Registration File No. 33-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAROLINA FIRST CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
South Carolina 6060 57-0824914
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
102 South Main Street
Greenville, South Carolina 29601
(803) 255-7913
(Address, including Zip Code, and telephone number,
including area code, of registrant's principal executive offices)
WILLIAM S. HUMMERS, III
Executive Vice President
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
(803) 255-7913
(Name, address, including Zip Code, and telephone
number, including area code, of agent for service)
<TABLE>
<CAPTION>
<S> <C>
Copies to:
WILLIAM P. CRAWFORD, JR., ESQ. GEORGE S. KING, JR., ESQ.
Wyche, Burgess, Freeman & Parham, P.A. Sinkler & Boyd, P.A.
Post Office Box 728 1426 Main Street, Suite 1200
Greenville, South Carolina 29602 Columbia, South Carolina 29201
(803) 242-8265 (tel) (803) 235-8900 (fax) (803) 779-3080 (tel) (803) 765-1243 (fax)
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the Registration Statement becomes effective and after
the waiver or satisfaction of all other conditions to the merger of Aiken
County National Bank ("ACNB") with and into a wholly-owned subsidiary of the
Registrant, all as set forth in the Merger Agreement described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box.
<PAGE>
<TABLE>
<CAPTION>
Calculation of Registration Fee
Proposed Proposed
Title of each class maximum maximum
of securities to be Amount to be price aggregate offering Amount of
registered registered(1) per unit(2) price(2) registration fee(2)
<S> <C> <C> <C> <C>
Common Stock 452,813 $8.41 $3,808,157 $1,313.17
</TABLE>
(1) Based on an estimate of the maximum number of shares of common stock
of the Registrant to be issued in connection with the merger of ACNB with and
into a wholly-owned subsidiary of the Registrant.
(2) Estimated solely for the purpose of computing the registration fee
based on the book value of the ACNB common stock computed as of December 31,
1994 (the latest practicable date prior to the filing date hereof).
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item
Number Caption in Form S-4 Caption in Prospectus
<S> <C> <C>
1 Forepart of Registration Statement and
Outside Front Cover Page of Prospectus . Facing Page of Registration Statement,
Cross Reference Sheet, Prospectus
Cover Page
2 Inside Front and Outside Back Cover Pages
of Prospectus. . . . . . . . . . . . . Available Information, Incorporation by
Reference; Table of Contents
3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . Summary, Risk Factors
4 Terms of the Transaction . . . . . . . . The Proposed Transaction,
Comparative Rights of Shareholders
5 Pro Forma Financial Information . . . . Pro Forma Condensed Financial Information
6 Material Contacts with the Company Being
Acquired . . . . . . . . . . . . . . . The Proposed Transaction
7 Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters . . . . . . . . . . . . Not Applicable
8 Interests of Named Experts and Counsel . Legal Matters; Experts
9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . Not Applicable
10 Information with Respect to S-3
Registrants Information about Carolina
First Corporation
11 Incorporation of Certain Information
by Reference . . . . . . . . . . . Information about Carolina
First Corporation
12 Information with Respect to S-2 and S-3
Registrants . . . . . . . . . . . . . . Not Applicable
13 Incorporation of Certain Information
by Reference . . . . . . . . . . . . . Not Applicable
14 Information with Respect to Registrants
Other Than S-3 or S-2 Registrants . . . Not Applicable
15 Information with Respect to S-3 Companies Not Applicable
16 Information with Respect to S-2 or S-3
Companies . . . . . . . . . . . . .. . Not Applicable
17 Information with Respect to Companies
Other Than S-3 or S-2 Companies . . . . Information About ACNB
18 Information if Proxies, Consents or Authori-
zations are to be Solicited. . . . . . . Information About the Special
Meeting; The Proposed
Transaction; Management
Information; Information about
Carolina First Corporation;
Information about ACNB;
19 Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer . . . . . . . Not Applicable
</TABLE>
<PAGE>
AIKEN COUNTY NATIONAL BANK
AIKEN, SOUTH CAROLINA
February __, 1995
Dear Shareholder:
You are cordially invited to attend the Special Meeting of
Shareholders (the "Special Meeting") of Aiken County National
Bank ("ACNB") to be held at the offices of ACNB located at 142
Chesterfield Street S.E. in Aiken, South Carolina 29801, on March
___, 1995 at 10:30 a.m., local time.
At the Special Meeting you will be asked to consider and
vote upon the Agreement and Plan of Reorganization (the "Merger
Agreement"), dated October 13, 1994, among Carolina First
Corporation, Carolina First Bank and ACNB, which Merger Agreement
is described in the accompanying Proxy Statement/Prospectus. If
the Merger Agreement is approved by holders of two-thirds of the
outstanding stock of ACNB, ACNB will be merged with and into
Carolina First Bank (the "Merger"). Upon the effective date of
the Merger (the "Effective Date"), ACNB shareholders will become
entitled to receive 1.125 shares of Carolina First Corporation
common stock for each share of ACNB common stock owned by them.
As a result of the Merger, the ACNB common stock will be
cancelled and Carolina First Bank will be the surviving
corporation. The current ACNB offices will continue in operation
as branch offices of Carolina First Bank.
Enclosed herewith are the Notice of Special Meeting of
Shareholders, a Proxy Statement/Prospectus and a Proxy for use in
connection with the Special Meeting. The Proxy
Statement/Prospectus includes a description of the terms and
conditions of the Merger and related agreements, financial and
other information about Carolina First Corporation, Carolina
First Bank and ACNB, and other information. You are urged to
consider carefully the entire Proxy Statement/Prospectus,
including the appendices thereto.
THE BOARD OF DIRECTORS OF ACNB BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF ACNB AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR THE APPROVAL
OF THE MERGER AGREEMENT.
Because the affirmative vote of holders of at least two-
thirds of the issued and outstanding shares of ACNB common stock
is required to approve the Merger, it is important that your
shares of ACNB common stock be represented at the Special
Meeting, whether or not you are personally able to attend. You
are therefore urged to complete, date and sign the enclosed
Proxy, and return it promptly in the enclosed return envelope,
which does not require any postage if mailed in the United
States. If you attend the Special Meeting, you may vote your
shares in person, even if you have already returned your Proxy.
Sincerely,
Michael L. Laughlin
Chairman of the Board of Directors
<PAGE>
AIKEN COUNTY NATIONAL BANK
142 Chesterfield Street S.E.
Aiken, South Carolina 29801
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH ___, 1995
TO THE SHAREHOLDERS OF AIKEN COUNTY NATIONAL BANK:
NOTICE IS HEREBY GIVEN that the Special Meeting of
Shareholders (the "Special Meeting") of Aiken County National
Bank ("ACNB") will be held at the offices of ACNB located at 142
Chesterfield Street S.E. in Aiken, South Carolina 29801, on March
__, 1995 at 10:30 a.m., local time, for the following purposes:
1. Consideration of the Merger. To consider and vote upon
a proposal to approve the Reorganization Agreement dated October
13, 1994, providing for the merger of ACNB with and into Carolina
First Bank, a wholly-owned subsidiary of Carolina First
Corporation, and, in connection therewith, the conversion of each
share of ACNB common stock into the right to receive 1.125 shares
of common stock of Carolina First Corporation.
2. Other Business. To transact such other business as may
properly come before the Special Meeting or any adjournment
thereof.
Only shareholders of record at the close of business on
January 31, 1995, are entitled to notice of and to vote at the
Special Meeting or any adjournment thereof. All shareholders,
whether or not they expect to attend the Special Meeting in
person, are requested to complete, date, sign and return the
enclosed Proxy in the accompanying envelope. The Proxy may be
revoked by written notice to the Secretary of ACNB at any time
before it is voted, by submitting a proxy having a later date, by
such person appearing at the Special Meeting and giving notice of
revocation to the corporate officers responsible for maintaining
the list of shareholders, or by giving notice of such revocation
in the open meeting of the shareholders.
By Order of the Board of Directors
Michael L. Laughlin, Chairman
<PAGE>
Proxy Statement/Prospectus
CAROLINA FIRST CORPORATION
Prospectus
452,813 Shares
Common Stock $1 Par Value
AIKEN COUNTY NATIONAL BANK
Proxy Statement for
Special Meeting of Shareholders
This Proxy Statement/Prospectus relates to the issuance by
Carolina First Corporation of up to 452,813 shares (the "CFC Shares")
of its common stock in connection with the proposed merger (the
"Merger") of Aiken County National Bank ("ACNB") with and into
Carolina First Bank, a wholly-owned subsidiary of Carolina First
Corporation. The CFC Shares are offered to the ACNB shareholders as
contemplated in the Reorganization Agreement, dated as of October 13,
1994, (the "Merger Agreement") and entered into among Carolina First
Corporation, Carolina First Bank and ACNB. The Merger Agreement
provides that in connection with the Merger, each outstanding share
of ACNB common stock will automatically be converted into 1.125
shares of Carolina First Corporation common stock, par value $1 per
share ("CFC common stock"). Cash will be paid in lieu of fractional
shares.
This Proxy Statement/Prospectus also serves as the Proxy
Statement of ACNB in connection with the solicitation of proxies to
be used at the Special Meeting of Shareholders of ACNB (the "Special
Meeting") to be held on March ___, 1995 for the purposes described
herein. This Proxy Statement/Prospectus is first being sent to ACNB
shareholders on or about February ___, 1995.
The Merger is subject to certain conditions, including, among
others, approval by the shareholders of ACNB at the Special Meeting
described herein and approval by applicable regulatory authorities.
Conditions to the transactions not required by state or federal law
may be waived by the respective parties. Any shareholder of ACNB
who, at or prior to the Special Meeting, gives written notice that he
dissents from the Merger or who votes against the Merger shall be
entitled, upon strict compliance with certain statutory procedures,
to receive the value of the ACNB common stock owned by such
shareholder at the time and in the manner set forth herein. See "THE
PROPOSED TRANSACTION -- Rights of Dissenting Shareholders of ACNB."
It is a condition to consummation of the Merger, however, that
dissenters' rights not have been perfected with respect to more than
10% of the outstanding shares of ACNB common stock.
THE ACNB BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE TO APPROVE THE MERGER. FAILURE TO VOTE IS
EQUIVALENT TO VOTING AGAINST THE MERGER.
The CFC common stock is traded on the Nasdaq National Market
under the NASDAQ market symbol "CAFC." On February ___, 1995, the
closing bid price of the CFC common stock, as reported by NASDAQ, was
$_____ per share. There is no established public trading market for
ACNB's common stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE CFC SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is February ___, 1995.
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION . . . . . . . . . . . . . . . .. . . . 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . 4
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 5
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . 6
Time, Place and Purpose of the Special Meeting . . . . . . . . 6
Parties to the Merger . . . . . . . . . . . . . . . . . . . . 6
Terms of the Proposed Transaction . . . . . . . . . . . . . . 6
Vote Required and Record Date . . . . . . . . . . . . . . . . 7
Recommendation of Board of Directors . . . . . . . . . . . . . 7
Rights of Dissenting Shareholders . . . . . . . . . . . . . . 7
Certain Differences in Shareholder's Rights. . . . . . . . . 7
Conditions and Regulatory Approvals . . . . . . . . . . . . . 7
Termination of the Merger . . . . . . . . . . . . . . . . . . 8
Effective Date of the Merger. . . . . . . . . . . . . . . . . 8
Opinion of Financial Adviser. . . . . . . . . . . . . . . . . 8
Special Considerations . . . . . . . . . . . . . . . . . . . . 8
Certain Income Tax Consequences . . . . . . . . . . . . . . . 8
Restrictions on Resales by Affiliates. . . . . . . . . . . . 8
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 9
Market Prices and Dividends . . . . . . . . . . . . . . . . . 9
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . 10
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . 13
INFORMATION CONCERNING THE SPECIAL MEETING . . . . . . . 14
Purpose of the Special Meeting . . . . . . . . . . . . . . . . 14
Record Date and Voting Rights . . . . . . . . . . . . . . . . 14
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . 15
THE PROPOSED TRANSACTION . . . . . . . . . . . . . . . . 16
General Description of the Terms of the Merger. . . . . . . .. 16
Background of and Reasons for the Merger . . . . . . . . . . . 16
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . 19
Exchange of ACNB Stock Certificates . . . . . . . . . . . . . 24
Conditions to Consummation of the Merger . . . . . . . . . . . 25
Termination . . . . . . . . . . . . . . . . . . . . . . . . . 26
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conduct of ACNB's and Carolina First Corporation's Business
Prior to the Effective Date . . . . . . . . . . . . . . . 26
Required Regulatory Approvals . . . . . . . . . . . . . . . . 27
Operations After the Merger . . . . . . . . . . . . . . . . . 28
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 28
Certain Federal Income Tax Consequences . . . . . . . . . . . 29
Restrictions on Resales by Affiliates . . . . . . . . . . . . 30
Rights of Dissenting Shareholders of ACNB. . . . . . . . . . 31
Recommendation of Board of Directors . . . . . . . . . . . . . 31
PRO FORMA COMBINED FINANCIAL INFORMATION . . . . . . . . 32
INFORMATION ABOUT CAROLINA FIRST CORPORATION . . . . . . 37
In General . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Recent Developments. . . . . . . . . . . . . . . . . . . . . 38
Market Prices of and Dividends Paid on CFC Common Stock . . . 40
Special Considerations . . . . . . . . . . . . . . . . . . . . 40
Incorporation of Certain Information By Reference . . . . . . 41
2
<PAGE>
Certain Regulatory Matters . . . . . . . . . . . . . . . . . . 42
INFORMATION ABOUT ACNB . . . . . . . . . . . . . . . . . 51
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Competition . . . . . . . . . . . . . . . . . . . . . . . . . 51
Consent Agreement with the OCC . . . . . . . . . . . . . . . . 52
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Market Price of ACNB Common Stock and Related ACNB
Stockholder Matters . . . . . . . . . . . . . . . . . . . . 54
Recent Developments . . . . . . . . . . . . . . . . . . . . . 54
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . 55
Results of Operations . . . . . . . . . . . . . . . . . . . . 56
Net Interest Income . . . . . . . . . . . . . . . . . . . . . 58
Liquidity and Interest Rate Sensitivity. . . . . . . . . . . 59
Provision for Loan Losses . . . . . . . . . . . . . . . . . . 60
Investment Securities Portfolio . . . . . . . . . . . . . . . 61
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . 63
Nonperforming Loans; Other Problem Assets . . . . . . . . . . 64
Potential Problem Loans . . . . . . . . . . . . . . . . . . . 64
Other Real Estate . . . . . . . . . . . . . . . . . . . . . . 65
Allowance for Loan Losses. . . . . . . . . . . . . . . . . . 65
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Return on Equity and Assets . . . . . . . . . . . . . . . . . 67
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Capital Adequacy and Resources . . . . . . . . . . . . . . . . 68
Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Supervision and Regulation of ACNB. . . . . . . . . . . . . . 69
MANAGEMENT INFORMATION . . . . . . . . . . . . . . . . . 72
Management and Principal Shareholders of Carolina First
Corporation . . . . . . . . . . . . . . . . . . . . . . . 72
Business Experience of Carolina First Corporation Directors . 73
Business Experience of Carolina First
Corporation Executive Officers. . . . . . . . . . . . . . . 73
Other Information Regarding Carolina First Corporation . . . . 74
Management and Principal Shareholders of ACNB . . . . . . . . 74
Interests of Certain Persons in the Merger . . . . . . . . . . 75
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . 76
Comparison of CFC Common Stock and ACNB Common Stock . . . . . 76
CAROLINA FIRST CORPORATION CAPITAL STOCK . . . . . . . . 79
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 79
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . 79
Stockholders' Rights Agreement . . . . . . . . . . . . . . . . 79
Management Contracts . . . . . . . . . . . . . . . . . . . . . 81
Board of Directors . . . . . . . . . . . . . . . . . . . . . . 81
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Control Share Acquisition / Business Combination Statutes. . 82
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . 83
Dividend Reinvestment Plans . . . . . . . . . . . . . . . . . 83
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . 84
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . 85
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . 85
FINANCIAL STATEMENTS OF AIKEN COUNTY NATIONAL BANK . . . 86
APPENDICES
Merger Agreement . . . . . . . . . . . . . . . . . . . APPENDIX A
12 U.S.C. (Section)214a(b). . . . . . . . . . . . . . . APPENDIX B
Opinion of The Carson-Medlin Company . . . . . . . . . APPENDIX C
3
Financial Statements of Carolina First Bank . . . . . . APPENDIX D
4
<PAGE>
AVAILABLE INFORMATION
Carolina First Corporation is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and, in accordance therewith, files reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and information statements filed by Carolina First
Corporation with the Commission may be inspected and copied at
the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional
Office, 75 Park Place, 14th Floor, New York, New York 10007; and
Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60606. Copies of
such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
Carolina First Corporation has filed with the Commission a
Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the CFC Shares
offered hereby. This Proxy Statement/Prospectus does not contain
all the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with
respect to Carolina First Corporation, ACNB and the CFC Shares
offered hereby, reference is hereby made to the Registration
Statement, including the exhibits and schedules thereto. The
Registration Statement can be inspected and copied at the public
reference facilities of the Commission, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and copies of such materials
can be obtained by mail from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, microfiche of the Registration
Statement and exhibits thereto are available for inspection and
reproduction at the public reference facilities of the Commission
at its New York Regional Office, 75 Park Place, 14th Floor, New
York, New York 10007, and at its Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60606.
Carolina First Corporation furnishes its shareholders with
annual reports containing audited financial information.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement/Prospectus incorporates documents by
reference which are not presented herein or delivered herewith.
Copies of any such documents (other than exhibits to such a
document unless such exhibit is specifically incorporated by
reference into such documents) are available without charge to
any person, including any ACNB shareholder, to whom this Proxy
Statement/Prospectus is delivered upon oral or written request to
William S. Hummers III, Executive Vice President, Carolina First
Corporation, 102 South Main Street, Greenville, SC 29601,
telephone number 803-255-7900. In order to ensure timely
delivery of the documents, any request should be made by March
___, 1995.
Carolina First Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, Carolina First
Corporation's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1994, June 30, 1994 and September 30,
1994, and Carolina First Corporation's Current Reports on Form 8-
K dated May 2, 1994 and November 22, 1994, in each case filed
with the Commission pursuant to Section 13 of the Exchange Act;
the description of the CFC common stock which is contained in its
registration statements filed under Section 12 of the Exchange
Act, including
5
<PAGE>
any amendment or report filed for the purpose of
updating such description; and all other reports filed pursuant
to Section 13(a) or 15(d) of the Exchange Act since the end of
the fiscal year ended December 31, 1993, from the date of filing
of such document, shall be deemed to be incorporated by reference
into this Proxy Statement/Prospectus.
All documents filed by Carolina First Corporation pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date hereof and prior to the Special Meeting shall be deemed
to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained
herein or in a document incorporated herein shall be deemed to be
modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently-filed document which also is
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Proxy Statement/Prospectus.
OTHER INFORMATION
This Proxy Statement/Prospectus does not cover any resales
of the CFC common stock offered hereby to be received by the
stockholders deemed to be "affiliates" of Carolina First
Corporation or ACNB upon consummation of the Merger. No person
is authorized to make use of this Proxy Statement/Prospectus in
connection with such resales, although securities received by
those stockholders of Carolina First Corporation not deemed to be
"affiliates" of Carolina First Corporation or ACNB may be traded
without the use of this Proxy Statement/Prospectus.
No person is authorized to give any information or to make
any representations other than those contained herein and, if
given or made, such information or representations must not be
relied upon as having been authorized. This document does not
constitute an offer or solicitation by any one in any
jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom
it is unlawful to make such offer or solicitation. Neither the
delivery of this document nor any distribution of securities made
hereunder shall under any circumstances create an implication
that there has been no change in the affairs of Carolina First
Corporation or ACNB since the date hereof or that the information
herein is correct as of any time subsequent to the date hereof.
6
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. This Summary is not intended to be a
complete statement and is qualified in its entirety by reference to more
detailed information contained elsewhere in this Proxy Statement/Prospectus,
the accompanying appendices, and the documents incorporated herein by
reference.
Introduction. This Proxy Statement/Prospectus is furnished
in connection with the issuance by Carolina First Corporation of
the CFC Shares and the solicitation of proxies by the Board of
Directors of ACNB with respect to the Special Meeting to be held
on March __, 1995 and at any adjournment(s) thereof, for the
purpose of considering and voting upon the Merger of ACNB with
and into Carolina First Bank. This Proxy Statement/Prospectus is
first being mailed to shareholders of ACNB on or about February
___, 1995.
Time, Place and Purpose of the Special Meeting. The Special
Meeting will be held on March ___, 1995 at 10:30 a.m. at ACNB's
main office, 142 Chesterfield Street, S.E., Aiken, South
Carolina. At the Special Meeting, shareholders of ACNB will
consider and vote on the proposal to approve the Merger
Agreement, which provides for the Merger of ACNB into Carolina
First Bank and the conversion of ACNB common stock into CFC
common stock. See "INFORMATION CONCERNING THE SPECIAL MEETING."
Parties to the Merger. Carolina First Corporation.
Carolina First Corporation is a bank holding company
headquartered in Greenville, South Carolina which engages in a
general banking business through its two subsidiaries: Carolina
First Bank and Carolina First Mortgage Company, which is a
mortgage loan origination and servicing company headquartered in
Columbia, South Carolina. Carolina First Corporation is a South
Carolina corporation which was organized in 1986. At September
30, 1994, it had total assets of approximately $1.07 billion,
total loans of approximately $816 million and total deposits of
approximately $940 million. Its principal executive offices are
located are 102 South Main Street, Greenville, South Carolina
29601, and its telephone number is (803) 255-7900. See
"INFORMATION ABOUT CAROLINA FIRST CORPORATION."
ACNB. ACNB is a national bank, the deposit accounts of
which are insured by the Bank Insurance Fund of the Federal
Deposit Insurance Corporation (the "FDIC"). ACNB's principal
office is located at 142 Chesterfield Street, S.E., Aiken, South
Carolina 29801, and its telephone number is (803) 649-9991. As
of September 30, 1994, ACNB had total assets of approximately $43
million, total loans of approximately $31 million, and total
deposits of approximately $39 million and operated through two
branches. See "INFORMATION ABOUT ACNB."
Carolina First Bank. Carolina First Bank is a South
Carolina-chartered bank which is a wholly-owned subsidiary of
Carolina First Corporation. It engages in a general banking
business through 44 locations, which are located throughout South
Carolina. It began its operations in December 1986 and at
September 30, 1994, had total assets of approximately $805
million, total loans of approximately $609 million, total
deposits of approximately $717 million and operated through 30
branches. On [January 20, 1995], Carolina First Savings Bank,
F.S.B., a wholly-owned savings bank subsidiary of Carolina First
Corporation, was merged into Carolina First Bank, adding assets
of approximately $264 million and 13 branch locations. The
deposits of Carolina First Bank are insured by the FDIC. See
"INFORMATION ABOUT CAROLINA FIRST CORPORATION." The Merger will
be effected through the merger of ACNB with and into Carolina
First Bank.
Terms of the Proposed Transaction. Pursuant to the terms of
the Merger Agreement, upon consummation of the Merger, each
outstanding share of ACNB's common stock will be converted into
1.125 shares of CFC common stock, and current shareholders of
ACNB will no longer have any rights
7
<PAGE>
in ACNB's common stock. Cash
will be paid in lieu of issuance of fractional shares. See "THE
PROPOSED TRANSACTION -- General Description of the Terms of the
Merger."
Vote Required and Record Date. Only ACNB shareholders of
record at the close of business on January 31, 1995 (the "Record
Date") will be entitled to notice of and to vote at the Special
Meeting. The Merger must be approved by the affirmative vote of
the holders of at least two-thirds of the outstanding shares of
ACNB's common stock eligible to vote at the Special Meeting. As
of the Record Date, there were 402,500 shares of ACNB's common
stock entitled to vote. As of the date hereof, the directors and
executive officers of ACNB and their affiliates beneficially
owned 86,688 shares, or approximately 21.5%, of ACNB's common
stock, all of which are expected to be voted in favor of the
Merger. Upon consummation of the transactions contemplated
hereby, such persons will beneficially own 97,524 shares of CFC
common stock, or approximately 2.0% of the outstanding CFC common
stock.
No shareholder vote is required on behalf of Carolina First
Corporation. Carolina First Corporation will vote all shares of
Carolina First Bank in favor of the Merger. See "THE PROPOSED
TRANSACTION."
Recommendation of Board of Directors. The Board of
Directors of ACNB has approved the Merger Agreement and believes
that the Merger is in the best interests of ACNB and its
shareholders. It unanimously recommends that ACNB's shareholders
vote FOR the Merger. See "THE PROPOSED TRANSACTION --
Recommendation of Board of Directors."
Rights of Dissenting Shareholders. Shareholders of ACNB who
give written notice at or prior to the Special Meeting that they
dissent to the proposed Merger, or who vote against the proposed
Merger will be entitled to obtain payment of the value of their
shares of ACNB common stock under federal law. Failure to comply
strictly with certain statutory procedures may result in the
forfeiture of such rights. It is a condition to consummation of
the Merger that dissenters' rights not have been perfected with
respect to more than 10% of ACNB's outstanding shares of common
stock. See "THE PROPOSED TRANSACTION -- Rights of Dissenting
Shareholders of ACNB."
Certain Differences in Shareholder's Rights. Upon
effectiveness of the Merger, the outstanding shares of ACNB
common stock will be converted into shares of CFC common stock.
Accordingly, the ACNB shareholders will become shareholders of
Carolina First Corporation, and their rights as shareholders will
be determined by South Carolina corporations law and by Carolina
First Corporation's Articles of Incorporation and Bylaws. The
rights of shareholders of Carolina First Corporation will differ
from the rights of shareholders of ACNB in several important
respects, including the right to remove directors, required
shareholder votes on certain matters, classification of
directors, nominations of directors, preemptive rights,
cumulative voting, and statutory and other restrictions on
certain business combinations and control share acquisitions.
See "COMPARATIVE RIGHTS OF SHAREHOLDERS."
Conditions and Regulatory Approvals. Consummation of the
transactions contemplated by the Merger Agreement is subject to
various conditions, including receipt of the approval by the
FDIC, the South Carolina State Board of Financial Institutions
(the "State Board"), and the shareholders of ACNB. Applications
to the FDIC and the State Board seeking approval of the proposed
transaction have been filed and are now pending. Consummation of
the Merger is also conditioned upon, among other things, a
determination by Carolina First Corporation that the Merger will
qualify for pooling-of-interests accounting treatment and
dissenters' rights not being exercised by the holders of more
than 10% of the outstanding shares of ACNB common stock.
Carolina First Corporation and ACNB may waive certain of the
conditions to their respective obligations to consummate the
Merger, other than conditions required by law. See "THE PROPOSED
TRANSACTION -- Conditions to Consummation of the Merger, and --
Required Regulatory Approvals."
8
<PAGE>
Termination of the Merger. The Merger Agreement may be
terminated at any time prior to the closing date (i) by mutual
consent of Carolina First Corporation, ACNB and Carolina First
Bank; (ii) by either Carolina First Corporation or ACNB if any
order preventing consummation of the Merger is entered by any
state or federal governmental or regulatory body; (iii) by either
Carolina First Corporation or ACNB if the other party has failed
to comply with the agreements or fulfill the conditions of the
Merger Agreement in a way that is material to the consolidated
businesses of the breaching party and has not cured the failure
to comply within a reasonable period of time after being given
notice thereof; (iv) by either Carolina First Corporation or ACNB
if the closing has not occurred by April 30, 1995; or (v) by ACNB
if the average of the closing sales price of CFC common stock for
any period of ten consecutive trading days from October 13, 1994
through the day before the closing date is less than $12.00 per
share. The Merger Agreement may be amended by mutual written
consent of all the parties.
Effective Date of the Merger. The Effective Date of the
Merger will be the time and date specified in the Articles of
Merger that are delivered for filing to the Secretary of State of
South Carolina. The Effective Date will occur as soon as
practicable following the date that all conditions specified in
the Merger Agreement have been satisfied or waived. The
Effective Date currently is anticipated to be in the first
quarter of 1995, although delays in the satisfaction of the
conditions to consummation of the Merger could result in a later
Effective Date. See "THE PROPOSED TRANSACTION -- Conditions to
Consummation of the Merger."
Opinion of Financial Adviser. The Carson Medlin Company
("Carson Medlin") has served as financial adviser to ACNB in
connection with the Merger and has rendered an opinion to the
ACNB Board of Directors that the exchange ratio of CFC common
stock for ACNB common stock is fair from a financial point of
view to the ACNB stockholders. For additional information
concerning Carson-Medlin and its opinion, see "THE PROPOSED
TRANSACTION -- Opinion of Financial Adviser" and the opinion of
Carson-Medlin attached as Appendix C to this Proxy
Statement/Prospectus.
Special Considerations. In considering whether or not to
vote for the Merger, ACNB shareholders should consider certain
factors applicable to Carolina First Corporation, including its
dependence on senior management, its growth through acquisitions,
and its anti-takeover measures which are in place. For further
information regarding these factors, see "INFORMATION ABOUT
CAROLINA FIRST CORPORATION -- Special Considerations."
Certain Income Tax Consequences. ACNB has received an
opinion of counsel stating that the Merger will constitute a tax-
free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), subject
to certain conditions. However, this opinion of counsel is not
binding on the Internal Revenue Service (the "IRS"). In such
opinion, counsel has opined that if certain conditions are met,
no taxable gain or loss for federal tax purposes will be
recognized by ACNB shareholders upon the exchange of ACNB common
stock solely for CFC common stock, except to the extent that such
shareholders receive cash in lieu of fractional shares. A
dissenting shareholder who receives cash in lieu of CFC common
stock will be taxed to the extent that the cash exceeds such
dissenting shareholder's basis in the ACNB common stock. See
"THE PROPOSED TRANSACTION -- Certain Federal Income Tax
Consequences." Because of the complexities of the federal income
tax laws and because the tax consequences may vary depending upon
a holder's individual circumstances or tax status, it is
recommended that each stockholder of ACNB consult his or her tax
advisor concerning the federal (and any applicable state, local
or other) tax consequences of the Merger.
Restrictions on Resales by Affiliates. As a condition to
Carolina First Corporation's obligation to consummate the Merger,
affiliates of ACNB must deliver written agreements to Carolina
First Corporation that they will not dispose of any shares of CFC
common stock received upon consummation of the Merger except in
compliance with Rule 145 under the Securities Act or otherwise in
compliance
9
<PAGE>
with the Securities Act and rules and regulations
promulgated thereunder. See "THE PROPOSED TRANSACTION --
Restrictions on Resales by Affiliates."
Accounting Treatment. The Merger is expected to be
accounted for as a "pooling-of-interests" of ACNB and Carolina
First Corporation under generally accepted accounting principles.
Market Prices and Dividends. CFC common stock is traded on
the Nasdaq National Market. Carolina First Corporation currently
pays a regular quarterly dividend of $.06 per common share.
Although Carolina First Corporation currently expects to continue
payment of its regular cash dividend on the CFC common stock,
there can be no assurance that Carolina First Corporation's
current dividend policy will continue unchanged after
consummation of the Merger. The declaration and payment of
dividends on CFC common stock is subject to legal restrictions
and further depends upon business conditions, operating results,
capital and reserve requirements and the Carolina First
Corporation Board of Directors' consideration of other relevant
factors.
Trading in ACNB common stock is limited. There are no
market makers for the ACNB common stock, and it is not listed on
any exchange or with the Nasdaq Stock Market. Management is
aware of transactions in the ACNB common stock at prices ranging
from $9.50 to $13.50 per share over the past two years. The most
recent trade of which management is aware occurred in September,
1994 in which 3,400 shares were traded at $10.00 per share. Such
trades may not be arm's length transactions and may not be
indicative of the market value of the ACNB common stock.
ACNB has never paid any dividends, and ACNB's ability to pay
dividends is presently restricted by an agreement between ACNB
and the Office of Comptroller of the Currency (the "OCC"), as
well as by the National Bank Act. See "INFORMATION ABOUT ACNB --
Dividends."
The information represented in the following table reflects
the last reported sales prices for CFC common stock on October
12, 1994, the last trading day prior to the public announcement
of the proposed Merger, and the ACNB common stock equivalent per
share basis, calculated by multiplying the closing price of the
CFC common stock on such date by the 1.125 exchange ratio. The
table also reflects the last reported sales prices for CFC common
stock on or prior to January 13, 1995:
<TABLE>
<CAPTION>
Market Values Per Share
Carolina First Corporation ACNB
Historical Historical Equivalent
<S> <C> <C> <C>
October 12, 1994 $ 15.50 $10.00 * $17.44
January 13, 1995 $ 13.50 Not Available $15.19
</TABLE>
* Estimated
ACNB stockholders are advised to obtain current market
quotations for the CFC common stock. The market price of CFC
common stock on the Effective Date may be higher or lower than
the market price at the time the Merger Agreement was executed,
at the date of mailing this Proxy Statement/Prospectus, or at the
time of the Special Meeting.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected unaudited historical
financial information of Carolina First Corporation (consolidated)
and ACNB and selected unaudited combined pro forma financial information
for Carolina First Corporation (consolidated) and ACNB. This information
is derived from the historical financial statements of Carolina First
Corporation (consolidated) and ACNB, and should be read in conjunction
with such historical financial statements and the notes thereto either
contained elsewhere in this Proxy Statement/Prospectus or incorporated
herein by reference. The pro forma financial data is presented using the
pooling-of-interests method of accounting. The selected pro forma
combined unaudited financial information showing the combined results of
Carolina First Corporation (consolidated) and ACNB is provided for
informational purposes only. It is not necessarily indicative of
actual results that would have been achieved had the Merger been
consummated on the dates or at the beginning of the periods presented,
nor is it necessarily indicative of future results. For additional pro
forma information, including pro forma results of additional acquisitions
by Carolina First Corporation, see "PRO FORMA COMBINED FINANCIAL STATEMENTS."
