common Stock. . . . . . . . . . . . . . . . . 5
1.5. CFB. . . . . . . . . . . . . . . . . . . . . . . . 5
1.7. Confidential Information. . . . . . . . . . . . . 5
1.8. Code. . . . . . . . . . . . . . . . . . . . . . . 5
1.9. Merger. . . . . . . . . . . . . . . . . . . . . . 5
1.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . 5
1.11. Effective Time. . . . . . . . . . . . . . . . . . 6
1.12. FDIC. . . . . . . . . . . . . . . . . . . . . . . 6
1.13. Midlands Common Stock. . . . . . . . . . . . . . . 6
1.14. OCC. . . . . . . . . . . . . . . . . . . . . . . . 6
1.15. OTS. . . . . . . . . . . . . . . . . . . . . . . . 6
1.16. Plan of Merger. . . . . . . . . . . . . . . . . . 6
1.17. Proxy Statement. . . . . . . . . . . . . . . . . . 6
1.18. Registration Statement. . . . . . . . . . . . . . 6
1.19. SEC. . . . . . . . . . . . . . . . . . . . . . . . 6
1.20. Securities Act. . . . . . . . . . . . . . . . . . 6
1.21. State Board. . . . . . . . . . . . . . . . . . . . 6
1.22. Stockholder Approvals. . . . . . . . . . . . . . . 6
1.23. Stockholders' Meeting. . . . . . . . . . . . . . . 6
1.24. Surviving Corporation. . . . . . . . . . . . . . . 6
SECTION II. THE MERGER . . . . . . . . . . . . . . . . . . . 6
2.1. General Provisions. . . . . . . . . . . . . . . . 6
2.2. The Closing. . . . . . . . . . . . . . . . . . . . 6
2.3. Consideration for the Merger. . . . . . . . . . . 6
2.4. Approval of Midlands Stockholders. . . . . . . . . 6
2.5. Tax Treatment. . . . . . . . . . . . . . . . . . . 6
SECTION III. REPRESENTATIONS AND WARRANTIES OF MIDLANDS . . 7
3.1. Organization, Good-Standing and Conduct of
Business. . . . . . . . . . . . . . . . . . . . . 7
3.2. Corporate Authority. . . . . . . . . . . . . . . . 7
3.3. Binding Effect. . . . . . . . . . . . . . . . . . 7
3.4. Capitalization of Midlands. . . . . . . . . . . . 7
3.5. Absence of Defaults. . . . . . . . . . . . . . . . 7
3.6. Non-Contravention and Defaults; No Liens. . . . . 7
3.7. Necessary Approvals. . . . . . . . . . . . . . . . 8
3.8. Financial Statements. . . . . . . . . . . . . . . 8
3.9. Tax Returns. . . . . . . . . . . . . . . . . . . . 8
3.10. Undisclosed Liabilities. . . . . . . . . . . . . . 8
3.11. Title to Properties, Encumbrances. . . . . . . . . 9
3.12. Litigation. . . . . . . . . . . . . . . . . . . . 9
3.13. Reports. . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
3.14. Brokers. . . . . . . . . . . . . . . . . . . . . . 9
3.15. Expenditures. . . . . . . . . . . . . . . . . . . 9
3.16. Insurance. . . . . . . . . . . . . . . . . . . . . 9
3.17. Contracts and Commitments. . . . . . . . . . . . . 9
3.18. Employee Benefit Plans . . . . . . . . . . . . . . 10
3.19. Midlands Information. . . . . . . . . . . . . . . 10
3.20. Due Diligence. . . . . . . . . . . . . . . . . . . 10
3.21. Resale of CFC Common Stock. . . . . . . . . . . . 11
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB . 11
4.1. Organization, Good-Standing and Conduct of
Business. . . . . . . . . . . . . . . . . . . . . 11
4.2. Corporate Authority. . . . . . . . . . . . . . . . 11
4.3. Binding Effect. . . . . . . . . . . . . . . . . . 11
4.4. Capitalization of CFC. . . . . . . . . . . . . . . 11
4.5. Subsidiaries of CFC. . . . . . . . . . . . . . . . 12
4.6. Absence of Defaults. . . . . . . . . . . . . . . . 12
4.7. Non-Contravention and Defaults; No Liens. . . . . 12
4.8. Necessary Approvals. . . . . . . . . . . . . . . . 12
4.9. Financial Statements. . . . . . . . . . . . . . . 13
4.10. Tax Returns. . . . . . . . . . . . . . . . . . . . 13
4.11. Undisclosed Liabilities. . . . . . . . . . . . . . 13
4.12. Litigation. . . . . . . . . . . . . . . . . . . . 13
4.13. Reports. . . . . . . . . . . . . . . . . . . . . . 13
4.14. CFC Information. . . . . . . . . . . . . . . . . . 13
4.15. Due Diligence. . . . . . . . . . . . . . . . . . . 14
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING . . . . . . 14
5.1. Conduct of Midlands Pending Closing. . . . . . . . 14
5.2. Conduct of CFC Pending Closing. . . . . . . . . . 15
SECTION VI. COVENANTS OF THE PARTIES . . . . . . . . . . . . 15
6.1. Access to Properties and Records. . . . . . . . . 15
6.2. Regulatory Filings. . . . . . . . . . . . . . . . 16
6.3. Registration Statement/Proxy Statement. . . . . . 16
6.4. Affiliates' Letters. . . . . . . . . . . . . . . . 16
6.5. Listing of CFC Common Stock. . . . . . . . . . . . 16
6.6. Letters from Accountants. . . . . . . . . . . . . 16
6.7. Tax Treatment/Accounting Treatment. . . . . . . . 16
6.8. Expenses. . . . . . . . . . . . . . . . . . . . . 17
6.9. Material Events . . . . . . . . . . . . . . . . . 17
6.10. Public Announcements . . . . . . . . . . . . . . . 17
6.11. Employment Contracts . . . . . . . . . . . . . . . 17
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE . . . 17
7.1. Performance of Acts and Representations by
Midlands. . . . . . . . . . . . . . . . . . . . . . 17
7.2. Opinion of Counsel for Midlands. . . . . . . . . . 17
7.3. Conduct of Business. . . . . . . . . . . . . . . . 18
7.4. Consents. . . . . . . . . . . . . . . . . . . . . 18
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7.5. Certificate. . . . . . . . . . . . . . . . . . . . 18
7.6. Limit on Dissent. . . . . . . . . . . . . . . . . 18
7.7. Pooling of Interests. . . . . . . . . . . . . . . 18
7.8. Affiliates' Letters. . . . . . . . . . . . . . . . 18
7.9. Due Diligence. . . . . . . . . . . . . . . . . . . 18
SECTION VIII. CONDITIONS TO THE OBLIGATION OF MIDLANDS TO
CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1. Performance of Acts and Representations by CFC
and CFB. . . . . . . . . . . . . . . . . . . . . 18
8.2. Opinion of Counsel for CFC. . . . . . . . . . . . 18
8.3. Conduct of Business. . . . . . . . . . . . . . . . 19
8.4. Consents. . . . . . . . . . . . . . . . . . . . . 19
8.5. Certificate. . . . . . . . . . . . . . . . . . . . 19
8.6. Tax Opinion. . . . . . . . . . . . . . . . . . . . 19
8.7. Fairness Opinion. . . . . . . . . . . . . . . . . 19
8.8. Stockholder Approvals. . . . . . . . . . . . . . . 19
SECTION IX. TERMINATIONS . . . . . . . . . . . . . . . . . 19
9.1. Termination. . . . . . . . . . . . . . . . . . . . 19
9.2. Effect of Termination. . . . . . . . . . . . . . . 20
SECTION X. INDEMNIFICATION . . . . . . . . . . . . . . . . 20
10.1. Information for Application and Statements. . . . 20
10.2. Indemnification of Directors and Officers. . . . 20
SECTION XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . 20
11.1. Survival of Representations and Warranties. . . . 20
11.2. Entire Agreement. . . . . . . . . . . . . . . . . 21
11.3. Binding Agreement. . . . . . . . . . . . . . . . 21
11.4. Notices. . . . . . . . . . . . . . . . . . . . . 21
11.5. Counterparts. . . . . . . . . . . . . . . . . . . 21
11.6. Headings. . . . . . . . . . . . . . . . . . . . . 21
11.7. Law Governing. . . . . . . . . . . . . . . . . . 21
11.8. Amendment. . . . . . . . . . . . . . . . . . . . 21
11.9. Waiver. . . . . . . . . . . . . . . . . . . . . . 21
APPENDICES
Appendix A Plan of Merger
Appendix B Form of Employment Contracts
4
<PAGE>
This REORGANIZATION AGREEMENT is entered into as of this
14th day of November, 1994, between Carolina First Corporation
("CFC"), a corporation organized and existing under the laws of
the State of South Carolina, Carolina First Bank ("CFB"), a
corporation organized and existing under the laws of the State of
South Carolina, and Midlands National Bank ("Midlands"), a
national banking association organized and existing under the
laws of the United States of America.
WHEREAS, CFC desires to acquire Midlands through the merger
of Midlands with and into CFB (the "Merger");
WHEREAS, the respective Boards of Directors of CFC, CFB and
Midlands have approved such Merger pursuant to the terms and
conditions of this Agreement and the Plan of Merger attached
hereto as Appendix A (the "Plan of Merger");
WHEREAS, for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended; and
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties and agreements herein
contained, CFC, CFB and Midlands hereby agree as follows:
SECTION I. DEFINITIONS
1.1. Agreement. This Reorganization Agreement between CFC,
CFB and Midlands, together with all schedules, exhibits and
appendices attached hereto.
1.2. Articles of Merger. The Articles of Merger to be
executed by CFC, CFB and Midlands and in form appropriate for
filing with the Secretary of State of South Carolina and the OCC,
and relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.3. CFC. Carolina First Corporation, a bank holding
company headquartered in Greenville, South Carolina, which term
shall include, when the context permits, CFC and all CFC
subsidiaries.
1.4. CFC Common Stock. The common stock, par value $1.00
per share, of CFC.
1.5. CFB. Carolina First Bank, a South Carolina
corporation and a wholly-owned subsidiary of CFC.
1.6. Closing Date. The term Closing Date shall have the
meaning ascribed to it in Section 2.2 hereof.
1.7. Confidential Information. The term "Confidential
Information" shall mean all information of any kind concerning a
party hereto that is furnished by such party or on its behalf
pursuant to Section 6.2 hereof and designated in writing as
"Confidential Information", except information (i) ascertainable
or obtained from public or published information, (ii) received
from a third party not known to the recipient of Confidential
Information to be under an obligation to keep such information
confidential, (iii) which is or becomes known to the public
(other than through a breach of this Agreement), (iv) of which
the recipient was in possession prior to disclosure thereof in
connection with the Merger, or (v) which was independently
developed by the recipient without the benefit of Confidential
Information.
1.8. Code. The Internal Revenue Code of 1986, as amended.
1.9. Merger. The merger of Midlands with and into CFB as
more particularly set forth herein and in the Plan of Merger.
1.10. ERISA. The Employee Retirement Income Security Act of
1974, as amended.
5
<PAGE>
1.11. Effective Time. The date and time which the Merger
becomes effective as more particularly set forth in Section 2.2
of the Plan of Merger.
1.12. FDIC. The Federal Deposit Insurance Corporation.
1.13. Midlands Common Stock. The common stock, par value
$5.00 per share, of Midlands.
1.14. OCC. The Office of Comptroller of the Currency.
1.15. OTS. The Office of Thrift Supervision.
1.16. Plan of Merger. The Plan of Merger attached to this
Reorganization Agreement as Appendix A.
1.17. Proxy Statement. The proxy statement included in the
Registration Statement which shall be furnished to the Midlands
stockholders in connection with the solicitation by the Midlands
Board of Directors of proxies for the approval of this Agreement
and the matters contemplated hereby.
1.18. Registration Statement. The Registration Statement on
Form S-4 to be filed with the SEC registering the CFC Common
Stock to be issued to the Midlands shareholders in connection
with the Merger.
1.19. SEC. The Securities and Exchange Commission.
1.20. Securities Act. The Securities Act of 1933, as
amended.
1.21. State Board. The South Carolina State Board of
Financial Institutions.
1.22. Stockholder Approvals. This term shall mean, as the
context may require, the written consent (duly authorized) of CFC
to the Merger of Midlands with and into CFB and the approval by
the requisite vote of the stockholders of Midlands at the
Stockholders' Meeting of the Merger of Midlands with and into
CFB, all in accordance with the Reorganization Agreement and this
Plan of Merger.
1.23. Stockholders' Meeting. The meeting of the
stockholders of Midlands at which the Merger shall be voted upon.
1.24. Surviving Corporation. The surviving corporation
after consummation of the Merger, which shall be CFB.
SECTION II. THE MERGER
2.1. General Provisions. Subject to the terms and
conditions of this Agreement, including the Plan of Merger, at
the Effective Time, Midlands shall be merged with and into CFB,
which shall be the Surviving Corporation and remain a wholly-
owned subsidiary of CFC. At the Effective Time, the separate
corporate existence of Midlands shall cease. CFC and Midlands
hereby agree that the Merger will be effected pursuant to the
terms set forth in the Plan of Merger.