CAROLINA FIRST CORPORATION
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
1989 1990 1991 1992 1993 1993 1994(1 )
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Net interest income $ 8,021 $ 10,241 $ 12,866 $ 17,819 $ 26,943 $ 19,346 $ 28,864
Provision for loan losses 869 790 1,423 1,453 909 909 450
Noninterest income, excluding
securities transactions 967 1,099 1,622 2,939 5,590 3,673 6,014
Securities transactions 17 (4) 664 517 662 546 189
Noninterest income 984 1,095 2,286 3,456 6,252 4,219 6,203
Noninterest expenses 6,695 8,927 11,607 16,145 25,178 17,649 27,186
Net income 925 1,045 1,680 2,517 4,935 3,408 5,247
Dividends on common stock -- -- -- -- 214 -- 668
Dividends on preferred stock -- -- -- 625 1,930 1,381 1,702
Net income applicable to
common stockholders 925 1,045 1,680 1,892 3,005 2,027 3,545
Balance Sheet Data (Period End)
Total assets $326,475 $345,745 $447,314 $529,063 $816,421 $754,649 $1,067,664
Debt securities and temporary
investments 74,197 42,186 69,007 80,766 168,938 139,696 125,442
Loans, net of unearned
income 232,995 275,315 338,701 396,557 565,158 536,890 816,341
Allowance for loan losses 2,041 2,403 3,727 4,263 5,688 5,352 5,029
Total earning assets 307,192 317,501 407,708 477,323 734,346 676,586 941,783
Total deposits 287,565 299,933 407,371 476,268 724,585 651,997 940,275
Borrowed funds 3,473 12,260 2,755 2,591 16,779 33,324 30,714
Long-term debt 3,376 276 1,322 1,268 1,214 1,264 1,212
Preferred stock -- -- -- 10,319 15,662 25,891 37,063
Stockholders' equity 28,834 30,235 31,875 44,225 62,869 62,281 87,024
Per Share Data(2)
Net income per common share:
Primary $ 0.29 $ 0.32 $ 0.51 $ 0.57 $ 0.90 $ 0.61 $ 0.79
Fully diluted n/a n/a n/a n/a n/a n/a 0.77
Book value per common
share (period end) 8.94 9.28 9.71 9.90 10.27 10.17 10.45
Tangible book value per
common share (period end) 8.94 9.28 8.90 9.07 7.02 6.39 6.85
Common shares outstanding:
Weighted average 3,221,792 3,233,633 3,266,288 3,290,692 3,331,787 3,313,613 4,519,486
Period end 3,224,142 3,259,429 3,284,593 3,306,008 4,493,710 3,348,601 4,524,361
</TABLE>
(1) This information does not reflect the writedown of approximately
$6,000,000 and tax liability of approximately $1,000,000 which occurred
in the fourth quarter of 1994. See "INFORMATION ABOUT
CAROLINA FIRST CORPORATION--Recent Developments--Corporate
Reorganization."
(2) Adjusted for stock dividends.
11
<PAGE>
AIKEN COUNTY NATIONAL BANK
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
1989 1990 1991 1992 1993 1993 1994
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Net interest income $ 856 $ 1,225 $ 1,429 $ 1,550 $ 1,630 $ 1,231 $ 1,398
Provision for loan losses 332 3 264 375 52 53 30
Noninterest income, excluding
securities transactions 79 152 185 217 211 150 213
Securities transactions -- -- 2 19 -- -- --
Noninterest income 79 152 187 235 211 150 213
Noninterest expenses 883 1,132 1,282 1,544 1,677 1,238 1,354
Net income (279) 243 59 (134) 112 90 156
Balance Sheet Data
(Period End)
Total assets $22,762 $35,752 $46,116 $45,288 $43,952 $44,419 $43,039
Debt securities and
temporary investments 2,270 6,323 8,075 9,365 10,260 10,864 7,755
Loans, net of unearned income 16,998 25,617 33,530 30,615 29,361 28,749 30,525
Allowance for loan losses 249 328 540 621 582 651 529
Total earning assets 20,150 32,231 41,700 40,096 39,621 39,613 38,280
Total deposits 17,588 31,536 41,849 41,431 40,092 40,571 39,045
Borrowed funds
Long-term debt 348 258 160 55 24 24 --
Stockholders' equity 3,422 3,664 3,723 3,589 3,701 3,679 3,808
Per Share Data
Net income per common share $ (0.69)$ 0.60 $ 0.15 $ (0.33) $ 0.28 $ 0.22 $ 0.39
Book value per common
share (period end) 8.50 9.10 9.25 8.92 9.20 9.14 9.46
Tangible book value per
common share (period end) 8.50 9.10 9.25 8.92 9.20 9.14 9.46
Common shares outstanding:
Weighted average 402,500 402,500 402,500 402,500 402,500 402,500 402,500
Period end 402,500 402,500 402,500 402,500 402,500 402,500 402,500
</TABLE>
12
<PAGE>
PRO FORMA COMBINED SELECTED FINANCIAL DATA
OF CAROLINA FIRST CORPORATION AND ACNB
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
1989 1990 1991 1992 1993 1993 1994(1 )
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Net interest income $ 8,877 $ 11,466 $ 14,295 $ 19,369 $ 28,573 $ 20,577 $30,262
Provision for loan losses 1,201 793 1,687 1,828 961 962 480
Noninterest income, excluding
securities transactions 1,046 1,251 1,807 3,156 5,801 3,823 6,227
Securities transactions 17 (4) 666 536 662 546 189
Noninterest income 1,063 1,247 2,473 3,691 6,463 4,369 6,416
Noninterest expenses 7,578 10,059 12,889 17,689 26,855 18,887 28,540
Net income 645 1,288 1,739 2,383 5,047 3,498 5,403
Dividends on common stock -- -- -- -- 214 -- 668
Dividends on preferred stock -- -- -- 625 1,930 1,381 1,702
Net income applicable to
common stockholders 645 1,288 1,739 1,758 3,117 2,117 3,701
Balance Sheet Data (Period End)
Total assets $349,239 $381,497 $493,430 $574,351 $860,373 $799,068 $1,110,703
Debt securities and
temporary investments 76,467 48,509 77,082 90,131 179,198 150,560 133,197
Loans, net of unearned
income 249,993 300,932 372,231 427,172 594,519 565,639 846,866
Allowance for loan
losses 2,290 2,731 4,267 4,884 6,270 6,003 5,558
Total earning assets 327,342 349,732 449,408 517,419 773,967 716,199 980,063
Total deposits 307,121 331,469 449,220 517,699 764,677 692,568 979,320
Borrowed funds 3,473 12,260 2,755 2,591 16,779 33,324 30,714
Long-term debt 3,724 534 1,482 1,323 1,238 1,288 1,212
Preferred stock -- -- -- 10,319 15,662 25,891 37,063
Stockholders' equity 32,256 33,899 35,598 47,814 66,570 65,960 90,832
Per Share Data(2)
Net income per common share:
Primary $ 0.18 $ 0.35 $ 0.47 $ 0.47 $ 0.82 $ 0.56 $ 0.74
Fully diluted n/a n/a n/a n/a n/a n/a 0.72
Book value per common
share (period end) 8.77 9.13 9.53 9.67 10.08 9.93 10.26
Tangible book value per
common share (period end) 8.77 9.13 8.81 8.93 7.12 6.60 6.99
Common shares outstanding:
Weighted average 3,674,604 3,686,445 3,719,100 3,743,504 3,784,599 3,766,426 4,972,299
Period end 3,676,954 3,712,241 3,737,406 3,758,820 4,946,523 3,801,414 4,977,174
</TABLE>
(1) This information does not reflect the write down of approximately
$6,000,000 and tax liability of approximately $1,000,000 which
occurred in the fourth quarter of 1994. See "INFORMATION ABOUT
CAROLINA FIRST CORPORATION--Recent Developments--Corporate
Reorganization."
(2) Adjusted for stock dividends.
13
<PAGE>
COMPARATIVE PER SHARE DATA
The following table represents at the dates and for the periods
indicated (i) certain consolidated historical and pro forma combined
per share data for CFC common stock after giving effect to the Merger
and (ii) certain historical and pro forma data for ACNB common stock.
The pro forma financial data is presented using the pooling-of-
interests method of accounting, and an exchange ratio of 1.125 shares
of CFC common stock for each share of ACNB common stock. The data
presented should be read in conjunction with the historical financial
statements and the related notes thereto included elsewhere herein or
incorporated herein by reference and in conjunction with the pro
forma combined condensed financial information included elsewhere
herein. Data for 1994 is derived from unaudited financial
information. The data is not necessarily indicative of actual
results that would have been achieved had the Merger been consummated
at the beginning of the periods presented and is not indicative of
future results.
<TABLE>
<CAPTION>
Historical Pro Forma
CFC ACNB CFC Combined ACNB Equivalent(1)
<S> <C> <C> <C> <C>
Primary Earnings Per Common Share
Years Ended December 31,
1994 (through 9/30/94) $ .79 $ .39 $ .74 $ .83
1993 .90 .28 .82 .92
1992 .57 (.33) .47 .53
1991 .51 .15 .47 .53
1990 .32 .60 .35 .36
1989 .29 (.69) .18 .21
Fully Diluted Earnings Per Share
Years Ended December 31,
1994 (through 9/30/94) .77 n/a .72 .81
1993 n/a n/a n/a n/a
1992 n/a n/a n/a n/a
1991 n/a n/a n/a n/a
1990 n/a n/a n/a n/a
1989 n/a n/a n/a n/a
Cash Dividends Declared Per Common Share
Years Ended December 31,
1994 (through 9/30/94) .15 -- .13 .15
1993 .05 -- .04 .05
1992 -- -- -- --
1991 -- -- -- --
1990 -- -- -- --
1989 -- -- -- --
Book Value Per Common Share
Years Ended December 31,
1994 (through 9/30/94) 10.45 9.46 10.26 11.54
14
<PAGE>
1993 10.27 9.20 10.08 11.34
1992 9.90 8.92 9.67 10.88
1991 9.71 9.15 9.53 10.72
1990 9.28 9.10 9.13 10.27
1989 8.94 8.50 8.77 9.90
(1) Calculated by multiplying the CFC Combined by the 1.125 exchange ratio.
</TABLE>
15
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to
shareholders of ACNB as of the Record Date in connection with the
solicitation of proxies by the Board of Directors of ACNB for use
at the Special Meeting and at any adjournment or adjournments
thereof. The Special Meeting is to be held on March ___, 1995 at
10:30 a.m. at the main office of ACNB, 142 Chesterfield Street,
S.E., Aiken, South Carolina. This Proxy Statement/Prospectus also
serves as the Prospectus of Carolina First Corporation with regard
to the offering of the CFC Shares to shareholders of ACNB.
Holders of ACNB common stock are requested to complete, date and
sign the accompanying Proxy and return it promptly to ACNB in the
enclosed postage-paid envelope.
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and take
action with respect to approval of the Merger Agreement. Approval
of the Merger Agreement will require the affirmative vote of the
holders of two-thirds of the outstanding shares of ACNB common
stock. See "Record Date and Voting Rights." Approval of the
Merger Agreement by holders of at least two-thirds of the
outstanding ACNB common stock is required by federal law.
This Proxy Statement/Prospectus, Notice of Special Meeting and
the Proxy are first being mailed to shareholders of ACNB on or
about February ___, 1995.
Record Date and Voting Rights
Only the holders of ACNB common stock on the Record Date are
entitled to receive notice of and to vote at the Special Meeting
and at any adjournments thereof. On the Record Date, there were
402,500 shares of ACNB common stock outstanding,which were held by
[465] holders of record. Each share of ACNB common stock
outstanding on the Record Date is entitled to one vote as to each
of the matters submitted at the Special Meeting; provided, however,
that shares held of record by persons whose liabilities to ACNB are
past due and unpaid may not be voted at the Special Meeting.
A majority of the shares entitled to be voted at the Special
Meeting constitutes a quorum. If a share is represented for any
purpose at the Special Meeting by the presence of the registered
owner or a person holding a valid proxy for the registered owner,
it is deemed to be present for purposes of establishing a quorum.
Therefore, valid proxies which are marked "Abstain" or "Withhold"
or as to which no vote is marked, including proxies submitted by
brokers that are the record owners of shares (so-called "broker
non-votes"), will be included in determining the number of shares
present or represented at the Special Meeting.
Approval of the Merger Agreement requires the affirmative vote
of two-thirds of the outstanding shares of ACNB common stock.
Accordingly, proxies marked "Abstain" and shares that are not voted
(including broker non-votes) will have the same effect as votes
against the Merger Agreement.
As of January 16, 1995, the directors and executive officers of
ACNB and their affiliates owned a total of 86,688 shares, or
approximately 21.5% of ACNB common stock, all of which are expected
to be voted in favor of the Merger Agreement.
16
<PAGE>
Proxies
The accompanying Proxy is for use at the Special Meeting. A
shareholder may use this Proxy if he is unable to attend the
Special Meeting in person or wishes to have his shares voted by
proxy even if he does attend the Special Meeting. All shares
represented by valid proxies received pursuant to this solicitation
that are not revoked before they are exercised will be voted in the
manner specified therein. If no specification is made, the proxies
will be voted FOR approval of the Merger Agreement. The Board of
Directors of ACNB is not aware of any other matters that may be
presented for action at the Special Meeting of Shareholders, but if
other matters do properly come before the Special Meeting, it is
intended that shares represented by proxies in the accompanying
form will be voted by the persons named in the Proxy in accordance
with their best judgment.
The presence of a shareholder at the Special Meeting will not
automatically revoke such shareholder's proxy. The proxy may be
revoked (1) by written notice to the Secretary of ACNB at any time
before it is voted, (2) by submitting a proxy having a later date,
(3) by such person appearing at the Special Meeting and giving
notice of revocation to the corporate officers responsible for
maintaining the list of shareholders, or (4) by giving notice of
such revocation in the open meeting of the shareholders.
Solicitation of proxies may be made in person or by mail, or by
telephone or telegraph by directors, officers and regular employees
of ACNB, who will not be specially compensated in such regard.
Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward solicitation materials to beneficial owners
and secure their voting instructions, if necessary, and will be
reimbursed for the expenses incurred in sending proxy materials to
beneficial owners. ACNB will bear the costs associated with the
solicitation of proxies and other expenses associated with the
Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this
Proxy Statement/Prospectus and, if given or made, such information
or representation should not be relied upon as having been
authorized by ACNB, Carolina First Corporation or any other person.
The delivery of this Proxy Statement/Prospectus will not, under any
circumstances, create any implication that there has been no change
in the affairs of ACNB or Carolina First Corporation since the date
of this Proxy Statement/Prospectus.
Recommendation
The ACNB Board of Directors has unanimously approved the Merger
Agreement and believes that the proposed transaction is fair to and
in the best interests of ACNB and its stockholders. The ACNB Board
of Directors unanimously recommends that ACNB's stockholders vote
FOR approval of the Merger Agreement.
17
<PAGE>
THE PROPOSED TRANSACTION
The following description of the terms and provisions of the
Merger is qualified in its entirety by reference to the Merger
Agreement, which is set forth in full as Appendix A to this Proxy
Statement/Prospectus and incorporated herein by reference.
General Description of the Terms of the Merger
The Merger Agreement provides for the Merger of ACNB with and
into Carolina First Bank. As a result of the Merger, the separate
corporate existence of ACNB will cease and Carolina First Bank, as
the surviving entity, will possess all rights, franchises and
interests of ACNB. On the Effective Date of the Merger, each
outstanding share of ACNB common stock will be converted into 1.125
shares of CFC common stock.
Cash will be paid to holders of ACNB common stock in lieu of
any fractional share that would otherwise be issuable. The amount
of such cash to be paid in lieu of fractional shares will be based
on the Fair Market Value of the CFC common stock on the last
trading day immediately preceding the Effective Date. The "Fair
Market Value" of the CFC common stock means, with respect to 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.
The Merger Agreement provides that Carolina First Corporation
and ACNB will each bear and pay their own costs and expenses
incurred in connection with the transactions contemplated in the
Merger Agreement, including fees of attorneys and accountants.
The Merger will become effective on the Effective Date, which
will be specified in the articles of merger to be filed with the
South Carolina Secretary of State. On the Effective Date, by
operation of law, ACNB shareholders will automatically become
owners of CFC common stock and will no longer be owners of ACNB
common stock. After the Effective Date, each outstanding
certificate representing shares of ACNB common stock prior to the
Effective Date shall be deemed for all corporate purposes (other
than the payment of dividends and other distributions to which the
former stockholders 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 the Merger
Agreement.
Background of and Reasons for the Merger
Since the passage of legislation in 1986 permitting bank
holding companies in the southeastern region to operate in more
than one state, the banking industry in the Southeast has undergone
a great deal of consolidation. This consolidation has resulted in
the acquisition of substantially all of the large South Carolina
banks by the larger out-of-state regional banking concerns. It was
in this consolidating environment that both Carolina First
Corporation and ACNB were created. Both institutions sought to
target individuals and small to medium-sized businesses in South
Carolina that were believed to be ignored by the larger regional
banking concerns.
Carolina First Corporation's objective is to become the
leading South Carolina-based banking institution which is
headquartered in the state. It believes that it can accomplish
this goal by being a "super-community" bank which offers both the
personalized service and "relationship" banking typically found in
18
<PAGE>
community banks, as well as the sophisticated banking products
offered by the regional and super-regional institutions. Since its
inception, it has pursued a strategy of growth both internally and
through acquisitions. As a result of such strategy, Carolina First
Corporation has engaged in numerous acquisitions of financial
institutions, branch locations and other financial assets over the
past five years. In the course of its continuing review of
potential acquisition candidates and markets, Carolina First
Corporation began considering the possibility of entering the Aiken
market and the related acquisition of ACNB.
Carolina First Corporation first approached ACNB about the
possibility of a business combination in May of 1994. Carolina
First Corporation was assisted and advised in this regard by
Blalock & Company, a company headquartered in Aiken, South Carolina
which, among other things, provides consulting services to
financial institutions.
The ACNB Board of Directors initially determined, however,
that it would not be appropriate to pursue discussions about a
business combination at that time and chose not to engage in any
specific negotiations with Carolina First Corporation.
Subsequently, in the summer of 1994, ACNB was approached by another
financial institution regarding the possibility of a business
combination between the two institutions. The Board of Directors
of ACNB considered the possibility of such a combination. Although
the Board recognized that it might be appropriate to consider a
business combination with such institution, it decided that before
it could make a well-reasoned and informed decision, the Board
needed to make an effort to determine what other alternatives might
be available. Accordingly, the Board began studying the relative
merits of remaining independent and, at the same time, contacted
several other financial institutions to see whether any of them had
an interest in some form of business combination with ACNB. ACNB
received proposals from three financial institutions, one of which
was again Carolina First Corporation.
After considering each of the proposals and the alternative of
remaining independent, ACNB's Board of Directors determined that
the Carolina First Corporation proposal contained terms that it
believed to be in the best interests of the ACNB stockholders and
more favorable than the two other proposals. During September and
October, 1994, further discussions were held with Carolina First
Corporation regarding the terms of a possible transaction. On
October 4, 1994, the Board of Directors of ACNB met and considered
the proposed transaction and voted to enter into a letter of intent
with Carolina First Corporation outlining the basic terms of an
agreement regarding the proposed transaction. From October 4, 1994
to October 13, 1994, ACNB, with the assistance of its legal
advisors, negotiated the terms of a definitive agreement.
At a meeting of the ACNB Board of Directors on October 13,
1994, the management of ACNB, as well as ACNB's legal advisors,
reviewed for the ACNB Board of Directors, among other things, a
summary of management's discussions with Carolina First Corporation
and the terms of the Merger Agreement. Based upon that review and
consideration of various other factors, the ACNB Board of Directors
unanimously approved and authorized the execution and adoption of
the Merger Agreement and executed the Merger Agreement on the same
date.
In December 1994, the ACNB Board of Directors was informed of
the corporate reorganization and securitization plans of Carolina
First Corporation, the facts of which are discussed below in
"INFORMATION ABOUT CAROLINA FIRST CORPORATION--Recent Developments-
- -Corporate Reorganization." After reviewing these transactions and
engaging in discussions with Carolina First Corporation management,
ACNB's Board of Directors affirmed their intention to pursue the
Merger.
During the course of negotiating the letter of intent and the
Merger Agreement, the Carolina First Corporation Board of Directors
unanimously approved the terms of the proposed acquisition. No
significant alternative transactions were pursued by Carolina First
Corporation in the Aiken market after May 1994.
19
<PAGE>
The terms of the Merger Agreement, including the consideration
to be paid to ACNB shareholders, were the result of arm's length
negotiations between Carolina First Corporation and ACNB.
ACNB Reasons. In reaching its determination that the Merger
Agreement is fair to, and in the best interests of, ACNB and its
stockholders, the ACNB Board of Directors consulted with its legal
advisors, as well as with ACNB management, and considered a number
of factors, including the following:
(i) the ACNB Board of Directors' familiarity with and
review of ACNB's business, operations, earnings, managerial
requirements and resources, prospects and financial condition,
including the prospects of continuing to operate under ACNB's
consent agreement with the OCC and the time, financial and
regulatory burdens associated therewith (See "INFORMATION
ABOUT ACNB--Consent Agreement with the OCC");
(ii) the ACNB Board of Directors' review of Carolina
First Corporation's business, operations, earnings and
financial condition, on both an historical and a prospective
basis, the enhanced opportunities for operating efficiencies
that could result from the Merger, the enhanced opportunities
for growth in the Aiken market that the Merger would make
possible, and the respective contributions the parties would
bring to a combined institution;
(iii) the commitments of Carolina First Corporation to
retain ACNB employees and to make substantial contributions in
the communities served by ACNB;
(iv) the ACNB Board of Directors' assessment that the
terms of the Merger Agreement and, based on historical stock
prices and the conversion ratio of 1.125, the consideration to
be received by the ACNB shareholders, were favorable to the
ACNB shareholders;
(v) the Board of Directors' assessment of Carolina First
Corporation as an ongoing institution, which it believes to
have good asset quality, reserve coverage, capital adequacy
and profitability, as well as an active market for its stock;
(vi) the ACNB Board of Directors' review of alternatives
to the Merger, including the alternatives of remaining
independent and growing internally, remaining independent for
a period of time and then selling the company, and remaining
independent and growing through future acquisitions;
(vii) the ACNB Board of Directors' review of possible
affiliation partners for ACNB (other than Carolina First
Corporation), the prospects of such other possible affiliation
partners, the likelihood of any such affiliation, and the fact
that none of the other potential partners expressed a present
interest in a transaction with terms as favorable as the
Carolina First Corporation proposal;
(viii) the ACNB Board of Directors' belief, based on an
analysis of the anticipated financial effects of the Merger on
Carolina First Corporation that, upon consummation of the
Merger, Carolina First Corporation and its subsidiaries would
exceed all applicable regulatory capital requirements;
(ix) the ACNB's Board of Directors' belief, based upon
the anticipated financial effects of the Merger, that CFC
would be able to continue to pay dividends at its current rate
which would, under the projected exchange ratio, result in
previously unavailable dividend income to ACNB stockholders;
20
<PAGE>
(x) the ACNB Board of Directors' belief that, in light of
the reasons discussed above, the respective geographic areas
in which ACNB and Carolina First Corporation operate and the
similarity in business outlook and approach and corporate
cultures between ACNB and Carolina First Corporation, Carolina
First Corporation was the most attractive choice as a long
term affiliation partner for ACNB;
(xi) the increased liquidity of the CFC common stock as
compared to the ACNB common stock;
(xii) the expectation that the Merger will generally be a
tax-free transaction to ACNB and its stockholders (see "--
Certain Income Tax Consequences of the Merger");
(xiii) the current and prospective economic environment,
competitive constraints and regulatory burdens facing
financial institutions, including ACNB; and
(xiv) the ACNB Board of Directors' assessment of the
benefits of the Merger to the employees of ACNB and the
communities served by ACNB.
The ACNB Board of Directors did not assign any specific or
relative weight to the factors in their consideration.
Subsequent to entering into the Merger Agreement and pursuant
to the requirements of the Merger Agreement, ACNB obtained the
financial opinion of Carson Medlin that the exchange ratio to be
paid ACNB shareholders by Carolina First Corporation is fair, from
a financial point of view, to the unaffiliated shareholders of
ACNB.
After receiving the opinion of Carson Medlin, the ACNB Board
of Directors met again and consulted with Carson-Medlin about the
Merger. After further considering the Merger and consulting with
Carson-Medlin, ACNB's Board of Directors reaffirmed its conclusion
that the Merger and the Merger Agreement are in the best interest
of ACNB and its shareholders and recommended that the ACNB
shareholders vote for approval of the Merger Agreement.
Carolina First Corporation Reasons. After consideration of
relevant business, financial, and market factors, the Board of
Directors of Carolina First Corporation believes that the Merger
will provide it with a favorable means for entering the Aiken
market. Carolina First Corporation's goal is to be the leading
South Carolina-headquartered, state-wide financial institution, and
having a market presence in Aiken is a necessary component to this
goal. Carolina First Corporation believes that acquiring an
existing institution is a superior means of entry into a market, as
compared to beginning operations de novo, primarily because of the
acquisition of the established customer relationships. Carolina
First Corporation believes that ACNB has valuable community
relationships which it will be able to use to expand its banking
operations in the Aiken market. Carolina First Corporation also
believes that terms of the proposed Merger are fair from its point
of view, from a financial perspective.
Opinion of Financial Advisor
The Board of Directors of ACNB retained Carson Medlin to
render its opinion as to the fairness of the terms of the Merger to
the unaffiliated shareholders of ACNB from a financial point of
view. Carson Medlin is a National Association of Securities
Dealers, Inc. member investment banking firm which specializes in
the securities of southeastern United States financial
institutions. As part of its investment
21
<PAGE>
banking activities, Carson
Medlin is regularly engaged in valuation of southeastern United
States financial institutions and transactions relating to their
securities. ACNB selected Carson Medlin as its financial adviser
on the basis of Carson Medlin's experience and expertise in
transactions similar to the Merger. Carson Medlin is being paid
$15,000 by ACNB for its services under the terms of an engagement
letter dated November 29, 1994.
Carson Medlin has delivered a written opinion dated as of the
date of this Proxy Statement/Prospectus to the Board of Directors
of ACNB stating that the consideration to be received by the
unaffiliated shareholders of ACNB for their ACNB Common Stock is
fair, from a financial point of view. The full text of Carson
Medlin's written opinion is attached as Appendix C to this Proxy
Statement/Prospectus and should be read in its entirety with
respect to the procedures followed, assumptions made, matters
considered, and qualification and limitations on the review
undertaken by Carson Medlin in connection therewith. Carson
Medlin's opinion is addressed to the ACNB Board only and does not
constitute a recommendation to any ACNB shareholder as to how such
shareholder should vote at the ACNB Special Meeting or as to any
other matter. The summary of the opinion of Carson Medlin set
forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion attached as
Appendix C hereto. Carson Medlin has relied upon, without
independent verification, the accuracy and completeness of the
information reviewed by it for purposes of such opinion. Carson
Medlin did not undertake any independent evaluation or appraisal of
the assets of ACNB and Carolina First Corporation, nor was it
furnished with any such appraisals.
In connection with rendering its opinions, Carson Medlin
performed a variety of financial analyses. The preparation of a
fairness opinion of this nature involves various determinations as
to the most appropriate and relevant methods of financial analyses
and the application of those methods to the particular
circumstances, and, therefore, is not readily susceptible to
partial analysis or summary description. Carson Medlin believes
that its analysis must be considered together as a whole and that
selecting portions of such analyses and the facts considered
therein, without considering all other factors and analyses, could
create an incomplete view of the analyses and the process
underlying Carson Medlin's opinion regarding the Merger. In its
analyses, Carson Medlin made numerous assumptions with respect to
industry performance, business and economic conditions, and other
matters, many of which are beyond the control of ACNB and Carolina
First Corporation and which may not be realized. Any estimates
contained in Carson Medlin's analyses are not necessarily
predictive of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of
companies do not purport to be appraisals or necessarily reflect
the prices at which such companies or their securities may actually
be sold. None of the analyses performed by Carson Medlin were
assigned a greater significance by Carson Medlin than any other.
In connection with rendering its opinion dated the date
hereof, Carson Medlin reviewed (i) the Merger Agreement, (ii)
ACNB's Annual Reports to shareholders, including the audited
financial statements of ACNB and the unaudited financial statements
of ACNB, (iii) the Annual and Quarterly Reports on Forms 10-K and
10-Q of Carolina First Corporation for the five years ended
December 31, 1993 and the nine months ended September 30, 1994,
(iv) monthly interim financial statements of ACNB for the period
January to November 1994, (v) certain financial and operating
information with respect to the business, operations and prospects
of ACNB and Carolina First Corporation, and (vi) this Proxy
Statement/Prospectus.
Carson Medlin also (a) held discussions with members of the
senior management of ACNB and Carolina First Corporation regarding
the historical and current business operations, financial condition
and future prospects of their respective companies, (b) reviewed
the historical market prices and trading activity for the common
stocks of ACNB and Carolina First Corporation and compared them
with the historical prices and trading activities of certain
publicly-traded companies which it deemed to be relevant, (c)
22
<PAGE>
compared the results of operations of ACNB and Carolina First
Corporation with those of certain banking companies which it deemed
to be relevant, (d) compared the proposed financial terms of the
Merger with the financial terms, to the extent publicly available,
of certain other recent business combinations of commercial banking
organizations, (e) analyzed the pro forma financial impact of the
Merger on Carolina First Corporation, and (f) conducted such other
studies, analyses, inquiries and examinations as Carson Medlin
deemed appropriate.
The following is a summary of selected analyses performed by
Carson Medlin in connection with its opinion.
Stock Trading History. Carson Medlin examined the history of
the trading prices for the CFC common stock and the relationship
between movements of its price and movements in the Standard &
Poor's ("S&P") 500 Index. This analysis showed that for the five
year period ended December 31, 1994, the increase in the market
value of the CFC common stock (including the reinvestment of cash
dividends) was 17% compared to an increase (including dividend
reinvestment) in the S&P 500 Index of 52%. During the five year
period considered, the equities markets increased their valuation
of Carolina First Corporation less than the S&P 500 companies.
However, the analysis also showed that for the three year period
ended December 31, 1994, the increase in the market value of CFC
common stock (including the reinvestment of cash dividends) was 77%
compared to an increase (including dividend reinvestment) in the
S&P 500 Index of 20%.
Carson Medlin also compared Carolina First Corporation's stock
price performance for the year ended December 31, 1994 to that of
25 NASDAQ National Market-traded banks (the "NASDAQ NM Banks"),
selected from among a group of 40 publicly-traded community
commercial banks in Alabama, Florida, Georgia, North Carolina,
South Carolina, Tennessee and Virginia (the "SIBR Banks") as
contained in the Southeastern Independent Bank ReviewTM (the "Bank
Review"), a proprietary research publication published by Carson
Medlin quarterly since 1991. For the year ended December 31, 1994,
the CFC common stock price increased 13% compared to a 9% average
increase for the NASDAQ NM Banks. The S&P 500 Index (excluding
reinvestment of dividends) declined by approximately 2% during the
year. On this basis, the CFC common stock price increased by more
than either of the S&P 500 Index or the NASDAQ NM Banks during
1994.
Carson Medlin also examined the recent trading volume in CFC
common stock, which trades on the NASDAQ National Market System.
Carson Medlin considers the CFC common stock to be liquid and
marketable in comparison with other community bank holding
companies.
Carson Medlin also compared Carolina First Corporation's stock
price performance during the period of January 1, 1991 to September
30, 1994 to those of the SIBR Banks. The SIBR Banks range in asset
size from approximately $70 million to $2.2 billion and in
shareholders' equity from approximately $9 million to $217 million.
Approximately 72% are listed on NASDAQ or the American Stock
Exchange and 28% are not traded in an established market. Carson
Medlin considers this group of financial institutions more
comparable to Carolina First Corporation and ACNB than larger, more
widely-traded regional financial institutions for the purposes of
evaluating financial characteristics, stock price performance, and
trading volume.
For the four quarters ending September 30, 1994, the ratio of
stock price to latest year-to-date earnings (annualized) for SIBR
Banks in the seven state southeastern region was: low 11.1x, high
13.3x, mean 12.2x. For SIBR banks in South Carolina only, the
price to earnings ratio during the four quarters was: low 10.7x,
high 13.9x, mean 12.2x. Over the same period Carolina First
Corporation's price to
23
<PAGE>
earnings ratio ranged from a low of 12.6x to
a high of 15.0x with a mean of 14.3x. Carolina First's common
stock has traded on average at a higher price to earnings ratio
than both South Carolina SIBR banks and all SIBR banks.
For the four quarters ending September 30, 1994, the stock
price as a percentage of book value for SIBR Banks in the Southeast
was: low 139%, high 155% and mean 146%. For SIBR banks in South
Carolina only, the price to book ratio for the four quarters was:
low 126%, high 147% and mean 138%. On the basis of stockholders'
equity as stated, Carolina First Corporation's recent price to book
ratio ranged from a low of 111% to a high of 149% with a mean of
132%. On a tangible stockholders' equity basis, Carolina First
Corporation's price to book ratio for the four quarter ranged from
a low of 185% to a high of 223% with a mean of 208%, Carolina First
Corporation's common stock has traded on average at a lower price
to stated book value ratio than both South Carolina SIBR banks and
all SIBR banks. This level may have resulted in part from Carolina
First Corporation's material level of intangible assets.
For the four quarters ending September 30, 1994, the stock
price as a percentage of assets for SIBR Banks in the Southeast
was: low 13.5%, high 16.9%, mean 14.6%. For SIBR banks in South
Carolina only, the price as a percentage of assets for the four
quarters was: low 8.2%, high 10.3%, mean 9.2%. Carolina First
Corporation's recent price to assets ratio ranged from a low of
6.3% to a high of 8.0% with a mean of 7.2%. Carolina First
Corporation's common stock has traded on average at a lower price
to assets ratio than the SIBR banks in South Carolina and the
Southeast as a whole.
Industry Comparative Analysis. In connection with rendering
its opinions, Carson Medlin compared selected operating results of
ACNB to the SIBR Banks. Carson Medlin compared, among other
factors, the profitability, capitalization, deposit growth rate,
loan to deposit ratio, and asset quality of ACNB to these financial
institutions. ACNB has a lower level of total assets and
shareholders' equity than the average SIBR Bank. In addition, ACNB
has been less profitable and is less well capitalized than the
average SIBR Bank, ACNB's asset quality ratios are substantially
less favorable than the SIBR Banks.
Carson Medlin also compared selected operating results of
Carolina First Corporation to a peer group of three SIBR Banks
located in South Carolina. Carolina First Corporation is the
largest of the four institutions in terms of assets and the second
largest in market capitalization among four SIBR Banks. Carolina
First Corporation's profitability is lower than and its asset
quality and capitalization measures are higher than these South
Carolina SIBR Banks.
Comparable Transaction Analysis. Carson Medlin reviewed all
transactions that were announced publicly between January 1, 1993
and November 30, 1994 which involved the acquisition of commercial
banks in seven southeastern states, including South Carolina. This
search resulted in an analysis of the terms of 129 transactions.
Carson Medlin considered, among other factors, the earnings,
capital level, asset size and quality of assets of the acquired
financial institutions. Carson Medlin compared the transaction
prices to trailing four quarter's earnings, stated book value and
total assets and deposit premiums (the ratio of the purchase
premiums over stated book value compared to total deposits).
Carson Medlin determined that of the 129 transactions considered,
41 transactions were most comparable to the acquisition of ACNB by
Carolina First Corporation (comparability being based on size,
profitability, type of market and other characteristics of the
acquired and acquiring banks).
In comparing the terms of the Merger Agreement to those of
comparable transactions, Carson Medlin assumed a per share market
value for the CFC common stock of $15.00 (the "CAFC Share Value"),
which was a value between the market price of the stock as of the
date of the initial public announcement of the Merger and the date
of this Proxy Statement/Prospectus.
24
<PAGE>
Carson Medlin calculated a range of purchase prices as a
percentage of stated book value for the comparable transactions of
from a low of 117.5% to a high of 248.3%, with a mean of 189.7%.
These transactions indicated a range of aggregate value for ACNB of
from $4.5 to $9.5 million, with mean $7.2 million. The aggregate
consideration implied by the terms of the Merger Agreement assuming
the CAFC Share Value is approximately $6.8 million and implies a
price to book value multiple of 178% or slightly below the average
for the comparable transactions.
Carson Medlin calculated a range of purchase prices as a
multiple of earnings for the comparable transactions of from a low
of 8.0x to a high of 24.7x, with a mean of 16.9x. These
transactions indicated a range of aggregate value for ACNB of from
$1.7 to $5.1 million, with a mean of $3.5 million. The aggregate
consideration implied by the terms of the Merger Agreement at
announcement is approximately $6.8 million and implies a price to
earnings multiple of 32.7x, almost twice the average for the
comparable transactions.
Carson Medlin calculated the deposit premiums for the
comparable transactions and found a range of values of from a low
of 1.7% to a high of 24.9%, with a mean of 10.9%. These
transactions indicated a range of aggregate value for ACNB of from
$4.5 to $13.5 million, with a mean of $8.1 million. The premium on
the Company's core deposits implied by the terms of the Merger
Agreement is 7.7%, below the average deposit premium for the
comparable transactions.
Finally, Carson Medlin also calculated a range of purchase
prices as a percentage of total assets for the comparable
transactions of from a low of 10.0% to a high of 26.7%, with a mean
of 17.7%. The indicated range of aggregate value for ACNB under
the price to assets approach is from $4.3 to $11.5 million, with a
mean value of $7.6 million. The percentage of total assets implied
by the terms of the Merger Agreement is approximately 15.8%,
slightly below the average for the comparable transactions.
No company or transaction considered (for comparative
purposes) in the preceding Industry Comparative or Comparable
Transaction Analyses sections is identical to ACNB, Carolina First
Corporation or the Merger. Accordingly, an evaluation of the
results of these analyses necessarily involves complex
considerations and judgments concerning differences in financial
and operating characteristics of ACNB and Carolina First
Corporation, and other factors that could affect the value of the
companies to which it is being compared. Mathematical analysis
(such as determining the average or median) is not, in itself, a
meaningful method of using comparable industry or transaction data.
Review of Research on Carolina First Corporation. Carson
Medlin reviewed research information concerning Carolina Fist
Corporation published in 1994 by certain investment and investment-
related firms, including J.C. Bradford & Co., Fox-Pitt, Kelton
Inc., and S&P. Information considered in these reports by Carson
Medlin included, but was not limited to, the authors' qualitative
assessment of Carolina First Corporation as well as estimates of
Carolina First Corporation's future profitability. Carson Medlin
concluded that these research findings, considered collectively,
were favorable regarding Carolina First Corporation's operations
and future prospects.
Present Value Analysis. Carson Medlin calculated the present
value of ACNB Common Stock on the basis of ACNB remaining an
independent bank for the next five years, while increasing its
assets by from 5% to 7% annually, earning from .75% to 1.00%
annually on average assets, and paying out from 5% to 20% of
earnings as dividends during the period. The analysis used
discount rates of 12% to 18% and assumed an exit point of 5 years
at 200% of their book value. On the basis of these various
assumptions, Carson Medlin calculated a present value of ACNB on a
stand-alone basis ranging from $5.7 to $7.4 million.
25
<PAGE>
The aggregate consideration implied by the terms of the Merger
Agreement, assuming the CAFC Share Value is approximately $6.8 million,
near the upper end of this valuation range.
Contribution Analysis. According to the terms of the Merger
Agreement, the shareholders of ACNB will receive approximately
452,812 shares of CFC common stock. At September 30, 1994, there
were 4,524,361 shares of CFC common stock outstanding. For the
three months ended September 30, 1994, there were 4,519,486 and
7,464,782 common shares of CFC common stock outstanding on average
on a primary basis and a fully diluted basis, respectively.
Accordingly, on a pro forma basis, for the three months ended
September 30, 1994, holders of ACNB would have held approximately
9.1% and 5.7% of the average outstanding common shares of Carolina
First Corporation subsequent to the Merger on a primary basis and a
fully diluted basis, respectively.
Carson Medlin analyzed the contribution of each of ACNB and
Carolina First Corporation to the assets, liabilities and earnings
of the pro forma combined company as of and for the nine months
ended September 30, 1994. During the first nine months of 1994,
ACNB would have contributed 3% of core earnings, 3% of net income
before preferred dividends, and 4% of net income after preferred
dividends. At September 30, 1994, ACNB would have contributed 4%
of earning assets, 4% of total assets, 4% of total deposits, 7% of
stated common shareholders' equity, 14% of tangible common
shareholders' equity, 4% of stated total shareholders' equity, and
6% of tangible total shareholders' equity.
Dilution Analysis. Carson Medlin evaluated the potential
impact of the Merger on Carolina First Corporation's earnings and
common shareholders' equity per share. Based on certain
assumptions as to the future profitability of ACNB and Carolina
First Corporation, Carson Medlin estimated that pro forma common
shareholders' equity per share would be reduced by approximately 2%
and that estimated 1995 earnings per common share would be reduced
by approximately 1%. Carson Medlin considers these levels of pro
forma dilution of per share values to be reasonable and typical for
transactions such as the Merger.
Shareholder Claims Analysis. Carson Medlin compared the
ownership of 1.125 shares of CFC common stock to the ownership of
one share of ACNB Common Stock from the perspective of claims on
various balance sheet and income statement variables. This
analysis indicated that ACNB shareholders would have a claim to
less in the way of tangible common equity, but more in the way of
stated common equity, earnings, dividends, expected market value of
stock, deposits and total assets. Carson Medlin considers these
factors to indicate that 1.125 shares of CFC common stock is likely
to have a higher expected value than one share of ACNB as the date
of consummation of the Merger.
The opinions expressed by Carson Medlin were based upon
market, economic and other relevant considerations as they existed
and have been evaluated as of the date of the opinions. Events
occurring after the date of reaching the opinions, including but
not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or
liabilities of ACNB and Carolina First Corporation, could
materially affect the assumptions used in preparing the opinions
and the conclusions reached.
Exchange of ACNB Stock Certificates
As soon as practicable after the Effective Date, ACNB
shareholders will be sent transmittal forms for use in forwarding
to Carolina First Corporation stock certificates previously
representing ACNB common stock for surrender and exchange for
certificates representing CFC common stock.
26
<PAGE>
ACNB SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL FORMS.
After the surrender of ACNB stock certificates by an ACNB
shareholder, Carolina First Bank, as transfer agent for Carolina
First Corporation (the "Agent"), will deliver certificates to such
shareholder representing the aggregate number of shares of CFC
common stock to which such shareholder is entitled under the Merger
Agreement. Certificates for CFC common stock distributable to the
former shareholders of ACNB shall not be delivered to any
shareholder except upon surrender by such shareholder of the
certificate or certificates for shares of ACNB common stock with
respect to which the shares of CFC common stock are deliverable, or
upon appropriate arrangements with respect to missing certificates,
which may include the furnishing of a satisfactory indemnity bond.
Any dividends or other distributions with respect to CFC common
stock for which certificates have not been delivered will be
remitted by Carolina First Corporation to the Agent and held by the
Agent until the expiration of one year after the Effective Date.
During such one year period, upon the subsequent delivery by ACNB
shareholders of certificates or the making of appropriate
arrangements with respect to missing certificates, such dividends
or other distributions shall be paid by the Agent to the former
ACNB shareholders, without any interest thereon. After the
expiration of such one year period, any remaining funds deposited
by Carolina First Corporation with the Agent shall be returned to
Carolina First Corporation and any former ACNB shareholder entitled
thereto shall look only to Carolina First Corporation for payment.
Conditions to Consummation of the Merger
The respective obligations of Carolina First Corporation,
Carolina First Bank and ACNB to consummate the Merger are subject
to the satisfaction of certain conditions, including, without
limitation, the taking of all necessary corporate action with
respect to the Merger Agreement, including the approval of the
Merger Agreement by the stockholders of ACNB; the continuing
effectiveness of the registration statement under the Securities
Act and applicable state securities or "Blue Sky" laws or
exemptions to those laws; the receipt of all necessary regulatory
approvals for the Merger and expiration of all notice periods and
waiting periods required after the granting of any such approvals;
the receipt of an opinion from Wyche, Burgess, Freeman & Parham,
P.A., in form and substance reasonably satisfactory to ACNB,
substantially to the effect that the Merger will, upon compliance
with reasonable conditions, qualify as a tax free reorganization
under Section 368(a) of the Code; the absence of any order, writ
decree or injunction of a judicial authority or agency which
enjoins or prohibits consummation of the transactions contemplated
by the Merger Agreement; the receipt of all permits, consents or
other authorizations necessary to the consummation of the Merger;
the accuracy of the representations and warranties set forth in the
Merger Agreement in all material respects as of the Effective Date
as though made on and as of such date; the performance by ACNB and
Carolina First Corporation in all material respects of all material
obligations and compliance with all material covenants required by
the Merger Agreement; and the receipt of certain opinions of
counsel and certificates from officers of Carolina First
Corporation and ACNB.
Consummation of the Merger also is subject to the conditions
that from the date of the Merger Agreement through the Effective
Date, the business of ACNB shall have been conducted in the usual
and customary manner, and neither Carolina First Corporation nor
ACNB shall have suffered a material casualty or a material adverse
change in their business or financial condition. It is also a
condition that Carolina First Corporation will have determined that
the Merger will qualify for the pooling-of-interests method of
accounting and received written agreements from the affiliates of
ACNB that they will not sell any shares of CFC common stock
received upon consummation of the Merger (a) 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)
27
<PAGE>
except in compliance with Rule 145 under the Securities Act or otherwise
in compliance with the Securities Act and rules and regulations
promulgated thereunder. A further condition of the Merger is that
dissenters' rights pursuant to 12 U.S.C. (Section) 214a with respect to the
Merger will not have been exercised by the holders of more than 10%
of the outstanding shares of ACNB common stock. See "THE PROPOSED
TRANSACTION -- Rights of Dissenting Shareholders of ACNB."
Carolina First Corporation and ACNB may waive certain of the
conditions imposed with respect to their respective obligations to
consummate the Merger.
Termination
The Merger Agreement may be terminated at any time on or prior
to the Effective Date by the mutual consent in writing of the
parties. Either party may elect to terminate the Merger Agreement
(i) if a permanent injunction or other order shall have been issued
by any state or federal court, or governmental or regulatory body
preventing consummation of the transactions contemplated by the
Merger Agreement; (ii) if the other party has failed to comply with
the agreements or fulfill the conditions contained in the Merger
Agreement if such failure of compliance or fulfillment is material
to the consolidated businesses of either Carolina First Corporation
or ACNB and the breaching party has been given notice of the
failure to comply and a reasonable time to cure; (iii) if the
Closing has not occurred by April 30, 1995; or (iv) by ACNB if the
average of the closing sales price of CFC common stock for any
period of ten consecutive trading days from October 13, 1994
through the day before the closing date is less than $12.00 per
share.
Amendment
The Merger Agreement may be amended or supplemented in writing
by mutual agreement of Carolina First Corporation and ACNB.
Conduct of ACNB's and Carolina First Corporation's Business Prior
to the Effective Date
Under the terms of the Merger Agreement, ACNB may not, without
the prior written consent of Carolina First Corporation, which
consent may not be unreasonably withheld, among other things: (i)
carry on its business other than in the ordinary course in
substantially the same manner as theretofore conducted; (ii) amend
its Articles of Association or Bylaws; (iii) except for existing
items or in the ordinary course of business in accordance with past
practice, issue, grant, pledge, sell, or authorize the issuance of,
reclassify, redeem, purchase or otherwise acquire any shares of its
capital stock or any rights, warrants or options to acquire any
such shares; (iv) declare, set aside or pay dividends or change its
equity capital structure; (v) take, agree to take or knowingly
permit any action that would be contrary to or breach any of the
terms or provisions of the Merger Agreement, or which would cause
ACNB's representations in the Merger Agreement to be or become
untrue in any material respect; (vi) incur any indebtedness for
borrowed money other than in the ordinary course of business; (vii)
except for expenses attendant to the Merger and current contractual
obligations, incur any expense in excess of $25,000; (viii) grant
any executive officers any increase in compensation, except in the
ordinary course in accordance with past practice and only upon
prior notice to Carolina First Corporation, or enter into any
employment agreement with any executive officer; or (ix) acquire or
agree to acquire any business. The Merger Agreement also requires
ACNB to promptly advise Carolina First Corporation of any change in
its business which is or may be reasonably expected to be
materially adverse to ACNB's business.
28
<PAGE>
Under the terms of the Merger Agreement, Carolina First
Corporation may not, without the prior written consent of ACNB,
which consent may not be unreasonably withheld, among other things:
(i) carry on its business other than in the ordinary course in
substantially the same manner as theretofore conducted; (ii) amend
its Articles of Incorporation or Bylaws in any manner that will
adversely affect the ACNB stockholders in any material respect;
(iii) create or issue any shares of capital stock except (A) shares
it is already obligated to issue (including shares in connection
with prior offerings of convertible preferred stock), or (B) shares
in connection with pending acquisitions, or in the ordinary course
in accordance with past practice (such as employee stock grants or
options); or (iii) take, agree to take or knowingly permit any
action that would be contrary to or breach any of the terms or
provisions of the Merger Agreement, or which would cause Carolina
First Corporation's representations in the Merger Agreement to
become untrue in any material respect. The Merger Agreement also
requires Carolina First Corporation to promptly advise ACNB of any
change in its business which is or may reasonably be expected to be
materially adverse to Carolina First Corporation.
Required Regulatory Approvals
The Merger is subject to certain regulatory approvals as set
forth below. To the extent that the following information
describes statutes and regulations, it is qualified in its entirety
by reference to the particular statutes and regulations promulgated
under such statutes.
The Merger of ACNB with Carolina First Bank is subject to
approval of the FDIC pursuant to the Bank Merger Act (12 U.S.C.
1828 et seq.). The Bank Merger Act requires that the FDIC take
into consideration the financial and managerial resources and
future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served. Further,
the FDIC may not approve the Merger if it would result in a
monopoly or if it would be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of
banking in any part of the United States, or if the effect in any
section of the country may be substantially to lessen competition
or to tend to create a monopoly, or if the Merger would be in any
other manner in restraint of trade, unless the FDIC finds that the
anticompetitive effects of the Merger are clearly outweighed in the
public interest by the probable effect of the transactions in
meeting the convenience and needs of the communities to be served.
In addition, the FDIC must take into account the record of
performance of the existing and proposed institutions under the
Community Reinvestment Act of 1977 ("CRA") in meeting the credit
needs of the entire community, including low- and moderate-income
neighborhoods, served by such institutions. Applicable regulations
also require publication of notice of the application for approval
of the Merger and provide an opportunity for the public to comment
on the application in writing and to request a hearing. Subject to
certain exceptions, the Bank Merger Act provides that no bank
merger may be consummated until the 30th day after approval, during
which time the United States Department of Justice (the "DOJ") may
challenge the merger on antitrust grounds. Carolina First
Corporation has submitted an application to the FDIC for approval
to consummate the Merger, which application is currently pending.
The Merger also is subject to approval by the State Board
under Section 34-24-30 of the South Carolina Bank Holding Company
Act ("SCBHCA"). Under Section 34-24-50 of the SCBHCA, the State
Board may approve the Merger only after determining that the Merger
would not create anticompetitive or monopolistic effects on the
South Carolina banking business. The State Board also must take
into consideration the financial and managerial resources and
future prospects of the companies and banks involved as well as the
convenience and needs of the communities to be served. In making
this determination, the State Board will wait until after the FDIC
makes its determination and will deny the application only if the
State Board finds that the FDIC's determination is not supported by
evidence that is
29
<PAGE>
substantial when viewed in light of the whole
record considered by the FDIC. Carolina First Corporation has
submitted an application to the State Board for approval to
consummate the Merger, and that application currently is pending.
Carolina First Corporation and ACNB expect that all necessary
approvals will be granted. However, there can be no assurance that
such approvals will be received and, if they are, there can be no
assurance as to the date of such approvals, that such approvals
will not be conditioned upon matters that could cause the Carolina
First Corporation Board of Directors to abandon the Merger, or that
an action will not be brought by the DOJ challenging the Merger on
antitrust grounds.
The Merger will not proceed in the absence of all required
approvals for the Merger. Carolina First Corporation and ACNB are
not aware of any other governmental approvals or actions that are
required for consummation of the Merger except as described above.
Should any such approval or action be required, it is presently
contemplated that such approval or action would be sought or taken.
There can be no assurance that any such approval or action, if
needed, could be obtained, would not delay consummation of the
Merger.
Operations After the Merger
After consummation of the Merger, the former ACNB banking
locations will be operated as branch locations of Carolina First
Bank and such locations are expected to conduct their business in
substantially the same manner as prior to the Merger. The ACNB
officers and employees will continue as officers and employees of
Carolina First Bank in an at-will employment capacity, except that
certain ACNB employees will serve under employment contracts. See
"THE PROPOSED TRANSACTION--Interests of Certain Persons in the
Merger." The ACNB officers and employees will continue at
approximately their current levels of compensation and will be
eligible for benefits available to other similarly situated
officers and employees of Carolina First Bank. The former ACNB
directors will constitute an Advisory Board for Carolina First Bank
for the Aiken market.
After consummation of the Merger, it is anticipated that
Carolina First Bank will continue to conduct its business in
substantially the same manner in which it is now conducted.
Accounting Treatment
Carolina First Corporation expects to account for the
acquisition of ACNB as a pooling-of-interests. For the transaction
to qualify for the pooling-of-interests method, it must satisfy
certain conditions, including the condition that substantially all
(90% or more) of the outstanding ACNB common stock must be
exchanged for CFC common stock. Under the pooling-of-interests
method, the assets and liabilities of Carolina First Bank and ACNB
will be combined and carried forward at their previously recorded
amounts. The revenues and expenses of Carolina First Bank and ACNB
will be retroactively combined for the entire fiscal period in
which the combination occurs and for all periods prior to the
combination at historically recorded amounts. The consummation of
the Merger is conditioned upon Carolina First Corporation receiving
reasonable assurance from Elliott, Davis & Company, LLP that the
Merger will qualify for pooling-of-interests accounting treatment
under generally accepted accounting principles.
30
<PAGE>
Certain Federal Income Tax Consequences
The following is a summary of certain material federal income
tax consequences of the Merger, including certain consequences to
holders of the ACNB common stock who are citizens or residents of
the United States and who hold their shares as capital assets. It
does not discuss all tax consequences that may be relevant to ACNB
shareholders subject to special federal income tax treatment (such
as insurance companies, dealers in securities, certain retirement
plans, financial institutions, tax exempt organizations or foreign
persons), or to ACNB shareholders who acquired their shares of
ACNB's common stock pursuant to the exercise of employee stock
options or rights or otherwise as compensation. Shareholders are
urged to consult their own tax advisors as to the specific tax
consequences to them of the Merger, including the applicability and
effect of state, local and other tax laws. The summary does not
address the state, local or foreign tax consequences of the Merger,
if any.
Pursuant to the terms of the Merger Agreement, ACNB will
receive the opinion of Wyche, Burgess, Freeman & Parham, P.A.,
dated as of the Effective Date, to the effect that based upon the
Code and regulations thereunder and rulings issued by the IRS in
transactions similar to those contemplated by the Merger Agreement
and assuming the Merger occurs in accordance with the Merger
Agreement and conditioned on the accuracy of certain
representations made by ACNB and Carolina First Corporation, for
federal income tax purposes:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code;
(2) No gain or loss will be recognized by either Carolina
First Corporation or ACNB as a result of the Merger;
(3) No gain or loss will be recognized by ACNB
shareholders on the exchange of their shares of ACNB
common stock for CFC common stock (disregarding for
this purpose any cash received for fractional share
interests or in connection with the exercise of
dissenters' rights);
(4) The tax basis of the CFC common stock to be received
by ACNB shareholders in connection with the Merger
will be the same as the basis in ACNB common stock
surrendered in exchange therefor; and
(5) The holding period of the CFC common stock to be
received by ACNB shareholders in connection with the
Merger will include the holding period of ACNB common
stock surrendered in exchange therefor, provided that
ACNB common stock is held as a capital asset at the
date of the exchange.
Fractional Share Interests. An ACNB shareholder who receives
cash in lieu of a fractional share interest in CFC common stock
will be treated as having received the cash in redemption of the
fractional share interest. The receipt of cash in lieu of a
fractional share interest should generally result in capital gain
or loss to the holder equal to the difference between the amount of
cash received and the portion of the holder's federal income tax
basis in the ACNB common stock allocable to the fractional share
interest. Such capital gain or loss will be long-term capital gain
or loss if the holder's holding period for the CFC common stock
received, determined as set forth above, is longer than one year.
Cash Received by Holders of ACNB Common Stock Who Dissent. A
shareholder of ACNB who perfects his dissenter's rights under
federal law and who receives payment of the value of his shares of
ACNB common stock will be treated as having received such payment
in redemption of such stock. Such
31
<PAGE>
redemption will be subject to
the conditions and limitations of Section 302 of the Code,
including the attribution rules of Section 318 of the Code. In
general, if the shares of ACNB common stock are held by the holder
as a capital asset at the Effective Date, such holder will
recognize capital gain or loss measured by the difference between
the amount of cash received by such holder and the basis for such
shares. Each holder of ACNB common stock who contemplates
exercising his dissenter's rights should consult his own tax
adviser as to the possibility that any payment to him will be
treated as dividend income.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON THE CODE (AND AUTHORITIES THEREUNDER) AS IN
EFFECT ON THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, WITHOUT CONSIDERATION OF
THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER. SHAREHOLDERS ARE
URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR SITUATIONS, AS WELL AS
CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL OR FOREIGN TAX LAWS.
Restrictions on Resales by Affiliates
The issuance of the CFC Shares has been registered under the
Securities Act. Accordingly, resales of the CFC Shares by non-
affiliates of ACNB will not require registration. However, under
existing law, any person who is an affiliate of ACNB at the time
the proposed exchange is submitted to a vote of the ACNB
shareholders who wishes to sell CFC Shares will be required to
either (a) register the sale of the CFC Shares under the Securities
Act, (b) sell in compliance with Rule 145 promulgated under the
Securities Act (permitting limited sales under certain
circumstances), or (c) utilize an exemption (if any) from
registration. Rule 145(d) requires that persons deemed to be ACNB
affiliates resell their CFC Shares pursuant to certain of the
requirements of Rule 144 under the Securities Act if such CFC
Shares are sold within the first two years after receipt thereof.
After two years, if such person is not an affiliate of Carolina
First Corporation and Carolina First Corporation is current in the
filing of its periodic securities law filings, a former ACNB
affiliate may freely sell the CFC Shares without limitation. After
three years from the issuance of the CFC Shares, if such person is
not a Carolina First Corporation affiliate at the time of sale or
for at least three months prior to such sale, such person may
freely sell such CFC Shares without limitation, regardless of the
status of Carolina First Corporation's periodic securities law
filings.
It is a condition to the consummation of the Merger, that
affiliates of ACNB agree in writing that they will not sell or
reduce their risk with respect to the CFC common stock to be
received by them until Carolina First Corporation has published
financial results covering at least 30 days of post-exchange
combined operations. Stop transfer instructions will be given by
Carolina First Corporation to the Agent with respect to the CFC
common stock to be received by persons subject to the restrictions
described above, and the certificates for such stock may be
appropriately legended.
An "affiliate" of ACNB, as defined by the rules promulgated
pursuant to the Securities Act, is a person who directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, ACNB at the time of
consummation of the Merger Agreement. In this context, an
"affiliate" will generally include the following persons:
directors or executive officers, and the holders of 10% or more of
ACNB common stock (and any relative or spouse of any such person
and any trusts, estates, corporations, or other entities in which
such persons have a 10% or greater beneficial or equity interest).
32
<PAGE>
Rights of Dissenting Shareholders of ACNB
The following discussion is merely a summary of rights of
dissenting shareholders pursuant to federal law and is qualified in
its entirety by the provisions of 12 U.S.C. (Section) 214a(b), a copy of
which is included herewith as Appendix B. Dissenting shareholders
have only those rights provided by 12 U.S.C. (Section) 214a(b). Any
shareholder wishing to exercise dissenters' rights is strongly
advised to consult with an attorney.
Any shareholder of ACNB who has voted against the Merger at
the Special Meeting, or has given notice in writing at or prior to
such meeting to the presiding officer that he dissents from the
Merger, shall be entitled to receive the value of the shares so
held by him upon written request made to Carolina First Corporation
at any time before thirty days after the date of consummation of
the Merger, accompanied by the surrender of his stock certificates.
The value of such shares shall be ascertained, as of the date
of the Special Meeting, by an appraisal made by a committee of
three persons, composed of (1) one selected by the majority vote of
the dissenting shareholders entitled to payment in cash; (2) one
selected by the directors of Carolina First Corporation; and (3)
one selected by the two so selected. The valuation agreed upon by
any two of the three appraisers shall govern. If the value so
fixed shall not be satisfactory to any dissenting shareholder who
has requested payment, that shareholder may, within five days after
being notified of the appraised value of his shares, appeal to the
OCC, which shall cause a reappraisal to be made which shall be
final and binding as to the value of the shares of the appealing
shareholder.
If, within 90 days from the date of consummation of the
Merger, for any reason one or more of the appraisers is not
selected, or the appraisers fail to determine the value of such
shares, the OCC shall upon written request of any interested party
cause an appraisal to be made which shall be final and binding on
all parties. The expenses of the OCC in making the reappraisal or
the appraisal, as the case may be, shall be paid by Carolina First
Corporation.
Recommendation of Board of Directors
The Board of Directors of ACNB has concluded that the Merger
Agreement is in the best interests of ACNB and has authorized
consummation thereof, subject to approval of the shareholders,
receipt of all requisite regulatory approvals, and satisfaction of
certain other conditions.
33
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Condensed Balance Sheet is
based on combining the historical consolidated balance sheet for
Carolina First Corporation (as used in the financial statements
contained in this Section, "CFC") at September 30, 1994 with the
balance sheet of ACNB at the same date, and adjusting for the
issuance of additional shares expected to be issued in the
Merger. It also reflects adjustments anticipated in connection
with the acquisition of Midlands National Bank by Carolina First
Corporation. See "INFORMATION ABOUT CAROLINA FIRST CORPORATION -
- - Recent Developments."
The unaudited Pro Forma Combined Capitalization is based on
combining the historical consolidated capitalization of Carolina
First Corporation at September 30, 1994 with the capitalization
of ACNB at the same date, and adjusting for the issuance of
additional shares expected to be issued in the Merger. It also
reflects adjustments anticipated in connection with the
acquisition by Carolina First Corporation of Midlands National
Bank (as used in the financial statements contained in this
Section, "Midlands").
The unaudited Pro Forma Combined Condensed Summary of
Earnings (Excluding Midlands National Bank) combines the
consolidated statements of income of Carolina First Corporation
for the years ended December 31, 1991, 1992 and 1993 and the nine
months ended September 30, 1994 with the consolidated statements
of income of ACNB for the same periods but does not reflect
adjustments anticipated in connection with the acquisition of
Midlands National Bank by Carolina First Corporation. The
unaudited Pro Forma Combined Condensed Summary of Earnings
(Including Midlands National Bank) combines the consolidated
statements of income of Carolina First Corporation for the years
ended December 31, 1991, 1992 and 1993 and the nine months ended
September 30, 1994 with the consolidated statements of income of
ACNB and Midlands National Bank for the same periods.
The Merger is expected to be accounted for under the pooling
of interests method of accounting and pro forma data is derived
in accordance with such method.
Information set forth below should be read in conjunction
with such historical and pro forma financial statements and the
notes thereto. The unaudited pro forma information is provided
for informational purposes only and is not necessarily indicative
of actual results that would have been achieved had the Merger
been consummated at the beginning of the period presented, nor is
it necessarily indicative of future results.
34
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Balance Sheet
September 30, 1994
Pro Forma Pro Forma
CFC ACNB Adjustments Combined Midlands Adjustments Combined
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks . . . . $ 43,444 $ 2,432 $ -- $ 45,876 $ 1,789 $ -- $ 47,665
Federal funds sold . . . . . . 8,904 2,110 -- 11,014 3,060 $ -- 14,074
Investment securities . . . . . 116,538 5,645 -- 122,183 8,500 $ -- 130,683
Loans . . . . . . . . . . . . . 817,404 30,525 -- 847,929 27,885 $ -- 875,814
Less unearned income . . . . . . (1,063) -- -- (1,063) -- -- (1,063)
Less allowance for loan losses. . (5,029) (529) (5,558) (418) (5,976)
Net loans . . . . . . . . . . . . 811,312 29,996 0 841,308 27,467 0 868,775
Premises and equipment . . . . 36,389 1,720 -- 38,109 1,317 -- 39,426
Other assets . . . . . . . . . 51,077 1,136 -- 52,213 762 -- 52,975
Total assets . . . . . . . . . . $ 1,067,664 $43,039 $ 0 $1,110,703 $ 42,895 $ 0 $1,153,598
Liabilities and stockholders' equity:
Liabilities
Deposits
Noninterest-bearing . . . . . . $ 108,575 $ 3,932 $ -- $ 112,507 $ 2,722 $ -- $ 115,229
Interest bearing . . . . . . . 831,700 35,113 -- 866,813 35,829 -- 902,642
Total deposits . . . . . . . . 940,275 39,045 0 979,320 38,551 0 1,017,871
Borrowed funds . . . . . . . . 31,926 -- -- 31,926 42 -- 31,968
Other liabilities . . . . . . . 8,439 186 -- 8,625 280 -- 8,905
Total liabilities . . . . . . . 980,640 39,231 0 1,019,871 38,873 0 94,854
Total stockholders' equity . . . 87,024 3,808 -- 90,832 4,022 -- 1,058,744
Total liabilities and stockholders'
equity . . . . . . . . . . . . $ 1,067,664 $ 43,039 $ 0 $1,110,703 $ 42,895 $ 0 $ 1,153,598
</TABLE>
35
<PAGE>
Pro Forma Combined Capitalization
September 30, 1994
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CFC ACNB Adjustments Combined Midlands Adjustments Combined
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt:
ESOP loan payable in annual installments of
$50,000, plus interest at 90% of prime $ 176 $ -- $ -- $ 176 $ -- $ -- $ 76
Mortgage debt . . . . . . . . . 1,089 -- -- 1,089 -- -- 1,089
Total long-term debt . . . . 1,265 0 0 1,265 0 0 1,265
Stockholders' equity:
Preferred stock-authorized . . 37,063 -- -- 37,063 -- -- 37,063
Common stock . . . . . . . . . 4,524 2,013 (1,560)(A) 4,977 1,772 (1,188)(B) 5,561
Surplus . . . . . . . . . . . . 38,247 1,985 1,560(A) 41,792 1,773 1,188(B) 44,753
Retained earnings . . . . . . . 8,591 (174) -- 8,417 551 -- 8,968
Noninvested restricted stock . (547) -- -- (547) -- -- (547)
Guarantee of ESOP debt . . . . (176) -- -- (176) -- -- (176)
Unrealized loss on securities available for
sale (678) (16) -- (694) (74) -- (768)
Total stockholders' equity . 87,024 3,808 0 90,832 4,022 0 94,854
Total capitalization . . $88,289 $ 3,808 $ 0 $ 92,097 $ 4,022 $ 0 $ 96,119
(A) Reflects the effects of issuing 453,000 shares of CFC common stock to holders of ACNB common stock.
(B) Reflects the effects of issuing 584,000 shares of CFC common stock to holders of Midlands common stock.