2.2. The Closing. The Closing of the transaction
contemplated herein shall be held as soon as reasonably
practicable after fulfillment of all conditions set forth in
Section VII and Section VIII hereof (the "Closing Date"), at the
offices of Wyche, Burgess, Freeman & Parham, P.A. or at such
other place and time as the parties hereto may mutually agree;
provided, however, that in the event that Closing has not
occurred by May 31, 1995, either party hereto shall have the
right to terminate this Agreement.
2.3. Consideration for the Merger. The manner of
converting the shares of Midlands into shares of CFC shall be as
set forth in Articles II and III of the Plan of Merger.
2.4. Approval of Midlands Stockholders. CFC, CFB and
Midlands shall jointly prepare the Proxy Statement, which shall
be reasonably acceptable to all parties. The Proxy Statement
shall be mailed to Midlands shareholders as soon as reasonably
practicable after the SEC's declaration of effectiveness of the
Registration Statement, with due consideration given to the
anticipated length of time that will be required to obtain the
necessary regulatory approvals.
2.5. Tax Treatment. CFC and Midlands intend that the
Merger shall qualify as a tax-free reorganization under Section
368(a) of the Code.
6
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SECTION III. REPRESENTATIONS AND WARRANTIES OF MIDLANDS
Midlands hereby represents and warrants to CFC the following
matters on and as of the date of this Agreement and at the
Effective Time; provided, however, that before any breach of or
inaccuracy in any of the representations or warranties given in
this Section III shall be actionable or shall constitute grounds
for termination of or failure to perform under the terms of this
Agreement by CFC, such breach or inaccuracy must be materially
adverse in the aggregate with respect to the business of
Midlands.
3.1. Organization, Good-Standing and Conduct of Business.
Midlands is a corporation, duly organized, validly existing and
in good standing under the laws of the United States of America,
and has full power and authority and all necessary governmental
and regulatory authorization to own all of its properties and
assets and to carry on its business as it is presently being
conducted, and is properly licensed, qualified and in good
standing as a foreign corporation in all jurisdictions wherein
the character of the properties or the nature of the business
transacted by Midlands makes such license or qualification
necessary.
3.2. Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the
Board of Directors of Midlands. Other than approval of the
Merger by the shareholders of Midlands, no other corporate acts
or proceedings on the part of Midlands are required or necessary
to authorize this Agreement or the Merger.
3.3. Binding Effect. Subject to receipt of Stockholder
Approval and any required regulatory approvals, when executed,
this Agreement will constitute a valid and legally binding
obligation of Midlands, enforceable against Midlands in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights or the
relief of debtors generally. Each document and instrument
contemplated by this Agreement, when executed and delivered by
Midlands in accordance with the provisions hereof, shall be duly
authorized, executed and delivered by Midlands and enforceable
against Midlands in accordance with its terms, subject to the
exceptions in the previous sentence.
3.4. Capitalization of Midlands. The authorized capital
stock of Midlands consists solely of (i) 10,000,000 authorized
shares of common stock ($5.00 par value), of which 354,526 shares
are issued and outstanding. All of the issued and outstanding
shares of Midlands are validly issued and fully paid and, except
as provided in 12 U.S.C.A. (section mark)55, nonassessable. Except
for the items set forth on Schedule 3.4 attached hereto, there are no
outstanding obligations, options, warrants or commitments of any
kind or nature or any outstanding securities or other instruments
convertible into shares of any class of capital stock of
Midlands, or pursuant to which Midlands is or may become
obligated to issue any shares of its capital stock. None of the
shares of the Midlands Common Stock is subject to any
restrictions as to the transfer thereof, except as set forth in
Midlands's Articles of Incorporation or Bylaws and except for
restrictions on account of applicable federal or state securities
laws. Midlands does not hold 10% of any class of equity
securities of any other company or legal entity.
3.5. Absence of Defaults. Midlands is not in default
under, or in violation of, any provision of its Articles of
Incorporation or Bylaws. Midlands is not in default under, or in
violation of, any agreement to which Midlands is a party, the
effect of which default or violation would have a material
adverse effect on Midlands or its business operations or
prospects. Midlands is not in violation of any applicable law,
rule or regulation, the effect of which would have a material
adverse effect on Midlands or its business operations or
prospects.
3.6. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of,
or compliance with, the terms and provisions hereof, will (i)
result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in a violation of,
termination of or acceleration of the performance provided by the
terms of, any agreement to which Midlands is a party or by which
it may be bound, (ii) violate any provision of any law, rule or
regulation,
7
<PAGE>
(iii) result in the creation or imposition of any lien, charge,
restriction, security interest or encumbrance of any nature
whatsoever on any asset of Midlands, or (iv) violate
any provisions of Midlands's Articles of Incorporation or Bylaws.
To the best of Midlands's knowledge, no other party to any
material agreement to which Midlands is a party is in default
thereunder or in breach of any provision thereof. To the best of
Midlands's knowledge, there exists no condition or event which,
after notice or lapse of time or both, would constitute a default
by any party to any such agreement.
3.7. Necessary Approvals. Midlands has obtained all
certificates of authority, licenses, permits, franchises,
registrations of foreign ownership or other regulatory approvals
in every jurisdiction necessary for the continuing conduct of its
business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no
such certificate, license, permit, franchise, registration or
other approval is about to expire, lapse, has been threatened to
be revoked or has otherwise become restricted by its terms which
would, upon such expiration, lapse, revocation or restriction,
have a material adverse effect on the financial circumstances of
Midlands. Further, there is no reasonable basis for any such
expiration, lapse, revocation, threat of revocation or
restriction. Except for any necessary filings with, and
approvals and authorizations of the OCC, the FDIC and the State
Board, no consent, approval, authorization, registration, or
filing with or by any governmental authority, foreign or
domestic, is required on the part of Midlands in connection with
the execution and delivery of this Agreement or the consummation
by Midlands of the transactions contemplated hereby. Except for
the agencies in the preceding sentence or as disclosed in
Schedule 3.7 attached hereto, Midlands is not required to procure
the approval of any person, firm, corporation, or other entity,
foreign or domestic, in order to prevent the termination of any
right, privilege, license or contract of Midlands as a result of
this Agreement.
3.8. Financial Statements. The audited financial
statements of Midlands for each of the fiscal years 1991, 1992
and 1993, the unaudited financial statements of Midlands at and
for the six month period ending June 30, 1994 and the unaudited
monthly statements subsequent to June 30, 1994 (the "Midlands
Financial Statements") all of which have been provided to CFC,
are true, correct and complete in all material respects and
present fairly, in conformity with generally accepted accounting
principles consistently applied, the financial position of
Midlands at the dates indicated and the results of its operations
for each of the periods indicated, except as otherwise set forth
in the notes thereto. The books and records of Midlands have
been kept, and will be kept to the Closing Date, in reasonable
detail, and will fairly and accurately reflect in all material
respects to the Closing Date, the transactions of Midlands.
3.9. Tax Returns. Midlands files its income tax returns
and maintains its tax books and records on the basis of a taxable
year ending December 31. Midlands has duly filed all tax reports
and returns required to be filed by any federal, state or local
taxing authorities (including, without limitation, those due in
respect of its properties, income, franchises, licenses, sales
and payrolls) through the date hereof, and Midlands has duly paid
all taxes with respect to the periods covered thereby and has
established adequate reserves in accordance with generally
accepted accounting principles consistently applied for the
payment of all income, franchises, property, sales, employment or
other taxes anticipated to be payable after the date hereof.
Midlands is not delinquent in the payment of any taxes,
assessments or governmental charges and no deficiencies have been
asserted or assessed, which have not been paid or for which
adequate reserves have not been established. Midlands does not
have in effect any waiver relating to any statute of limitations
for assessment of taxes with respect to any federal, state or
local income, property, franchise, sales, license or payroll tax.
Midlands does not know, or have reason to know, of any questions
which have been raised or which may be raised by any taxing
authority relating to taxes or assessments of Midlands which, if
determined adversely, would result in the assertion of any
deficiency.
3.10. Undisclosed Liabilities. Except for the liabilities
which are disclosed in the Midlands Financial Statements or as
set forth on Schedule 3.10, Midlands has no material liabilities
or material
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obligations of any nature, whether absolute, accrued,
contingent or otherwise, and whether due or to become due. Since
December 31, 1993, there has been (i) no material adverse change
in the business or operations of Midlands, (ii) no incurrence by
or subjection of Midlands to any obligation or liability (whether
fixed, accrued or contingent) or commitment material to Midlands
not referred to in this Agreement, except such obligations or
liabilities as were or may be incurred in the ordinary course of
business and which are reflected on the Midlands Financial
Statements at and for the periods subsequent to December 31,
1993.
3.11. Title to Properties, Encumbrances. All real property
and personal property owned by Midlands is set forth on Schedule
3.11. Midlands has good and marketable title to all of the real
property and personal property set forth on Schedule 3.11, free
and clear of any liens, claims, charges, options or other
encumbrances, except for any lien for current taxes not yet due
and payable.
3.12. Litigation. Except as set forth on Schedule 3.12,
there are no claims, actions, suits or proceedings pending or
threatened against Midlands, or to its knowledge affecting
Midlands, at law or in equity, before or by any Federal, state,
municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse
determination of which could have a material adverse effect on
the business or operations of Midlands, and Midlands knows of no
basis for any of the foregoing. There is no order, writ,
injunction, or decree of any court, domestic or foreign, or any
Federal agency affecting Midlands or to which Midlands is
subject.
3.13. Reports. Midlands has duly made all reports and
filings required to be made pursuant to applicable law, except
for failures to file or reports which would not have a material
adverse effect on the business or financial condition of
Midlands.
3.14. Brokers. Midlands has not incurred any liability for
any commission or fee in the nature of a finder's, originator's
or broker's fee in connection with the transaction contemplated
herein.
3.15. Expenditures. Schedule 3.15 sets forth any single
expenditure of $25,000 or more proposed to be made by Midlands
after the date hereof and a summary of the terms and conditions
pertaining thereto. At least 20 business days prior to the
Closing Date, Midlands will advise CFC of any changes to Schedule
3.15 reflecting additions or deletions thereto since the date
hereof.
3.16. Insurance. Attached hereto as Schedule 3.16 is a true
and complete summary of the policies of fire, liability, life and
other type of insurance held by Midlands, setting forth with
respect to each such policy, the policy number, name of the
insured party, type of insurance, insurance company, annual
premium, expiration date, deductible amount, if any, and amount
of coverage. Each such policy is in an amount reasonably
sufficient for the protection of the assets and business covered
thereby, and, in the aggregate, all such policies are reasonably
adequate for the protection of all the assets and business of
Midlands taking into account the availability and cost of such
coverage. All such policies shall remain in full force and
effect for a period of at least 90 days following the Closing
Date. There is no reason known to Midlands that any such policy
will not be renewable on terms and conditions as favorable as
those set forth in such policy.
3.17. Contracts and Commitments. Schedule 3.17 attached
hereto sets forth each contract or other commitment of Midlands
which requires an aggregate payment by Midlands after the date
hereof of more than $25,000, and any other contract or commitment
that in the opinion of the Midlands management materially affects
the business of Midlands. Except for the contracts and
commitments described in this Agreement or as set forth in
Schedule 3.17, Midlands is not party to or subject to:
1. Any contracts or commitments which are
material to its business, operations or financial condition;
2. Any employment contract or arrangement,
whether oral or written, with any officer, consultant,
director or employee which is not terminable on 30 day's
notice without penalty or liability to make any payment
thereunder for more than 30 days after such termination;
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3. Any plan or contract or other arrangement,
oral or written, providing for insurance for any officer or
employee or members of their families;
4. Any plan or contract or other arrangement,
oral or written, providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit-sharing
or other benefits for employees;
5. Any contract or agreement with any labor
union;
6. Any contract or agreement with customers for
the sale of products or the furnishing of services, or any
sales agency, broker, distribution or similar contract,
except contracts made in the ordinary course of business;
7. Any contract restricting Midlands from
carrying on its business anywhere in the United States;
8. Any instrument or arrangement evidencing or
related to indebtedness for money borrowed or to be
borrowed, whether directly or indirectly, by way of purchase
money obligation, guaranty, conditional sale, lease-
purchase, or otherwise;
9. Any joint venture contract or arrangement or
any other agreement involving a sharing of profits;
10. Any license agreement in which Midlands is the
licensor or licensee;
11. Any material contract or agreement, not of the
type covered by any of the other items of this Section 3.17,
which by its terms is either (i) not to be performed prior
to 30 days from the date hereof, or (ii) does not terminate,
or is not terminable without penalty to Midlands, or any
successors or assigns prior to 30 days from the date hereof.
3.18. Employee Benefit Plans.
(a) Except as described on Schedule 3.18, Midlands
does not sponsor or maintain and is not otherwise a party to
or liable under, any plan, program, fund or arrangement
(whether or not qualified for Federal income tax purposes,
whether benefiting a single individual or multiple
individuals, and whether funded or not) that is an "employee
pension benefit plan", or an "employee welfare benefit
plan", as such terms are defined in ERISA, or any incentive
or other benefit arrangement for its employees, their
dependents and beneficiaries.
(b) Midlands has, for all periods ending on or prior
to the date hereto, administered each employee welfare
benefit plan described on Schedule 3.18 in material
compliance with the reporting, disclosure and all other
requirements applicable under ERISA, the Code or any other
applicable law.
(c) All amounts required to be accrued under generally
accepted accounting principles applied consistently by
Midlands under any incentive or other compensation plan have
been accrued and are reflected in the balance sheet
contained in the December 31, 1993 Midlands Financial
Statements.
3.19. Midlands Information. The written information with
respect to Midlands, and its officers, directors, and affiliates
supplied by Midlands to CFC for use in the Registration Statement
which shall be used in soliciting approval of the Merger by
shareholders of Midlands will not, on the date the Proxy
Statement is first mailed to shareholders of Midlands or on the
date of the Stockholders' Meeting, as amended or supplemented,
contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or
necessary to correct any statement in any earlier communication
to Midlands shareholders with respect to the Merger.
3.20. Due Diligence. All information provided by Midlands
in connection with the due diligence investigation by CFC was, at
the time that such information was provided, fair, accurate and
complete in all material respects. Midlands has not failed to
provide or make available to CFC all material information
regarding Midlands.
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3.21. Resale of CFC Common Stock. Midlands knows of no
present plan or intention on the part of its shareholders to
sell, assign, transfer or otherwise dispose of shares of CFC
Common Stock to be received by such shareholders in connection
with the Merger which would reduce said shareholders' holdings of
CFC common stock to a number of shares having, in the aggregate,
a value of less than 50% of the value of Midlands Common Stock
outstanding as of the Effective Time. For purposes of this
representation, the number of shares of CFC Common Stock which
would have been received by any dissenting shareholders of
Midlands had they not dissented, and shares of Midlands Common
Stock sold, redeemed or otherwise disposed of prior or subsequent
to and as part of the Merger, will be considered as shares
received by shareholders of Midlands and then disposed of by
shareholders of Midlands.
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB
CFC and CFB hereby represent and warrant to Midlands the
following matters on and as of the date of this Agreement and at
the Effective Time; provided, however, that before any breach of
or inaccuracy in any of the representations or warranties given
in this Section IV shall be actionable or shall constitute
grounds for termination of or failure to perform under the terms
of this Agreement by Midlands, such breach or inaccuracy must be
materially adverse in the aggregate with respect to the
businesses of CFC and CFB.
4.1. Organization, Good-Standing and Conduct of Business.
CFC and CFB are corporations, duly organized, validly existing
and in good standing under the laws of the State of South
Carolina, and have full power and authority and all necessary
governmental and regulatory authorization to own all of their
properties and assets and to carry on their business as they are
presently being conducted, and are properly licensed, qualified
and in good standing as foreign corporations in all jurisdictions
wherein the character of the properties or the nature of the
business transacted by CFC and CFB makes such license or
qualification necessary.
4.2. Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the
Boards of Directors of CFC and CFB. No further corporate acts or
proceedings on the part of CFC or CFB are required or necessary
to authorize this Agreement or the Merger.
4.3. Binding Effect. When executed, this Agreement will
constitute a valid and legally binding obligation of CFC and CFB,
enforceable against CFC and CFB in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights or the relief of debtors generally.
Each document and instrument contemplated by this Agreement, when
executed and delivered by CFC and/or CFB in accordance with the
provisions hereof, shall be duly authorized, executed and
delivered by CFC and/or CFB and enforceable against CFC and/or
CFB in accordance with its terms, subject to the exceptions in
the previous sentence.
4.4. Capitalization of CFC. The authorized capital stock
of CFC consists solely of (i) 20,000,000 authorized shares of
common stock ($1.00 par value), of which 4,523,784 shares are
issued and outstanding and (ii) 10,000,000 shares of preferred
stock, of which 621,000 shares of 7.50% Noncumulative Convertible
Preferred Stock Series 1993, 60,000 shares of Convertible
Preferred Stock Series 1993B, and 920,000 shares of 7.32%
Noncumulative Convertible Preferred Stock Series 1994, are
outstanding. All of the issued and outstanding shares of CFC are
validly issued and fully paid and nonassessable. Except for (i)
stock options to purchase shares of CFC Common Stock granted
under employee benefit plans, (ii) the 621,000 shares of 7.50%
Noncumulative Convertible Preferred Stock Series 1993, (iii) the
60,000 shares of Convertible Preferred Stock Series 1993B, and
(iv) the 920,000 shares of 7.32% Noncumulative Convertible Pre-
ferred Stock Series 1994, (v) the CFC Shareholders' Rights Plan
entered into as of November 9, 1993 between CFC and CFB, or (vi)
as otherwise set forth
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on Schedule 4.4, there are no outstanding
obligations, options, warrants or commitments of any kind or
nature or any outstanding securities or other instruments
convertible into shares of any class of capital stock of CFC, or
pursuant to which CFC is or may become obligated to issue any
shares of its capital stock. None of the shares of the CFC
Common Stock is subject to any restrictions as to the transfer
thereof, except as set forth in CFC's Articles of Incorporation
or Bylaws and except for restrictions on account of applicable
federal or state securities laws. The Common Stock to be issued
in connection with this Agreement and the Merger will, when
issued, be validly issued, fully paid and nonassessable and
issued pursuant to an effective registration statement.
4.5. Subsidiaries of CFC. CFC owns 100% of the issued and
outstanding shares of CFB, Carolina First Savings Bank, F.S.B and
Carolina First Mortgage Company. Other than CFC, no individual
or entity has rights to acquire shares of CFB, Carolina First
Savings Bank, F.S.B or Carolina First Mortgage Company. CFC does
not hold 10% of any class of equity securities of any other
company or legal entity other than CFB, Carolina First Savings
Bank, F.S.B. and Carolina First Mortgage Company.
4.6. Absence of Defaults. Neither CFC nor CFB is in
default under, or in violation of any provision of their Articles
of Incorporation or Bylaws. Neither CFC nor CFB is in default
under, or in violation of, any agreement to which they are a
party, the effect of which default or violation would have a
material adverse effect on CFC or CFB or their business
operations or prospects. Neither CFC nor CFB is in violation of
any applicable law, rule or regulation the effect of which would
have a material adverse effect on CFC or CFB or their business
operations or prospects.
4.7. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of,
or compliance with, the terms and provisions hereof, will (i)
result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in a violation of,
termination of or acceleration of the performance provided by the
terms of, any agreement to which CFC or CFB is a party or by
which they may be bound, (ii) violate any provision of any law,
rule or regulation, (iii) result in the creation or imposition of
any lien, charge, restriction, security interest or encumbrance
of any nature whatsoever on any asset of CFC or CFB, or (iv)
violate any provisions of CFC's or CFB's Articles of
Incorporation or Bylaws. To the best of CFC's and CFB's
knowledge, no other party to any material agreement to which CFC
or CFB is a party is in default thereunder or in breach of any
provision thereof. To the best of CFC's and CFB's knowledge,
there exists no condition or event which, after notice or lapse
of time or both, would constitute a default by any party to any
such agreement.
4.8. Necessary Approvals. CFC and CFB have obtained all
certificates of authority, licenses, permits, franchises,
registrations of foreign ownership or other regulatory approvals
in every jurisdiction necessary for the continuing conduct of its
business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no
such certificate, license, permit, franchise, registration or
other approval is about to expire, lapse, has been threatened to
be revoked or has otherwise become restricted by their terms
which would, upon such expiration, lapse, revocation or
restriction, have a material adverse effect on the financial
circumstances of CFC or CFB. Further, there is no basis for any
such expiration, lapse, revocation, threat of revocation or re-
striction. Except for (i) any necessary filings with, and
approvals and authorizations of the OCC, the FDIC and the State
Board, and (ii) the filing with the SEC of the Registration
Statement and filings with blue sky authorities, no consent,
approval, authorization, registration, or filing with or by any
governmental authority, foreign or domestic, is required on the
part of CFC or CFB in connection with the execution and delivery
of this Agreement or the consummation by CFC and CFB of the
transactions contemplated hereby. Except for the agencies and
other entities in the preceding sentence, neither CFC nor CFB is
required to procure the approval of any person, firm, corpora-
tion, or other entity, foreign or domestic, in order to prevent
the termination of any right, privilege, license or contract of
CFC or CFB as a result of this Agreement.
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4.9. Financial Statements. The audited financial
statements of CFC for each of the fiscal years 1991, 1992 and
1993, the unaudited financial statements of CFC at and for the
six month period ending June 30, 1994 and the unaudited monthly
statements subsequent to June 30, 1994 (the "CFC Financial
Statements") all of which have been provided to Midlands, are
true, correct and complete in all material respects and present
fairly, in conformity with generally accepted accounting
principles consistently applied, the financial position of CFC at
the dates indicated and the results of its operations for each of
the periods indicated, except as otherwise set forth in the notes
thereto. The books and records of CFC have been kept, and will
be kept to the Closing Date, in reasonable detail, and will
fairly and accurately reflect in all material respects to the
Closing Date, the transactions of CFC.
4.10. Tax Returns. CFC files its income tax returns and
maintains its tax books and records on the basis of a taxable
year ending December 31. CFC has duly filed all tax reports and
returns required to be filed by any federal, state or local
taxing authorities (including, without limitation, those due in
respect of its properties, income, franchises, licenses, sales
and payrolls) through the date hereof, and CFC has duly paid all
taxes with respect to the periods covered thereby and has
established adequate reserves in accordance with generally
accepted accounting principles consistently applied for the
payment of all income, franchises, property, sales, employment or
other taxes anticipated to be payable in respect of the period
subsequent to the period ending after the date hereof. CFC is
not delinquent in the payment of any taxes, assessments or
governmental charges and no deficiencies have been asserted or
assessed, which have not been paid or for which adequate reserves
have not been established and which are not being contested in
good faith. CFC does not have in effect any waiver relating to
any statute of limitations for assessment of taxes with respect
to any federal, state or local income, property, franchise,
sales, license or payroll tax. Except as set forth on Schedule
4.10, CFC does not know, or have reason to know, of any questions
which have been raised or which may be raised by any taxing
authority relating to taxes or assessments of CFC which, if
determined adversely, would result in the assertion of any
deficiency.
4.11. Undisclosed Liabilities. Except for the liabilities
which are disclosed in the CFC Financial Statements or as set
forth on Schedule 4.11, CFC has no material liabilities or
material obligations of any nature, whether absolute, accrued,
contingent or otherwise, and whether due or to become due. Since
December 31, 1993, there has been no material adverse change in
the business or operations of CFC.
4.12. Litigation. There are no claims, actions, suits or
proceedings pending or threatened against or, to its knowledge,
affecting CFC at law or in equity, before or by any Federal,
state, municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse
determination of which could have a material adverse effect on
the business or operations of CFC, and CFC knows of no basis for
any of the foregoing. There is no order, writ, injunction, or
decree of any court, domestic or foreign, or any Federal agency
affecting CFC or to which CFC is subject, except for a dividend
agreement between CFC and the OTS which regulates the payment of
dividends from Carolina First Savings Bank, F.S.B. to CFC.
4.13. Reports. CFC has duly made all reports and filings
required to be made pursuant to applicable law, except for
failures to file or reports which would not have a material
adverse effect on the business or financial condition of CFC.
4.14. CFC Information. The written information with respect
to CFC, and its officers, directors, and affiliates which shall
have been supplied by CFC (or any of its accountants, counsel or
other authorized representatives) specifically for use in
soliciting approval of the Merger by shareholders of Midlands, or
which shall be contained in the Registration Statement, will not,
on the date the Proxy Statement is first mailed to shareholders
of Midlands or on the date of the Stockholders' Meeting, or in
the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
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or necessary to correct any statement in any earlier communication
to Midlands stockholders with respect to the Merger. The
Registration Statement will comply as to form with all applicable
laws, including the provisions of the Securities Act.
4.15. Due Diligence. All information provided by CFC in
connection with the due diligence investigation by Midlands was,
at the time that such information was provided, fair, accurate
and complete in all material respects. CFC has not failed to
provide or make available to Midlands all material information
regarding CFC.
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING
5.1. Conduct of Midlands Pending Closing. During the
period commencing on the date hereof and continuing until the
Closing Date, Midlands covenants and agrees to the following
(except to the extent that CFC shall otherwise expressly consent
in writing, which consent shall not be unreasonably delayed or
withheld); provided, however, that any breach of or inaccuracy in
any of the covenants given in this Section 5.1 must be material
in the aggregate with respect to the business of Midlands before
such breach shall be actionable or shall constitute grounds for
termination or failure to perform under this Agreement.
(a) Midlands will carry on its business only in the
ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its
business organization, maintain the services of its present
officers and employees and preserve its relationships with
customers, suppliers and others having business dealings
with it so that its goodwill and going business shall be
unimpaired at the Closing Date. Midlands shall not purchase
or otherwise acquire or enter into a contract to acquire
servicing or subservicing rights without the written consent
of CFC, which consent shall not be unreasonably withheld.
(b) Midlands will not amend its Articles of
Incorporation or Bylaws as in effect on the date hereof.