</TABLE>
36
<PAGE>
Pro Forma Combined Condensed Summary of Earnings
(Excluding Midlands)
<TABLE>
<CAPTION>
Nine months ended Years ended December 31,
September 30, 1991 1992 1993 1994
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . $ 39,025 $ 41,703 $51,760 $ 52,024
Interest expense . . . . . . . . . . . . . . 24,730 22,334 23,187 21,762
Net interest income. . . . . . . . . . . . $ 14,295 19,369 28,573 30,262
Provision for loan losses. . . . . . . . . . 1,687 1,828 961 480
Net interest income after provision
for loan losses. . . . . . . . . . . . 12,608 17,541 27,612 29,782
Noninterest income. . . . . . . . . . . . . 2,473 3,691 6,463 6,416
Noninterest expenses. . . . . . . . . . . . 12,889 17,689 26,855 28,540
Income before income taxes . . . . . . . 2,192 3,543 7,220 7,658
Income taxes . . . . . . . . . . . . . . . 454 1,160 2,173 2,255
Net income. . . . . . . . . . . . . . . . 1,738 2,383 5,047 5,403
Dividends on preferred stock. . . . . . . . -- 625 1,930 1,702
Net income applicable to
common shareholders. . . . . . . . . . $ 1,738 $ 1,758 $ 3,117 $ 3,701
Net income per common share
Primary . . . . . . . . . . . . . . . . . $ 0.47 $ 0.47 $ 0.82 $ 0.74
Fully diluted . . . . . . . . . . . . . . n/a n/a n/a 0.72
Average shares outstanding
Primary . . . . . . . . . . . . . . . . . 3,719,100 3,743,504 3,784,599 4,963,556
Fully diluted . . . . . . . . . . . . . . 3,719,100 4,495,895 5,930,215 7,273,430
</TABLE>
37
<PAGE>
Pro Forma Combined Condensed Summary of Earnings
(Including Midlands)
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30
1991 1992 1993 1994
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . $ 41,964 $ 44,811 $55,016 $ 54,467
Interest expense . . . . . . . . . . . . . . 26,613 24,010 24,608 22,754
Net interest income. . . . . . . . . . . . $ 15,351 20,801 30,408 31,713
Provision for loan losses. . . . . . . . . . 1,846 2,238 1,106 517
Net interest income after provision
for loan losses. . . . . . . . . . . . 13,505 18,563 29,307 31,196
Noninterest income. . . . . . . . . . . . . 2,743 4,116 6,764 6,603
Noninterest expenses. . . . . . . . . . . . 13,875 18,898 28,295 29,615
Income before income taxes . . . . . . . 2,373 3,781 7,771 8,184
Income taxes . . . . . . . . . . . . . . . 458 1,184 2,386 2,440
Net income. . . . . . . . . . . . . . . . 1,915 2,597 5,385 5,744
Dividends on preferred stock. . . . . . . . 0 625 1,930 1,702
Net income applicable
to common shareholder $ 1,915 $ 1,972 $ 3,455 $ 4,042
Net income per common share
Primary . . . . . . . . . . . . . . . . . $ 0.47 $ 0.48 $ 0.83 $ 0.75
Fully diluted . . . . . . . . . . . . . . n/a n/a n/a 0.72
Average shares outstanding
Primary . . . . . . . . . . . . . . . . . 4,091,295 4,108,262 4,151,552 5,337,645
Fully diluted . . . . . . . . . . . . . . 4,091,295 4,806,653 6,297,168 7,647,519
</TABLE>
38
<PAGE>
INFORMATION ABOUT CAROLINA FIRST CORPORATION
In General
Carolina First Corporation. Carolina First Corporation is a bank
holding company headquartered in Greenville, South Carolina which
engages in a general banking business through its two subsidiaries:
Carolina First Bank and Carolina First Mortgage Company, which is a
mortgage loan origination and servicing company headquartered in
Columbia, South Carolina. Carolina First Corporation, which
commenced operations in December 1986, currently conducts business in
47 locations in South Carolina and is the fifth largest independent
South Carolina-headquartered financial institution holding company.
At September 30, 1994, it had total assets of approximately $1.07
billion, total loans of approximately $816 million and total deposits
of approximately $940 million.
Carolina First Corporation was formed principally in response to
opportunities resulting from the takeovers of several South
Carolina-based banks by large southeastern regional bank holding
companies. A significant number of Carolina First Corporation'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 Carolina First Corporation's loan and deposit growth. Carolina
First Corporation targets individuals and small to medium-sized
businesses in South Carolina that require a full range of quality
banking services typically provided by larger regional banking
concerns, but that prefer the personalized service afforded by a
South Carolina-based institution.
Carolina First Corporation's objective is to become the leading
South Carolina-based banking institution headquartered in the state.
It believes that it can accomplish this goal by being a "super-
community" bank which offers both the personalized service and
"relationship" banking typically found in community banks, as well as
the sophisticated banking products offered by the regional and super-
regional institutions. Carolina First Corporation 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). Carolina First Corporation's principal market areas are
located in three of the four largest Metropolitan Statistical Areas
of the state.
Carolina First Corporation 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. Its more significant acquisitions include the
acquisition in August 1990 of First Federal Savings and Loan
Association of Georgetown (subsequently renamed Carolina First
Savings Bank, which was subsequently merged into Carolina First Bank
on January 20, 1995) and the acquisition of 12 branch locations of
Republic National Bank in March 1993, in which deposits of
approximately $190 million were assumed. Approximately half of
Carolina First Corporation's total deposits have been generated
through acquisitions. Carolina First Corporation anticipates that it
will continue to expand in the future and is frequently in
discussions regarding possible acquisitions. See "--Recent
Developments."
Carolina First Corporation is a legal entity separate and
distinct from its subsidiary bank and non-banking subsidiary.
Accordingly, the right of Carolina First Corporation, and thus the
right of Carolina First Corporation's creditors and shareholders, to
participate in any distribution of the assets or earnings of any
subsidiary is necessarily subject to the prior claims of creditors of
the subsidiary, except to the extent that claims of Carolina First
Corporation in its capacity as a creditor may be recognized. The
principal source of Carolina First Corporation's revenues is
dividends from its subsidiaries. See "--Certain Regulatory Matters" for a
39
<PAGE>
discussion of regulatory restrictions on the ability of certain
subsidiaries to pay dividends to Carolina First Corporation.
Carolina First Bank. Carolina First Bank is a South Carolina-
chartered, non-member bank and a wholly-owned subsidiary of Carolina
First Corporation. It engages in a general banking business through
44 locations, which are located throughout South Carolina. It began
its operations in December 1986 and at September 30, 1994, had total
assets of approximately $805 million, total loans of approximately
$609 million and total deposits of approximately $717 million. Its
deposits are insured by the FDIC.
Recent Developments
Corporate Reorganization. In General. In the fourth quarter of
1994, Carolina First Corporation initiated a reorganization which was
designed to improve the long-term competitive position of Carolina
First Corporation. This reorganization had several different
components, although none of the components were contingent upon or
related to the other components. The reorganization involved the
merger of Carolina First Savings Bank and Carolina First Bank, the
transfer of Carolina First Bank's credit card portfolio off balance
sheet to a master trust, and the write-off of certain intangible
assets. In connection with these transactions, Carolina First
Corporation incurred in the fourth quarter of 1994, an aggregate one-
time, after-tax write-down of approximately $6 million and a tax
liability of $1 million. Such writedowns offset all earnings of
Carolina First Corporation in 1994. However, Carolina First
Corporation expects that on a going-forward basis, the aggregate
effect of the reorganization will be to increase Carolina First
Corporation's pre-tax income by approximately $2.8 million a year.
The reorganization was undertaken by Carolina First Corporation in an
effort to improve its financial performance by reducing expenses and
finding alternative off-balance sheet income sources. Absent the
one-time charge associated with these corporate transactions,
Carolina First Corporation anticipates that it would have had net
income of approximately $7 million during 1994.
Merger of Carolina First Savings Bank and Carolina First Bank.
In 1990, Carolina First Corporation acquired First Federal Savings
and Loan Association of Georgetown, which was subsequently renamed
Carolina First Savings Bank ("CF Savings Bank"). From 1990 until its
merger with Carolina First Bank on January 20, 1995, CF Savings Bank
was operated as a separate savings bank subsidiary of Carolina First
Corporation. As part of the reorganization, Carolina First
Corporation determined to merge CF Savings Bank into Carolina First
Bank. In connection with such merger, Carolina First Corporation
incurred a one-time tax liability of approximately $1 million as a
result of the different tax treatment accorded the allowance for loan
losses of CF Savings Bank and Carolina First Bank. This merger is
expected to result in significant savings for Carolina First
Corporation on a going-forward basis, primarily as a result of the
elimination of duplicative administration, the reduction of
regulatory burdens and the facilitation of corporate management.
Securitization of Credit Card Portfolio. In December 1994,
Carolina First Bank began negotiations with an investment banking
firm with a view toward securitization of substantially all of its
credit card portfolio. These negotiations are ongoing and Carolina
First Bank expects to consummate such securitization, which is
described below, in late January 1995. As a result of the pending
securitization and in anticipation of its consummation, Carolina
First Bank wrote down approximately $4 million (after-tax) in
intangible assets in the fourth quarter of 1994. Although, Carolina
First Bank believes that such securitization will be consummated, no
assurance of such fact may be given.
In connection with the securitization, Carolina First Bank
expects to transfer substantially all of its credit card accounts and
receivables (approximately $100 million) to a trust. Carolina First
Bank will retain an interest in approximately 30% of the assets of
the trust, while certain interests in approximately 70% of the trust
will be sold to accredited institutional investors. The various
interests in the trust will have different rights with respect to the
income of the trust, and a substantial portion of Carolina First
Bank's interest will be subordinated
40
<PAGE>
(with respect to losses) to such
institutional investors' interests. One of the principal benefits of
this structure is that Carolina First Bank will receive income from
the trust (assuming its continued viability), while the assets
(except for the 30% interest retained) are not included on Carolina
First Bank's balance sheet. In addition, this transaction is
expected to provide Carolina First Bank with significant liquidity to
make loans in its market areas. The trust documents provide that the
trust arrangement may be terminated in certain events, including in
the event that credit card loan losses exceed a stated percentage or
in the event that principal repayments exceed a stated percentage.
In the event that the trust is terminated, Carolina First Corporation
will generally not be required to repurchase the credit card accounts
represented by the 70% interest sold to accredited institutional
investors. Carolina First Corporation believes that the liability
associated with the securitization is not materially greater than the
liability that would exist if Carolina First Bank retained its credit
card portfolio.
Writedown of Certain Intangible Assets. In the third quarter
of 1994, Carolina First Corporation retained a consulting firm to
determine whether any of its intangible assets were impaired and
should be written off. Such intangible assets were created
principally in connection with acquisitions of financial institutions
and financial assets, and the origination of credit card accounts.
Such study determined that Carolina First Corporation should write
off after-tax approximately $2 million in intangible assets
associated with the origination of credit card accounts. Such
writedown occurred in the fourth quarter of 1994 in connection with
the securitization of Carolina First Bank's credit card portfolio and
the merger of CF Savings Bank into Carolina First Bank.
Proposed Acquisition of Midlands National Bank. On November 14,
1994, Carolina First Corporation and Carolina First Bank entered into
a reorganization agreement with Midlands National Bank ("Midlands
National"), which provides for the acquisition of Midlands National
by Carolina First Corporation through the merger of Midlands National
with and into Carolina First Bank (the "Midlands Transaction"). The
Midlands Transaction is expected to be accounted for as a pooling-of-
interests and to result in the issuance of up to 584,000 shares of
CFC common stock in exchange for the outstanding shares of Midlands
National common stock. At December 31, 1994, Midlands National
operated through three locations in Prosperity, Newberry and Chapin,
South Carolina and had approximately $43 million in assets. In
connection with the Midlands Transaction, Carolina First Bank is
expected to receive approximately $28 million in loans and
approximately $38 million in deposits. At September 30, 1994,
Midlands National's non-performing assets (which includes loans which
are 90 days or more past due and still accruing interest) totalled
2.62% of total loans and other real estate owned. For the years
ended December 31, 1992 and 1993, Midlands National had net income of
$214,000 and $338,000, respectively. For the nine months ended
September 30, 1994, Midlands National had net income of $341,000.
Carolina First Corporation has filed all regulatory applications
necessary to its acquisition of Midlands National. Such regulatory
applications are currently pending. This transaction requires the
approval of the Midlands National Bank shareholders. Although
Carolina First Corporation expects that its acquisition of Midlands
National will be consummated in March or April of 1995, no assurance
of such fact may be given. For additional information concerning the
Midlands Transaction and its anticipated effect on Carolina First
Corporation, see "PRO FORMA COMBINED FINANCIAL INFORMATION" above.
Other Acquisitions. Carolina First Corporation continues to
explore opportunities to acquire banks and other companies engaging
in financial institutions-related activities. It is not presently
known whether, or on what terms, such discussions will result in
further acquisitions. Carolina First Corporation's acquisition
strategy is flexible in that it does not require Carolina First
Corporation to effect specific acquisitions so as to enter certain
markets or to attain specified growth levels. Rather than being
market driven or size motivated, Carolina First Corporation's
acquisition strategy reflects its willingness to consider potential
acquisitions wherever and whenever such opportunities arise based on
the then-existing market conditions and other circumstances.
Carolina First Corporation's acquisitions may be made by the exchange
of stock, through cash purchases, or with other consideration. Other
than as described above, Carolina First Corporation does not
41
<PAGE>
currently have any definitive understandings or agreements for any
acquisitions material to Carolina First Corporation. However,
Carolina First Corporation anticipates that it will continue to
expand by acquisition in the future.
Market Prices of and Dividends Paid on CFC Common Stock
The CFC common stock is, and the CFC Shares offered hereby will
be, traded on the Nasdaq National Market. The following table sets
forth, for the periods indicated, the high and low reported closing
sale prices per share of CFC common stock as reported by the Nasdaq
Stock Market and the cash dividends per share of the CFC common
stock. The dividend and stock price information has been adjusted to
reflect stock dividends.
Price Range of CFC Common Stock
High Low Dividends
1992
First Quarter . . . . . . . . . . $ 9.50 $ 7.34 $ --
Second Quarter. . . . . . . . . . 9.75 8.16 --
Third Quarter . . . . . . . . . . 10.66 8.62 --
Fourth Quarter. . . . . . . . . . 12.02 10.20 --
1993
First Quarter . . . . . . . . . . $11.79 $10.43 $ --
Second Quarter. . . . . . . . . . 12.38 10.48 --
Third Quarter . . . . . . . . . . 12.38 11.43 --
Fourth Quarter. . . . . . . . . . 14.05 11.67 --
1994
First Quarter . . . . . . . . . . $12.86 $11.43 $0.05
Second Quarter. . . . . . . . . . 15.00 12.50 0.05
Third Quarter . . . . . . . . . . 15.75 14.00 0.05
Fourth Quarter. . . . . . . . . . 14.00 13.25 0.06
Carolina First Corporation intends to continue its present policy
of paying quarterly cash dividends to its shareholders. However, the
timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of Carolina First Corporation
and its subsidiaries, applicable government regulations and other
factors deemed relevant by Carolina First Corporation management. As
described under "--Certain Regulatory Matters," various state and
federal laws limit the ability of Carolina First Bank to pay
dividends to Carolina First Corporation.
Special Considerations
In addition to the other information contained in this Proxy
Statement/Prospectus, the following factors should be considered
carefully when evaluating Carolina First Corporation and the CFC
common stock.
Dependence on Senior Management. Carolina First Corporation is
dependent upon the services of certain of the senior executive
officers of Carolina First Corporation and its subsidiaries. The
loss of the services of one or more of such individuals could have an
adverse effect on Carolina First Corporation. No assurance can be
given that replacements for any of these officers could be employed
if their services were no longer available. Carolina First
Corporation maintains key employee insurance on Mack I. Whittle, Jr.,
Carolina First Corporation's Chief Executive Officer.
42
<PAGE>
Growth Through Acquisitions. Carolina First Corporation has
experienced significant growth in assets as a result of acquisitions.
Moreover, Carolina First Corporation anticipates engaging in selected
acquisitions of financial institutions and branch locations in the
future. There are certain risks associated with Carolina First
Corporation's acquisition strategy that could adversely impact net
income. Such risks include, among others, incorrectly assessing the
asset quality of a particular institution being acquired,
encountering greater than anticipated costs of incorporating acquired
businesses into Carolina First Corporation and being unable to
profitably deploy funds acquired in an acquisition. Furthermore,
there can be no assurance as to the extent that Carolina First
Corporation can continue to grow through acquisitions. In the past,
Carolina First Corporation has engaged in acquisitions accounted for
by the purchase method of accounting. Acquisitions accounted for by
the purchase method of accounting may lower the capital ratios of the
entities involved. Consequently, in the event that Carolina First
Corporation engages in significant acquisitions accounted for by the
purchase method of accounting in the future, Carolina First
Corporation may be required to raise additional capital in order to
maintain capital levels required by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"). In the future,
Carolina First Corporation may issue capital stock in connection with
additional acquisitions accounted for as a pooling of interests.
Such acquisitions and related issuances of stock may have a dilutive
effect on earnings per share and ownership.
Anti-takeover Measures. Carolina First Corporation has certain
anti-takeover measures in place. These include (i) a Shareholders'
Rights Plan which, among other things, provides for the dilution of
the CFC common stock holdings of certain shareholders who acquire 20%
or more of the CFC common stock and attempt to acquire Carolina First
Corporation without the consent of management, (ii) certain
management contracts which provide for additional management
compensation in the event that executive officers who are a party
thereto are terminated after a change in control of Carolina First
Corporation, and (iii) various charter provisions providing for,
among other things, a "staggered" board of directors and
supermajority voting requirements in connection with the removal of
directors without cause and certain business combinations involving
Carolina First Corporation. Any one or more of these measures may
impede the takeover of Carolina First Corporation without the
approval of Carolina First Corporation's Board of Directors. See
"CAROLINA FIRST CORPORATION CAPITAL STOCK."
Incorporation of Certain Information By Reference
The following documents are hereby incorporated by reference:
Carolina First Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993;
Carolina First Corporation's Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, 1994, June 30, 1994 and
September 30, 1994;
Carolina First Corporation's Current Reports on Form 8-K dated
May 2, 1994 and November 22, 1994; and
The description of the CFC common stock which is contained in
its registration statements filed under Section 12 of the
Exchange Act, including any amendment or report filed for the
purpose of updating such description.
All documents filed by Carolina First Corporation pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the Special Meeting shall be deemed to be
incorporated by
43
<PAGE>
reference in this Proxy Statement/Prospectus and to
be a part hereof from the respective dates of filing of such
documents.
Any statement contained herein or in a document incorporated
herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently-filed document which
also is incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement/Prospectus.
Certain Regulatory Matters
General
Carolina First Corporation and its subsidiaries are extensively
regulated under federal and state law. To the extent that the
following information describes statutory or regulatory provisions,
it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in applicable laws
may have a material effect on the business and prospects of Carolina
First Corporation. The operations of Carolina First Corporation may
be affected by possible legislative and regulatory changes and by the
monetary policies of the United States.
Carolina First Corporation. As a bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
Carolina First Corporation is subject to regulation and supervision
by the Federal Reserve. Under the BHCA, Carolina First Corporation's
activities and those of its subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing
services for its subsidiaries or engaging in any other activity that
the Federal Reserve determines to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
The BHCA prohibits Carolina First Corporation from acquiring direct
or indirect control of more than 5% of any class of outstanding
voting stock, or substantially all of the assets of any bank, or
merging or consolidating with another bank holding company without
prior approval of the Federal Reserve. The BHCA also prohibits
Carolina First Corporation from acquiring control of any bank
operating outside the State of South Carolina (until September 29,
1995) unless such action is specifically authorized by the statutes
of the state where the bank to be acquired is located. See " --
Certain Regulatory Matters--Interstate Banking."
Additionally, the BHCA prohibits Carolina First Corporation from
engaging in or from acquiring ownership or control of more than 5% of
the outstanding voting stock of any company engaged in a nonbanking
business unless such business is determined by the Federal Reserve to
be so closely related to banking or managing or controlling banks as
to be properly incident thereto. The BHCA generally does not place
territorial restrictions on the activities of such nonbanking-related
entities.
Further, the Federal Deposit Insurance Act, as amended ("FDIA"),
authorizes the merger or consolidation of any Bank Insurance Fund
("BIF") member with any Savings Association Insurance Fund ("SAIF")
member, the assumption of any liability by any BIF member to pay any
deposits of any SAIF member or vice versa, or the transfer of any
assets of any BIF member to any SAIF member in consideration for the
assumption of liabilities of such BIF member or vice versa, provided
that certain conditions are met and, in the case of any acquiring,
assuming or resulting depository institution which is a BIF member,
that such institution continues to make payment of SAIF assessments
on the portion of liabilities attributable to any acquired, assumed
or merged SAIF-insured institution (or, in the case of any acquiring,
assuming or resulting depository institution
44
<PAGE>
which is a SAIF member,
that such institution continues to make payment of BIF assessments on
the portion of liabilities attributable to any acquired, assumed or
merged BIF-insured institution).
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by
law and regulatory policy that are designed to minimize potential
loss exposure to the depositors of such depository institutions and
to the FDIC insurance funds in the event the depository institution
becomes in danger of defaulting or in default under its obligations
to repay deposits. For example, under current federal law, to reduce
the likelihood of receivership of an insured depository institution
subsidiary, a bank holding company is required to guarantee the
compliance of any insured depository institution subsidiary that may
become "undercapitalized" with the terms of any capital restoration
plan filed by such subsidiary with its appropriate federal banking
agency up to the lesser of (i) an amount equal to 5% of the
institution's total assets at the time the institution became
undercapitalized, or (ii) the amount that is necessary (or would have
been necessary) to bring the institution into compliance with all
applicable capital standards as of the time the institution fails to
comply with such capital restoration plan. Under a policy of the
Federal Reserve with respect to bank holding company operations, a
bank holding company is required to serve as a source of financial
strength to its subsidiary depository institutions and to commit
resources to support such institutions in circumstances where it
might not do so absent such policy. The Federal Reserve also has the
authority under the BHCA to require a bank holding company to
terminate any activity or relinquish control of a nonbank subsidiary
(other than a nonbank subsidiary of a bank) upon the Federal
Reserve's determination that such activity or control constitutes a
serious risk to the financial soundness or stability of any
subsidiary depository institution of the bank holding company.
Further, federal law grants federal bank regulatory authorities
additional discretion to require a bank holding company to divest
itself of any bank or nonbank subsidiary if the agency determines
that divestiture may aid the depository institution's financial
condition.
In addition, the "cross-guarantee" provisions of the FDIA require
insured depository institutions under common control to reimburse the
FDIC for any loss suffered by either the SAIF or the BIF as a result
of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly
controlled insured depository institution in danger of default. The
FDIC may decline to enforce the cross-guarantee provisions if it
determines that a waiver is in the best interest of the SAIF or the
BIF, or both. The FDIC's claim for damages is superior to claims of
stockholders of the insured depository institution or its holding
company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the
commonly controlled insured depository institutions.
Carolina First Corporation is subject to the obligations and
restrictions described above. However, management currently does not
expect that any of these provisions will have any material impact on
its operations.
As a bank holding company registered under the South Carolina Bank
Holding Company Act, Carolina First Corporation also is subject to
regulation by the State Board. Consequently, Carolina First
Corporation must receive the approval of the State Board prior to
engaging in the acquisitions of banking institutions or assets.
Carolina First Corporation must also file with the State Board
periodic reports with respect to its financial condition and
operations, management, and intercompany relationships between
Carolina First Corporation and its subsidiaries.
Carolina First Bank. Carolina First Bank is an FDIC-insured,
South Carolina-chartered banking corporation and is subject to
various statutory requirements and rules and regulations promulgated
and enforced primarily by the State Board and the FDIC. These
statutes, rules and regulations relate to insurance of deposits,
required reserves, allowable investments, loans, mergers,
consolidations, issuance of securities, payment of dividends,
establishment of branches and other aspects of the business of
Carolina First Bank. The FDIC has broad
45
<PAGE>
authority to prohibit
Carolina First Bank from engaging in what it determines to be unsafe
or unsound banking practices. In addition, federal law imposes a
number of restrictions on state-chartered, FDIC-insured banks and
their subsidiaries. These restrictions range from prohibitions
against engaging as a principal in certain activities to the
requirement of prior notification of branch closings. Carolina First
Bank also is subject to various other state and federal laws and
regulations, including state usury laws, laws relating to
fiduciaries, consumer credit and equal credit and fair credit
reporting laws. Carolina First Bank is not a member of the Federal
Reserve System.
Dividends. The holders of CFC common stock are entitled to
receive dividends when and if declared by the Board of Directors out
of funds legally available therefor. The holders of Carolina First
Corporation's outstanding series of preferred stock are also entitled
to receive dividends when, as and if declared by the Board of
Directors in their discretion out of funds legally available therefor
and as set forth in Carolina First Corporation's Articles of
Incorporation. For a description of the dividends to which holders
of such preferred stock are entitled, see "CAROLINA FIRST CORPORATION
CAPITAL STOCK." Carolina First Corporation is a legal entity
separate and distinct from its subsidiaries and depends for its
revenues on the payment of dividends from its subsidiaries. Current
federal law would prohibit, except under certain circumstances and
with prior regulatory approval, an insured depository institution,
such as Carolina First Bank, from paying dividends or making any
other capital distribution if, after making the payment or
distribution, the institution would be considered "undercapitalized,"
as that term is defined in applicable regulations. In addition, as a
South Carolina-chartered bank, Carolina First Bank is subject to
legal limitations on the amount of dividends it is permitted to pay.
In particular, Carolina First Bank must receive the approval of the
South Carolina Commissioner of Banking prior to paying dividends to
Carolina First Corporation.
Capital Adequacy
Carolina First Corporation. The Federal Reserve has adopted
risk-based capital guidelines for bank holding companies. Under
these guidelines, the minimum ratio of total capital to risk-weighted
assets (including certain off-balance sheet activities, such as
standby letters of credit) is 8%. At least half of the total capital
is required to be "Tier 1 capital," principally consisting of common
stockholders' equity, noncumulative preferred stock, a limited amount
of cumulative perpetual preferred stock, and minority interests in
the equity accounts of consolidated subsidiaries, less certain
goodwill items. The remainder (Tier 2 capital) may consist of a
limited amount of subordinated debt and intermediate-term preferred
stock, certain hybrid capital instruments and other debt securities,
perpetual preferred stock, and a limited amount of the general loan
loss allowance. In addition to the risk-based capital guidelines,
the Federal Reserve has adopted a minimum Tier 1 (leverage) capital
ratio under which a bank holding company must maintain a minimum
level of Tier 1 capital (as determined under applicable rules) to
average total consolidated assets of at least 3% in the case of bank
holding companies which have the highest regulatory examination
ratios and are not contemplating significant growth or expansion.
All other bank holding companies are required to maintain a ratio of
at least 100 to 200 basis points above the stated minimum. At
September 30, 1994, Carolina First Corporation was in compliance with
both the risk-based capital guidelines and the minimum leverage
capital ratio, with consolidated Tier 1 capital of 8.84% of risk-
weighted assets, total capital of 9.47% of risk-weighted assets and a
leverage capital ratio of 6.73%.
Carolina First Bank. As a state-chartered, FDIC-insured
institution which is not a member of the Federal Reserve System,
Carolina First Bank is subject to capital requirements imposed by the
FDIC. The FDIC requires state-chartered nonmember banks to comply
with risk-based capital standards substantially similar to those
required by the Federal Reserve, as described above. The FDIC also
requires state-chartered nonmember banks to maintain a minimum
leverage ratio similar to that adopted by the Federal Reserve. Under
the FDIC's leverage capital requirement, state nonmember banks that
(a) receive the highest rating during the examination
46
<PAGE>
process and (b)
are not anticipating or experiencing any significant growth are
required to maintain a minimum leverage ratio of 3% of Tier 1 capital
to total assets; all other banks are required to maintain a minimum
ratio of 100 to 200 basis points above the stated minimum, with an
absolute minimum leverage ratio of not less than 4%. At September
30, 1994, Carolina First Bank had Tier 1 capital of 7.91% of
risk-weighted assets, total capital of 8.48% of risk-weighted assets,
and a leverage capital ratio of 6.36%.
Federal Deposit Insurance Corporation Improvement Act of 1991
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") required each federal banking agency to revise its
risk-based capital standards to ensure that those standards take
adequate account of interest rate risk, concentration of credit risk
and the risk of nontraditional activities, as well as reflect the
actual performance and expected risk of loss on multifamily
mortgages. The Federal Reserve, the FDIC and the OCC have issued a
joint advance notice of proposed rulemaking, and have issued a
revised proposal, soliciting comments on a proposed framework for
implementing these revisions. Under the proposal, an institution's
assets, liabilities, and off-balance sheet positions would be
weighted by risk factors that approximate the instruments' price
sensitivity to a 100 basis point change in interest rates.
Institutions with interest rate risk exposure in excess of a
threshold level would be required to hold additional capital
proportional to that risk. The notice also asked for comments on how
the risk-based capital guidelines of each agency may be revised to
take account of concentration and credit risk and the risk of
nontraditional activities. Carolina First Corporation cannot assess
at this point the impact the proposal would have on the capital
requirements of Carolina First Corporation or its subsidiary
depository institutions.
Insurance
As an FDIC-insured institution, Carolina First Bank is subject
to insurance assessments imposed by the FDIC. Under current law, the
insurance assessment to be paid by BIF-insured institutions shall be
as specified in a schedule required to be issued by the FDIC that
specifies, at semiannual intervals, target reserve ratios designed to
increase the FDIC insurance fund's reserve ratio to 1.25% of
estimated insured deposits (or such higher ratio as the FDIC may
determine in accordance with the statute) in 15 years. Further, the
FDIC is authorized to impose one or more special assessments in any
amount deemed necessary to enable repayment of amounts borrowed by
the FDIC from the United States Department of the Treasury (the
"Treasury Department").
Effective January 1, 1993, the FDIC implemented a risk-based
assessment schedule, having assessments ranging from 0.23% to 0.31%
of an institution's average assessment base. The actual assessment
to be paid by each BIF member is based on the institution's
assessment risk classification, which is determined based on whether
the institution is considered "well capitalized," "adequately
capitalized" or "undercapitalized," as such terms have been defined
in applicable federal regulations adopted to implement the prompt
corrective action provisions of FDICIA (see "--Certain Regulatory
Matters--Other Safety and Soundness Regulations"), and whether such
institution is considered by its supervisory agency to be financially
sound or to have supervisory concerns. As a result of the current
provisions of federal law, the assessment rates on deposits could
increase over the next 15 years over present levels. Based on the
current financial condition and capital levels of Carolina First
Bank, Carolina First Corporation does not expect that the current BIF
risk-based assessment schedule will have a material adverse effect on
Carolina First Bank's earnings. Carolina First Bank's risk-based
insurance assessment currently is set at 0.26% of its average
assessment base.
In connection with the merger of CF Savings Bank into Carolina
First Bank and Carolina First Bank's assumption of other SAIF-insured
deposits in connection with various acquisitions, approximately 28% of
47
<PAGE>
Carolina First Bank's total deposits are subject to SAIF insurance
assessments imposed by the FDIC. Under current law, the insurance
assessment to be paid by SAIF-insured institutions must be the
greater of 0.15% of the institution's average assessment base (as
defined) or such rate as the FDIC, in its sole discretion, determines
to be appropriate to be able to increase (or maintain) the SAIF
reserve ratio to 1.25% of estimated insured deposits (or such higher
ratio as the FDIC may determine in accordance with the statute)
within a reasonable period of time. From January 1, 1994 through
December 31, 1997, the assessment rate must not be less than 0.18% of
the institution's average base assessment. In each case, the
assessment rate may be higher if the FDIC, in its sole discretion,
determines a higher rate to be appropriate. In addition, the FDIC
has adopted for SAIF assessments the risked based assessment schedule
described above. Carolina First Bank's risk-based insurance
assessment on its SAIF-insured deposits has been set at 0.23% of its
average assessment base.
Other Safety and Soundness Regulations
Prompt Corrective Action. Current law provides the federal
banking agencies with broad powers to take prompt corrective action
to resolve problems of insured depository institutions. The extent
of these powers depends upon whether the institutions in question are
"well capitalized, "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized."
Under uniform regulations defining such capital levels issued by each
of the federal banking agencies, a bank is considered "well
capitalized" if it has (i) a total risk-based capital ratio of 10% or
greater, (ii) a Tier 1 risk-based capital ratio of 6% or greater,
(iii) a leverage ratio of 5% or greater, and (iv) is not subject to
any order or written directive to meet and maintain a specific
capital level for any capital measure. An "adequately capitalized"
bank is defined as one that has (i) a total risk-based capital ratio
of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or
greater, and (iii) a leverage ratio of 4% or greater (or 3% or
greater in the case of a bank with a composite CAMEL rating of 1). A
bank is considered (A) "undercapitalized" if it has (i) a total risk-
based capital ratio of less than 8%, (ii) a Tier 1 risk-based capital
ratio of less than 4%, or (iii) a leverage ratio of less than 4% (or
3% in the case of a bank with a composite CAMEL rating of 1);
(B) "significantly undercapitalized" if the bank has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based
capital ratio of less than 3%, or (iii) a leverage ratio of less than
3%; and (C) "critically undercapitalized" if the bank has a ratio of
tangible equity to total assets equal to or less than 2%. Carolina
First Corporation and Carolina First Bank each currently meet the
definition of adequately capitalized.
Brokered Deposits. Current federal law also regulates the
acceptance of brokered deposits by insured depository institutions to
permit only a "well capitalized" depository institution to accept
brokered deposits without prior regulatory approval. Under FDIC
regulations, "well capitalized" insured depository institutions may
accept brokered deposits without restriction, "adequately
capitalized" insured depository institutions may accept brokered
deposits with a waiver from the FDIC (subject to certain restrictions
on payments of interest rates) while "undercapitalized" insured
depository institutions may not accept brokered deposits. The
regulations provide that the definitions of "well capitalized,"
"adequately capitalized" and "undercapitalized" are the same as the
definitions adopted by the agencies to implement the prompt
corrective action provisions of FDICIA (as described in the previous
paragraph). Carolina First Corporation does not believe that these
regulations will have a material adverse effect on its current
operations.
Other FDICIA Regulations. To facilitate the early identification
of problems, FDICIA required the federal banking agencies to review
and, under certain circumstances, prescribe more stringent accounting
and reporting requirements than those required by generally accepted
accounting principles. The FDIC has issued final regulations
implementing those provisions. The rule, among other things,
requires that management report on the institution's responsibility
for preparing financial statements and establishing and maintaining
an internal control structure and procedures for financial reporting
and compliance with designated laws and regulations
48
<PAGE>
concerning safety
and soundness, and that independent auditors attest to and report
separately on assertions in management's reports concerning
compliance with such laws and regulations, using FDIC approved audit
procedures.