(c) Midlands will not issue, grant, pledge or sell, or
authorize the issuance of, reclassify or redeem, purchase or
otherwise acquire, any shares of its capital stock of any
class or any securities convertible into shares of any
class, or any rights, warrants or options to acquire any
such shares (except for employee stock options in the
ordinary course in accordance with past practice and only
upon prior notice to CFC); nor will it enter into any
arrangement or contract with respect to the issuance of any
such shares or other convertible securities (except that it
may permit the exercise of existing warrants to purchase
Midlands Common Stock which are currently exercisable); nor
will it declare, set aside or pay any dividends (of any
type) or make any other change in its equity capital
structure; provided, however, that Midlands shall be
permitted to pay in 1995 substantially the same regular cash
dividend (on an aggregate and percentage of net income
basis) to holders of the Midlands Common Stock as was paid
in 1994.
(d) Midlands will promptly advise CFC orally and in
writing of any change in the businesses of Midlands which is
or may reasonably be expected to be materially adverse to
the business of Midlands.
(e) Midlands will not take, agree to take, or
knowingly permit to be taken any action or do or knowingly
permit to be done anything in the conduct of the business of
Midlands, or otherwise, which would be contrary to or in
breach of any of the terms or provisions of this Agreement,
or which would cause any of the representations of Midlands
contained herein to be or become untrue in any material respect.
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(f) Midlands will not incur any indebtedness for
borrowed money, issue or sell any debt securities, or assume
or otherwise become liable, whether directly, contingently
or otherwise, for the obligation of any other party, other
than in the ordinary course of business.
(g) Except for expenses attendant to the Merger and
current contractual obligations, Midlands will not incur any
expense in an amount in excess of $25,000 after the
execution of this Agreement without the prior written
consent of CFC.
(h) Midlands will not grant any executive officers any
increase in compensation (except in the ordinary course in
accordance with past practice and only upon prior notice to
CFC), or enter into any employment agreement with any
executive officer without the consent of CFC except as may
be required under employment or termination agreements in
effect on the date hereof which have been previously
disclosed to CFC in writing.
(i) Midlands will not acquire or agree to acquire by
merging or consolidating with, purchasing substantially all
of the assets of or otherwise, any business or any
corporation, partnership, association or other business
organization or division thereof.
5.2. Conduct of CFC Pending Closing. During the period
commencing on the date hereof and continuing until the Closing
Date, CFC covenants and agrees to the following (except to the
extent that Midlands shall otherwise expressly consent in
writing, which consent shall not be unreasonably delayed or
withheld); provided, however, that any breach of or inaccuracy in
any of the covenants given in this Section 5.2 must be material
in the aggregate with respect to the business of CFC before such
breach shall be actionable or shall constitute grounds for
termination or failure to perform under this Agreement.
(a) CFC shall carry on its business in substantially
the same manner as heretofore conducted.
(b) CFC will not amend its Articles of Incorporation
or Bylaws as in effect on the date hereof in any manner that
will adversely affect the Midlands stockholders in any
material respect.
(c) Except for the issuance of stock (i) in connection
with the Convertible Preferred Stock, (ii) in connection
with the items set forth on Schedule 4.4, (iii) in
connection with acquisitions (including, but not limited to,
the acquisitions listed on Schedule 4.4), or (iv) in the
ordinary course in accordance with past practice (such as
employee stock grants or options), CFC will not authorize,
create or issue any shares of capital stock.
(d) CFC will promptly advise Midlands orally and in
writing of any change in its business which is or may
reasonably be expected to be materially adverse to CFC.
(e) CFC will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to
be done anything in the conduct of its business or
otherwise, which would be contrary to or in breach of any of
the terms or provisions of this Agreement, or which would
cause any of the representations of CFC contained herein to
be or become untrue in any material respect.
SECTION VI. COVENANTS OF THE PARTIES
6.1. Access to Properties and Records. Between the date of
this Agreement and the Closing Date, the parties will provide to
each other and to their respective accountants, counsel and other
authorized representatives reasonable access (with due
consideration being given to the fact that CFC is a company
traded on the Nasdaq National Market, that CFC is acquiring all
of Midlands and that Midlands will constitute only a small
portion of CFC after the consummation of the transactions
herein), during reasonable business hours and upon reasonable
notice, to their respective premises, properties, contracts,
commitments, books, records and other information and will cause
their respective officers to
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furnish to the other party and its authorized representatives
such financial, technical and operating data and other
information pertaining to their respective businesses, as the
parties shall from time to time reasonably request. Each party
will and will cause its employees and agents to hold in strict
confidence, unless disclosure is compelled by judicial or
administrative process, or in the opinion of its counsel,
by other requirements of law, all Confidential Information
and will not disclose the same to any person. Confidential
Information shall be used only for the purpose of and in
connection with consummating the transaction contemplated herein.
If this Agreement is terminated, each party hereto will promptly
return all documents received by it from each other party
containing Confidential Information. The covenants in this
Section 6.1 shall survive the Closing Date forever.
6.2. Regulatory Filings. The parties hereto will use their
respective best efforts and cooperate with each other to obtain
promptly all such regulatory approvals and to make such filings
as, in the opinion of their respective counsels, may be necessary
or advisable in connection with this transaction. CFC shall be
responsible for all filings fees required in connection with such
approvals or filings.
6.3. Registration Statement/Proxy Statement. CFC shall
file the Registration Statement with the SEC and shall pay the
required filing fees. The parties will use their respective best
efforts and cooperate with each other to obtain promptly the
effectiveness of the Registration Statement. CFC shall also take
any reasonable action required to be taken under the blue sky
laws in connection with the issuance of CFC Common Stock in the
Merger. Midlands shall file the Proxy Statement with the OCC and
mail, at its expense, the Proxy Statement to its shareholders.
6.4. Affiliates' Letters. Midlands shall deliver to CFC a
letter identifying all persons who are, at the time the Merger is
submitted to a vote of the shareholders of Midlands, "affiliates"
of Midlands for purposes of Rule 145 of the General Rules and
Regulations under the Securities Act. Midlands shall use its
best efforts to cause each person who is identified as an
"affiliate" in the letter referred to above to deliver to CFC on
or prior to the Effective Time a written agreement, in form
reasonably satisfactory to CFC, (a) that such person will not
offer to sell, transfer or otherwise dispose of any of the shares
of CFC Common Stock issued to such person pursuant to the Merger
in such a manner so as to destroy the tax-free status of the
Merger or the qualification by the Merger as a pooling of
interests transaction, and (b) that such person will not offer to
sell, transfer or otherwise dispose of any of the shares of CFC
Common Stock issued to such person pursuant to the Merger, except
in accordance with the applicable provisions of Rule 145.
6.5. Listing of CFC Common Stock. CFC shall cause the
shares of CFC Common Stock to be issued in the transactions
contemplated by this Reorganization Agreement to be approved for
quotation on the Nasdaq National Market, subject to official
notice of issuance, prior to the Effective Time. CFC shall give
such notice to Nasdaq as may be required to permit the listing of
the CFC Common Stock issued in connection with the Merger.
6.6. Letters from Accountants. Prior to the date the
Registration Statement is declared effective and prior to the
Effective Time, Midlands will deliver to CFC letters from Donald
G. Jones and Company, P.A. addressed to CFC and dated not more
than two business days before the date on which such Registration
Statement shall have become effective and not more than two
business days prior to the Effective Time, respectively, in form
and substance satisfactory to CFC, and CFC will deliver to
Midlands letters from Elliott Davis & Co., addressed to Midlands
and dated not more than two business days before the Registration
Statement shall have become effective and not more than two
business days prior to the Effective Time, respectively, in form
and substance satisfactory to Midlands, in each case with respect
to the financial condition of the other party and such other
matters as are customary in accountants' comfort letters.
6.7. Tax Treatment/Accounting Treatment. Midlands and CFC
shall each take such acts within their power as may be reasonably
necessary to cause the Merger to qualify (i) as a
"reorganization" within the meaning of Section 368(a) of the Code
and (ii) as a "pooling of interests" under general
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accepted accounting practices, except to the extent such
performance or failure would be prohibited by law. Such
reasonable acts shall include, without limitation, the
abstention from resales of CFC Common Stock received in
connection herewith.
6.8. Expenses. The parties shall pay their own fees and
expenses (including legal and accounting fees) incurred in
connection with this transaction.
6.9. Material Events. At all times prior to the Closing
Date, each party shall promptly notify the other in writing of
the occurrence of any event which will or may result in the
failure to satisfy the conditions specified in Section VI or
Section VII of this Agreement.
6.10. Public Announcements. At all times until after the
Closing Date, neither Midlands nor CFC shall issue or permit any
of its respective subsidiaries, affiliates, officers, directors
or employees to issue any press release or other information to
the press with respect to this Agreement, without the express
prior consent of the other party, except as may be required by
law or the policies of NASDAQ.
6.11. Employment Contracts. At Closing, CFC shall enter
into employment contracts with David W. Bowers and E. Monte
Bowers, which contracts shall be substantially in the form of
those contracts attached hereto as Appendix B.
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE
The obligation of CFC and CFB to consummate the transactions
contemplated in this Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
7.1. Performance of Acts and Representations by Midlands.
Each of the acts and undertakings of Midlands to be performed on
or before the Closing Date pursuant to the terms of this
Agreement shall have been duly authorized and duly performed, and
each of the representations and warranties of Midlands set forth
in this Agreement shall be true on the Closing Date, except as to
transactions contemplated by this Agreement.
7.2. Opinion of Counsel for Midlands. Midlands shall have
furnished CFC with an opinion of its counsel, dated as of the
Closing Date, and in form and substance reasonably satisfactory
to CFC and its counsel, to the effect that: (i) Midlands is duly
organized, validly existing and in good standing under the laws
of the United States of America; (ii) the consummation of the
transactions contemplated by this Agreement will not (A) violate
any provision of Midlands's Articles of Incorporation or Bylaws,
(B) violate any provision of, result in the termination of, or
result in the acceleration of any obligation under, any mortgage,
lien, lease, franchise, license, permit, agreement, instrument,
order, arbitration award, judgment or decree known to counsel to
which Midlands is a party, or by which it is bound, except as
such would not, in the aggregate, have a material adverse effect
on the business or financial condition of Midlands, or (C)
violate or conflict with any other restriction of any kind or
character of which such counsel has knowledge and to which
Midlands is subject; (iii) all of the shares of Midlands Common
Stock are validly authorized and issued, fully paid and, except
as provided in 12 U.S.C.A. (section mark)55, non-assessable; (iv)
Midlands has the legal right and power, and all authorizations and
approvals required by law, to enter into this Agreement, and to
consummate the transactions contemplated herein; (v) Midlands has full
corporate power and authority to enter into this Agreement, and
this Agreement has been duly authorized, executed and delivered
by Midlands and constitutes a valid and legally binding
obligation of Midlands enforceable against Midlands in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws now or hereafter in effect relating to creditors'
rights or debtors' obligations generally; (vi) to the best
knowledge of such counsel, no material suit or proceeding is
pending or threatened against Midlands or other parties which
would have a material adverse effect on Midlands's business or
properties or its abilities to make the representations and
warranties and perform the obligations set forth herein.
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7.3. Conduct of Business. The business of Midlands shall
have been conducted in the usual and customary manner, and there
shall have been no material casualty or material adverse change
in the business or financial condition of Midlands from the date
hereof through the Closing Date.
7.4. Consents. All permits, orders, consents, or other
authorizations necessary, in the reasonable opinion of counsel
for CFC, to the consummation of the transactions contemplated
hereby shall have been obtained, and no governmental agency or
department or judicial authority shall have issued any order,
writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable
regulatory agencies shall have been obtained without the
imposition of any condition or requirements that, in the
reasonable judgment of CFC, renders the consummation of this
transaction unduly burdensome.
7.5. Certificate. CFC shall have been furnished with such
certificates of officers of Midlands and/or such certificates of
Midlands stockholders, in form and substance reasonably
satisfactory to CFC, dated as of the Closing Date, certifying to
such matters as CFC may reasonably request, including but not
limited to the fulfillment of the conditions specified in this
Section VII.
7.6. Limit on Dissent. The holders of 10% or more of the
Midlands Common Stock outstanding at the time of the
Stockholders' Meeting shall not have dissented to the Merger by
demanding payment for fair value of their shares in the manner
provided by 12 U.S.C.A. (section mark)214a.
7.7. Pooling of Interests. CFC shall have received
reasonable assurance from Elliott, Davis & Co. that the Merger
will qualify for pooling of interests accounting treatment under
general accepted accounting practices.
7.8. Affiliates' Letters. CFC shall have received letters
from all affiliates of Midlands as contemplated in Section 6.4
hereof.
7.9. Due Diligence. CFC shall have completed a due
diligence investigation of Midlands by a date not later than two
weeks from the date hereof, the results of which shall be
reasonably satisfactory to CFC.
SECTION VIII. CONDITIONS TO THE OBLIGATION OF MIDLANDS TO CLOSE
The obligation of Midlands to consummate the transactions
contemplated in this Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
8.1. Performance of Acts and Representations by CFC and
CFB. Each of the acts and undertakings of CFC and CFB to be
performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly authorized and duly
performed, and each of the representations and warranties of CFC
and CFB set forth in this Agreement shall be true on the Closing
Date, except as to transactions contemplated by this Agreement.