FDICIA required each of the federal banking agencies to develop
regulations addressing certain safety and soundness standards for
insured depository institutions (such as Carolina First Bank) and
depository institution holding companies (such as Carolina First
Corporation), including operational and managerial standards, asset
quality, earnings and stock valuation standards, as well as
compensation standards (but not dollar levels of compensation). Each
of the federal banking agencies has issued a joint notice of proposed
rulemaking, which requested comment on the implementation of these
standards. The proposed rule sets forth general operational and
managerial standards in the areas of internal controls, information
systems and internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth and compensation
fees and benefits. The proposed rule also establishes a maximum
ratio of classified assets to capital, and requires institutions to
meet minimum capital standards as a measure of whether such
institutions have minimum earnings sufficient to absorb losses
without impairing capital. Finally, the proposed rule would define
compensation as excessive if it is unreasonable or disproportionate
to the services actually performed. Bank holding companies would not
be subject to the standards on compensation. The proposal
contemplates that each federal agency would determine compliance with
these standards through the examination process, and if necessary to
correct weaknesses, require an institution to file a written safety
and soundness compliance plan. Carolina First Corporation has not
yet determined the effect the proposed rule would have on its
operations and the operations of its depository institution
subsidiary if it is adopted substantially as proposed.
Community Reinvestment Act
Carolina First Bank is subject to the requirements of the CRA.
The CRA requires that financial institutions have an affirmative and
ongoing obligation to meet the credit needs of their local
communities, including low- and moderate-income neighborhoods,
consistent with the safe and sound operation of those institutions.
Each financial institution's efforts in meeting community credit
needs are evaluated as part of the examination process pursuant to
twelve assessment factors. These factors also are considered in
evaluating mergers, acquisitions and applications to open a branch or
facility. Carolina First Bank received an outstanding rating in its
most recent evaluation.
As a result of a Presidential initiative, each of the federal
banking agencies has issued a notice of proposed rulemaking that
would replace the current CRA assessment system with a new evaluation
system that would rate institutions based on their actual performance
(rather than efforts) in meeting community credit needs. Under the
proposal, each institution would be evaluated based on the degree to
which it is providing loans (the lending test), branches and other
services (the service test) and investments to low- and
moderate-income areas (the investment test). Under the lending test,
as proposed, an institution would be evaluated on the basis of its
market share of reportable loans in low- and moderate-income areas in
comparison to other lenders subject to CRA in its service area, and
in comparison with the institution's market share of reportable loans
in other service areas. An institution would be evaluated under the
investment test based on the amount of investments made that have had
a demonstrable impact on low- and moderate-income areas or persons as
compared to its risk-based capital. The service test would evaluate
a retail institution primarily based on the percentage of its
branches located in, or that are readily accessible to, low- and
moderate-income areas. Each depository institution would have to
report to its federal supervisory agency and make available to the
public data on the geographic distribution of its loan applications,
denials, originations and purchases. Small institutions could elect
to be evaluated under a streamlined method that would not require
them to report this data. All institutions, however, would receive
one of five ratings based on their performance: Outstanding, High
49
<PAGE>
Satisfactory, Low Satisfactory, Needs to Improve or Substantial
Noncompliance. An institution that received a rating of Substantial
Noncompliance would be subject to enforcement action. Carolina First
Corporation currently is studying the proposal and determining
whether the regulation, if adopted, would require changes to Carolina
First Bank's CRA action plans.
Transactions Between Carolina First Corporation, Its Subsidiaries
and Affiliates
Carolina First Corporation's subsidiaries are subject to certain
restrictions on extensions of credit to executive officers,
directors, principal stockholders or any related interest of such
persons. Extensions of credit (i) must be made on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unaffiliated
persons; and (ii) must not involve more than the normal risk of
repayment or present other unfavorable features. Aggregate
limitations on extensions of credit also may apply. Carolina First
Corporation's subsidiaries also are subject to certain lending limits
and restrictions on overdrafts to such persons.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of
credit to the bank holding company or its nonbank subsidiary, on
investments in their securities and on the use of their securities as
collateral for loans to any borrower. Such restrictions may limit
Carolina First Corporation's ability to obtain funds from its bank
subsidiary for its cash needs, including funds for acquisitions,
interest and operating expenses.
In addition, under the BHCA and certain regulations of the Federal
Reserve, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of
services. For example, a subsidiary may not generally require a
customer to obtain other services from any other subsidiary or
Carolina First Corporation, and may not require the customer to
promise not to obtain other services from a competitor, as a
condition to an extension of credit to the customer.
Interstate Banking
In 1986, South Carolina adopted legislation which permitted banks
and bank holding companies in certain southern states to acquire
banks in South Carolina to the extent that such other states had
reciprocal legislation which was applicable to South Carolina banks
and bank holding companies. The legislation resulted in a number of
South Carolina banks being acquired by large out-of-state bank
holding companies. Size gives the larger banks certain advantages in
competing for business from large corporations. These advantages
include higher lending limits and the ability to offer services in
other areas of South Carolina and the region. As a result, Carolina
First Corporation does not generally attempt to compete for the
banking relationships of large corporations, but concentrates its
efforts on small to medium-sized businesses and on individuals.
Carolina First Corporation believes it has competed effectively in
this market segment by offering quality, personal service.
In July 1994, South Carolina enacted legislation which effectively
provides that, after June 30, 1996, out-of-state bank holding
companies (including bank holding companies in the Southern Region,
as defined under the statute) may acquire other banks or bank holding
companies having offices in South Carolina upon the approval of the
South Carolina State Board of Financial Institutions and assuming
compliance with certain other conditions, including that the effect
of the transaction not lessen competition and that the laws of the
state in which the out-of-state bank holding company filing the
applications has its principal place of business permit South
Carolina bank holding companies to acquire banks and bank holding
companies in that state. Although
50
<PAGE>
such legislation may increase
takeover acitivity in South Carolina, Carolina First Corporation does
not believe that such legislation will have a material impact on its
competitive position. However, no assurance of such fact may be
given.
Congress recently enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, which will increase the ability of
bank holding companies and banks to operate across state lines.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, the existing restrictions on interstate acquisitions of
banks by bank holding companies will be repealed one year following
enactment, such that Carolina First Corporation and any other bank
holding company located in South Carolina would be able to acquire a
bank located in any other state, and a bank holding company located
outside South Carolina could acquire any South Carolina-based bank,
in either case subject to certain deposit percentage and other
restrictions. The legislation also provides that, unless an
individual state elects beforehand either (i) to accelerate the
effective date or (ii) to prohibit out-of-state banks from operating
interstate branches within its territory, on or after June 1, 1997,
adequately capitalized and managed bank holding companies will be
able to consolidate their multistate bank operations into a single
bank subsidiary and to branch interstate through acquisitions. De
novo branching by an out-of-state bank would be permitted only if it
is expressly permitted by the laws of the host state. The authority
of a bank to establish and operate branches within a state will
continue to be subject to applicable state branching laws. Carolina
First Corporation believes that this legislation may result in
increased takeover activity of South Carolina financial institutions
by out-of-state financial institutions. However, Carolina First
Corporation does not presently anticipate that such legislation will
have a material impact on its operations or future plans.
Change in Bank Control
The BHCA and the Change in Bank Control Act, together with
regulations promulgated by the Federal Reserve, require that,
depending on the particular circumstances, either Federal Reserve
approval must be obtained or notice must be furnished to the Federal
Reserve and not disapproved prior to any person or company acquiring
control of a bank holding company, such as Carolina First
Corporation, subject to certain exemptions for certain transactions.
Control is conclusively presumed to exist if an individual or company
acquires 25% or more of any class of voting securities of the bank
holding company. Control is rebuttably presumed to exist if a person
acquires 10% or more but less than 25% of any class of voting
securities and either the company has registered securities under
Section 12 of the Exchange Act (which Carolina First Corporation has
done with respect to the Common Stock) or no other person will own a
greater percentage of that class of voting securities immediately
after the transaction. The regulations provide a procedure for
challenge of the rebuttable control presumption.
Approval of Senior Officers. Banks and their holding companies
which have undergone a change in control within the past two years or
which have been deemed by their primary federal bank regulator to be
troubled institutions must give their primary federal bank regulator
or the Federal Reserve, respectively, 30 days prior notice of the
appointment of any senior executive officer or director. Within the
30 day period, their primary federal bank regulator or the Federal
Reserve, as the case may be, may approve or disapprove any such
appointment. Neither Carolina First Corporation nor Carolina First
Bank currently meet the criteria which trigger this additional
approval.
51
<PAGE>
Other Regulations
Interest and certain other charges collected or contracted for by
Carolina First Bank and Carolina First Mortgage Company are subject
to state usury laws and certain federal laws concerning interest
rates. Carolina First Bank's and Carolina First Mortgage Company's
loan operations are also subject to certain federal laws applicable
to credit transactions, such as the federal Truth-In-Lending Act
governing disclosures of credit terms to consumer borrowers, CRA
requiring financial institutions to meet their obligations to provide
for the total credit needs of the communities they serve, including
investing their assets in loans to low- and moderate-income
borrowers, the Home Mortgage Disclosure Act of 1975 requiring
financial institutions to provide information to enable the public
and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the
community it serves, the Equal Credit Opportunity Act prohibiting
discrimination on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act of 1978
governing the use and provision of information to credit reporting
agencies, the Fair Debt Collection Act governing the manner in which
consumer debts may be collected by collection agencies, and the rules
and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws. The deposit
operations of Carolina First Bank also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial
records, and the Electronic Funds Transfer Act and Regulation E
issued by the Federal Reserve to implement that act, which govern
automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated
teller machines and other electronic banking services.
52
<PAGE>
INFORMATION ABOUT ACNB
General
ACNB is a national bank which was chartered in 1987. ACNB
operates from its main office at 142 Chesterfield Street, S.E., and a
branch office at 2040 Whiskey Road in Aiken, South Carolina. ACNB's
primary market area is comprised of the City of Aiken and the
immediately surrounding area. Its broader market includes all of
Aiken County and, to a limited extent, the surrounding counties.
ACNB offers a full range of commercial banking services. Deposit
services include business and personal checking accounts, NOW
accounts, savings accounts, money market accounts, various term
certificates of deposit, IRA accounts, Christmas Club accounts and
other deposit services. All deposits are insured up to applicable
limits by the FDIC. Most of ACNB's deposit customers are individuals
and small businesses.
ACNB offers secured and unsecured, short- to intermediate-term
loans, with floating and fixed interest rates for commercial and
consumer purposes. Consumer loans include car loans, boat loans,
mobile home loans, home equity improvement loans (secured by first
and second mortgages), personal expenditure loans, and education
loans. Commercial loans include short term unsecured loans, short
and intermediate term real estate mortgage loans, loans secured by
listed stocks, and loans secured by equipment, inventory and accounts
receivable. ACNB's loans are not concentrated within a single
industry or group of related industries.
Other services offered by ACNB include safe deposit boxes, night
depository service, VISA and Master Card credit cards (through a
correspondent bank), discount brokerage services, and twenty-four
hour automated teller service.
ACNB began its operations in 1987 and, accordingly, has a limited
history. Based on its experience to date, management has had no
indication that a significant portion of ACNB's business is seasonal.
At September 30, 1994, ACNB employed 30 persons full-time,
including 2 principal officers, and 3 part-time employees.
Management of ACNB believes that its employee relations are good.
Competition
The market for financial institutions in the Aiken area is highly
competitive, both with respect to generating deposits and with
respect to making commercial, mortgage and consumer loans. Banks
generally compete with other financial institutions through the
banking products and services offered, the pricing of services, the
level of service provided, the convenience and availability of
services, and the degree of expertise and personal concern with which
services are offered. ACNB encounters strong competition from most
of the financial institutions in ACNB's market area. In the conduct
of certain aspects of its banking business, ACNB also competes with
credit unions, consumer finance companies, insurance companies, money
market mutual funds and other financial institutions, some of which
are not subject to the same degree of regulation and restriction
imposed upon ACNB. Many of ACNB's competitors have substantially
greater resources and lending limits than ACNB and offer certain
services, such as international banking services and trust services,
that ACNB does not provide. Moreover, most of these competitors have
numerous branch offices located throughout the market area, a
competitive advantage that ACNB does not have. ACNB has attempted to
compensate for its smaller size by offering more personalized service
than many of its competitors.
53
<PAGE>
At December 31, 1994, there were a total of six FDIC-insured
banking institutions in the City of Aiken and the immediately
surrounding area (including ACNB). At such date, these institutions
operated through an aggregate of 16 banking locations.
Consent Agreement with the OCC
As a result of deficiencies found by the OCC in its March 10, 1992
Report of Examination of ACNB, in April, 1992, ACNB entered into a
written consent agreement with the OCC within the meaning of 12
U.S.C. (Section) 1818(e)(1) and (i)(2) (the "OCC Consent Agreement"). These
deficiencies principally related to problems with credit quality and
loan documentation, the absence of credit procedures, the need for
capable lending personnel and other problems related to management.
Pursuant to the OCC Consent Agreement, ACNB was required to make
certain changes in management, obtain a management study, improve its
loan administration and review policies and procedures, provide for
ongoing review and elimination of problem assets, provide for ongoing
review and maintenance of adequate loan loss allowances, increase its
regulatory capital levels, develop a three-year capital program,
amend and refile certain reports of condition with the FDIC, and
correct certain violations of law cited in OCC examination reports.
ACNB's Board of Directors was also required to establish a compliance
committee comprised of at least five directors who were not officers
of ACNB to monitor ACNB's compliance with the OCC Consent Agreement
and to submit periodic reports thereon to the Board of Directors to
be forwarded to the OCC.
Efforts to comply with the requirements of the OCC Consent
Agreement are ongoing. Such efforts are not only expensive to ACNB,
but also require the expenditure of significant amounts of time by
ACNB's senior management and Board of Directors. To date, the Board
of Directors has taken the following actions, among others, to comply
with the requirements of the OCC Consent Agreement:
1. The Board has appointed a compliance committee comprised of
five directors who are not officers of ACNB. The compliance
committee monitors ACNB's efforts pursuant to the OCC Consent
Agreement and provides monthly written progress reports to
the Board of Directors, which the Board then submits with its
comments to the OCC.
2. The Board has obtained a written report from an independent
outside management consultant relating to the adequacy of
staffing for current levels of operations and qualifications
of such staff to perform assigned duties. After receiving
the report, the compliance committee prepared and submitted
to the OCC a plan of implementation. Efforts to comply with
such plan are ongoing.
3. The Board has developed a written program to improve ACNB's
loan administration in the areas of (a) procedures to ensure
satisfactory and perfected collateral documentation; (b)
procedures to ensure renewals or extensions of credit are
subject to analysis of current, satisfactory credit
information; (c) procedures to ensure accuracy of internal
management information systems; and (d) procedures to ensure
reasonable repayment terms that relate directly to the source
of repayment. Efforts to implement this program are ongoing.
4. The Board has established an independent loan review system
to periodically review ACNB's loan portfolio to assure timely
identification and categorization of problem credits. The
review must be conducted at least semiannually and a report
must be filed with the Board after each review. The OCC has
been critical of the system established by the Board and the
Board's efforts to satisfy the OCC are continuing.
54
<PAGE>
5. The Board has revised ACNB's written policy setting forth
criteria under which renewals of extensions of credit may be
approved.
6. The Board has adopted a written program designed to eliminate
the basis of criticism of assets criticized in the OCC's
Report of Examination as "doubtful," "substandard," or "other
assets especially mentioned." Although the program is
structured according to the requirements of the OCC Consent
Agreement, implementation has been problematic because of the
unavailability of, or the difficulty in obtaining from
borrowers, the required information. The Board of Directors
is required to review certain aspects of this program on a
monthly basis. A copy of each review must be forwarded to
the OCC. Compliance with this program has been a continuing
source of criticism by the OCC.
7. The Board has adopted written policies and procedures
governing the supervision and control of nonaccrual loans and
for auditing accrued interest on loans.
8. The Board has reviewed the adequacy of ACNB's Allowance for
Loan and Lease Losses and has established a program for the
maintenance of an adequate Allowance. The program requires
quarterly review of the Allowance by the Board and
maintenance of written documentation indicating the factors
considered and conclusions reached by the Board in
determining the adequacy of the Allowance.
9. ACNB maintains capital levels not less than the minimums
required by the OCC Consent Agreement.
10. The Board has developed a three year capital program which
includes (a) specific plans for maintenance of adequate
capital; (b) projections for growth and capital
requirements based on a detailed analysis of ACNB's
assets, liabilities, earnings, fixed assets, and off-
balance sheet activities; (c) projections of the sources
and timing of additional capital to meet current and
future needs; and (d) a dividend policy that permits
declaration of a dividend only when ACNB is in compliance
with the capital program, and with the written approval of
the OCC. The capital program required approval of the OCC
and such approval has been granted. The Board is required
to review and update the program at least annually, or
more frequently if necessary, and to submit copies of its
reviews to the OCC.
11. The Board has caused ACNB to file amended Reports of
Condition and Income for the periods ended June 30, 1991
and September 30, 1991 and has adopted policies and
procedures to cause such reports to comply with OCC
guidelines.
The OCC Consent Agreement also required the Board to employ a
senior loan administrator with skills and experience necessary to
ensure effective supervision and administration of ACNB's lending
activities. The Board has not employed such a senior loan
administrator, and if the Merger is consummated, it will not be
necessary for ACNB to employ such a person. If, however, the Merger
is not consummated, ACNB will be required to employ a senior loan
administrator, and the cost to ACNB of employing such a person would
be expected to be significant.
The OCC Consent Agreement also requires ACNB to take all steps
necessary to correct each violation of law, rule or regulation cited
in any Report of Examination and to notify the OCC of the steps taken
in this regard. The Board is also required to adopt and implement
specific procedures to prevent future violations of law and to
implement procedures relating to compliance and internal control
systems. Although such procedures have been adopted and efforts at
compliance are ongoing, because of the complexity and volume of
applicable laws and regulations, ACNB has had difficulty implementing
the procedures. Furthermore, in some instances, correction of past
violations of law may be extremely difficult, if not impossible.
Accordingly, ACNB's compliance with the requirements of this portion
of the OCC Consent Agreement has been a source of continuing
criticism by the OCC.
55
<PAGE>
Although the Board has worked, and continues to work, diligently
and in good faith to comply with the requirements of the OCC Consent
Agreement, and has made substantial progress toward compliance, the
OCC may continue to criticize certain aspects of the compliance
effort. If the Board is unable to satisfy the OCC with its
compliance efforts, the OCC may decide to take further enforcement
action against ACNB. The Board believes that, with continued
diligence, it should be able to satisfy the OCC that it has
substantially complied with the requirements of the OCC Consent
Agreement, but there can be no assurance to that effect, and there
can be no assurance as to how long it would take to achieve such
result. While ACNB remains subject to the OCC Consent Agreement, it
continues to incur substantial expenses for compliance, which
necessarily have an adverse impact on net income. Furthermore,
compliance efforts, particularly the review and reporting require-
ments, consume a significant amount of the Board's and management's
time and tend to distract them from everyday efforts to operate ACNB
and increase earnings.
Dividends
As a national bank, ACNB's ability to pay dividends is restricted
by federal banking law and the regulations of the OCC. See "--
Supervision and Regulation of ACNB -- Payment of Dividends." ACNB
has never paid dividends. Furthermore, ACNB is presently a party to
the OCC Consent Agreement, which permits ACNB to pay dividends only
if it is in compliance with its approved capital program under such
agreement and has obtained the prior written approval of the OCC.
See " --Consent Agreement with the OCC."
Market Price of ACNB Common Stock and Related ACNB Stockholder
Matters
Trading in ACNB common stock is limited. There are no market
makers for the ACNB common stock, and it is not listed on any
exchange or with the Nasdaq Stock Market. Management is aware of
transactions in the ACNB common stock at prices ranging from $9.50 to
$13.50 per share over the past two years. The most recent trade of
which management is aware occurred in September, 1994 in which 3,400
shares were traded at $10.00 per share. Such trades may not be arm's
length transactions and may not be indicative of the market value of
the ACNB common stock.
For information regarding the stock ownership of certain persons,
including directors and executive officers of ACNB (both before and
after the Merger), see "MANAGEMENT INFORMATION -- Management and
Principal Shareholders of ACNB."
Recent Developments
ACNB took the following actions in the fourth quarter of 1994:
Investment Securities Portfolio. In December 1994, the ACNB
Board of Directors approved the sale of three U.S. Government
Agency securities at a loss of approximately $159,000. Proceeds
from these sales will be reinvested in loans or investment
securities with yields at higher current market rates.
Nonperforming Loans; Other Problem Assets. In the fourth
quarter of 1994, the reserve for other real estate was increased
$221,000 to a balance at December 31, 1994 of $236,000, or 20% of
the carrying value of other real estate. This adjusted reserve
balance more fully covers potential losses which may occur upon
the liquidation of other real estate based upon ongoing efforts to
sell such properties.
56
<PAGE>
Allowance For Loan Losses. Based upon its assessment of total
nonperforming loans, ACNB charged-off approximately $240,000 of
such loans in December 1994. These charge-offs, combined with the
additional provision for loan losses in the fourth quarter of
1994, will provide an allowance for loan losses to gross loans of
approximately 1.35% at December 31, 1994, compared to 1.98% at
December 31, 1993.
The combined effect of the above charges to earnings in the fourth
quarter will create a loss for the year ended December 31, 1994 of
approximately $250,000.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
financial statements of ACNB, the accompanying footnotes and
supplemental financial data contained herein.
Total assets decreased $1,335,000, or 3%, from December 31, 1992
to December 31, 1993. From December 31, 1993 to September 30, 1994,
total assets decreased $913,000, or 2%, to $43,039,000 at September
30, 1994. The decrease resulted generally from the continuation of
the strategy to reduce the level of higher-cost funds (particularly
CD's) and thereby increase the net interest margin.
Loans, net of unearned discounts, are ACNB's largest single
category of assets. From December 31, 1992 to December 31, 1993,
total loans, net of unearned discounts, decreased $1,215,000, or
4.1%. This decrease resulted primarily from the more stringent
lending standards implemented pursuant to the OCC Consent Agreement.
See " -- Consent Agreement with the OCC." From December, 31, 1993 to
September 30, 1994, ACNB's total loans increased $1,217,000, or 4.23%
to $29,996,000 at September 30, 1994. The increase in loans was
attributable to the addition of two new loan officers with experience
in ACNB's market.
Total investment securities increased $1,656,000, or 31%, from
December 31, 1992 to December 31, 1993. The increase in the
investment portfolio was funded largely through the investment of
excess cash, as cash and due from banks and federal funds sold
decreased by $1,693,000, or 26.7%, from December 31, 1992 to December
31, 1993. Total investment securities decreased $1,356,000, or
19.37%, from December 31, 1993 to September 30, 1994. As investment
securities matured or were sold, the proceeds were reinvested in
loans.
Total liabilities decreased $1,448,000, or 3.5%, from December 31,
1992 to December 31, 1993, largely as a result of a $1,339,000
decrease in total deposits. Time deposits of $100,000 or more,
comprised primarily of certificates of deposits and which represented
6.9% of total deposits at December 31, 1993, increased $102,000, or
3.84%, from December 31, 1992 to $2,762,000 at December 31, 1993.
The decrease in total deposits was attributable primarily to ACNB's
determination to lower deposit rates, in relation to its competition,
in order to lower its cost of funds and increase its net interest
margin. Total liabilities decreased $1,019,000 or 2.53%, from
December 31, 1993 to September 30, 1994, largely as a result of a
$1,046,000 decrease in deposits. This decrease in deposits was
attributable primarily to the continuation of relatively lower
deposit rates, which were designed to increase ACNB's net interest
margin.
Shareholders' equity increased $112,000, or 3.1%, from December
31, 1992 to $3,701,000 at December 31, 1993. Shareholders' equity
increased $107,000, or 2.89%, from December 31, 1993 to $3,808,000 at
September 30, 1994. These increases resulted from positive earnings
for the periods.
57
<PAGE>
Results of Operations
1993 Compared with 1992
ACNB's net income for the year ended December 31, 1993 increased
$246,000 to $112,000, or $.28 per share, compared with a loss of
$134,000 in 1992, or ($.33) per share. The increase in 1993 net
income was attributable primarily to a $323,000 decrease in the
provision for loan losses. As a result of improving loan quality and
reduced levels of expected loss, management decreased the provision
for loan losses from $375,000 in 1992 to $52,000 in 1993. This
resulted in a slight reduction in the allowance for loan losses at
December 31, 1993.
Net interest income, the major component of ACNB's income,
increased $80,000, or 5.16%, from $1,550,000 in 1992 to $1,630,000 in
1993. The increase in net interest income resulted primarily from a
continued decline in market interest rates and changes in the volume
of interest earning assets and interest bearing liabilities, which
resulted in an improved net interest margin.
Average earning assets decreased $212,000, or 0.52%, from
$41,017,000 in 1992 to $40,805,000 in 1993. Although average
balances on investment securities increased $1,229,000, or 24.39%, to
$6,267,000, and average federal funds sold increased $2,381,000, or
100.2%, to $4,719,000, over the 1992 amounts, interest income on
these categories of earning assets decreased as a result of a
reduction in the yield on such investments precipitated by the
declining market interest rate environment. In addition, average
loans decreased $3,732,000, or 11.1%, from $33,551,000 in 1992 to
$29,819,000 in 1993. The reduction in loans was primarily the result
of more stringent lending standards instituted to improve the credit
quality of the loan portfolio. As a result of the changes in earning
assets and the declining rate environment, the yield on earning
assets decreased from 8.60% in 1992 to 7.56% in 1993.
Total interest bearing deposits decreased $1,151,000, or 3.03%,
from $37,925,000 in 1992 to $36,774,000 in 1993. Interest bearing
transaction accounts increased $1,213,000, or 18.38%, to $7,813,000
and money market accounts increased $267,000, or 4.3%, to $6,472,000,
while other time deposits decreased $3,535,000, or 19.88%, to
$14,246,000. The net decrease in interest bearing deposits, coupled
with the declining rate environment, resulted in a 25.4% decrease in
the cost of interest bearing deposits. Total interest paid on
interest bearing deposits decreased $542,000, or 27.39%, from
$1,979,000 in 1992 to $1,437,000 in 1993.
Other income, comprised primarily of fees and service charges,
decreased $24,000 from $235,000 in 1992 to $211,000 in 1993. Other
expense increased $133,000 from $1,543,000 to $1,677,000 in 1993. Of
this amount, approximately $60,000 was due to increases in salaries
and employee benefits caused by changes in ACNB's senior management
dictated by the OCC. The remaining increase in non-interest expense
resulted primarily from payment of $45,000 in consulting fees
incurred in connection with the OCC-mandated review of ACNB's
operations, increased charges related to other real estate owned, and
increases in general expenses.
As a result of net operating loss carryforwards, ACNB was not
required to pay income taxes in 1993.
1992 Compared with 1991
ACNB's net income for the year ended December 31, 1992 decreased
$192,000, to a loss of $134,000, or ($.33) per share, compared with a
profit of $59,000, or $.15 per share, for 1991. The decrease in 1992
net income was attributable primarily to decreases in income on
earning assets resulting from declining market interest rates and
increases to the provision for loan losses.
Although average earning assets increased $2,443,000, or 6.33%, to
$41,017,000 during 1992, declining market interest rates during 1992
caused the yield on average total earning assets to decrease to 8.60%
from
58
<PAGE>
the 9.64% for 1991. As a result, income on average earning
assets decreased $191,000 from the 1991 level to $3,528,000 during
1992.
Total interest bearing deposits decreased from $39,197,000 in 1991
to $37,925,000 during 1992. Interest expense decreased $312,000 from
$2,291,000 in 1991 to $1,979,000 in 1992. The decrease in interest
expense was attributable to the repricing of liabilities, which
caused the rate paid on interest bearing liabilities to decline from
6.84% in 1991 to 5.17% for 1992. As a result of these decreases in
the rates paid by ACNB in 1992, net interest income increased
$121,000 from $1,429,000 in 1992 to $1,550,000 in 1992.
Continuing loan problems during 1992 caused ACNB to increase the
provision for loan losses by $110,000 from $264,000 in 1991 to
$374,000 in 1992. See " -- Loan Portfolio".
Other income, comprised primarily of fees and service charges,
increased $48,000 from $187,000 in 1991 to $235,000. Other expenses
increased $262,000, or 20.4%, from $1,282,000 in 1991 to $1,544,000
in 1992. This increase in other expenses was attributable primarily
to an increase of $82,000, or 13.9%, in salaries and employee
benefits, and a significant increase of $90,000 in legal and
professional fees. These increases were associated with efforts to
resolve problem loans during 1992.
Results of Operations September 30, 1993 Compared with September 30,
1994 and Changes in Financial Position from December 31, 1993 to
September 30, 1994
ACNB's net income increased $66,000 to $156,000, or $.38 per
share, for the nine months ended September 30, 1994, compared with
$90,000, or $.22 per share, for the nine months ended September 30,
1993. The primary reason for this increase was a continuing increase
in net interest income brought about by a reduction in ACNB's cost of
funds.
Net interest income for the nine months ended September 30, 1994
increased $167,000, or 13.6%, to $1,398,000 compared to the same nine
month period in 1993. The increase in net interest income was
attributable primarily to the continued decline in rates paid on
interest bearing liabilities and changes in the volume of interest
earning assets and interest bearing liabilities.
Average earning assets for the nine month period ending
September 30, 1994 decreased $1,046,000, or 2.56% to $39,759,000 when
compared to the averages for the period ending December 31, 1993.
Average loans remained relatively unchanged while average investment
securities decreased $160,000, or 2.55% to $6,107,000 and average
federal funds sold decreased $1,049,000 or 22.29% from the year-ended
1993 to $3,670,000. The yield on average earning assets and on
average loan balances increased over 1993 approximately 0.17% to
7.73% and 0.14% to 8.67%, respectively.
Total interest bearing deposits decreased $1,661,000, or 4.52%
from December 31, 1993 to $35,113,000 at September 30, 1994.
Interest bearing transaction accounts for the same period increased
$454,000, or 6.29%, to $7,673,000, while money market accounts
decreased $1,410,000, or 19.2%, to $5,942,000, and other time
deposits decreased $1,646,000, or 10.2%, to $14,478,000. The net
decrease in interest bearing deposits coupled with the continued
increasing rate environment resulted in a 0.51% decrease in the cost
of interest bearing deposits to 3.33%.
Interest income for the nine month period ending September 30,
1994 decreased $58,000 to $2,296,000 when compared to the nine month
period ending September 30, 1993. Total interest expense, for the
same period, decreased $225,000, or 20%, to $898,000. This resulted
in a $167,000 increase in net interest income.
Other income increased $63,000, or 42%, to $213,000 for the nine
months ended September 30, 1994, while non-interest expense increased
$116,000, or 9.4%, to $1,354,000 for the 1994 period. The increase
in
59
<PAGE>
non-interest income was attributable primarily to increases in
fees associated with deposit accounts. The increase in non-interest
expense was attributable primarily to increases in attorney and
professional fees associated with problem loans.
Net Interest Income
Net interest income is the amount of interest earned on interest
earning assets (loans, investment securities, time deposits in other
banks and federal funds sold), less the interest expense incurred on
interest bearing liabilities (interest bearing deposits and short-
term borrowings), and is the principal source of ACNB's earnings.
Net interest income is affected by the level of interest rates,
volume and mix of interest earning assets and interest bearing
liabilities and the relative funding of these assets.
The "Comparative Average Balances, Yields and Rates" table below
provides a detailed analysis of the effective yields and rates on the
various categories of interest earning assets and interest bearing
liabilities for the years ended December 31, 1991, 1992 and 1993.
<TABLE>
<CAPTION>
COMPARATIVE AVERAGE BALANCES - YIELDS AND COSTS
(dollars in thousands)
Years ended December 31,
1991 1992 1993
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets
Loans (net of unearned income)(1) $31,852 $3,200 10.05% $33,551 $3,023 9.01% $29,819 $2,526 8.47%
Investment securities (taxable)(2) 4,548 393 8.64 5,038 366 7.26 6,267 399 6.37
Investment securities (nontaxable)
Federal funds sold 1,994 111 5.57 2,338 83 3.55 4,719 143 3.03
Interest bearing deposits with
other banks 180 15 8.83 90 5 5.56
Total earning assets 38,574 3,719 9.64% 41,017 3,477 8.48% 40,805 3,068 7.52%
Non-earning assets 1,612 3,936 3,664
Total assets $40,186 $44,953 $44,469
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking $ 4,398 $ 230 5.23% $ 6,126 $ 236 3.85% $ 7,219 193 2.67%
Savings 1,652 90 5.45 2,964 122 4.12 3,499 114 3.26
Money market 3,388 204 6.02 4,773 202 4.23 7,352 233 3.17
Certificates of deposit>$100,000 2,914 170 5.83 3,805 183 4.81 3,204 110 3.43
Other 21,122 1,596 7.56 20,194 1,236 6.12 16,124 787 4.88
Total interest-bearing deposits 33,474 2,290 6.84 37,862 1,979 5.23 37,398 1,437 3.84
Total interest-bearing liabilities 33,474 2,290 6.84 37,862 1,979 5.23 37,398 1,437 3.84
Non-interest bearing liabilities
Non-interest bearing deposits 2,418 2,950 3,186
Other non-interest bearing
liabilities 505 366 265
Total liabilities 36,397 41,178 40,849
Stockholders' equity 3,789 3,775 3,620
Total liabilities and stock-
holders' equity $40,186 $44,953 $44,469
Net interest income and net yield
on earning assets (3) $1,429 3.70% $1,498 3.65% $1,631 4.00%
Interest rate spread(4) 2.80% 3.25% 3.72%
</TABLE>
(1) Includes non-accrual loans.
(2) Fully tax-equivalent basis at 34% tax rate.
(3) Net interest income divided by total average interest earning assets.
(4) Total interest earning assets yield minus total interest bearing
liabilities rate.