8.2. Opinion of Counsel for CFC. CFC shall have furnished
Midlands with an opinion of its counsel, dated as of the Closing
Date, and in form and substance reasonably satisfactory to
Midlands and its counsel, to the effect that: (i) CFC and CFB
are duly organized, validly existing and in good standing under
the laws of the State of South Carolina; (ii) the consummation of
the transactions contemplated by this Agreement will not (A)
violate any provision of CFC's or CFB's Articles of Incorporation
or Bylaws, (B) violate any provision of, result in the
termination of, or result in the acceleration of any obligation
under, any mortgage, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or
decree known to counsel to which CFC or CFB is a party, or by
which it is bound, except as such would not, in the aggregate,
have a material adverse effect on the business or financial
condition of CFC, or (C) violate or conflict with any other re-
striction of any kind or character of which such counsel has
knowledge and to which CFC or CFB is subject; (iii) all of the
shares of CFC Common Stock to be issued in connection with the
Merger will be, when issued, validly authorized and issued,
18
<PAGE>
fully paid and non-assessable; (iv) CFC and CFB have the legal
right and power, and all authorizations and approvals required
by law, to enter into this Agreement, and to consummate the
transactions contemplated herein; (v) CFC and CFB have full
corporate power and authority to enter into this Agreement, and
this Agreement has been duly authorized, executed and delivered by
CFC and CFB and constitutes a valid and legally binding obligation
of CFC and CFB enforceable against CFC and CFB in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws now or hereafter in effect relating to creditors'
rights or debtors' obligations generally; (vi) to the best
knowledge of such counsel, no material suit or proceeding
is pending or threatened against CFC or other parties which
would have a material adverse effect on CFC's business or
properties or its abilities to make the representations and
warranties and perform the obligations set forth herein.
8.3. Conduct of Business. There shall have been no
material casualty or material adverse change in the business or
financial condition of CFC from the date hereof through the
Closing Date.
8.4. Consents. All permits, orders, consents, or other
authorizations necessary, in the reasonable opinion of counsel
for Midlands, to the consummation of the transactions
contemplated hereby shall have been obtained, and no governmental
agency or department or judicial authority shall have issued any
order, writ, injunction or decree prohibiting the consummation of
the transactions contemplated hereby. Approvals of all
applicable regulatory agencies shall have been obtained without
the imposition of any condition or requirements that, in the
reasonable judgment of Midlands, renders the consummation of this
transaction unduly burdensome.
8.5. Certificate. Midlands shall have been furnished with
such certificates of officers of CFC, in form and substance
reasonably satisfactory to Midlands, dated as of the Closing
Date, certifying to such matters as Midlands may reasonably
request, including but not limited to the fulfillment of the
conditions specified in this Section VIII.
8.6. Tax Opinion. Midlands shall have received from Wyche,
Burgess, Freeman & Parham, P.A. a tax opinion, reasonably
satisfactory to Midlands, opining, subject to reasonable
qualifications, that the Merger shall, upon compliance with
reasonable conditions, qualify as a tax-free reorganization under
Section 368(a) of the Code.
8.7. Fairness Opinion. The Board of Directors of Midlands
shall have received a fairness opinion from a reputable
investment banking firm, which opinion is reasonably acceptable
to Midlands.
8.8. Stockholder Approvals. The Stockholder Approvals
shall have been obtained.
SECTION IX. TERMINATIONS
9.1. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of the parties;
(b) by either CFC or Midlands, at that party's option,
if a permanent injunction or other order (including any
order denying any required regulatory consent or approval)
shall have been issued by any Federal or state court of
competent jurisdiction in the United States or by any United
States Federal or state governmental or regulatory body,
which order prevents the consummation of the transactions
contemplated herein;
(c) by either CFC or Midlands if the other party has
failed to comply with the agreements or fulfill the
conditions contained herein, provided, however, that any
such failure of compliance or fulfillment must be material
to the consolidated businesses of either CFC or Midlands and
the breaching must be given notice of the failure to comply
and a reasonable period of time to cure; or
(d) by either CFC or Midlands as set forth in Section
2.2 hereof.
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<PAGE>
9.2. Effect of Termination. In the event of termination of
this Agreement by either CFC or Midlands as provided above, this
Agreement shall forthwith become void and there shall be no
liability hereunder on the part of CFC or Midlands, or their
respective officers or directors, except for intentional breach;
provided, however, that in the event this Agreement is
terminated, (i) any agreements between the two parties as to
confidential information and (ii) the grant of the option to
purchase 65,000 shares of Midlands common stock as set forth in
that certain Letter of Intent between CFC and Midlands dated
September 21, 1994, shall survive such termination.
SECTION X. INDEMNIFICATION
10.1. Information for Application and Statements. Each of
CFC and Midlands represents and warrants that all information
concerning it which is or will be included in any statement and
application made to any governmental agency (including the
Registration Statement) in connection with the transactions
contemplated by the Agreement shall be true and correct in all
material respects and shall not omit any material fact required
to be stated therein or necessary to make the statements made, in
light of the circumstances under which they were made, not
misleading. Each of CFC and Midlands so representing and
warranting will indemnify and hold harmless the other, each of
its directors and officers, who controls the other within the
meaning of the Securities Act, from and against any and all
losses, claims, damages, expenses or liabilities to which any of
them may become subject under applicable laws and rules and
regulations thereunder and will reimburse them for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any actions whether or not resulting
in liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any such application or statement or arise out of or
are based upon the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary in
order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance
upon and in conformity with information furnished in writing by
the representing and warranting party expressly for use therein.
Each of CFC and Midlands agrees, at any time upon the request of
the other, to furnish to the other a written letter or statement
confirming the accuracy of the information contained in any proxy
statement, registration statement, report or other application or
statement, or in any draft of any such document, and confirming
that the information contained in such document or draft was
furnished expressly for use therein or, if such is not the case,
indicating the inaccuracies contained in such document or draft
or indicating the information not furnished expressly for use
therein. The indemnity agreement contained in this Section X
shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the other party.
10.2. Indemnification of Directors and Officers. CFC shall
ensure that all rights to indemnification and limitations of
liability existing in favor of officers and directors of Midlands
as provided in the charter documents and bylaws of Midlands
arising from facts or events existing or occurring prior to the
Effective Time shall survive the transactions contemplated by
this Agreement and shall continue in full force and effect for a
period of not less than three years.
SECTION XI. MISCELLANEOUS
11.1. Survival of Representations and Warranties. Except
with respect to confidentiality provisions contained herein, the
representations, warranties and covenants contained in this
Agreement or in any other documents delivered pursuant hereto,
shall not survive the Closing of the transactions
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contemplated hereby. Notwithstanding any investigation made by
or on behalf of the parties, whether before or after Closing Date,
the parties shall be entitled to rely upon the representations and
warranties given or made by the other party(ies) herein.
11.2. Entire Agreement. This Agreement, including any
schedules, exhibits, lists and other documents referred to herein
which form a part hereof, contains the entire agreement of the
parties with respect to the subject matter contained herein and
there are no agreements, warranties, covenants or undertakings
other than those expressly set forth herein.
11.3. Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that
the Agreement shall not be assigned by either of the parties
hereto without the prior written consent of the other party
hereto.
11.4. Notices. Any notice given hereunder shall be in
writing and shall be deemed delivered and received upon
reasonable proof of receipt. Unless written designation of a
different address is filed with each of the other parties hereto,
notice shall be transmitted to the following addresses:
For CFC: William S. Hummers III
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Copies to: William P. Crawford, Jr.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602
For Midlands: David W. Bowers
Midlands National Bank
Post Office Box 248
Prosperity, South Carolina 29127
Copy to: Robert C. Schwartz
Smith Gambrell & Russell
3343 Peachtree Road N.E., Suite 1800
Atlanta, Georgia 30326
11.5. Counterparts. This Agreement may be executed in one
or more Counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
11.6. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretations of
this Agreement.
11.7. Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of South
Carolina.
11.8. Amendment. This Agreement may not be amended except
by an instrument in writing signed on behalf of all of the
parties.
11.9. Waiver. Any term, provision or condition of this
Agreement (other than the required by law) may be waived in
writing at any time by the party which is entitled to the
benefits thereof.
END OF PAGE
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IN WITNESS WHEREOF, this Agreement has been duly entered as
of the date first written above.
Witnesses CAROLINA FIRST CORPORATION
By:
William S. Hummers III
Executive Vice President
Witnesses CAROLINA FIRST BANK
By:
Mack I. Whittle, Jr.
Chairman
MIDLANDS NATIONAL BANK
By:
David W. Bowers
President and Chief Executive Officer
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APPENDIX A
PLAN OF MERGER
OF
MIDLANDS NATIONAL BANK
WITH AND INTO
CAROLINA FIRST BANK
Pursuant to this Plan of Merger (this "Plan of Merger"),
Midlands National Bank ("Midlands"), a national banking
association existing under the laws of the United States of
America, shall be acquired by Carolina First Corporation ("CFC"),
a corporation existing under the laws of the State of South
Carolina, by the merger of Midlands with and into Carolina First
Bank ("CFB"), a banking corporation existing under the laws of
the State of South Carolina and a wholly-owned subsidiary of CFC.
ARTICLE I. DEFINITIONS
The capitalized terms set forth below shall have the
following meanings:
1.1. "Articles of Merger" shall mean the Articles of Merger
to be executed by CFC, CFB and Midlands and in form appropriate
for filing with the Secretary of State of South Carolina and
relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.2. "CFC Common Stock" shall mean the common stock, par
value $1.00 per share, of CFC.
1.3. "Conversion Ratio" shall mean the number of shares of
CFC Common Stock issuable in exchange for one share of Midlands
Common Stock, as calculated pursuant to Section 3.1 hereof.
1.4. "Dissenting Stockholder" shall mean the holder of
shares of Midlands Common Stock who has made a timely demand for
payment of the fair value of his or her shares by the effective
exercise of dissenters' rights in the manner provided in 12
U.S.C.A. (section mark)214a.
1.5. "Effective Time" shall mean the date and time which
the Merger becomes effective as more particularly set forth in
Section 2.2 hereof.
1.6. "Merger" shall mean the merger of Midlands with and
into CFB as more particularly set forth herein and in the
Reorganization Agreement.
1.7. "Fair Market Value" shall mean, with respect to the
CFC Common Stock for a particular day in question, the average of
the high and low sale prices as quoted on the Nasdaq National
Market for that particular day and the immediately preceding four
business days.
1.8. "OCC" shall mean the Office of Comptroller of the
Currency.
1.9. "Reorganization Agreement" shall mean the Agreement
and Plan of Reorganization between CFC, CFB and Midlands, to
which this Plan of Merger is attached as Appendix A.
1.10. "Stockholder Approvals" shall mean, as the context
may require, the written consent (duly authorized) of CFC to the
merger of Midlands with and into CFB and the approval by the
requisite vote of the stockholders of Midlands at the
Stockholders' Meeting of the merger of Midlands with and into
CFB, all in accordance with the Reorganization Agreement and this
Plan of Merger.
1.11. "Stockholders' Meeting" shall mean the meeting of the
stockholders of Midlands at which the Merger shall be voted upon.
1.12. "Surviving Corporation" shall mean CFB after
consummation of the Merger.
ARTICLE II. THE MERGER
2.1. Merger. Subject to the terms and conditions set forth
in the Reorganization Agreement, unless effectively waived as
provided therein, and in accordance with all applicable laws,
regulations and regulatory requirements, at the Effective Time,
Midlands shall be merged with and into CFB. CFB shall
<PAGE>
be the Surviving Corporation of the Merger and shall continue
to be governed by the laws of the State of South Carolina.
2.2. Effective Time. The Merger shall become effective on
the date and at the time specified in the Articles of Merger, and
in the form to be filed with the Secretary of State of the State
of South Carolina as applicable.
2.3. Capitalization The number of authorized shares of
capital stock of the Surviving Corporation shall be the same as
immediately prior to the Merger.
2.4. Charter. The charter of CFB as in effect at the
Effective Time shall be and remain the charter of the Surviving
Corporation.
2.5. Bylaws. The Bylaws of CFB, as in effect at the
Effective Time, shall continue in full force and effect as the
bylaws of the Surviving Corporation until otherwise amended as
provided by law or by such bylaws.
2.6. Properties and Liabilities of Midlands and CFB. At the
Effective Time, the separate existence and corporate organization
of Midlands shall cease, and CFB shall thereupon and thereafter,
to the extent consistent with its charter and the changes, if
any, provided by the Merger, possess all the rights, privileges,
immunities, liabilities and franchises, of a public as well as a
private nature, of Midlands without further act or deed.
ARTICLE III. MANNER OF CONVERTING SHARES
3.1. Midlands Common Stock. Each share of Midlands Common
Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be exchanged for and converted into
such number of shares of CFC Common Stock as shall be equal to
the quotient (rounded to the nearest 1/100th of a share)
resulting from the division of (i) 225% of the September 30, 1994
tangible book value per share of Midlands Common Stock by (ii)
the Fair Market Value per share of the CFC Common Stock on
September 30, 1994.
3.2. CFB Common Stock. None of the shares of CFB shall be
converted in the Merger and the capitalization of CFB after the
Merger shall remain unchanged.
3.3. Treasury Shares. Any and all shares of Midlands Common
Stock held as treasury shares by Midlands shall be cancelled and
retired at the Effective Time, and no consideration shall be
issued or given in exchange therefor.