60
<PAGE>
The "Analysis of Changes in Net Interest Income" table below
provides a summary of changes in net interest income resulting from
changes in volumes of interest earning assets and interest bearing
liabilities, and the rates earned and paid on such assets and
liabilities for the years ended December 31, 1993, 1992 and 1991.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
1991 compared to 1992 1992 compared to 1993
Amount Amount Amount Amount
Caused Caused Caused Caused
By By By By
Total Change in Change in Total Change in Change in
Change Volume(1) Rate(1) Change Volume(1) Rate(1)
<S> <C> <C> <C> <C> <C> <C>
Earnings assets
Loans (net of unearned income)(2) $(177) $ 172 $ (349) $ (496) $ (336) $ (143)
Investment securities (taxable) 24 42 (18) 33 102 (120)
Investment securities (nontaxable)(3) -- -- -- -- -- --
Federal funds sold and interest-bearing
deposits with other banks (13) (11) (45) (3) (81) (26)
Total interest income (191) 225 (416) (460) (153) (289)
Interest-bearing liabilities
Interest-bearing deposits
Interest-bearing checking 6 90 (84) (43) 42 (85)
Savings 32 71 (39) (8) 22 (30)
Money market (2) 83 (85) 31 109 (78)
Certificates of deposit 13 52 (39) (73) (29) (44)
Other (383) (70) (313) (426) (245) (181)
Total interest-bearing deposits (334) 226 (560) (541) (101) (418)
Total interest expense 143 (1) 144 81 (52) 129
</TABLE>
(1) The rate/volume variance for each category has been allocated
on a consistent basis between rate and volume variances based on the
percentage of rate or volume variance to the sum of the two absolute
variances.
(2) Non-accruing loans have been included.
(3) Investment Securities (nontaxable) are included in taxable
figures for September 1993 and September 1994 for comparative
purposes. Income is included on a fully tax-equivalent basis at 34%.
Liquidity and Interest Rate Sensitivity
Interest rate sensitivity management is concerned with the timing
and magnitude of repricing assets compared to liabilities and is an
important part of asset/liability management. It is the objective of
interest rate sensitivity management to generate stable growth in net
interest income, and to control the risks associated with interest
rate movement. Management constantly reviews interest rate risk
exposure and the expected interest rate environment so that
adjustments in interest rate sensitivity can be timely made. When
interest sensitive assets exceed interest sensitive liabilities for a
specific repricing "horizon", a positive interest sensitivity gap
results. The gap is negative when interest sensitive liabilities
exceed interest sensitive assets. For a bank with a negative gap,
falling interest rates would be expected to have a positive effect on
net interest income and rising
61
<PAGE>
rates would be expected to have the
opposite effect. At December 31, 1993, approximately 51.75% of
ACNB's interest earning assets repriced within one year compared to
approximately 91.45% of interest bearing liabilities, resulting in a
negative gap position.
The table below reflects the balances, at December 31, 1993, of
interest earning assets and interest bearing liabilities at the
earlier of their repricing or maturity dates. Scheduled payment
amounts of amortizing fixed rate loans are reflected at each
scheduled payment date. Variable rate amortizing loans reflect
scheduled payments at each scheduled payment date until the loan may
be repriced contractually; the unamortized balance is reflected at
that point. Deposits in other banks and debt securities are
reflected in each instrument's ultimate maturity date. Overnight
federal funds sold are reflected in the earliest repricing interval
due to the immediately available nature of these funds. Interest
bearing liabilities with no contractual maturity, such as interest
bearing transaction accounts and savings deposits are reflected in
the earliest repricing interval due to contractual arrangements which
give management the opportunity to vary the rates paid on these
deposits within a thirty-day or shorter period. However, ACNB is
under no obligation to vary the rates paid on those deposits within
any given period. Fixed rate time deposits, principally certificates
of deposit, are reflected at their contractual maturity dates.
<TABLE>
<CAPTION>
Interest Rate Sensitivity
Over One
Total Year or
0-3 4-6 7-12 Within Non-
Months Months Months One Year sensitive Total
Assets (dollars in thousands)
<S> <C> <C> <C> <C> <C> <S>
Earning assets
Loans, net of unearned income $14,191 $1,710 $2,708 $18,609 $14,428 $33,037
Investment securities, taxable 751 100 - 851 4,050 4,901
Investment securities, nontaxable - - - - 600 600
Federal funds sold 2,110 - - 2,110 - 2,110
Total earning assets 17,052 1,810 2,708 21,570 19,078 40,648
Non-earning assets - net - - - - 3,304 3,304
Total assets 17,052 1,810 2,708 21,570 22,382 43,952
Liabilities and Stockholders' Equity
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Savings $4,168 $ - $ - $4,168 $ - $4,168
Money market/Super NOW 13,369 - - 13,369 - 13,369
Certificates of deposit
over $100,000 2,054 400 826 3,280 1,083 4,363
Other certificates of deposit 3,634 3,024 3,365 10,023 3,180 13,203
Total interest-bearing
deposits $23,224 $3,424 $4,191 $30,840 $4,263 $35,103
Short-term Borrowings - - 24 24 - 24
Total interest-bearing
liabilities 13,369 - - 13,369 - 13,369
Non-interest-bearing liabilities
Non-interest-bearing deposits - - - - 3,318 $3,318
Other non-interest bearing
liabilities - net - - - - 1,806 1,806
Total liabilities 23,224 3,424 4,215 30,864 9,387 40,251
Stockholders' equity - - - - 3,701 3,701
Total liabilities and
stockholders equity $23,224 $3,424 $4,215 $30,86440 $13,088 $43,952
Interest sensitive gap $(6,173) $(1,614) $(1,507) $(9,294) $ 9,294 -
Cumulative interest
sensitive gap $(6,173) $(7,787) $(9,294) $(9,294)
</TABLE>
Provision for Loan Losses
The provision for loan losses is charged to earnings based on
management's continuing review and evaluation of the loan portfolio
and general economic conditions. Provisions for loan losses were
$52,000 and $375,000 for the years ended December 31, 1993 and 1992,
respectively. The lower provision in 1993 is due to the
identification of specific potential problems during 1992 and
allocations therefor.
62
<PAGE>
At December 31, 1993, the allowance for loan losses as a
percentage of outstanding loans was 2.02% compared to 2.07% at
December 31, 1992. Management determines the adequacy of ACNB's loan
loss allowance on a quarterly basis. Factors considered in
determining the adequacy of the allowance for loan losses include:
(1) previously classified loans deemed less than 100% collectible,
(2) loans reflecting a recurring delinquent status, (3) past-due
loans on which interest is not being collected in accordance with the
terms of the loan, and loans whose terms have been modified by
reducing the interest rates or deferring interest, (4) excessive loan
renewals or payment extensions, (5) general and local economic
conditions, (6) risk in consumer credit products, (7) subjective
considerations as a result of internal discussions with ACNB's loan
officers, (8) known loan deteriorations and/or concentrations of
credit, (9) historical loss experience based on volume and types of
loans, (10) trends in portfolio volume, maturity and composition,
(11) projected collateral values, (12) off balance sheet risk, and
(13) depth and experience of ACNB's existing lending staff. By
considering the above factors, management attempts to determine the
amount of allowances necessary to provide for potential losses in the
loan portfolio.
Investment Securities Portfolio
The following tables summarize the book value and approximate
market value amounts of investment securities held by ACNB at
December 31, 1991, 1992 and 1993 and at September 30, 1994, and the
maturities and weighted average yields of those securities at
September 30, 1994:
Investment Portfolio Composition, Maturities and Yields
<PAGE>
<TABLE>
<CAPTION>
1991 1992 1993
Book Gain/Loss Fair Value BookGain/Loss Fair Value BookGain/Loss Fair Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Treasury & Government Agencies $ 4,542 $ 201 $ 4,743 $ 5,345 $ 159 $ 5,504 $ 7,002 $ 113 $ 7,115
State and Municipals -- -- -- -- -- -- -- -- --
Equity 113 -- 113 116 -- 116 157 -- 157
Total $ 4,655 $ 201 $ 4,856 $ 5,461 $ 159 $ 5,620 $ 7,159 $ 113 $ 7,272
</TABLE>
September 30, 1994
Book Value Gain/Loss Fair Value
Available For Sale
Treasury & government agencies $ 1,449 $ (16) $ 1,433
Hold To Maturity
Treasury & government agencies $ 3,450 $ (183) $ 3,267
State and Municipals 599 (34) 565
Equity 163 --- 163
Total $ 4,212 $ (217) $ 3,995
Total $ 5,661 $ (233) $ 5,428
63
<PAGE>
<TABLE>
<CAPTION>
Maturities & Yields
Available for Sale
1 Yr Yield 1-5 Yrs Yield 5-10 Yrs Yield >10 Yrs Yield Total Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Treasuries & Government
Agencies $100 7.87% $ 5987 .06% $ -- 0.00% $ 751 4.36% $ 1,449 5.72%
Held to Maturity
1 Yr Yield 1-5 Yrs Yield 5-10 Yrs Yield >10 Yrs Yield Total Yield
Treasuries & Government
Agencies -- 0.00% $ 2,952 5.41% $ 498 4.74% $ -- 0.00% $ 3,450 5.31%
State and Municipals (1) -- 0.00% 399 5.75% 200 6.21% -- 0.00% 599 5.87%
Equity -- 0.00% -- 0.00% -- 0.00% 163 6.00% 163 6.00%
Total -- 3,351 5.45% 698 5.16% 163 6.00% 4,212 5.39%
Total $100 $ 3,949 $ 698 $ 914 $ 5,661
Yield 7.87% 5.70% 5.16% 4.65% 5.50%
</TABLE>
The weighted average yields set forth in the foregoing table are
calculated on the basis of cost and effective yields for the
scheduled maturity of each security. At December 31, 1993, the
market value of the securities portfolio was $113,000 more than its
book value, the average maturity of the securities portfolio was 41
months, and the average adjusted tax equivalent yield on the
portfolio was 5.50%. As of December 31, 1993, gross unrealized
securities gains totaled $115,000, and gross unrealized losses
totaled $2,000.
Decisions involving investment securities are based upon
management's expectations for interest rate movements, overall market
conditions, pledging requirements, and the composition and structure
of the balance sheet in conjunction with asset/liability management.
SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," was issued by the Financial Accounting Standards
Board in May, 1993. The provisions of this Statement are required to
be adopted for fiscal years beginning after December 15, 1993. As
required, ACNB implemented SFAS No. 115 effective January 1, 1994.
SFAS No. 115 addresses the accounting and reporting for investments
in equity securities that have readily determinable fair values, and
for all investments in debt securities. According to the Statement,
equity and debt securities are to be classified in three categories:
held-to-maturity, trading and available-for-sale. Securities
classified as held-to-maturity are those for which the positive
intent and ability to hold such securities to ultimate maturity is
present. These securities will continue to be accounted for at
amortized cost. Securities classified as trading are those which are
purchased primarily for sale in the near term, and will be accounted
for on a fair value basis with unrealized gains and losses included
in earnings. Available-for-sale securities are those which do not
fall in the held-to-maturity or trading categories, and are to be
accounted for at fair value, with unrealized holding gains and losses
excluded from the income statement and recorded directly in a
separate shareholders' equity account, net of applicable income tax
effects.
As of January 1, 1994, and September 30, 1994, management assessed
the categorization of investment securities using the criteria set
forth by SFAS No. 115. At such dates, investment securities with an
amortized cost of $1,928,998 and $1,612,000, respectively, and market
values of $1,974,799 and $1,596,000, respectively, were classified as
available-for-sale. All other investment securities were classified
as held-to-maturity for which no change in the method of accounting
is required. The effect of this change in accounting principle on
January 1, 1994, was to increase the book value of investment
securities $45,801, and directly increase shareholders' equity
$31,145, net of income tax effects of $14,656.
64
<PAGE>
Loan Portfolio
Management of ACNB believes the loan portfolio is adequately
diversified. There are no significant concentrations of loans with
any particular individuals or industry or group of related
individuals or industries, and there are no foreign loans.
The amount of loans outstanding at December 31, 1989, 1990, 1991,
1992 and 1993 and at September 30, 1994 are shown in the following
table according to type of loan:
<TABLE>
<CAPTION>
Loan Portfolio Composition
Years ended December 31, September 30,
1989 1990 1991 1992 1993 1994
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 4,533 $ 6,247 $ 9,515 $ 9,110 $ 9,777 $10,643
Real estate - construction 1,397 3,152 4,037 2,078 1,569 1,259
Real estate - mortgage 1,826 2,552 3,041 3,206 3,133 8,914
Installment loans to individuals 6,573 10,011 12,204 11,313 10,057 5,911
Other 2,670 3,654 4,732 4,908 4,825 3,798
TOTAL $16,999 $25,616 $33,529 $30,615 $29,361 $30,525
</TABLE>
A certain degree of risk taking is inherent in the extension of
credit. Management has established loan and credit policies designed
to control both the types and amounts of risks assumed and to
ultimately minimize losses. Such policies include limitations on
loan-to-collateral values for various types of collateral,
requirements for appraisals of real estate collateral, problem loan
management practices and collection procedures, and nonaccrual and
charge-off guidelines.
Commercial and industrial loans primarily represent loans made to
businesses, and may be made on either a secured or an unsecured
basis. When taken, collateral consists of liens on receivables,
equipment, inventories, furniture and fixtures. Unsecured business
loans are generally short-term with emphasis on repayment strengths
and low debt to worth ratios. During 1993, total commercial,
industrial and business purpose loans secured by real estate
(nonfarm, nonresidential) increased $574,000, or 7.2%. Commercial
lending involves significant risk because repayment usually depends
on the cash flows generated by a borrower's business, and the debt
service capacity of a business can deteriorate because of downturns
in national and local economic conditions. To control risk, initial
and continuing financial analysis of a borrower's cash flows and
other financial information is required.
Real estate construction loans generally consist of financing the
construction of 1-4 family dwellings and some nonfarm, nonresidential
real estate. Usually, loan to cost ratios are limited to 75% and
permanent financing commitments are required prior to the advancement
of loan proceeds.
Loans secured by real estate mortgages comprised approximately
30.8% and 30.0% of ACNB's loan portfolio at the end of 1993 and 1992,
respectively. Residential real estate loans consist mainly of first
and second mortgages on single family homes, with some multifamily
loans. Loan-to-value ratios for these instruments are generally
limited to 80%. Nonfarm, nonresidential loans are secured by
business and commercial properties with loan-to-value ratios
generally limited to 70%. The repayment of both residential and
business real estate loans is dependent primarily on the income and
cash flows of the borrowers, with the real estate serving as a
secondary or liquidation source of repayment.
65
<PAGE>
Nonperforming Loans; Other Problem Assets
Nonaccrual and Past Due Loans
<TABLE>
<CAPTION>
September, 30 Years ended December 31,
1994 1990 1991 1992 1993 1989
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
Non-accrual Loans $ 28 $ 282 $ 936 $ 1,628 $ 1,539 $ 1,404
Loans contractually past due 90 days
or more on which interest
is still being accrued 51 181 295 6 -- --
Other real estate -- -- 751 1,445 1,413 776
Total nonperforming assets $ 79 $ 463 $ 1,982 $ 3,079 $ 2,952 $ 2,180
</TABLE>
When a loan is 90 days past due as to interest or principal or
there is serious doubt as to collectibility, the accrual of interest
income is generally discontinued unless the estimated net realizable
value of collateral is sufficient to assure collection of the
principal balance and accrued interest. Previously accrued interest
on loans placed in a nonaccrual status is reversed against current
income, and subsequent interest income is recognized when received.
At December 31, 1993, ACNB had $1,539,110 in non-accrual loans, no
loans past due 90 days and still accruing interest, and $1,413,300 in
other real estate owned, compared to $1,628,565, $6,000 and
$1,444,719, respectively, at December 31, 1992. Non-accrual loans
amounted to 5.1% of total loans at December 31, 1993, compared to
5.3% of total loans at December 31, 1992.
When the collectibility of a significant amount of principal is in
serious doubt, the principal balance is reduced to the estimated net
realizable value of collateral by charge-off to the allowance for
loan losses and any subsequent collections are credited first to the
remaining principal balance and then to the allowance for loan losses
as a recovery of the amount charged off. A nonaccrual loan is not
returned to accrual status unless principal and interest are current
and the borrower has demonstrated the ability to continue making
payments as agreed.
Net loan charge-offs for 1993 were $92,000 or .39% of average
loans compared to $262,000 or .78% of average loans for 1992.
Interest income that would have been recorded if nonaccrual loans
had been current in accordance with their original terms amounted to
$289,190 and $173,313 for 1993 and 1992, respectively. No interest
income was recognized on these loans during 1992 and 1993. As of
December 31, 1993, there were no commitments to lend additional funds
to debtors owing amounts on nonaccrual loans.
The Financial Accounting Standards Board adopted Statement 114,
"Accounting by Creditors for Impairment of a Loan", in May, 1993.
This statement requires a lender to consider a loan to be impaired if
the lender believes it is probable that it will be unable to collect
all principal and interest due according to the original contractual
terms of the loan. If a loan is impaired, the lender will be
required to record a loan valuation allowance equal to the present
value of the estimated future cash flows discounted at the loan's
effective rate. This accounting change, effective for years
beginning after December 15, 1994, will significantly change the
accounting by lenders presently allowed under Statement 15. The
statement does not require restatement for previously restructured
loans which are performing in accordance with their restructured
terms. Based upon the present status of the loan portfolio,
management does not believe this statement will have a material
adverse effect on ACNB.
Potential Problem Loans
66
<PAGE>
Management has identified and maintains a list of potential
problem loans. These are loans that are not included in nonaccrual
status or past due 90 days or more and still accruing. A loan is
added to the potential problem list when management becomes aware of
information about possible credit problems of borrowers that causes
serious doubts as to the ability of such borrowers to comply with the
current loan repayment terms.
The total amount of loans outstanding at December 31, 1993 and
September 30, 1994 determined by management to be potential problem
loans was $1,185,000 and $1,975,000, respectively. This amount does
not represent management's estimate of potential losses since a large
proportion of such loans are secured by various types of collateral.
The following table presents information about the categories and
types of collateral with respect to potential problem loans at
December 31, 1993 and September 30, 1994.
Potential Problem Loans
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1993 September 30, 1994
Percent of Percent of
Amount Category Amount Category
<S> <C> <C> <C> <C>
Commercial and industrial:
Equipment and inventory $ 289 3.36% $ 18 0.21%
Unsecured -- -- -- --
Real estate - mortgage:
Commercial 178 5.42% 982 16.92%
1-4 family residential 718 24.00% 965 22.36%
Consumer installment:
Vehicles, mobile homes and equipment -- -- 10 0.23%
Unsecured -- -- -- --
Total $ 1,185 4.04% $ 1,975 6.47%
</TABLE>
Other Real Estate
Other real estate totaled $1,413,300 at December 31, 1993, and
consisted of foreclosed properties. Other real estate held is
located in and around the city of Aiken. Other real estate is
initially recorded at the lower of net loan principal balance or its
estimated fair market value less estimated selling costs. The
estimated fair value is determined by appraisal at the time of
acquisition. The market for real estate in Aiken has been impacted
by the uncertainty of the future of Westinghouse's Savannah River
Site, the area's largest employer.
Allowance for Loan Losses
The purpose of the allowance for loan losses is to absorb loan
losses that occur in the loan portfolio. Management considers a
variety of factors in establishing a level of allowance for losses
and the related provision, which is charged to expense. The factors
used in this determination are historical net charge-off experience,
growth in the loan portfolio, present and forecasted economic
environment, management's evaluation of specifically identified
loans, internal classification of the loan portfolio and consultation
with regulatory authorities.
The allowance for loan losses represents management's estimate of
an amount adequate in relation to the risk of future losses inherent
in the loan portfolio. In its continuing evaluation of the allowance
and its adequacy management considers, among other factors, ACNB's
loan loss experience, the amount of past due and nonperforming loans,
current and anticipated economic conditions and the values of
collateral securing loans.
67
<PAGE>
While it is ACNB's policy to charge off in the current period
loans in which a loss is considered probable, there are additional
risks of future losses which cannot be quantified precisely or
attributed to particular loans or classes of loans. Because these
risks include the state of the economy as well as conditions
affecting individual borrowers, management's judgment of the
allowance is necessarily imprecise. ACNB is also subject to
regulatory examinations and determinations as to adequacy, which may
take into account such factors as the methodology used to calculate
the allowance for loan losses and the size of the allowance for loan
losses in comparison to a group of peer companies, identified by the
regulatory agencies.
In assessing the adequacy of the allowance, management relies
predominantly on its ongoing review of the loan portfolio, which is
undertaken both to ascertain whether there are probable losses which
much be charged off and to assess the risk characteristics of the
portfolio in the aggregate. The review considers the judgments of
management and also those of bank regulatory agencies that review the
loan portfolio as part of their regular examination process. The
OCC, as part of its routine examination process of various national
banks, may require additions to the allowance for loan losses based
upon the regulators' credit evaluations differing from those of
management.
On December 31, 1993, the allowance for loan losses was $582,000
compared with $621,000 for the prior year. The ratio of the
allowance for loan losses to net loans outstanding was 2.02% at
December 31, 1993 compared to 2.07% at December 31, 1992.
During 1993, ACNB experienced net charge-offs of $91,000 compared
to net charge-offs of $262,000 one year earlier. Installment loan
net charge-offs were $24,000 in 1993 versus $56,000 in 1992.
Commercial loan net charge-offs were $106,000 in 1992 compared to net
recoveries of $1,000 in 1993. Real estate loan net charge-offs were
$115,000 in 1993 compared to $30,000 in 1992.
Management will continue to closely monitor the levels of
nonperforming and potential problem loans and will address the
weaknesses in these credits to enhance the amount of ultimate
collection on recovery of these assets. Should increases in the
overall level of nonperforming and potential problem loans accelerate
from the current trend, management will adjust the methodology for
determining the allowance for loan losses to increase the provision
and allowance for loan losses. This would likely decrease net
income.
The following table summarizes loan balances of ACNB at the end
of each period and averages for each period, changes in the allowance
arising from charge-offs and recoveries by category, and additions to
the allowance which have been charged to expense.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Nine Months ended
Years ended December 31, September 30,
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
Balance at beginning of period $ 57 $ 249 $ 328 $ 508 $ 621 $ 582
Charge-offs:
Commercial, financial and agricultural (139) (26) (9) (192) (34) (31)
Real estate - mortgage -- -- (31) (30) (55) (37)
Consumer -- -- (31) (56) (24) (13)
Other -- -- (13) (12) (1) (15)
Total loans charged-off $ (139) $ (26) $ (84) $ (290) $ (114) $ (96)
Recoveries:
Commercial, financial and agricultural -- 101 -- 28 -- --
Real estate mortgage -- -- -- -- 23 --
Consumer -- -- -- -- -- --
Other -- -- -- -- -- 13
68
<PAGE>
Net charge-offs (139) 75 (84) (262) (91) (83)
Provision charged to expense 331 4 264 375 52 30
Balance at end of period $ 249 $ 328 $ 508 $ 621 $ 582 $ 529
Ratio of net charge-offs to average loans .83% .36% .26% .78% .31% .28%
</TABLE>
Management considers the allowance for loan losses adequate to
cover possible losses on the loans outstanding at December 31, 1993.
In the opinion of management, there are no material risks or
significant loan concentrations, and the allowance for loan losses is
adequate to absorb anticipated loan losses in the present loan
portfolio. It must be emphasized, however, that the determination of
the allowance for loan losses using ACNB's procedures and methods
rests upon various judgments and assumptions about future economic
conditions and other factors affecting loans. No assurance can be
given that ACNB will not in any particular period sustain loan losses
which are sizable in relationship to the amount reserved or that
subsequent evaluation of the loan portfolio, in light of conditions
and factors then prevailing, will not require significant changes in
the allowance for loan losses or future charges to earnings. The
allowance for loan losses is also subject to review and approval by
various regulatory examinations. Such examinations could result in
required changes to the allowances for loan losses.
Deposits
The average amounts and percentage composition of deposits held
by ACNB for the years ended December 31, 1991, 1992, 1993, are
summarized below:
Average Deposits
<TABLE>
<CAPTION>
Years Ended December 31,
1991 1992 1993
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
Noninterest bearing demand $ 3,186 7.85% $ 2,950 7.23% $ 2,418 6.73%
Interest bearing transaction accounts 7,219 17.79 6,126 15.01 4,398 12.25
Savings 10,851 36.74 7,737 18.95 5,040 14.04
Time deposits $100,000 and greater 3,204 7.89 3,805 9.32 2,914 8.12
Other time deposits 16,124 39.73 20,194 49.48 21,122 58.84
Total deposits $ 40,584 100.00% $ 40,812 100.00% $ 35,892 100.00%
</TABLE>
The vast majority of time deposits $100,000 and over are acquired
from customers within ACNB's service area in the ordinary course of
business. ACNB does not purchase brokered deposits. While most of
the large time deposits are acquired from customers with standing
relationships with ACNB, it is a common industry practice not to
consider these types of deposits as core deposits because their
retention can be expected to be heavily influenced by rates offered,
and therefore such deposits have the characteristics of shorter-term
purchased funds. Certificates of deposit $100,000 and over involve
the maintenance of an appropriate matching of maturity distribution
and a diversification of sources to achieve an appropriate level of
liquidity.
Return on Equity and Assets
The following table shows the return on assets (net income divided
by average total assets), return on equity, (net income divided by
average equity), and equity to assets ratio (average equity divided
by average total assets) for each period indicated.
Years ended December 31,
1991 1992 1993
69
<PAGE>
(dollars in thousands)
Return on assets 0.15% (.30)% 0.25%
Return on equity 1.54 (3.55) 3.10
Equity to assets 9.43 8.40 8.14
70
<PAGE>
Liquidity
Liquidity is the ability to meet current and future obligations
through liquidation or maturity of existing assets or the acquisition
of additional liabilities. Adequate liquidity is necessary to meet
the requirements of customers for loans and deposit withdrawals in
the most timely and economical manner. Some liquidity is ensured by
maintaining assets which may be immediately converted into cash at
minimal cost (amounts due from banks and federal funds sold).
However, the most manageable sources of liquidity are composed of
liabilities, with the primary focus on liquidity management being on
the ability to obtain deposits within ACNB's service area. Core
deposits (total deposits less time deposits of $100,000 and over)
provide a relatively stable funding base, and the average of these
deposits represented 76.89% of average total assets during 1993
compared with 75.76% during 1992. Local governmental deposits
comprised approximately 1.1% and 1.0% of total deposits at the end of
1993 and 1992, respectively. ACNB has available an unused short-term
line of credit to purchase up to $1,000,000 of federal funds from an
unrelated correspondent institution. The line is available on a one
to seven day basis. Asset liquidity is provided from several
sources, including amounts due from banks and federal funds sold.
Investment securities, particularly those maturing within one year,
also provide a secondary source of liquidity. While most investment
securities are generally purchased with the intent of being held to
maturity, such securities are marketable and occasional sales may
occur prior to maturity as a part of the process of liquidity
management. In addition, funds from maturing loans are a source of
liquidity. Management believes that ACNB's overall liquidity sources
are adequate to meet its operating needs.
Capital Adequacy and Resources
ACNB is subject to regulatory risk-based capital adequacy
standards. Under these standards, banks are required to maintain
certain minimum ratios of capital to risk-weighted assets and average
total assets. Under the provisions of FDICIA, federal bank
regulatory authorities are required to implement prescribed "prompt
corrective actions" upon the deterioration of the capital position of
a bank. If the capital position of an affected institution were to
fall below certain levels, increasingly stringent regulatory
corrective actions are mandated. See - "--Supervision and Regulation
of ACNB."
Inflation
Since the assets and liabilities of a bank are primarily monetary
in nature (payable in fixed, determinable amounts), the performance
of a bank is affected more by changes in interest rates than by
inflation. Interest rates generally increase as the rate of
inflation increases, but the magnitude of the change in rates may not
be the same.
While the effect of inflation on banks is normally not as
significant as is its influence on those businesses which have large
investments in plant and inventories, it does have an effect. During
periods of high inflation, there are normally corresponding increases
in the money supply, and banks will normally experience above-average
growth in assets, loans and deposits. Also general increases in the
prices of goods and services will result in increased operating
expenses.
Properties
ACNB operates through its main office, located at 142 Chesterfield
Street, S.E., and one branch office, located at 2040 Whiskey Road, in
Aiken, South Carolina. Both facilities are owned by ACNB and were
built specifically for ACNB. The main office contains approximately
6,688 square feet and the branch office contains approximately 2,900
square feet. ACNB believes that these facilities are adequate for
its current operations.
71
<PAGE>
Supervision and Regulation of ACNB
As a national bank with deposit accounts insured by the FDIC, ACNB
is subject to extensive federal regulation. The following discussion
is a summary of certain provisions of law and regulation that apply
to ACNB and is qualified in its entirety by reference to the
applicable laws or regulations.
Capital Adequacy Requirements for National Banks
The OCC has adopted capital adequacy regulations for national
banks. Under the regulations, the minimum ratio of total capital to
risk-weighted assets (including certain off-balance sheet activities,
such as standby letters of credit) is 8%. At least half of the total
capital is required to be "Tier 1 capital," principally consisting of
common shareholders' equity, noncumulative perpetual preferred stock,
and minority interests in the equity accounts of consolidated
subsidiaries, less certain goodwill items. The remainder ("Tier 2
capital") may consist of a limited amount of subordinated debt,
certain hybrid capital instruments and other debt securities,
cumulative perpetual preferred stock, long term preferred stock,
convertible preferred stock, and a limited amount of the general loan
loss allowance. In addition to the risk-based capital ratio, the OCC
has adopted a minimum level of Tier 1 (leverage) capital ratio, under
which a national bank must maintain a minimum level of Tier 1 capital
to average total consolidated assets of at least 3% in the case of a
national bank which has the highest regulatory examination rating and
is not contemplating significant growth or expansion. All other
national banks are expected to maintain a ratio of at least 1% to 2%
above the stated minimum. Pursuant to the OCC Consent Agreement,
ACNB is required to maintain ratios of at least 9.5% of Tier 1
capital to risk-weighted assets and 6.5% of Tier 1 capital to
adjusted total assets.
The table below summarizes ACNB's capital position at December 31,
1994 and at January ___, 1995.
December 31, 1994 January __, 1995
Primary capital to total assets 8.31% _.__%
Total capital to total assets 9.29% _.__%
Tier 1 capital to risk weighted assets 10.19% __.__%
Total capital to risk weighted assets 11.37% __.__%
See "INFORMATION ABOUT CAROLINA FIRST CORPORATION -- Certain
Regulatory Matters --Federal Deposit Insurance Corporation
Improvement Act of 1991," for a discussion of certain proposed rules
relating to risk-based capital standards that also relate to ACNB.
The management of ACNB is unable to predict whether and when higher
capital requirements would be imposed and, if so, at what levels and
on what schedule.
Payment of Dividends
If a national bank's surplus fund equals the amount of its capital
stock, the directors may declare quarterly, semiannual or annual
dividends out of the bank's net profits, after deduction of losses
and bad debts. If the surplus fund does not equal the amount of
capital stock, a dividend may not be paid until one-tenth of the
bank's net profits of the preceding half year, in the case of
quarterly or semi-annual dividends, or the preceding two years, in
the case of an annual dividend, are transferred to the surplus fund.
The approval of the OCC is required if the total of all dividends
declared by a national bank in any calendar year will exceed the
total of its retained net profits of that year combined with its
retained net profits of the two preceding years, less any required
transfers to surplus or a fund for the retirement of any preferred
72
<PAGE>
stock. OCC regulations provide that provisions for possible credit
losses cannot be added back to net income and charge-offs cannot be
deducted from net income in calculating the level of net profits
available for the payment of dividends.
The payment of dividends by ACNB may also be affected or limited
by other factors, such as the requirements to maintain adequate
capital above regulatory guidelines. In addition, if, in the opinion
of the OCC, a bank under its jurisdiction is engaged in or is about
to engage in an unsafe or unsound practice (which, depending on the
financial condition of the bank, could include the payment of
dividends), the OCC may require, after notice and hearing, that such
bank cease and desist from such practice. The OCC has indicated that
paying dividends that deplete a national bank's capital base to an
inadequate level would be an unsafe and unsound banking practice.
The Federal Reserve, the OCC and the FDIC have issued policy
statements which provide that bank holding companies and insured
banks should generally only pay dividends out of current operating
earnings.
ACNB does not currently qualify to pay dividends under the
National Bank Act. Furthermore, ACNB's ability to pay dividends is
currently limited by the OCC Consent Agreement. See " --Consent
Agreement with the OCC."
FDIC Insurance Assessments
Because ACNB's deposits are insured by the BIF, ACNB is subject to
insurance assessments imposed by the FDIC. Under current law, the
insurance assessment to be paid by BIF-insured institutions is as
specified in a schedule issued by the FDIC that specifies, at
semiannual intervals, target reserve ratios designated to increase
the FDIC insurance funds' reserve ratios to 1.25% of estimated
insured deposits (or such higher ratio as the FDIC may determine in
accordance with the statute) in 15 years. Further, the FDIC is
authorized to impose one or more special assessments in any amount
deemed necessary to enable repayment of amounts borrowed by the FDIC
from the Treasury Department. The FDIC has implemented a risk-based
assessment schedule, imposing assessments ranging from 0.23% to 0.31%
of an institution's average assessment base. The actual assessment
to be paid by each BIF member is based on the institution's
assessment risk classification, which is determined based on whether
the institution is considered "well capitalized," "adequately
capitalized" or "undercapitalized," as such terms have been defined
in applicable federal regulations adopted to implement the prompt
corrective action provisions of FDICIA (see "---Other Safety and
Soundness Regulations"), and whether such institution is considered
by its supervisory agency to be financially sound or to have
supervisory concerns. Based on its current financial condition and
capital levels, ACNB does not expect that the current BIF risk-based
assessment schedule will have a material adverse effect on its
earnings.
Other Regulatory Matters
ACNB is also subject to examination by the OCC bank examiners. In
addition, ACNB is subject to various other state and federal laws and
regulations. See "INFORMATION ABOUT CAROLINA FIRST CORPORATION --
Certain Regulatory Matters -- Other Regulations" for a discussion of
these other state and federal laws and regulations.
ACNB is also subject to the requirements of the CRA. See
"INFORMATION ABOUT CAROLINA FIRST CORPORATION -- Certain Regulatory
Matters -- Community Reinvestment Act" for a discussion of the CRA
and the proposed rule issued by each of the federal banking agencies,
including the OCC.
73
<PAGE>
Other Safety and Soundness Regulations
See "INFORMATION ABOUT CAROLINA FIRST CORPORATION -- Certain
Regulatory Matters -- Other Safety and Soundness Regulations" for a
discussion of other laws and regulations that are also applicable to
ACNB.
Interstate Banking
Congress recently enacted legislation which will increase the
ability of bank holding companies and banks to operate across state
lines. For further discussion of such legislation, see "INFORMATION
ABOUT CAROLINA FIRST CORPORATION -- Certain Regulatory Matters --
Interstate Banking." ACNB is unable to determine at this time what
effect such legislation is likely to have on it and its operations.
74
<PAGE>
MANAGEMENT INFORMATION
Management and Principal Shareholders of Carolina First Corporation
The following table sets forth the persons serving as the
Company's directors and executive officers, their respective ages,
positions, and the dates of service, as well as the number of
shares of CFC common stock owned beneficially or of record by the
directors, the named executive officers and by all directors and
executive officers of Carolina First Corporation as a group. Unless
otherwise noted, each person has sole voting power and sole
investment power with respect to shares listed. Ownership by the
named inviduals of Carolina First Corporation preferred stock is
set forth in the footnotes.
<TABLE>
<CAPTION>
Officer/ Amount and Percent Percent
Position or Office with Director Nature of Bene- of of
Name Age Carolina First Corporation Since ficial Ownership Class(1) Class(2)
<S> <C> <C> <C> <C> <C> <C>
Directors
Judd B. Farr 67 Director 1994 34,817 0.81% 0.63%
C. Claymon Grimes, Jr. 71 Director 1990 38,655 0.90% 0.70%
M. Dexter Hagy 49 Director 1993 4,428 0.10% 0.08%
Robert E. Hamby, Jr. 47 Director 1993 4,924 (3) 0.11% 0.09%
William S. Hummers III 48 Director 1990 28,023 (4) 0.65% 0.51%
R. Glenn Hilliard 51 Director 1986 20,047 0.47% 0.36%
Richard E. Ingram 52 Director 1986 52,665 1.23% 0.96%
Charles B. Schooler 65 Director 1990 23,684 0.55% 0.43%
Elizabeth P. Stall 62 Director 1986 30,842 (5) 0.72% 0.56%
William R. Timmons, Jr. 69 Chairman 1986 157,695 (6) 3.68% 2.86%
William M. Webster III 60 Director 1986 60,000 (7) 1.40% 1.09%
Mack I. Whittle, Jr. 45 Director 1986 90,428 2.13% 1.65%
Executive Officers
Mack I. Whittle, Jr. 45 President and CEO 1986 90,428 2.13% 1.65%
William S. Hummers III 48 Executive Vice President 1988 28,023 (4) 0.65% 0.51%
James W. Terry, Jr. 46 President and Director of 1991 4,928 (9) 0.11% 0.09%
Carolina First Bank
David L. Morrow 43 Executive Vice President of 1992 6,867(10)
Carolina First Bank
Joseph C. Reynolds 48 President and Director of 1993 12,343(11) 0.19% 0.14%
Carolina First Mortgage Company
All Directors and Executive Officers as a Group (15 persons) 571,375 13.33% 10.31%
(1) The calculation is based on a total of 4,581,247 shares of outstanding Common
Stock outstanding as of January 16, 1995 and assumes no issuance of CFC common
stock in connection with the Merger, no issuance of CFC common stock in
connection with Carolina First Corporation's acquisition of Midlands National
Bank, and no conversion of any shares of any series of Carolina First
Corporation preferred stock (except for shares of preferred stock owned by the
named individual).
(2) The calculation is based on a total of 5,034,060 shares of outstanding Common
Stock outstanding as of January 16, 1995 and assumes the issuance of 452,813
shares of CFC common stock in connection with the Merger, no issuance of CFC
common stock in connection with Carolina First Corporation's acquisition of
Midlands National Bank, and no conversion of any shares of any series of
Carolina First Corporation preferred stock (except for shares of preferred
stock owned by the named individual).
(3) The calculation assumes conversion of 2,000 shares of Series 1993 Preferred
Stock owned by Mr. Hamby.
(4) Includes 15,306 shares of Common Stock owned by Mr. Hummers through the
Restricted Stock Plan.
(5) Includes 1,500 shares of Common Stock owned by Ms. Stall's spouse.
(6) Includes 82,757 shares of Common Stock owned by a company of which Mr. Timmons
is an officer.
(7) Includes 4,950 shares of Common Stock owned by Mr. Webster's family.
(8) Includes 25,015 shares of Common Stock owned by Mr. Whittle through the
Restricted Stock Plan and assumes conversion of 492 shares of Series 1993B
Preferred Stock.
(9) Includes 3,840 shares of Common Stock owned by Mr. Morrow through the
Restricted Stock Plan.
(10) Includes 5,000 shares of Common Stock owned by Mr. Reynolds through the
Restricted Stock Plan.
(11) Includes 8,815 shares of Common Stock owned by Mr. Terry through the Restricted
Stock Plan.
</TABLE>
75
<PAGE>
Business Experience of Carolina First Corporation Directors
Mr. Farr is the owner and President of Greenco Beverage, Inc., a
distributorship headquartered in Greenville, South Carolina. Mr. Farr
has served as President since the opening of Greenco Beverage, Inc. in
1965.
Mr. Grimes is an attorney in private practice in Georgetown, South
Carolina. From 1987 until 1992 Mr. Grimes was of counsel with The
McNair Law Firm in its Georgetown, South Carolina office.
Mr. Hamby is Senior Vice President-Finance and Administration and
Chief Financial Officer of Multimedia, Inc., a diversified media
company headquartered in Greenville, South Carolina which owns and
operates newspapers, television and radio stations, cable television
systems and media productions. Mr. Hamby became Multimedia, Inc.'s
Chief Financial Officer in 1987 and Senior Vice President in 1993.
Prior to 1985, when Mr. Hamby first became affiliated with Multimedia,
Inc., Mr. Hamby was a partner in the accounting firm of KPMG Peat
Marwick. Mr. Hamby is a director of Multimedia, Inc.
Mr. Hagy is President of Vaxa Corporation, an investment holding
company located in Greenville, South Carolina which was formed in 1987.
From 1991 through 1993, Mr. Hagy (through Vaxa Corporation) owned
Siteguard Security Holding Company, a security alarm business
headquartered in Greenville, South Carolina.
Mr. Hilliard is President and Chief Executive Officer of ING Life
Companies, a company which is engaged in insurance related operations.
From 1989 until 1992, Mr. Hilliard served as President and Chief
Executive Officer of Security Life of Denver. Prior to 1989, he was
Chairman and Chief Executive Officer of Liberty Life Insurance Company,
Greenville, South Carolina.
Mr. Hummers joined the Company in June 1988 in his present capacity.
From 1986 to 1988, he was Vice President - Management Reporting with
First Union Corporation, Charlotte, North Carolina. From 1982 to 1986,
he was Senior Vice President and Controller with Southern Bank and
Trust which was acquired by First Union National Bank of South Carolina
in 1986. He is also a director of World Acceptance Corporation.
Mr. Ingram is currently Chairman of Builder Marts of America, Inc.,
a company engaged in the wholesale distribution of building materials
("Builder Marts"). From 1988 until 1993, Mr. Ingram served as Chief
Executive Officer of Builder Marts. Since 1993, Mr. Ingram has also
served as Chief Executive Officer of Snyder's Auto Sales, Inc., a
company which operates a car dealership in Greenville, South Carolina.
Mr. Ingram is also a director of Synalloy Corporation.
Mr. Schooler is a Doctor of Optometry in Georgetown, South Carolina.
Ms. Stall is a private investor in Greenville, South Carolina. Ms.
Stall is a director of Multimedia, Inc.
Mr. Timmons is currently Chairman of Canal Insurance Company, an
insurer of commercial motor vehicles ("Canal"). From 1947 until 1993,
Mr. Timmons served as First Vice President and Secretary of Canal.
Mr. Webster is, and has been since 1978, a partner in Carabo
Capital, a company which owns real property. During the past five
years until 1992, he has also served as an executive officer of
Litchfield Enterprises, Inc., a resort development company.
Mr. Whittle has been President and Chief Executive Officer of the
Company since its organization in 1986. From 1986 until 1991, Mr.
Whittle also served as President of Carolina First Bank. Mr. Whittle
previously served as Senior Vice President and Regional Officer for
Bankers Trust of South Carolina (currently NationsBank of South
Carolina) from 1982 until May 1986, when he resigned his position in
order to organize the Company.
Business Experience of Carolina First Corporation Executive Officers
Mr. Whittle's business experience is set forth above under "Business
Experience of Directors."
76
<PAGE>
Mr. Hummers' business experience is set forth above under "Business
Experience of Directors."
Mr. Terry has served as the President and a Director of Carolina
First Bank since 1991. From 1986 to 1991, Mr. Terry was Senior Vice
President and Regional Executive for First Union National Bank of South
Carolina in Greenville, South Carolina.
Mr. Morrow has served as the President and a Director of Carolina
First Savings Bank since 1992. From 1988 to 1992, Mr. Morrow was Vice
President/City Executive for First Union National Bank of South
Carolina in Hilton Head, South Carolina.
Mr. Reynolds has served as President of Carolina First Mortgage
Company since 1993. From 1984 until 1993, Mr. Reynolds was Senior Vice
President and Chief Mortgage Banking Officer at South Carolina Federal
Savings Bank, F.S.B. in Columbia, South Carolina.
Other Information Regarding Carolina First Corporation
Other information concerning the directors and executive officers of
Carolina First Corporation, compensation of directors and executive
officers of Carolina First Corporation and any related transactions in
which they have an interest, together with information related to
principal shareholders of Carolina First Corporation, is set forth in
Carolina First Corporation Proxy Statement, dated February 28, 1994,
incorporated herein by reference to Carolina First Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993. See
"INFORMATION ABOUT CAROLINA FIRST CORPORATION -- Incorporation of
Certain Information By Reference."
Management and Principal Shareholders of ACNB
As of January 16, 1995, there were no persons or groups known to
ACNB which owned five percent or more of its total outstanding common
stock.
The following table sets forth (i) as of January 16, 1995, and (ii)
pro forma upon consummation of the Merger, the number and percent of
total outstanding shares of ACNB common stock beneficially owned by all
directors and executive officers of ACNB individually and by all
directors and executive officers of ACNB as a group.
<TABLE>
<CAPTION>
Pro Forma
Amount and Percent Amount and Percent
Title Nature of Bene- of Nature of Bene- of
of Class Name of Beneficial Owner ficial Ownership Class ficial Ownership Class(1)
<S> <C> <C> <C> <C> <C>
Directors
Common Stock L. O. Benton, III 15,000 3.7% 16,875 *
Common Stock Wade M. Brodie 10,000 2.5% 11,250 *
Common Stock Harold D. Enloe 15,000 3.7% 16,875 *
Common Stock Michael L. Laughlin 15,900 3.9% 17,887 *
Common Stock David M. Lock 14,500 3.6% 16,312 *
Common Stock A. G. Milner, III 200 * 225 *
Common Stock Ted W. Morton 12,500 3.1% 14,062 *
Common Stock William H. Nock 2,588(2) * 19,786(3) *
77
Executive Officers
Common Stock William H. Nock 2,588(2) * 19,786(3) *
Common Stock Harriet R. Murray 1,000 * 1,125 *
Directors and Executive Officers as a Group
Common Stock All directors and officers
as a group (9 persons) 86,688(2) 21.5% 97,524 2.0%
TABLE Continued
- ---------------------------------------
* Less than 1%.
(1) This calculation is based on an aggregate of 4,581,247
shares of Common Stock, which is deemed to be outstanding under Rule 13d-3
of the Exchange Act.
(2) Does not include an outstanding option to purchase 15,000 shares of
ACNB common stock held by Mr. Nock, which option will be cancelled at the
Effective Date of the Merger and replaced with an option to purchase 16,875
shares of CFC common stock.
(3) Assumes the grant of an option to purchase 16,875 shares of CFC common stock,
which option will be granted at the Effective Date of the Merger in exchange for the
cancellation of an existing option to purchase 15,000 shares of ACNB common stock.
</TABLE>
Interests of Certain Persons in the Merger
As of the Effective Date of the Merger, Carolina First Corporation
will enter into an employment agreement with William H. Nock, who is
currently the President and a director of ACNB. The agreement will
provide for continued payment of salary in the event of certain types
of termination, an employment term of three years, that may be extended
by Carolina First Corporation, and for certain other benefits. In
connection with the Merger, Carolina First Corporation has also agreed
to issue to Mr. Nock, at the Effective Date, an option to purchase
16,875 shares of CFC common stock, which option will be granted at the
Effective Date of the Merger in exchange for the cancellation of an
existing option to purchase 15,000 shares of ACNB common stock. Mr.
Nock will not be considered an executive officer of Carolina First Bank
after the Merger.
In connection with the Merger, Carolina First Corporation also
expects to enter into employment contracts with three other ACNB
employees. These contracts generally provide for continued payment of
salary in the event of certain types of termination, an employment term
of two years, and for certain other benefits. None of these three
persons will be considered executive officers of Carolina First Bank
after the Merger.
78
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
On the Effective Date, all of the outstanding shares of ACNB common
stock will be converted into CFC common stock. Accordingly,
shareholders of ACNB will become shareholders of Carolina First
Corporation, and their rights as Carolina First Corporation
shareholders will be determined by South Carolina law and Carolina
First Corporation's Articles of Incorporation and Bylaws. The rights
of Carolina First Corporation shareholders differ from the rights of
ACNB's shareholders with respect to certain important matters,
including the required shareholder votes as to mergers, consolidations,
exchanges, sales of assets or dissolution, removal of directors and
amendments to the articles of incorporation; classification of the
board of directors; preemptive rights; cumulative voting rights;
nomination of directors, and statutory and other restrictions on
certain business combinations and control share acquisitions.
A comparison of the respective rights of ACNB's shareholders and
Carolina First Corporation's shareholders with respect to these matters
is set forth immediately below. A description of the CFC common stock
is set forth below under "CAROLINA FIRST CORPORATION CAPITAL STOCK."
Comparison of CFC Common Stock and ACNB Common Stock
The rights of Carolina First Corporation shareholders are governed
by Carolina First Corporation's Articles of Incorporation and Bylaws
and the applicable provisions of the South Carolina Business
Corporation Act of 1988, as amended (the "South Carolina Corporations
Law"). By contrast, the rights of ACNB shareholders are governed by
ACNB's Articles of Association and Bylaws and by federal law. If the
holders of ACNB common stock approve the Merger Agreement and the
Merger is subsequently consummated, holders of ACNB common stock will
become holders of CFC common stock. Although it is impracticable to
note all the differences between the South Carolina Corporations Law
and federal law generally, and all of the differences between the
applicable governing documents of Carolina First Corporation and ACNB,
the following is intended to be a summary of certain significant
differences between the rights of holders of CFC common stock and ACNB
common stock. This comparison of the rights of holders of ACNB common
stock and CFC common stock is based on the current terms of the
governing documents of the respective companies and on the current
provisions of state and federal law and is qualified in its entirety
thereby.
Capitalization. ACNB is authorized to issue 500,000 shares of
common stock, $5.00 par value, of which 402,500 shares were issued and
outstanding as of January 16, 1995. Carolina First Corporation has (i)
20,000,000 shares of $1 par value common stock authorized, of which
4,581,247 shares of Common Stock were outstanding as of January 16,
1995, and (ii) 10,000,000 shares of "blank check" preferred stock
authorized, of which 621,000 shares of Noncumulative Convertible
Preferred Stock Series 1993 (the "Series 1993 Preferred Stock"), 60,000
shares of Noncumulative Convertible Preferred Stock Series 1993B (the
"Series 1993B Preferred Stock") and 920,000 shares of Noncumulative
Convertible Preferred Stock Series 1994 (the "Series 1994 Preferred
Stock") were authorized and outstanding at January 16, 1995.
Voting in General. In general, holders of both ACNB common stock
and CFC common stock are entitled to one vote per share and to the same
and identical voting rights as other holders of such common stock.
However, in the election of directors, ACNB shareholders have the right
to cumulate votes, i.e. the right to give one candidate as many votes
as shall equal the number of directors multiplied by the number of his
shares, or to distribute them on the same principle among as many
candidates as he shall think fit. Holders of CFC common stock are not
entitled to cumulate votes under any circumstances.
Mergers, Consolidations, Exchanges, Sales of Assets or Dissolution.
A vote of two-thirds of the outstanding shares of ACNB is required to
approve any merger, consolidation, exchange, sale of substantially all
of the assets
79
<PAGE>
of, or dissolution of ACNB. Carolina First Corporation's
Articles of Incorporation require the affirmative vote of holders of at
least 80% of the outstanding stock of Carolina First Corporation
entitled to vote for approval before Carolina First Corporation may (a)
merge or consolidate with any other corporation, (b) sell or exchange
all or a substantial part of its assets to or with any other
corporation, or (c) issue or deliver any stock or other securities in
exchange or payment for any properties or assets of any other
corporation, or securities issued by any other corporation, or in a
merger of any subsidiary of Carolina First Corporation with or into any
other corporation (the foregoing being hereinafter referred to as a
"business combination"). This 80% supermajority is reduced to the
percentage required by applicable law if such business combination was
approved and recommended without condition by the affirmative vote of
at least 80% of the directors.
Directors. The Articles of Association of ACNB provide for a Board
of Directors having not less than five or more than fifteen members as
determined from time to time by vote of a majority of the members of
the Board of Directors or by resolution of the shareholders of ACNB.
Vacancies may be filled by the other or remaining directors, provided,
however, that the directors may not increase the number of directors to
a number that exceeds by more than two the number of directors last
elected by the shareholders where the number was fifteen or less.
Carolina First Corporation's Articles of Incorporation provide that the
number of directors shall be set by the Board of Directors or the
shareholders. However, the Board of Directors cannot change the size
of the Board by more than 30% without shareholder approval. Vacancies
may be filled by existing directors. The Carolina First Corporation
Board of Directors currently has twelve members. In accordance with
Carolina First Corporation's Articles of Incorporation, whenever the
Board consists of nine or more persons, the Board shall be divided into
three classes of directors (with each class having as close to an equal
number as possible). The members of each class are elected for
staggered three-year terms.
Nomination of Directors. The Articles of Association of ACNB
provide that nominations for election to the board of directors may be
made by the board of directors or by any shareholder of ACNB entitled
to vote for election of directors. Nominations other than those made
by or on behalf of the existing ACNB management must be made in writing
and be delivered or mailed to the president of ACNB and to the OCC not
less than 14 days nor more than 50 days prior to any meeting of
shareholders called for the election of directors; provided, however,
that if less than 21 days notice of the meeting is given to
shareholders, such nominations must be mailed or delivered to the
president of ACNB and to the OCC not later than the close of business
on the seventh day following the day on which the notice of meeting was
mailed. Such notification must contain certain specified information
to the extent known to the notifying shareholder. Carolina First
Corporation's Articles of Incorporation provide that, in addition to
the Board of Directors, any stockholder entitled to vote for the
election of directors may make nominations for the election of
directors only by giving written notice to the Secretary of Carolina
First Corporation at least 30 days but not more than 60 days prior to
the annual meeting of stockholders at which directors are to be
elected, unless such requirement is waived in advance of the meeting by
the Board of Directors.
Indemnification of Officers and Directors. The governing documents
of both Carolina First Corporation and ACNB generally provide that the
parties have the power to indemnify any director, officer or employee,
his or her heirs, executors or administrators, and agents for expenses,
judgments, decrees and any liability incurred in actions to which the
director, officer or employee is a party, or potential party, by reason
of the performance of his official duties, assuming he conducted
himself in good faith and reasonably believed his conduct in his
official capacity to be in the parties' best interest. Such
indemnification provisions do not apply in instances where such person
acted in bad faith or engaged in conduct against the interest of ACNB or
Carolina First Corporation. The governing documents of both
Carolina First Corporation and ACNB also provide that the respective
companies have the power to pay premiums for insurance covering certain
liabilities of directors, officers and employees to the extent such
insurance is permitted under South Carolina corporations laws.
80
<PAGE>
Preemptive Rights. The Articles of Association of ACNB provide that
shareholders have preemptive rights to purchase additional shares of
ACNB's stock upon any issuance by ACNB of additional shares thereof.
Holders of CFC common stock have no preemptive rights.
Assessment. Under the National Bank Act, if the capital stock of a
national bank (such as ACNB) is impaired, by losses or otherwise, the
OCC is authorized to seek payment of the deficiency by assessment upon
its shareholders, pro rata, but the assessment is only enforceable by
selling the stock of any shareholder who does not pay the assessment.
There are no assessment provisions applicable to CFC common stock.
Conversion; Redemption; Sinking Fund. Neither CFC common stock nor
ACNB common stock is convertible, redeemable nor entitled to any
sinking fund.
Liquidation Rights. In the event of the liquidation, dissolution or
winding-up of the affairs of ACNB, holders of outstanding shares of
ACNB common stock are entitled to share, in proportion to their
respective interests, in ACNB's assets and funds remaining after
payment, or provision for payment, of all debts and other liabilities
of ACNB. In the event of the liquidation, dissolution or winding-up of
the affairs of Carolina First Corporation, holders of CFC common stock
are entitled to share, pro rata, in Carolina First Corporation's assets
and funds remaining after payment, or provision for payment, of all
debts and other liabilities of Carolina First Corporation, and after
payment of all amounts due to holders of Preferred Stock upon
liquidation.
Dividends. Holders of ACNB common stock and CFC common stock are
entitled to receive such dividends as the respective Board of Directors
may declare out of funds legally available therefor. However, the
payment of dividends by ACNB is currently subject to the restrictions
of the OCC Consent Agreement. These restrictions are described under
"INFORMATION ABOUT ACNB - Supervision and Regulation of ACNB - Payment
of Dividends."
Amendment. ACNB's Articles of Association provide that they may be
amended by the affirmative vote of a majority of ACNB's shareholders,
unless a greater vote is required by law. Carolina First Corporation's
Articles of Incorporation generally may be amended only upon the
approval of holders of two-thirds of the votes outstanding, and in
certain circumstances, such two-thirds requirement is increased to 80%.
Anti-takeover Measures. ACNB has not implemented any material anti-
takeover measures. By contrast, Carolina First Corporation has
implemented a number of provisions which have the effect of impeding a
takeover of Carolina First Corporation that is not favored by Carolina
First Corporation management. See "CAROLINA FIRST CORPORATION CAPITAL
STOCK." Furthermore, South Carolina law has business combination and
control share acquisition statutes which may serve to impede takeovers
not favored by management.
The South Carolina control share statute provides that upon the
acquisition by a person of certain threshold percentages of stock (20%,
33% and 50%), a shareholders' meeting must be held in order to
determine whether or not to confer voting rights upon such acquiring
person's shares. An affirmative vote of holders of a majority of all
outstanding company stock (excluding shares held by the acquiring
person, company officers and company employees who are also directors
of the company) is required to confer voting rights upon such acquiring
person's shares.
The South Carolina business combinations statute provides that a 10%
or greater shareholder of a resident domestic corporation cannot engage
in a "business combination" (as defined in the statute) with such
corporation for a period of two years following the date on which the
10% shareholder became such, unless the business combination or the
acquisition of shares is approved by a majority of the disinterested
members of such corporation's board of directors before the 10%
shareholder's share acquisition date. This statute further provides
that at no time (even after the two-year period subsequent to such
share acquisition date) may the 10% shareholder engage in a business
combination with the relevant corporation unless certain approvals of
the board of directors
81
<PAGE>
or disinterested shareholders are obtained or
unless the consideration given in the combination meets certain minimum
standards set forth in the statute.
There are no comparable federal statutes which are applicable to
ACNB.
82
<PAGE>
CAROLINA FIRST CORPORATION CAPITAL STOCK
Common Stock
Carolina First Corporation has 20,000,000 shares of common stock
authorized, of which 4,581,247 shares of common stock were outstanding
as of January 16, 1995. The holders of the CFC common stock are
entitled to dividends when, as and if declared by the Board of
Directors in their discretion out of funds legally available therefor.
The principal source of funds for Carolina First Corporation is
dividends from its subsidiaries. Carolina First Corporation's
subsidiaries are subject to certain legal restrictions on the amount of
dividends they are permitted to pay. See "INFORMATION ABOUT CAROLINA
FIRST CORPORATION - Certain Regulatory Matters." All outstanding
shares of CFC common stock are fully paid and nonassessable. No holder
of CFC common stock has any redemption or sinking fund privileges, any
preemptive or other rights to subscribe for any other shares or
securities, or any conversion rights. In the event of liquidation, the
holders of CFC common stock are entitled to receive pro rata any assets
distributable to stockholders in respect of shares held by them,
subject to the rights of any holders of the Series 1993 Preferred
Stock, the Series 1993B Preferred Stock, Series 1994 Preferred Stock,
and any other senior stock which may be issued in the future (although
no such issuance is currently contemplated). Holders of the CFC common
stock are entitled to one vote per share.
Preferred Stock
Carolina First Corporation has 10,000,000 shares of "blank check"
preferred stock authorized (the "Preferred Stock"), of which 621,000
shares of Series 1993 Preferred Stock, 60,000 shares of Series 1993B
Preferred Stock and 920,000 shares of Series 1994 Preferred Stock were
authorized and outstanding at January 16, 1995. Carolina First
Corporation's Board of Directors has the sole authority, without
stockholder vote, to issue shares of authorized but unissued Preferred
Stock to whomever and for whatever purposes it, in its sole discretion,
deems appropriate. The relative rights, preferences and limitations of
the Preferred Stock are determined by Carolina First Corporation's
Board of Directors in its sole discretion. Among other things, the
Board may designate with respect to the Preferred Stock, without
further action of the stockholders of Carolina First Corporation, the
dividend rate and whether dividends shall be cumulative or
participating or possess other special rights, the voting rights,
Carolina First Corporation's rights and terms of redemption, the
liquidation preferences, any rights of conversion and any terms related
thereto, and the price or other consideration for which the Preferred
Stock shall be issued. The Preferred Stock could be utilized by
Carolina First Corporation to impede the ability of third parties who
attempt to acquire control of Carolina First Corporation without the
cooperation of Carolina First Corporation's Board of Directors.
A summary of the provisions of the outstanding series of Preferred
Stock is set forth below under "--Terms of the Preferred Stock."
Stockholders' Rights Agreement
On November 9, 1993, the Board of Directors adopted a Shareholders'
Rights Agreement (the "Rights Agreement"). Pursuant to the Rights
Agreement, on November 9, 1993, the Board of Directors declared a
dividend distribution to stockholders of record at the close of
business on November 24, 1993 of one common stock purchase right (a
"Right") for each outstanding share of CFC common stock. Each Right
entitles the registered holder to purchase from Carolina First
Corporation one-half share of CFC common stock at a cash exercise price
of $18.00, subject to adjustment.
Initially, the Rights are not exercisable and are attached to all
outstanding shares of CFC common stock (including to all shares of
common stock issued after November 24, 1993). No separate Right
Certificates have been or will be distributed. The Rights will
separate from the CFC common stock and a "Distribution Date" will
83
<PAGE>
occur upon the earliest of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the
outstanding shares of CFC common stock (the date of said announcement
being referred to as the "Share Acquisition Date") and (ii) 10 business
days following the commencement of a tender offer or exchange offer
that would result in a person or group owning 20% or more of the
outstanding shares of CFC common stock. Until the Distribution Date,
(i) the Rights will be evidenced by the CFC common stock certificates
and will be transferred with and only with such certificates, (ii) new
CFC common stock certificates issued after November 24, 1993 will
contain a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificates for CFC common
stock will also constitute the transfer of the Rights associated with
the CFC common stock represented by such certificate. The Rights are
not exercisable until the Distribution Date and will expire at the
close of business on November 24, 2003, unless previously redeemed by
Carolina First Corporation as described below. As soon as practicable
after the Distribution Date, Right Certificates will be mailed to
holders of record of CFC common stock as of the close of business on
the Distribution Date and, thereafter, the separate Right Certificates
alone will represent the Rights. Except as otherwise determined by the
Board of Directors, only shares of CFC common stock issued prior to the
Distribution Date will be issued with Rights.
ln the event that (i) a Person acquires beneficial ownership of 20%
or more of the CFC common stock, (ii) Carolina First Corporation is the
surviving corporation in a merger with an Acquiring Person or any
Affiliate or Associate (as defined in the Rights Agreement) and the CFC
common stock is not changed or exchanged, (iii) an Acquiring Person
engages in one of a number of self-dealing transactions specified in
the Rights Agreement, or (iv) an event occurs which results in an
Acquiring Person's ownership interest being increased by more than 1%
(e.g., a reverse stock split), proper provision will be made so that
each holder of a Right will thereafter have the right to receive upon
exercise thereof at the then current exercise price, that number of
shares of CFC common stock (or in certain circumstances, cash,
property, or other securities of Carolina First Corporation) having a
market value of two times such exercise price. However, the Rights are
not exercisable following the occurrence of any of the events set forth
above until such time as the Rights are no longer redeemable as set
forth below. Notwithstanding any of the foregoing, Rights that are or
were beneficially owned by an Acquiring Person shall become null and
void. In the event that following the Share Acquisition Date, (i)
Carolina First Corporation is acquired in a merger or other business
combination transaction, or (ii) 50% or more of Carolina First
Corporation's assets or earning power is sold, each holder of a Right
shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a market value equal to two times the
exercise price of the Right. At any time after any person becomes an
Acquiring Person and prior to such time such Person, together with its
Affiliates and Associates, becomes the Beneficial Owner of 50% or more
of the outstanding CFC common stock, the Board of Directors may
exchange the Rights (other than Rights which have become void), in
whole or in part, at the exchange rate of one share of CFC common stock
per Right, subject to adjustment as provided in the Rights Agreement.
The exercise price payable, and the number of shares of CFC common
stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the CFC common stock, (ii) if holders of the
CFC common stock are granted certain rights or warrants to subscribe
for CFC common stock or securities convertible into CFC common stock at
less than the current market price of the CFC common stock, or (iii)
upon the distribution to holders of the CFC common stock of evidence of
indebtedness or assets (excluding regular quarterly cash dividends) or
of subscription rights or warrants (other than those referred to
above).
The Rights may be redeemed in whole, but not in part, at a price of
$.001 per Right (payable in cash, CFC common stock or other
consideration deemed appropriate by the Board of Directors) by the
Board of Directors at any time prior to the close of business on the
tenth day after the Share Acquisition Date or the final expiration Date
of the Rights (whichever is earlier); provided that under certain
circumstances, the Rights may not be redeemed unless there are
Disinterested Directors (as defined in the Rights Agreement) in office
and such redemption is approved by a majority of such Disinterested
Directors. After the redemption period has expired, Carolina First
Corporation's right of redemption may be reinstated upon the approval
of the Board of Directors if an Acquiring
84
<PAGE>
Person reduces his beneficial
ownership to 15% or less of the outstanding shares of CFC common stock
in transaction or series of transactions not involving Carolina First
Corporation and there are no other Acquiring Persons. Immediately upon
the action of the Board of Directors ordering redemption of the Rights,
the Rights will terminate and thereafter the only right of the holders
of Rights will be to receive the redemption price.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of Carolina First Corporation prior to the
Distribution Date. After the Distribution Date, the provisions of the
Rights Agreement, other than those relating to the principal economic
terms of the Rights, may be amended by the Board to cure any ambiguity,
defect or inconsistency, to make changes which do not adversely affect
the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement. Amendments adjusting time periods may, under certain
circumstances, require the approval of a majority of Disinterested
Directors, or otherwise be limited. This summary description of the
Rights does not purport to be complete and is qualified in its entirety
by reference to the Shareholder Rights Agreement.
Management Contracts
Carolina First Corporation has entered into Noncompetition,
Severance and Employment Agreements with Mack I. Whittle, Jr., William
S. Hummers III and James W. Terry, Jr. These agreements set forth
general provisions regarding compensation, confidentiality, termination
and noncompetition. However, they also provide that in the event that
the named executive's employment with Carolina First Corporation is
voluntarily or involuntarily terminated after a "change in control" (as
defined in such agreement), then, except in very limited instances, the
named executive becomes entitled to receive immediately amounts
substantially equal to three years' compensation (including bonus
compensation).
Board of Directors
Classification of Board of Directors. Carolina First Corporation's
Board of Directors currently consists of twelve persons. In accordance
with the Articles of Incorporation, whenever the Board consists of nine
or more persons, the Board shall be divided into three classes of
directors (with each class having as close to an equal number as
possible). The members of each class are elected for staggered
three-year terms. The staggering of Board terms has the effect of
making it more difficult to remove current Directors than would
otherwise be the case. In addition, Carolina First Corporation's
Articles of Incorporation require the affirmative vote of the holders
of not less than 80% of the outstanding voting securities of Carolina
First Corporation to remove any Director without cause. Accordingly,
unless holders of 80% of the outstanding CFC common stock vote to
remove one or more Directors, it would take three annual meetings for
shareholders to change the composition of the Board. See "--Removal of
Directors".
Limitation of Director Liability. The directors of Carolina First
Corporation are exempt under Carolina First Corporation's Articles of
Incorporation from personal monetary liability to the extent permitted
by Section 33-2-102(e) of the South Carolina Business Corporation Act
of 1988, as amended. This statutory provision provides that a director
of the corporation shall not be personally liable to the corporation or
any of its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not be deemed to
eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involved gross
negligence, intentional misconduct, or a knowing violation of law,
(iii) imposed under Section 33-8-330 of the South Carolina Business
Corporation Act of 1988 (improper distribution to shareholder), or
(iv) for any transaction from which the director derived an improper
personal benefit.
85
<PAGE>
Removal of Directors. Carolina First Corporation's Articles of
Incorporation require the affirmative vote of the holders of not less
than 80% of the outstanding voting securities of Carolina First
Corporation to remove any Director or the entire Board of Directors
without cause. Carolina First Corporation's Articles of Incorporation
also provide that any stockholder entitled to vote for the election of
directors may make nominations for the election of directors only by
giving written notice to the Secretary of Carolina First Corporation at
least 30 days but not more than 60 days prior to the annual meeting of
stockholders at which directors are to be elected, unless such
requirement is waived in advance of the meeting by the Board of
Directors.