3.4. Fractional Shares. No fractional shares of CFC Common
Stock will be issued as a result of the Merger. In lieu of the
issuance of fractional shares pursuant to Section 3.1 hereof,
cash will be paid to the holders of the Midlands Common Stock in
respect of any fractional share that would otherwise be issuable
based on the Fair Market Value of the CFC Common Stock on the
last trading day immediately preceding the Effective Time.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. Issuance of CFC Certificates; Cash for Fractional
Shares. After the Effective Time, each holder of shares of
Midlands Common Stock issued and outstanding at the Effective
Time shall surrender the certificate or certificates representing
such shares to CFC or its transfer agent, and shall promptly upon
surrender receive in exchange therefor the consideration provided
in Section 3.1 of this Plan of Merger. The certificate or
certificates of Midlands Common Stock so surrendered shall be
duly endorsed as CFC or its transfer agent may require. To the
extent required by Section 3.4 of this Plan of Merger,
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<PAGE>
each holder of shares of Midlands Common Stock issued and
outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of CFC Common
Stock to which such holder might be entitled.
4.2. Authorized Withholdings. CFC shall not be obligated to
deliver the consideration to which any former holder of Midlands
Common Stock is entitled as a result of the Merger until such
holder surrenders his or her certificate or certificates
representing the shares of Midlands Common Stock for exchange as
provided in this Article IV, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a
bond as may be reasonably required in each case by CFC or
Midlands. In addition, no dividend or other distribution payable
to the holders of record of CFC Common Stock as of any time
subsequent to the Effective Time shall be paid to the holder of
any certificate representing shares of Midlands Common Stock
issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section
4.1 above. However, upon surrender of the Midlands Common Stock
certificate both the CFC Common Stock certificate, together with
all such withheld dividends or other distributions and any
withheld cash payments in respect of fractional share interest,
but without any obligation for payment of interest by such
withholding, shall be delivered and paid with respect to each
share represented by such certificate.
4.3. Limited Rights of Former Midlands Stockholders. After
the Effective Time, each outstanding certificate representing
shares of Midlands Common Stock prior to the Effective Time shall
be deemed for all corporate purposes (other than the payment of
dividends and other distributions to which the former stockholder
of Midlands Common Stock may be entitled) to evidence only the
right of the holder thereof to surrender such certificate and
receive the requisite number of shares of CFC Common Stock in
exchange therefor as provided in this Plan of Merger.
ARTICLE V. STOCK OPTIONS
5.1. Options. At the Effective Time, all outstanding
obligations, commitments, options, warrants or other securities
set forth on Schedule 3.4 of the Reorganization Agreement which
are exercisable for or convertible into, or which require the
issuance of, shares of any class of capital stock of Midlands,
shall, after the Effective Date, represent only the right to
receive shares of CFC Common Stock as shall be equal to the
quotient (rounded to the nearest 1/100th of a share) resulting
from the division of (i) 225% of the September 30, 1994 tangible
book value per share of Midlands Common Stock by (ii) the Fair
Market Value per share of the CFC Common Stock on September 30,
1994.
ARTICLE VI. MISCELLANEOUS
6.1. Conditions Precedent. Consummation of the Merger is
conditioned upon receipt of the Stockholder Approvals. In
addition, consummation of the Merger is conditioned upon the
fulfillment of the conditions precedent set forth in Section VII
and Section VIII of the Reorganization Agreement, subject to
waiver of any such conditions, if appropriate, as provided
thereunder.
6.2. Rights of Dissenting Stockholders. If any stockholder
of Midlands shall have filed with Midlands, prior to or at the
meeting of stockholders of Midlands at which the Merger is
submitted to a vote, written notice that he or she objects to the
Merger as provided in 12 U.S.C.A. (section mark)214a, CFC, upon
written notice from Midlands as to the identity of each
such Dissenting Stockholder and of the number of shares of
Midlands Common Stock held by such Dissenting Stockholder, shall
not include in the certificate or certificates for the CFC Common
Stock to be issued pursuant to Section 3.1, the number of shares of
CFC Common Stock to which any such Dissenting Stockholder would have
been entitled
25
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under said Section. Each Dissenting Stockholder who, pursuant to
12 U.S.C.A. (section mark) 214a, becomes entitled to payment of
the fair value of his or her Midlands Common Stock shall
receive payment therefor from CFC (but only after such value
shall have been agreed upon or as finally determined as provided
in 12 U.S.C.A (section mark)214a). In the event that CFC shall
become obligated after the Effective Time to deliver shares of
CFC Common Stock to any Dissenting Stockholder who shall have
failed to perfect, or shall have effectively lost or abandoned, his
or her right to appraisal of or payment for his or her shares of
Midlands Common Stock, CFC shall issue and deliver for the
benefit of such Dissenting Stockholder a certificate representing
the shares of CFC Common Stock to which he or she is then entitled.
6.3. Termination. This Plan of Merger may be terminated at
any time prior to the Effective Time as provided in Section IX of
the Reorganization Agreement.
6.4. Amendments. To the extent permitted by law, this Plan
of Merger may be amended by a subsequent writing signed by all of
the parties hereto upon the approval of the board of directors of
each of the parties hereto; provided, however, that this Plan of
Merger may not be amended after the Stockholders' Meeting except
in accordance with applicable law.
Dated as of this _____ day of _____________, 1995.
26
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APPENDIX B AND SCHEDULES
Appendix B and the Schedules are omitted. Such documents will be
provided to the Commission upon request.
27
Exhibit 4.1
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF CORRECTION
The following information is submitted pursuant to (section
mark)33-1-240 of the 1976 South Carolina Code, as amended:
1. The name of the corporation is Carolina First Corporation.
2. That on March 3, 1993, the corporation filed (fill out whichever
is applicable):
a. [X] The following described document: Articles of Amendment
dated February 26, 1993.
b. [ ] The attached document (attach copy of the document).
3. That this document was incorrect in the following manner:
The third line of Section II(b) (page 2) states ". . . over
the $25, which premium shall be 8% on July 1, 1993 and shall
decline by 1% . . .." The "8%" should be "7%," which
conforms with the intended terms of the Noncumulative
Convertible Preferred Stock Series 1993 as referenced in all
public offering documents used in connection with the sale
of the Noncumulative Convertible Preferred Stock Series
1993. See Prospectus of Carolina First Corporation dated
February 26, 1993 filed with the Securities and Exchange
Commission.
4. That the incorrect matters stated in Paragraph 3 should be
revised as follows:
The third line of Section II(b) shall be revised as follows:
". . . over the $25, which premium shall be 7% on July 1,
1993 and shall decline by 1% . . .."
Date: June 29, 1994 Carolina First Corporation
By:
William S. Hummers III
Executive Vice President
<PAGE>
FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate
original or a conformed copy, must be filed.
2. Filing Fee (payable to the Secretary of State at the time of
filing this application) - $10.00
SPECIAL NOTE
SECTION 33-1-240(c) STATES THAT ARTICLES OF CORRECTION ARE EFFECTIVE
ON THE EFFECTIVE DATE OF THE DOCUMENT THEY CORRECT EXCEPT AS TO
PERSONS RELYING ON THE UNCORRECTED DOCUMENT AND ADVERSELY AFFECTED BY
THE CORRECTION. AS TO THOSE PERSONS, ARTICLES OF CORRECTION ARE
EFFECTIVE WHEN FILED.
Form Approved by South Carolina
Secretary of State 1/89
Exhibit 10.2
AGREEMENT
This Agreement is entered into as of this 19th day of October,
1994 by and between Carolina First Corporation ("CFC"), Richard E.
Greer ("Greer"), William Graham ("Graham") and Telepay, Inc.
("Telepay").
PREAMBLE
Whereas the parties hereto desire to engage in the delivery of
certain home banking products and services through the development
and marketing of a home banking system, as the same may be amended,
changed, replaced and improved (the "System");
Now, Therefore, in consideration of the mutual covenants and
representations contained herein, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
SECTION I. FORMATION OF DART, INC.
1.1. Formation of DART, Inc. The parties hereto agree to form
a new corporation named DART, Inc. ("DART"), which shall have
5,000,000 common shares authorized. The formation of DART (the
"Formation Time") shall occur as soon as reasonably practicable after
CFC receives a final determination from the Board of Governors of the
Federal Reserve System and the South Carolina State Board of
Financial Institution regarding whether or not it will may own the
450,000 shares of DART Common Stock as contemplated in Section 2.2
below.
1.2. Contributions of Telepay Shareholders. Greer and Graham
shall cause all shareholders of Telepay (including themselves) to
contribute to DART all outstanding shares of Telepay capital stock.
All new shareholders of Telepay shall be required, as a condition to
investment in Telepay, to agree to maintain their Telepay stock free
and clear of all liens and encumbrances and to contribute their
Telepay stock to DART (upon the formation of DART) in exchange for
the DART stock as contemplated in Section 2.1 below. Such agreement
shall be in a form reasonably acceptable to CFC. A non-exclusive
list of the assets of Telepay is set forth on Schedule 1.2.
1.3. Contributions of CFC. Subject to other provisions herein,
CFC (or its affiliate) shall contribute to DART (i) the CFC customer
base in connection with the testing and marketing of the System, (ii)
the data processing capability necessary to perform beta testing of
the System, (iii) its know-how regarding the marketing of the System,
and (iv) the data processing hardware and software necessary to
perform the data processing. A non-exclusive list of the assets to
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be contributed, in addition to the assets expressly referenced in the
preceding sentence, is set forth on Schedule 1.3.
1.4. Contributions of Other Parties. As contemplated in
Section 2.3, other parties who may be members of the initial control
group within the contemplation of (section mark)351 of the Internal
Revenue Code of 1986 ("(Section Mark)351"), may contribute cash or such
other property in exchange for such number of shares of DART Common
Stock as may be agreed upon by CFC and Greer.
1.5. Capital Matters of Telepay. It is acknowledged that prior
to the Formation Time, Greerco Partners shall loan or cause to be
loaned to Telepay $750,000 for a period of up to six months (the
"Greerco Loan"), which loan shall have an interest rate of prime plus
1% if loaned by Greerco Partnership or, if loaned by a third party,
at a rate agreed upon by Telepay and the third party. From the date
hereof and prior to the Formation Time, Telepay shall have received
additional equity capital contributions totalling $500,000 in cash.
It is ackowledged that Telepay may use any or all of the $1,250,000
before the Formation Time for such reasonable expenses as may be from
time to time agreed upon by Telepay and CFC. At the Formation Time,
Greerco Partnership shall contribute shares of Baby Superstore, Inc.
common stock having a fair market value of $1,000,000 in exchange for
166,667 shares of DART common stock. The fair market value shall be
determined as the average closing prices of the Baby Superstore, Inc.
common stock on the five business days prior to contribution to DART.
It is acknowledged that DART shall pay off the Greerco Loan as soon
as reasonably practicable after the Formation Time through proceeds
received from the sale of such Baby Superstore, Inc. common stock or
a loan secured by such stock. The parties agree to use their
reasonable best efforts to effect such sale.
1.6. Best Efforts. Telepay, Greer, Graham, CFC and DART (after
its formation) shall use their respective assets and best efforts to
develop and market the System.
SECTION II. ISSUANCE OF COMMON STOCK
2.1. Issuance of Common Stock to Telepay Shareholders. In
exchange for the contribution of Telepay capital stock as set forth
in Section 1.2 above, DART shall issue 800,000 shares of DART Common
Stock to the Telepay shareholders in the same proportion as they hold
their Telepay stock. In the event that Telepay receives less than
the $1,500,000 in cash contemplated in Section 1.5, the number of
shares issuable upon the contribution of the Telepay stock shall be
reduced at a rate of $6 per share (i.e. if only $1,200,000 is
contributed to Telepay within the contemplation of Section 1.5, then
Telepay shareholders shall receive an aggregate of 750,000 shares
instead of 800,000 shares).
2.2. Issuance of Common Stock to CFC. Subject to receipt of
regulatory approval, as partial consideration for CFC's contributions
set forth in Section 1.3 above, DART shall issue 49,500 shares of
DART Common Stock to CFC (or its affiliate). Subject to receipt of
regulatory approval, in exchange for CFC's contributions set forth in
Section 1 above, DART shall issue an additional 400,500 shares of
DART Common Stock to CFC (or its affiliate). In the event that CFC
does not receive all necessary regulatory approvals for its ownership
of the additional 400,500 shares of DART Common Stock, such 400,500
2
<PAGE>
shares of Common Stock shall be issued to Greer and Graham in the
same proportion as designated pursuant to Section 2.1 and CFC shall
be entitled to receive the percentage compensation referenced in
Section 4.2.
2.3. Subsequent Issuance of Common Stock. DART may issue
additional shares of DART Common Stock to one or more additional
persons or entities who shall be a part of the initial control group
within the contemplation of (section mark)351. Such issuance may only
be upon such terms and for such consideration as may be agreed upon by
CFC and Greer.
2.4. Maintenance of 4.95% Equity Interest. In the event that
CFC is unable to procure the necessary regulatory approvals for its
ownership of DART Common Stock in excess of 5%, and in consideration
of this Agreement, CFC's contributions set forth in Section I above,
and other good and valuable consideration, the receipt of which is
hereby acknowledged, DART shall, for no additional consideration,
issue such number of shares of DART Common Stock as may be required
from time to time such that the DART Common Stock owned by CFC shall,
at all times, constitute 4.95% of the then outstanding DART Common
Stock (such action being hereinafter referred to as the "4.95% Equity
Maintenance"). The 4.95% Equity Maintenance shall be applicable
regardless of whether CFC shall receive regulatory approval to
receive (or actually receives) the percentage compensation referenced
in Section 4.2 and set forth in Exhibit A. Notwithstanding the
foregoing, the 4.95% Equity Maintenance shall be capped such that no
shares of DART Common Stock will be issued after the total number of
shares of DART Common Stock owned by CFC pursuant to the 4.95% Equity
Maintenance equals the 450,000 shares which it originally was to
receive (but for denial of regulatory approval of such ownership), as
such 450,000 shares may be equitably adjusted from time to time to
take into account stock splits, stock dividends, reverse stock
splits, other similar recapitalizations, and issuances of DART Common
Stock (or securities convertible into DART Common Stock) at less than
fair market value.
2.5. Issuance of DART Common Stock to Greerco Partnership.
DART shall issue Common Stock to Greerco Partnership as contemplated
in Section 1.5 above.
SECTION III. REGULATORY MATTERS
3.1. Compliance with Applicable Law. Consummation of the
transactions contemplated herein shall be subject to receipt of all
necessary regulatory approvals, and CFC shall not consummate any
transactions contemplated herein except upon receipt of necessary
approvals. Notwithstanding anything to the contrary herein, in no
event shall this Agreement be construed to require CFC to take, or
impose any liability on CFC as a result of its failure to take, any
action which is not permissible under applicable law. The
consummation of any transaction contemplated herein (including, but
not limited to the entry into the DP Agreement (as defined below)
shall constitute a representation to Telepay, Telepay's shareholders
and DART that all regulatory approvals necessary for that particular
transaction have been received.
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<PAGE>
3.2. Receipt of Regulatory Approvals. CFC shall, at its own
costs, be responsible for obtaining any necessary regulatory
approvals. CFC shall use its best efforts to obtain all regulatory
approvals necessary to the consummation of the transactions
contemplated herein. Notwithstanding the foregoing, the parties
acknowledge that CFC shall be responsible only for regulatory
approvals from banking authorities and any other applicable
regulatory approvals (such as regulatory approvals for
telecommunications related matters) shall be the responsibility of
DART.
SECTION IV. DATA PROCESSING CONTRACT
4.1. Entry in Data Processing Agreement. Telepay shall enter
into an agreement (the "DP Agreement") with CFC or an affiliate of
CFC which shall provide that CFC or its affiliate shall provide all
servicing and data processing which are incident to the System. The
compensation payable to CFC shall, subject to other provisions
contained herein, consist of the fixed compensation per transaction
set forth on Exhibit A attached hereto. The DP Agreement shall be
for a period of at least 20 years and shall contain other reasonable
terms and industry provisions typical of such agreements. CFC and
Telepay shall enter into this DP Agreement regardless of whether CFC
is ultimately able to acquire the stock as contemplated in Section
2.2 above or receive the percentage compensation as contemplated in
Section 4.2 below). It is expressly acknowledged that the CFC,
pursuant to the DP Contract, shall be entitled to provide data
processing services to all System customers (including those
customers who are not customers of CFC or its affiliates). It is
further acknowledged that Telepay's obligations under the DP Contract
will be assumed by DART upon contribution of the Telepay stock to
DART as contemplated in Section I above.
4.2. Percentage Compensation. In the event that CFC is unable
to procure regulatory approval for its ownership of the DART Common
Stock contemplated in Section 2.2 hereof, the DP Agreement shall
provide that CFC (or its affiliate) shall be entitled to receive the
percentage compensation set forth in Exhibit A attached hereto.
SECTION V. REPRESENTATIONS OF TELEPAY, GREER AND GRAHAM
Telepay, Greer and Graham hereby jointly and severally represent
and warrant to CFC the following matters on and as of the date of
this Agreement:
5.1. Organization, Good-Standing and Conduct of Business.
Telepay is a corporation, duly organized, validly existing and in
good standing under the laws of South Carolina, and has full power
and authority and all necessary governmental and regulatory
authorization to own all of its properties and assets and to carry on
its business as it is presently being conducted.
5.2. Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the Board
4
<PAGE>
of Directors of Telepay. No other corporate acts or proceedings on
the part of Telepay are required or necessary to authorize this
Agreement or the consummation of the transactions contemplated
herein; except that additional Telepay shareholders will be required
to contribute their Telepay stock as contemplated in Section I above.
5.3. Binding Effect. When executed, this Agreement will
constitute valid and legally binding obligations of Telepay, Greer
and Graham and, subject to the conditions set forth herein, will be
enforceable against each of such parties in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights or the relief of debtors generally. Each
document and instrument contemplated by this Agreement, when executed
and delivered by Telepay, Greer and/or Graham (as applicable) in
accordance with the provisions hereof, shall be duly authorized,
executed and delivered by Telepay, Greer and Graham (as applicable)
and enforceable against Telepay, Greer and Graham (as applicable) in
accordance with its terms, subject to the exceptions in the previous
sentence.
5.4. Capitalization of Telepay. The authorized capital stock
of Telepay consists solely of (i) 10,000 authorized shares of common
stock (no par value), of which 1,000 shares are currently issued and
outstanding. Greer and Graham are the only shareholders of Telepay.
All of the issued and outstanding shares of Telepay are validly
issued and fully paid and nonassessable. All of shares of Telepay
which may, in the future, become issued and outstanding, shall be
validly issued and fully paid and nonassessable. Except as
contemplated herein, there are no outstanding obligations, options,
warrants or commitments of any kind or nature or any outstanding
securities or other instruments convertible into shares of any class
of capital stock of Telepay, or pursuant to which Telepay is or may
become obligated to issue any shares of its capital stock. Greer and
Graham own their respective shares of Telepay stock free and clear of
all liens or encumbrances of any type. At the Formation Time, all
shareholders of Telepay will own their respective shares of Telepay
stock free and clear of all liens or encumbrances of any type. Upon
consummation of the transactions contemplated herein, DART shall own
100% of all Telepay stock free and clear of all liens and
encumbrances of any type.
5.5. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of, or
compliance with, the terms and provisions hereof, will (i) result in
a breach of the terms, conditions or provisions of, or constitute a
default under, or result in a violation of, termination of or
acceleration of the performance provided by the terms of, any
agreement to which Telepay, Greer or Graham is a party or by which
any of them may be bound, (ii) violate any provision of any law, rule
or regulation, (iii) result in the creation or imposition of any
lien, charge, restriction, security interest or encumbrance of any
nature whatsoever on any asset of Telepay, Greer or Graham, or (iv)
violate any provisions of Telepay's Articles of Incorporation or
Bylaws.
5.6. Necessary Approvals. Except for any necessary approvals
from banking regulators and the public service commission, Telepay
5
<PAGE>
has obtained all certificates of authority, licenses, permits,
franchises, registrations of foreign ownership or other regulatory
approvals in every jurisdiction necessary for the continuing conduct
of its business and ownership of its assets (including the operation
of the System).
5.7. Representations Regarding the System. The System is a
unique system for providing home banking services. The System
generally consists of a telephone system with magnetic strip "swipe"
capabilities which will permit the user to pay bills electronically,
to purchase various consumer items such as cable movies and takeout
food, and select long distance companies.
5.8. Patents. There are patent applications pending on the
principal proprietary aspects of the System, the sole beneficiary of
which is Telepay. Telepay has been advised by competent patent
counsel that such patent applications have reasonable probability of
being granted. Such patent applications, if granted and upon
transfer of the stock of Telepay to DART as contemplated herein, will
provide Dart with a significant technical advantage over systems
presently being used for "home banking."
5.9. Title to Properties, Encumbrances. Telepay has good and
marketable title to all of its property, free and clear of any liens,
claims, charges, options or other encumbrances, except for any lien
for current taxes not yet due and payable. Telepay solely owns the
rights to all of the software necessary to operate the System, except
for such software which is currently owned or licensed to CFC or its
affiliates. All intangible assets of Telepay will be assignable to
DART after contribution of the Telepay stock as contemplated in
Section I.
5.10. Litigation. There are no claims, actions, suits or
proceedings pending or threatened against Telepay, or to Telepay's,
Greer's or Graham's knowledge affecting Telepay, at law or in equity,
before or by any Federal, state, municipal, administrative or other
court, governmental department, commission, board, or agency, an
adverse determination of which could have a material adverse effect
on the business or operations of Telepay, and none of Greer, Graham
or Telepay know of no basis for any of the foregoing. There is no
order, writ, injunction, or decree of any court, domestic or foreign,
or any Federal agency affecting Telepay or to which Telepay is
subject.
5.11. Telepay Information. The information with respect to
Telepay, Greer, Graham and the System which has been provided to CFC
is accurate and complete in all material respects. Except for such
liabilities as have been expressly disclosed to CFC in writing,
Telepay has no material liabilities or material obligations of any
nature, whether absolute, accrued, contingent or otherwise, and
whether due or to become due. Since its incorporation, there has
been (i) no material adverse change in the business or operations of
Telepay, (ii) no incurrence by or subjection of Telepay to any
obligation or liability (whether fixed, accrued or contingent) or
commitment material to Telepay not expressly disclosed to CFC in
writing.
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<PAGE>
SECTION VI. REPRESENTATIONS OF CFC
CFC hereby represents and warrants to CFC the following matters
on and as of the date of this Agreement:
6.1. Organization, Good-Standing and Conduct of Business. CFC
is a corporation, duly organized, validly existing and in good
standing under the laws of South Carolina, and has full power and
authority and all necessary governmental and regulatory authorization
to own all of its properties and assets and to carry on its business
as it is presently being conducted.
6.2. Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the Board
of Directors of CFC. No other corporate acts or proceedings on the
part of CFC are required or necessary to authorize this Agreement or
the consummation of the transactions contemplated herein.
6.3. Binding Effect. When executed, this Agreement will
constitute valid and legally binding obligation of CFC and, subject
to the conditions set forth herein, will be enforceable against CFC
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights or the relief of
debtors generally. Each document and instrument contemplated by this
Agreement, when executed and delivered by CFC in accordance with the
provisions hereof, shall be duly authorized, executed and delivered
by CFC and enforceable against CFC in accordance with its terms,
subject to the exceptions in the previous sentence.
6.4. Capitalization of CFC. CFC is a company registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended and
its capitalization is as set forth in its publicly-filed documents.
6.5. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of, or
compliance with, the terms and provisions hereof, will, assuming
receipt of all necessary regulatory approvals, (i) result in a breach
of the terms, conditions or provisions of, or constitute a default
under, or result in a violation of, termination of or acceleration of
the performance provided by the terms of, any agreement to which CFC
is a party or by which it may be bound, (ii) violate any provision of
any law, rule or regulation, (iii) result in the creation or
imposition of any lien, charge, restriction, security interest or
encumbrance of any nature whatsoever on any asset of CFC, or (iv)
violate any provisions of CFC's Articles of Incorporation or Bylaws.
6.6. Necessary Approvals. Except for any necessary approvals
from banking regulators and the public service commission, CFC has
obtained all certificates of authority, licenses, permits,
franchises, registrations of foreign ownership or other regulatory
approvals in every jurisdiction necessary for the continuing conduct
of its business and ownership of its assets (including the operation
of the System).
6.7. Representations Regarding Data Processing. Except for the
proprietary software of Telepay (which will be provided to CFC), CFC
has or will have the capability to provide all data processing
reasonably necessary to the operation of the System, as the System
has been described to CFC.
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6.8. Title to Properties, Encumbrances. CFC has good and
marketable title to all of the property which will be contributed to
DART, free and clear of any liens, claims, charges, options or other
encumbrances, except for any lien for current taxes not yet due and
payable.
6.9. Litigation. There are no claims, actions, suits or
proceedings pending or threatened against CFC, or to its knowledge
affecting CFC, at law or in equity, before or by any Federal, state,
municipal, administrative or other court, governmental department,
commission, board, or agency, an adverse determination of which could
have a material adverse effect on the business or operations of CFC,
and CFC knows of no basis for any of the foregoing. There is no
order, writ, injunction, or decree of any court, domestic or foreign,
or any Federal agency affecting CFC or to which CFC is subject.
6.10. CFC Information. The information with respect to CFC and
its data processing capabilities which has been provided to Telepay,
Greer and Graham is accurate and complete in all material respects.
SECTION VII. MANAGEMENT
7.1. Directors. DART shall initially have a total of nine
directors. The following persons shall be elected as directors for
an initial term of three years and thereafter until such time as a
public offering of DART Common Stock has occurred:
Richard E. Greer Edward Sebastian Carroll A. Campbell
Leighton Cubbage Donald R. Futch Mack I. Whittle, Jr.
Cynthia Engle Steve Powell William O. Graham, Jr.
The DART directors shall be paid reasonable directors' fees.
7.2. Replacement of Directors. In the event that any of the
persons set forth in Section 7.1 is unable or unwilling to serve (or
to continue in service) as director of DART, that the replacement
Director for such person(s) shall be mutually acceptable to Greer and
CFC. Until such time as CFC and Greer agree upon a mutually
acceptable replacement, DART's board shall be decreased in size to
equal the number of existing directors.
7.3. Executive Committee. The Board of Directors of DART shall
establish an executive committee consisting of Richard E. Greer and
Mack I. Whittle, Jr., which committee must unanimously approve
material capital expenditures, material compensation increases,
issuances of capital stock and any company restructuring. Such
approval shall be in addition to any necessary board approvals.
7.4. Voting of Stock and Other Actions. CFC, Greer and Graham
agree to vote their DART Common Stock and take such other reasonable
action as may be necessary to cause the actions set forth in this
Section VII to occur. CFC, Graham and Greer agree that each of them
shall not vote their DART Common Stock or take any actions which are
contrary to the purposes and intent set forth in this Section VII.
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7.5. Other Covenants of Telepay regarding Voting. In the event
that CFC is precluded because of regulatory reasons from acquiring
DART Common Stock in excess of the 4.95% to be owned by CFC as
contemplated herein, Greer and Graham shall nevertheless vote all of
their shares of DART Common Stock as may be necessary to implement
this Section VII.
7.6. Termination of Voting Agreement. The provisions of this
Section VII shall terminate completely upon the completion of an
underwritten public offering whereby DART is registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended.
SECTION VIII. COVENANTS OF THE PARTIES
8.1. Confidentiality and No-Use. Each party will and, will
cause its employees and agents to, hold in strict confidence, unless
disclosure is compelled by judicial or administrative process, or in
the opinion of its counsel, by other requirements of law, all
Confidential Information of the other party and will not disclose the
same to any person. Confidential Information shall be used only for
the purpose of and in connection with consummating the transaction
contemplated herein. Each party will and will cause its employees
and agents to hold in strict confidence all Confidential Information
except for such disclosure as may be required in the ordinary course
of business, or unless disclosure is compelled by judicial or
administrative process, or in the opinion of its counsel, by other
requirements of law. During the pendency of this Agreement, each
party agrees that it shall use Confidential Information only in
connection with the business of DART and not for any other purpose.
In the event that this Agreement is terminated because of a breach
hereof, the breaching party shall never be entitled to use
Confidential Information. Subsequent shareholders of DART shall be
required to agree to confidentiality and no-use provisions
substantially similar to the provisions contained in this Section
VIII. The term "Confidential Information" shall mean all information
of any kind concerning a party hereto (or an affiliate of a party)
that is furnished by such party or on its behalf in connection with
this Agreement, except information (i) ascertainable or obtained from
public or published information, (ii) received from a third party not
known to the recipient of Confidential Information to be under an
obligation to keep such information confidential, (iii) which is or
becomes known to the public (other than through a breach of this
Agreement), (iv) of which the recipient was in possession prior to
disclosure thereof in connection with the Merger, or (v) which was
independently developed by the recipient without the benefit of
Confidential Information.
8.2. CFC Customer Base. CFC shall offer the System to its
customer base, provided that the System functions in customer's homes
as demonstrated by the System prototypes shown to CFC.
8.3. Fees. Each party shall be responsible for its own costs
and fees associated with the transactions contemplated herein.
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8.4. Sale of Telepay Stock. Greer and Graham shall at all
times maintain ownership of at least two-thirds of the outstanding
stock of Telepay.
8.5. Contribution of Telepay Stock. Greer and Graham agree
that each Telepay shareholder, at the Formation Time, shall be
obligated to transfer their respective shares of Telepay stock to
DART upon the terms and conditions contemplated herein.
SECTION IX. CONDITIONS TO CONSUMMATION
9.1. Conditions to CFC's Obligation of Consummation. The
following shall be a condition to CFC's obligation to enter into the
DP Agreement and to consummate any of the other transactions
contemplated herein (including the transfer of CFC property and the
receipt of DART Common Stock):
(i) All permits, orders, consents, or other authorizations
necessary for CFC to engage in the particular transaction shall have
been obtained, and no governmental agency or department or judicial
authority shall have issued any order, writ, injunction or decree
prohibiting the consummation of such transaction. Approvals of all
applicable regulatory agencies shall have been obtained without the
imposition of any condition or requirements that, in the reasonable
judgment of CFC, renders the subject transaction unduly burdensome.
(ii) Telepay, Greer and Graham shall have complied with all
their covenants contained herein (to the extent that such covenants
may have been complied with by the date of entry into the DP
Agreement) and Telepay's, Greer's and Graham's representations and
warranties contained herein shall be accurate in all material
respects.
(iii) The business of Telepay shall have been conducted in the
usual and customary manner, and there shall have been no material
casualty or material adverse change in the business or financial
condition of Telepay from the date hereof through the date of
consummation of the subject transaction.
9.2. Conditions to Consummation. The following shall be a
condition to Telepay's obligation to enter into the DP Agreement and
for Telepay, Greer and Graham to consummate any of the other
transactions contemplated herein:
(i) CFC shall have complied with all its covenants contained
herein (to the extent that such covenants may have been complied with
by the date of consummation of the subject transaction) and CFC's
representations and warranties contained herein shall be accurate in
all material respects.
SECTION X. TERMINATIONS
10.1. Termination. This Agreement may be terminated at any
time:
(i) by mutual consent of the parties;
(ii) by either (A) CFC or (B) Telepay, Greer or Graham, at that
party's option, if a permanent injunction or other order, including
10
<PAGE>
any order denying any required regulatory consent or approval, shall
have been issued by any Federal or state court of competent
jurisdiction in the United States or by any United States Federal or
state governmental or regulatory body, which order prevents the
consummation of the transactions contemplated herein;
(iii) by either (A) CFC or (B) Telepay, Greer or Graham, if the
other party has failed to comply with the agreements or fulfill the
conditions contained herein, provided, however, that any such failure
of compliance or fulfillment must be material and the breaching party
must be given notice of the failure to comply and a reasonable period
of time to cure; and provided, further that the non-breaching party
elects to terminate because of such failure of compliance;
(iv) by any party hereto as set forth in Section 12.2 hereof.
10.2. Effect of Termination. In the event of termination of
this Agreement by any party as provided above, this Agreement shall
forthwith become void and there shall be no liability hereunder on
the part of any party, or their respective agents, representatives or
affiliates, except for intentional breach; provided, however, that in
the event this Agreement is terminated, any agreements between the
two parties as to confidential information shall survive such
termination, and provided, further, that CFC shall be entitled to
sole possession and ownership to all of its property (both tangible
and intangible) contributed or made available to Telepay and/or DART
and to all work product created in furtherance of the transactions
contemplated herein.
SECTION XI. DISPUTE RESOLUTION
11.1. Dispute Resolution. Any dispute arising under this
Agreement, including without limitation, any dispute as to the terms
of the DP Agreement or the reasonableness of compensation thereunder,
referred to and resolved by arbitration in Greenwood, South Carolina,
in accordance with the rules of the American Arbitration Association,
by a panel of three arbitrators, one of whom shall be selected by the
Telepay, one of whom shall be selected by CFC and the third of whom
shall be selected by the arbitrators selected by Telepay and CFC. A
determination made in accordance with such rules shall be delivered
in writing to the parties hereto and shall be final and binding and
conclusive upon them. Each party shall pay its or his own legal,
accounting and other fees in connection with such an arbitration;
provided, however, that the arbitrators may award arbitration costs,
including legal, auditing and other fees to the prevailing party in
the arbitration proceeding if the arbitrators determine that such an
award is appropriate.
SECTION XII. MISCELLANEOUS
12.1. Survival of Representations and Warranties. The
representations, warranties and covenants contained in this Agreement
or in any other documents delivered pursuant hereto, shall survive
the consummation of the transactions contemplated hereby.
Notwithstanding any investigation made by or on behalf of the
11
<PAGE>
parties, whether before or after Closing Date, the parties shall be
entitled to rely upon the representations and warranties given or
made by the other party(ies) herein.
12.2. Severability. Each provision of this Agreement is
severable from the remainder of the Agreement. If any provision or
covenant contained in this Agreement is not permissible under
applicable law, then such provision or covenant shall be modified
such that it is in accordance with applicable law and the benefits
resulting from such provision or covenant are substantially
preserved. However, in the event that such modification represents a
material change to the benefits or detriments of either party hereto,
then such party which is affected by such change in benefits and/or
detriments shall have the right to terminate this Agreement without
liability.
12.3. Entire Agreement. This Agreement, including any
schedules, exhibits, lists and other documents referred to herein
which form a part hereof, contains the entire agreement of the
parties with respect to the subject matter contained herein and there
are no agreements, warranties, covenants or undertakings other than
those expressly set forth herein.
12.4. Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the
Agreement shall not be assigned by either of the parties hereto
without the prior written consent of the other party hereto.
12.5. Notices. Any notice given hereunder shall be in writing
and delivered to such addresses as may be provided by the parties to
each other from time to time. Any notice shall be deemed delivered
and received upon reasonable proof of receipt.
12.6. Counterparts. This Agreement may be executed in one or
more Counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
12.7. Headings. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretations of this Agreement.
12.8. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina.
12.9. Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of all of the parties.
12.10. Waiver. Any term, provision or condition of this
Agreement (other than the required by law) may be waived in writing
at any time by the party which is entitled to the benefits thereof.
IN WITNESS WHEREOF, this Agreement has been duly entered as of
the date first written above.
Witnesses
CAROLINA FIRST CORPORATION
/s/______________________ By: /s/_________________________
William S. Hummers III
Executive Vice President
12
<PAGE>
TELEPAY, INC.
/s/______________________ By: /s/_________________________
Richard E. Greer
WILLIAM GRAHAM
/s/______________________ By: /s/_________________________
An individual
RICHARD E. GREER
/s/______________________ By: /s/_________________________
An individual
13
<PAGE>
SCHEDULE 1.2
Non-exclusive List of Assets of Telepay
Software, patents, patent applications, licenses, trademarks and
know-how related to the System.
SCHEDULE 1.3
Capital Contributions of CFC
14
<PAGE>
Exhibit A
Fixed Compensation
$______ per transaction (with "transaction" to be defined more
clearly)
Percentage Compensation
CFC shall receive 32.5% of after tax net income of DART, as
calculated pursuant to generally accepted accounting principles (the
"Percentage Compensation"). This 32.55% assumes that the 200,000
shares is issued as contemplated in Section 2.3 of the Agreement;
otherwise the Percentage Commission shall be 40.05%. The Percentage
Compensation as may become payable shall be represented by a
promissory note delivered on April 1 of each year, which note shall
bear interest at 2% over prime, and shall be payable in full five
years from its date of issuance, with interest to be paid annually.
Such Percentage Compensation shall be adjusted in the event that
additional equity (in addition to the capital to be received from the
sale of 200,000 shares of Common Stock) is contributed to DART, all
in accordance with the following calculation:
The percentage compensation shall be diluted to the same extent
that 450,000 of the original total outstanding shares get
diluted by the issuance of equity.
For example: If there are 1,200,000 shares of Common Stock
outstanding (after the (Section Mark)351 incorporation) and DART
issues an additional 1,200,000 shares of Common Stock, then CFC
percentage compensation will be reduced to 18.75%.
15
EXHIBIT 11.1
<TABLE>
<CAPTION>
CAROLINA FIRST CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(All Amounts, Except Share Data, in Thousands)
Three Months Ended Nine Months Ended
September 30, 1994 September 30, 1994
<S> <C> <C>
Primary
Net income applicable to
common shareholders $ 1,270 $ 3,545
Shares:
Weighted average number of
outstanding common shares 4,519,486 4,510,744
Primary earnings per common share $ 0.28 $ 0.79
Fully Diluted
Net income applicable to
common shareholders $ 1,270 $ 3,545
Dividends on preferred stock 731 1,702
Net income $ 2,001 $ 5,247
Shares:
Weighted average number of
outstanding common shares 4,519,486 4,510,744
Weighted average common share
equivalents from preferred stock 2,945,296 2,309,874
Total common share equivalents 7,464,782 6,820,618
Fully diluted earnings per share $ 0.27 $ 0.77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 42,944
<INT-BEARING-DEPOSITS> 500
<FED-FUNDS-SOLD> 8,904
<TRADING-ASSETS> 722
<INVESTMENTS-HELD-FOR-SALE> 54,904
<INVESTMENTS-CARRYING> 60,912
<INVESTMENTS-MARKET> 58,668
<LOANS> 816,341
<ALLOWANCE> 5,029
<TOTAL-ASSETS> 1,067,664
<DEPOSITS> 940,275
<SHORT-TERM> 30,713
<LIABILITIES-OTHER> 8,439
<LONG-TERM> 1,213
<COMMON> 4,524
0
37,063
<OTHER-SE> 45,437
<TOTAL-LIABILITIES-AND-EQUITY> 1,067,664
<INTEREST-LOAN> 17,618
<INTEREST-INVEST> 1,485
<INTEREST-OTHER> 40
<INTEREST-TOTAL> 19,143
<INTEREST-DEPOSIT> 7,467
<INTEREST-EXPENSE> 8,152
<INTEREST-INCOME-NET> 10,991
<LOAN-LOSSES> 250
<SECURITIES-GAINS> 54
<EXPENSE-OTHER> 10,072
<INCOME-PRETAX> 2,929
<INCOME-PRE-EXTRAORDINARY> 2,929
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,001
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 8.43
<LOANS-NON> 397
<LOANS-PAST> 1,372
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,971
<CHARGE-OFFS> 236
<RECOVERIES> 44
<ALLOWANCE-CLOSE> 5,029
<ALLOWANCE-DOMESTIC> 5,029
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