Evaluation of Proposed Business Combinations. Carolina First
Corporation's Articles of Incorporation provide that the Board of
Directors, when evaluating any proposed business combination with
Carolina First Corporation, shall give due consideration to (i) all
relevant factors, including without limitation, the social, legal,
environmental and economic effects on the employees, customers,
suppliers and other constituencies of Carolina First Corporation, and
on its subsidiaries, the communities and geographical areas in which
Carolina First Corporation and its subsidiaries operate or are located,
and on any of the businesses and properties of Carolina First
Corporation or any of its subsidiaries, as well as such other factors
as the directors deem relevant, and (ii) not only the consideration
being offered in relation to the then current market price for Carolina
First Corporation's outstanding shares, but also in relation to the
then current value of Carolina First Corporation in a freely-negotiated
transaction and in relation to the Board of Directors' estimate of the
future value of Carolina First Corporation (including the unrealized
value of its properties and assets) as an independent going concern.
Voting
Noncumulative Voting. Carolina First Corporation's Articles of
Incorporation provide that stockholders may not cumulate votes for the
election of directors. Accordingly, holders of more than 50% of the
shares voting at the election of directors can elect all of the
directors if they choose to do so and, in such event, the holders of
the remaining shares (less than 50%) voting are not able to elect any
board members.
Supermajority Voting Requirements. Carolina First Corporation's
Articles of Incorporation require the affirmative vote of holders of at
least 80% of the outstanding stock of Carolina First Corporation
entitled to vote for approval before Carolina First Corporation may (a)
merge or consolidate with any other corporation, (b) sell or exchange
all or a substantial part of its assets to or with any other
corporation, or (c) issue or deliver any stock or other securities of
its issue in exchange or payment for any properties or assets of any
other corporation, or securities issued by any other corporation, or in
a merger of any subsidiary of Carolina First Corporation with or into
any other corporation (the foregoing being hereinafter referred to as a
"business combination"). This 80% supermajority is reduced to the
percentage required by applicable law if such business combination was
approved (or adopted) and recommended without condition by the
affirmative vote of at least 80% of the directors. The Articles of
Incorporation expressly permit the Board of Directors to condition its
approval (or adoption) of any business combination upon the approval of
holders of 80% of the outstanding stock of Carolina First Corporation
entitled to vote on such business combination. The 80% supermajority
provision is not applicable to any transaction solely between Carolina
First Corporation and another corporation, 50% or more of the voting
stock of which is owned by Carolina First Corporation. Under present
South Carolina law, a merger or the sale of substantially all the
assets requires the affirmative approval of holders of two-thirds of
the outstanding shares entitled to vote. The amendment of the
foregoing business combination provisions requires the approval of
holders of 80% of the outstanding stock entitled to vote. The
foregoing supermajority voting provision could impede the ability of
third parties who attempt to acquire control of Carolina First
Corporation without the cooperation of Carolina First Corporation's
Board of Directors.
Control Share Acquisition / Business Combination Statutes
86
<PAGE>
South Carolina Corporations Law has business combination and control
share acquisition statutes which may serve to impede takeovers not
favored by management. These statutes are summarized above in "--
Comparison of CFC Common Stock and ACNB Common Stock."
Transfer Agent
The transfer agent for the CFC common stock is Carolina First Bank.
Dividend Reinvestment Plans
Carolina First Corporation has in place dividend reinvestment
plans with respect to its common stock, its Series 1993 Preferred
Stock, and its Series 1994 Preferred Stock. As set forth in the plans,
holders of such shares may elect to receive CFC common stock in lieu of
receiving the cash dividends to which such holder may otherwise be
entitled. These plans also provide for purchases of CFC common stock
through optional cash payments.
Terms of the Preferred Stock
Series 1994 Preferred Stock. Holders of the Series 1994 Preferred
Stock are entitled to receive when, as and if declared by the Board of
Directors in their discretion, out of funds legally available therefor,
quarterly noncumulative cash dividends of approximately $0.46 per
share. To date, Carolina First Corporation has paid all regular
dividends on the Series 1994 Preferred Stock and Carolina First
Corporation intends to continue to pay the regular cash dividends on
the Series 1994 Preferred Stock unless prohibited by Carolina First
Corporation's regulatory authorities. Carolina First Corporation may
at any time after July 1, 1994, at the option of the Board of
Directors, redeem all or part of the outstanding shares of the Series
1994 Preferred Stock upon the specified notice and upon receipt of
approval of the Federal Reserve. However, if Carolina First
Corporation elects to redeem the Series 1994 Preferred Stock prior to
2001, Carolina First Corporation must pay a premium as set forth in its
Articles of Amendment establishing the Series 1994 Preferred Stock.
However, the Series 1994 Preferred Stock may not be redeemed prior to
July 1, 1997, unless, certain market price standards for the CFC common
stock are met, all as set forth in the Articles of Amendment
establishing the Series 1994 Preferred Stock. The Series 1994
Preferred Stock is convertible at any time at the option of the holder
into fully-paid and nonassessable shares of CFC common stock at a
conversion price of $13.95 per share of CFC common stock (equivalent to
a conversion ratio of approximately 1.7931 shares of CFC common stock
for each share of Series 1994 Preferred Stock), subject to adjustment
in certain circumstances for equitable purposes. Holders of the
Series 1994 Preferred Stock are entitled to vote on each matter on
which holders of CFC common stock are entitled to vote and are
otherwise accorded all voting powers and rights of CFC common stock.
Each share of Series 1994 Preferred Stock has the number of votes equal
to the number of shares of CFC common stock into which it is
convertible. In the event of any liquidation, dissolution, or winding
up of Carolina First Corporation, the holders of shares of the Series
1994 Preferred Stock shall be entitled to be paid, out of the assets of
Carolina First Corporation available for distribution to its
stockholders whether from capital, surplus or earnings and before any
payment shall be made in respect of CFC common stock or on any other
class of stock ranking junior to the Series 1994 Preferred Stock (but
only after all amounts payable upon liquidation with respect to the
Series 1993 Preferred Stock and Series 1993B Preferred Stock have been
paid), an amount equal to $25.00 per share.
Series 1993 Preferred Stock. Holders of the Series 1993 Preferred
Stock are entitled to receive when, as and if declared by the Board of
Directors in their discretion, out of funds legally available therefor,
quarterly noncumulative cash dividends of approximately $0.47 per
share. To date, Carolina First Corporation has paid all regular
dividends on the Series 1993 Preferred Stock and Carolina First
Corporation intends to continue to pay the regular cash dividends on
the Series 1993 Preferred Stock unless prohibited by Carolina First
Corporation's regulatory authorities. Carolina First Corporation may
at any time after July 1, 1993, at the option of the Board
87
<PAGE>
of Directors, redeem all or part of the outstanding shares of the Series
1993 Preferred Stock upon the specified notice and upon receipt of
approval of the Federal Reserve. However, if Carolina First
Corporation elects to redeem the Series 1993 Preferred Stock prior to
July 1, 2000, Carolina First Corporation must pay a premium as set
forth in its Articles of Amendment establishing the Series 1993
Preferred Stock. However, the Series 1993 Preferred Stock may not be
redeemed prior to July 1, 1996, unless, certain market price standards
for the CFC common stock are met, all as set forth in the Articles of
Amendment establishing the Series 1993 Preferred Stock. The Series
1993 Preferred Stock is convertible at any time at the option of the
holder into fully-paid and nonassessable shares of CFC common stock at
a conversion price of $13.04 per share of CFC common stock (equivalent
to a conversion ratio of approximately 1.9173 shares of CFC common
stock for each share of Series 1993 Preferred Stock), subject to
adjustment in certain circumstances for equitable purposes. Holders of
the Series 1993 Preferred Stock are entitled to vote on each matter on
which holders of CFC common stock are entitled to vote and are
otherwise accorded all voting powers and rights of CFC common stock.
Each share of Series 1993 Preferred Stock has the number of votes equal
to the number of shares of CFC common stock into which it is
convertible. In the event of any liquidation, dissolution, or winding
up of Carolina First Corporation, the holders of shares of the Series
1993 Preferred Stock shall be entitled to be paid, out of the assets of
Carolina First Corporation available for distribution to its
stockholders whether from capital, surplus or earnings and before any
payment shall be made in respect of CFC common stock or on any other
class of stock ranking junior to the Series 1993 Preferred Stock, an
amount equal to $25.00 per share.
Series 1993B Preferred Stock. Holders of the Series 1993B Preferred
Stock are entitled to receive when, as and if declared by the Board of
Directors, in their discretion, out of funds legally available there-
for, quarterly cumulative cash dividends of approximately $0.31 per
share. The Series 1993B Preferred Stock is subordinate to the Series
1993 Preferred Stock with respect to dividends. The regular cash
dividends on the Series 1993B Preferred Stock cumulate, provided that
current quarterly earnings are available for payment of such regular
cash dividends and assuming that all regular dividends on the Series
1993 Preferred Stock for the current and all past quarters have been
paid in cash. The Series 1993B Preferred Stock is not subject to any
prescribed redemption provisions, but redemption may be otherwise
effected as permitted by applicable law. Each share of Series 1993B
Preferred Stock may be converted at any time after issuance, at the
option of the holder, until January 31, 1997, into 1.75 fully-paid and
non-assessable shares of CFC common stock, subject to equitable
adjustment in certain circumstances and to adjustment based on certain
earnings goals, all as more particularly set forth in the Articles of
Amendment establishing the Series 1993B Preferred Stock. In the event
that all outstanding shares of Series 1993B Preferred Stock have not
been converted by February 1, 1997, on such date all remaining
outstanding shares of the Series 1993B Preferred Stock shall be
converted into CFC common stock in accordance with the above-stated
conversion ratio. Holders of the Series 1993B Preferred Stock are
entitled to vote on each matter on which holders of CFC common stock
are entitled to vote and are otherwise accorded all voting powers and
rights of CFC common stock. Each share of Series 1993B Preferred Stock
has the number of votes equal to the number of shares of CFC common
stock into which it is convertible. In the event of any liquidation,
dissolution, or winding up of Carolina First Corporation, the holders
of shares of the Series 1993B Preferred Stock shall be entitled to be
paid, out of the assets of Carolina First Corporation available for
distribution to its stockholders whether from capital, surplus or
earnings and before any payment shall be made in respect of CFC common
stock or on any other class of stock ranking junior to the Series 1993B
Preferred Stock (but only after all amounts payable upon liquidation
with respect to the Series 1993 Preferred Stock have been paid), an
amount equal to $20.00 per share.
LEGAL MATTERS
Certain legal matters in connection with the Merger Agreement,
including the validity of the CFC Shares offered hereby, will be passed
upon for Carolina First Corporation by Wyche, Burgess, Freeman &
Parham, P.A., Greenville, South Carolina. Wyche, Burgess, Freeman &
Parham, P.A. is also rendering a tax opinion to ACNB regarding the
Merger. As of January 16, 1995, members and attorneys of Wyche,
Burgess Freeman & Parham, P.A. beneficially owned a total of 38,300
shares of CFC common stock, 2,000 shares of Series 1993 Preferred
Stock, and 1,200 shares of Series 1994 Preferred Stock.
88
<PAGE>
Certain legal matters in connection with the Merger Agreement will
be passed upon for ACNB by Sinkler & Boyd, P.A., Columbia, South
Carolina.
EXPERTS
The financial statements of ACNB as of and for each of the years in
the three-year period ended December 31, 1993, included in this Proxy
Statement/Prospectus have been so included in reliance on the reports
of Elliott, Davis & Company, LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in auditing and accounting. Representatives of
Elliott, Davis & Company are expected to be present at the Special
Meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate
questions.
The consolidated financial statements of Carolina First Corporation
as of and for each of the years in the three-year period ended December
31, 1993, incorporated by reference herein have been audited by
Elliott, Davis & Company, independent certified public accountants, and
have been so incorporated by reference on the reports of Elliott, Davis
& Company appearing elsewhere herein, and upon the authority of said
firm as experts in auditing and accounting.
OTHER MATTERS
The Board of Directors of ACNB is not aware of any other matters
which may be presented for action at the Special Meeting, but if other
matters do properly come before the meeting, it is intended that the
shares of ACNB common stock represented by proxies in the accompanying
form will be voted by the persons named in the proxies in accordance
with their best judgment.
89
<PAGE>
AIKEN COUNTY NATIONAL BANK
AIKEN, SOUTH CAROLINA
REPORT ON FINANCIAL STATEMENTS
For the three years in the period ended December 31, 1993
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Aiken County National Bank
Aiken, South Carolina
We have audited the accompanying balance sheets of Aiken County
National Bank as of December 31, 1993 and 1992, and the related
statements of income, shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Aiken County National Bank at December 31, 1993 and 1992 and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
ELLIOTT DAVIS & COMPANY, L.L.P.
January 14, 1994
F-2
<PAGE>
AIKEN COUNTY NATIONAL BANK
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $1,385,312 $ 2,316,984
FEDERAL FUNDS SOLD 3,258,000 4,020,000
Total cash and cash equivalents 4,643,312 6,336,984
INVESTMENTS (market value of $7,114,505 and $5,504,224
at December 31, 1993 and 1992, respectively) - Note 2 7,001,584 5,345,459
LOANS (less allowance for loan losses of $582,323
and $621,278 at December 31, 1993 and 1992,
respectively) - Note 3 28,779,022 29,993,799
ACCRUED INTEREST RECEIVABLE 243,146 242,625
PREMISES AND EQUIPMENT - Net - Notes 4 and 6 1,576,189 1,597,979
OTHER REAL ESTATE OWNED 1,413,300 1,444,719
OTHER ASSETS 295,581 325,988
$43,952,134 $45,287,553
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 3,317,771 $ 3,506,267
Interest bearing - Note 5 36,774,173 37,924,673
40,091,944 41,430,940
Accrued interest on deposits 102,538 153,299
Obligations under capital leases - Note 6 24,423 55,054
Other 31,803 59,225
Total liabilities 40,250,708 41,698,518
COMMITMENTS AND CONTINGENCIES - Notes 7 and 12
SHAREHOLDERS' EQUITY - Note 12
Common stock, par value $5 per share, authorized
500,000 shares, issued 402,500 shares 2,012,500 2,012,500
Additional paid-in capital 1,985,117 1,985,117
Retained earnings (deficit) (296,191) (408,582)
Total shareholders' equity 3,701,426 3,589,035
$43,952,134 $45,287,553
</TABLE>
See Notes to Financial Statements which are an integral
part of these statements.
F-3
<PAGE>
AIKEN COUNTY NATIONAL BANK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,526,344 $ 3,022,301 $3,200,406
Interest on investment securities 398,689 366,323 393,151
Interest on federal funds sold and deposits
in other banks 142,545 139,782 125,895
Total interest income 3,067,578 3,528,406 3,719,452
INTEREST EXPENSE ON DEPOSITS 1,437,329 1,978,826 2,290,741
Net interest income 1,630,249 1,549,580 1,428,711
PROVISION FOR LOAN LOSSES - Note 3 52,170 375,237 264,110
Net interest income after provision for
loan losses 1,578,079 1,174,343 1,164,601
OTHER INCOME
Service charges and fees 181,066 163,594 148,157
Credit life insurance commissions 13,684 16,987 21,561
Gain on sale of securities - 18,731 2,187
Other 16,459 35,993 15,498
211,209 235,305 187,403
OTHER EXPENSES
Salaries and employee benefits 744,080 673,548 592,161
Occupancy - net 86,181 82,045 72,085
Equipment 189,016 193,913 188,421
Other - Note 8 657,620 594,103 429,047
1,676,897 1,543,609 1,281,714
Income (loss) before income taxes 112,391 (133,961) 70,290
PROVISION FOR INCOME TAXES - Note 9 - - 11,789
Net income (loss) $ 112,391 $ (133,961) $ 58,501
NET INCOME (LOSS) PER SHARE $.28 $(.33) $ .15
</TABLE>
See Notes to Financial Statements which are an integral
part of these statements.
F-4
<PAGE>
AIKEN COUNTY NATIONAL BANK
STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1993, 1992, and 1991
<TABLE>
<CAPTION>
Additional Retained Total
Common paid-in earnings shareholders'
stock capital (deficit) equity
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1990 $2,012,500 $1,985,117 $ (333,122) $3,664,495
Net income - - 58,501 58,501
BALANCE, DECEMBER 31, 1991 2,012,500 1,985,117 (274,621) 3,722,996
Net loss - - (133,961) (133,961)
BALANCE, DECEMBER 31, 1992 2,012,500 1,985,117 (408,582) 3,589,035
Net income - - 112,391 112,391
BALANCE, DECEMBER 31, 1993 $2,012,500 $1,985,117 $ (296,191) $3,701,426
</TABLE>
See Notes to Financial Statements which are an integral
part of these statements.
F-5
<PAGE>
AIKEN COUNTY NATIONAL BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
1993 1992 1991
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 112,391 $ (133,961) $ 58,501
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization 146,197 154,329 148,324
Provision for loan losses 52,170 375,237 264,110
Provision for loss on other real estate owned 15,000 - -
(Gain) loss on other real estate owned transactions 3,897 - 32,500
Amortization of investment security premiums and
accretion of discounts 984 (3,285) (4,253)
Realized investment securities gains - (18,731) (2,187)
(Increase) decrease in other assets and accrued
interest receivable 29,886 24,381 (23,711)
Increase (decrease) in other liabilities and
accrued interest payable (78,183) (170,775) 89,585
Net cash provided by operating activities 282,342 227,195 562,869
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in
other banks - 95,000 196,000
Proceeds from investments sold, called
or matured 1,692,329 4,718,701 1,104,725
Purchase of investments (3,349,438) (5,502,966) (1,100,000)
Net (increase) decrease in loans 1,080,273 1,959,069 (8,780,744)
Proceeds from sale of foreclosed property 94,856 - -
Purchase of equipment (47,673) (46,564) (14,761)
Net cash provided by (used for)
investing activities (529,653) 1,223,240 (8,594,780)
FINANCING ACTIVITIES
Net increase in deposits 1,610,249 5,369,560 3,296,011
Net increase (decrease) in certificates
of deposit (2,949,245) (5,787,796) 7,017,081
Repayment of obligations under capital leases (107,365) (105,160) (97,629)
Net cash provided by (used for) financing
activities (1,446,461) (523,396) 10,215,463
Net increase in cash and cash equivalents (1,693,672) 927,039 2,183,552
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,336,984 5,409,945 3,226,393
CASH AND CASH EQUIVALENTS AT END OF YEAR $4,643,312 $ 6,336,984 $ 5,409,945
CASH PAID (RECEIVED) FOR
Interest $ 1,488,090 $ 2,405,852 $ 2,307,855
Income taxes $ (105,557) $ 140,384 $ 10,893
NONCASH INVESTING ACTIVITY
Additions to other real estate owned $ 89,907 $ 693,762 $ 783,457
Acquisitions of equipment under capital lease 76,734 - -
$ 166,641 $ 693,762 $ 783,457
</TABLE>
See Notes to Financial Statements which are an integral part of
these statements.
F-6
<PAGE>
AIKEN COUNTY NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentrations of credit risk
The Bank makes loans to individuals and businesses located
primarily in Aiken County, South Carolina for various personal and
commercial purposes. The Bank has a diversified loan portfolio and the
borrowers' ability to repay their loans is not dependent upon any
specific economic segment.
Investments
The accounting for debt securities held as assets is dependent
upon their classification as investments, trading assets or assets held
for sale. Such assets classified as investments are carried at cost,
adjusted for the amortization of premiums and the accretion of
discounts which are recognized as adjustments to interest income
using the level yield method. Trading assets are carried at current
market values and those debt securities held for sale are carried at
the lower of amortized cost or market value. In order to qualify
as investment assets, the Company must have the ability to hold the
securities to maturity and a positive intention to hold them for
the foreseeable future. Management utilizes these criteria in
determining the accounting treatment accorded such securities. The Bank
considers all debt securities acquired to date to be investment
assets. Gains or losses on dispositions are based on the difference
between the net proceeds and the adjusted carrying amount of the
securities sold, using the specific identification method.
Loans
Loans are placed on a non-accrual basis when they become 90 days
past due as to either principal or interest, or when in the opinion of
management, full collection of principal or interest is unlikely. When
the loan is placed on non-accrual, the accrual of interest is
discontinued and previously recorded but unpaid interest is reversed
and charged against current earnings.
Allowance for loan losses
The allowance for loan losses is based on management's ongoing
evaluation of the loan portfolio and reflects an amount that, in
management's opinion, is adequate to absorb losses in the existing
portfolio. In evaluating the portfolio, management takes into
consideration numerous factors, including current economic
conditions, prior loan loss experience, the composition of the loan
portfolio, and management's estimate of anticipated credit losses.
Loans are charged against the allowance at such time as they are
determined to be losses. Subsequent recoveries are credited to the
allowance. Management considers the year-end allowance appropriate
and 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.
Other real estate owned (OREO)
OREO includes properties acquired in satisfaction of debt and loans
considered to be in substance foreclosures. The properties are carried
at the lower of cost or fair market value. Reductions in carrying
value are recognized through charges to other operating expenses. The
costs of maintaining and operating foreclosed properties are expensed
as incurred.
Premises and equipment
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of
the assets and on an accelerated basis for tax purposes. The
estimated useful lives range from five to twelve years for furniture
and equipment and thirty-one years for buildings.
Income taxes
Effective January 1, 1992, the Bank adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". SFAS 109 replaces SFAS 96 beginning in 1993, with
early implementation permitted. The Bank previously accounted for
income taxes in accordance with Accounting Principles Board Statement
Number 23. The impact of the adoption of SFAS 109 is not considered to
be material and thus is not separately presented as a change in
accounting principle.
(Continued)
F-7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Net income (loss) per share
Net income (loss) per share is computed on the basis of the weighted
average number of common shares outstanding during the period. The
weighted average number of shares outstanding during the years ended
December 31, 1993, 1992 and 1991 was 402,500.
Cash and cash equivalents
For purposes of the Statements of Cash Flows, cash and cash equivalents
are defined as cash working funds and federal funds sold.
Recently issued accounting standards
The Financial Accounting Standards Board has issued Statements
of Financial Accounting Standards Nos. 106, 107 and 112. SFAS 106,
titled "Employers' Accounting for Postretirement Benefits Other Than
Pensions" is effective for calendar year 1993 and requires the accrual
of postretirement benefits over the expected service terms of
employees. SFAS 107, titled "Disclosures about Fair Value of
Financial Instruments" is effective for calendar year 1992, except for
entities with less than $150 million in total assets. For those
entities, the effective date shall be for financial statements for
calendar year 1995. SFAS 107 requires disclosure of fair value of
financial instruments for which it is practicable to estimate that
value. SFAS 112, titled "Employers' Accounting for Postemployment
Benefits", is effective for calendar year 1994 and requires the accrual
of benefits to be paid to employees after employment but before
retirement. The Bank does not currently pay postretirement or
postemployment benefits and thus SFAS 106 and 112 are not expected to
have a material impact on the Bank's financial statements.
Reclassifications
Certain items in the financial statements for 1992 and 1991 have been
reclassified to conform with the presentation for 1993. Such
reclassifications had no effect on the net results of operations.
NOTE 2 - INVESTMENTS
A comparison of the carrying value and approximate fair value
of the Bank's investments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
Carrying Unrealized
value Gains Losses Fair value
<S> <C> <C> <C> <C>
U. S. Treasury Obligations $ 797,085 $ 59,806 $ - $ 856,891
U. S. Government Agency Obligations 6,204,499 55,583 2,468 6,257,614
$7,001,584 $ 115,389 $2,468 $ 7,114,505
DECEMBER 31, 1992
Carrying Unrealized
value Gains Losses Fair value
U. S. Treasury Obligations $1,843,132 $ 92,790 $ - $ 1,935,922
U. S. Government Agency Obligations 3,502,327 65,975 - 3,568,302
$5,345,459 $ 158,765 $ - $ 5,504,2244
</TABLE>
(Continued)
F-8
<PAGE>
NOTE 2 - INVESTMENTS, Continued
The carrying value and fair value of investments at December
31, 1993 by contractual maturity are as follows:
<TABLE>
<CAPTION>
Carrying
value Fair value
<S> <C> <C>
Due in one year or less $ 400,000 $ 408,438
Due in one year through five years 4,147,951 4,234,747
Due from five years to ten years 498,531 507,500
Due after ten years 1,955,102 1,963,820
$7,001,584 $7,114,505
</TABLE>
Proceeds from the sale of investments were $1,692,329, $4,718,701
and $204,725, resulting in realized gains of none, $18,731 and $2,187
for the years ended December 31, 1993, 1992 and 1991, respectively.
U. S. Government and U. S. Government agency obligations of
$300,000 were pledged to secure deposits and public funds at December
31, 1993.
NOTE 3 - LOANS
Loans consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
<S> <C> <C>
Commercial and agricultural $9,777,333 $ 9,109,917
Real estate construction 1,569,111 2,077,734
Real estate mortgage 3,132,993 3,206,443
Installment and consumer 10,056,644 11,313,143
Other 4,825,264 4,907,840
29,361,345 30,615,077
Less allowance for loan losses 582,323 621,278
Net loans $28,779,022 $29,993,799
</TABLE>
Non-accrual loan information is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
<S> <C> <C>
Non-accrual loans $1,539,110 $1,628,565
Interest revenue under original terms $ 289,190 $ 173,313
Interest revenue recognized $ - $-
</TABLE>
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $621,278 $ 507,652 $ 327,546
Provision for loan losses 52,170 375,237 264,110
Loan charge-offs (114,166) (290,377) (84,339)
Recoveries 23,041 28,766 335
Balance at end of year $582,323 $ 621,278 $ 507,652
</TABLE>
F-9
<PAGE>
NOTE 4 - PREMISES AND EQUIPMENT
Premises and equipment at December 31, is summarized as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 550,800 $ 550,800
Building 742,437 742,437
Furniture, fixtures and equipment 1,023,775 899,599
2,317,012 2,192,836
Less accumulated depreciation 740,823 594,857
$1,576,189 $1,597,979
</TABLE>
Depreciation expense, including amortization of leased property,
for the years ended December 31, 1993, 1992 and 1991 was
$146,197, $154,329 and $148,324, respectively.
NOTE 5 - DEPOSITS
At December 31, 1993 and 1992, deposits of $100,000 or more
included in time deposits totaled approximately $2,762,000 and
$2,660,000, respectively.
NOTE 6 - CAPITAL LEASES
The Bank utilizes various leased furniture and equipment in its
operations. The leases have terms of five years and are classified as
capital leases. The present value of minimum lease payments under
capital leases due during 1994 is $24,423, net of $1,454 of interest.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheet. The
Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument is essentially the same as
that involved in extending loan facilities to customers. The Bank
uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The amount of collateral obtained
if deemed necessary by the Bank upon extension of credit is based on
management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property, plant
and equipment, and income-producing commercial properties.
Commitments to extend credit, including unused lines of credit,
amounted to $1,840,088 at December 31, 1993.
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third party.
Commitments under standby letters of credit amounted to $183,925 at
December 31, 1993.
The Bank had available a $1,000,000 line of credit as of December
31, 1993. No amounts had been drawn on this line.
F-10
(Continued)
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES, Continued
The Bank is party to litigation and claims arising in the
normal course of business. Management, after consultation with
legal counsel, believes that the liabilities, if any, arising from
such litigation and claims will not be material to the Bank's
financial position.
NOTE 8 - OTHER EXPENSES
A summary of the components of other expenses is as follows:
For the years ended December 31,
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Advertising $ 23,885 $ 14,107 $17,951
Printing, stationery and supplies 62,690 46,490 34,952
Legal and professional fees 112,755 98,701 8,637
Director fees 1,500 80,700 44,700
Insurance 29,685 26,887 27,428
Automatic teller machine (ATM) charges 23,692 29,839 30,115
FDIC and Comptroller of Currency fees 124,873 115,132 85,901
Telephone 21,106 18,828 17,544
Loss on other real estate owned 69,730 - 32,500
Other 187,704 163,419 129,319
$ 657,620 $ 594,103 $ 429,047
</TABLE>
NOTE 9 - INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Income taxes payable (refundable) $ (45,124) $ (37,493) $ 88,001
Deferred income taxes 45,124 37,493 (76,212)
Provision for income taxes $ - $ - $ 11,789
</TABLE>
The provision for income taxes as of December 31, 1993 is
reconciled to the amount of income taxes computed at the federal
statutory rate as follows:
<TABLE>
<CAPTION>
Amount Percent
<S> <C> <C>
Tax expense at statutory rates $ 44,138 34%
Reduction in taxes resulting from
Surtax rate reduction (11,750) (9)
Organizational costs (8,588) (7)
Other, net (23,800) (18)
Provision for income taxes $ - -%
</TABLE>
F-11 (Continued)
<PAGE>
NOTE 9 - INCOME TAXES
The deferred income tax assets and liabilities at December 31, 1993
and 1992, consists of the following:
<TABLE>
<CAPTION>
1993 1992
Deferred Deferred
tax asset tax asset
(liability) (liability)
<S> <C> <C>
Bad debts $ 92,673 $98,067
Depreciation (27,868) (26,916)
Cash basis adjustment (31,113) (10,610)
Net operating loss carryforward 6,300 -
Other net 945 16,889
40,937 77,430
Valuation allowance (40,937) (32,306)
Deferred taxes $ - $45,124
</TABLE>
Included in other assets is approximately $21,194
representing refundable federal income taxes as a result of the
carryback of the 1993 loss to 1991.
At December 31, 1993, the Bank had net operating loss
carryforwards of $42,000 for tax purposes, which expire in 1998.
NOTE 10 - RELATED PARTY TRANSACTIONS
Certain officers, directors, employees and companies in which
they have ten percent or more beneficial ownership, were indebted
to the Bank in the amount of $1,550,390 and $1,652,615 as of
December 31, 1993 and 1992, respectively. Loans to these parties
are made on substantially the same terms as those prevailing at the time
for comparable transactions with unaffiliated persons and, in
the opinion of management, do not involve more than the normal risk
of collectibility. An analysis of the activity for related party loans
is summarized as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
1993 1992
<S> <C> <C>
Balance, beginning of year $1,652,615 $1,889,841
Loan advances 2,251,623 268,002
Loan repayments (2,598,757) (284,216)
Other changes 244,909 (221,012)
Balance, end of year $1,550,390 $1,652,615
</TABLE>
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Bank maintains an Employee Savings Plan qualified under
Section 401(k) of the Internal Revenue Code. The Bank matches
employee contributions at 50 percent, up to 6.0 percent of salary.
Employees of the Bank with one or more years service are eligible to
participate in the Plan. The amount charged to expense was
$9,029, $11,992 and $11,498 for 1993, 1992 and 1991, respectively.
The Plan also has a provision for discretionary profit-sharing
upon the approval by the Board of Directors, should certain
profitability goals be attained. No contributions were made in 1993
and 1992 and $8,704 was contributed for 1991.
F-12
NOTE 12 - REGULATORY MATTERS
The Bank is currently operating under regulatory supervision
through an agreement between the Board of Directors and the Office
of the Comptroller of the Currency. The agreement requires the Board
to make certain changes and improvements in the areas of credit
administration, loan underwriting, internal controls and regulatory
compliance and to decrease the level of classified and nonperforming
loans. To date, the Board is in partial compliance with the regulatory
agreement.
The Bank is subject to the dividend restrictions set forth by
the Comptroller of the Currency. Under such restrictions, the
Bank may not, without the prior approval of the Comptroller of the
Currency, declare dividends in excess of the sum of the current year's
earnings, as defined, plus the retained earnings, as defined, from the
prior two years. At December 31, 1993, the Bank could not declare
dividends without approval of the Comptroller of the Currency.
The Bank is required to maintain minimum levels of capital. At
December 31, 1993, the Bank was in compliance with its regulatory
capital requirements. The Bank is also required by the Federal
Reserve Bank to maintain average cash reserve balances at the Federal
Reserve Bank and in working funds.
F-13
<PAGE>
APPENDIX A
REORGANIZATION AGREEMENT BY AND BETWEEN CAROLINA FIRST CORPORATION,
CAROLINA FIRST BANK, AND AIKEN COUNTY NATIONAL BANK
Dated as of October 13, 1994.
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; andNOW,
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 meanall 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.
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
1
<PAGE>
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 whichthe 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 ofMerger.
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.
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) generalprinciples 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)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
2
<PAGE>
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.
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, fran-chises,
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 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
3
<PAGE>
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 fullforce 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 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 to30
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.
4
<PAGE>
(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 isfirst 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 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 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.
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
Preferred 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 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
5
<PAGE>
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 orprovisions 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 amaterial
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 restriction. 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, corporation, 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 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, fran- chises,
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
oflimitations 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.
6
<PAGE>
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 theOTS 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 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 shallbe 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 thebusiness 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.
7
<PAGE>
(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 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 limitedto, 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
constituteonly 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.
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
8
<PAGE>
"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 intereststransaction,
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.
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 Association 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 materialadverse 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)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
9
<PAGE>
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 inthe 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 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)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
transactionscontemplated 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 restriction 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
thisAgreement, 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 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
10
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 byeither 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 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 inaccuraciescontained 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.
11
<PAGE>
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
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 transactionscontemplated 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.
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.
12
<PAGE>
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.
IN WITNESS WHEREOF, this Agreement has been duly entered as of the
date firstwritten above.
CAROLINA FIRST CORPORATION
By: /s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
President and CEO
CAROLINA FIRST BANK
By: /s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
Chairman
AIKEN COUNTY NATIONAL BANK
By: /s/ Michael L. Laughlin
Michael L. Laughlin
Chairman of the Board of
Directors
13
<PAGE>
APPENDIX A TO REORGANIZATION AGREEMENT
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 CommonStock 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)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
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
1
<PAGE>
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 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 theconsideration 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 tothe 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.
2
<PAGE>
APPENDIX B
DISSENTERS' RIGHTS
(Section) 214a. Procedure for conversion, merger, or
consolidation; vote of stockholders
A national banking association may, by vote of the holders
of at least two-thirds of each class of its capital stock,
convert into, or merge or consolidate with, a State bank in the
same State in which the national banking association is located,
under a State charter, in the following manner:
(a) Approval of board of directors; publication of notice of
stockholders; meeting; waiver of publication; notice by
registered or certified mail
The plan of conversion, merger, or consolidation must be
approved by a majority of the entire board of directors of the
national banking association. The bank shall publish notice of
the time, place, and object of the shareholders' meeting to act
upon the plan, in some newspaper with general circulation in the
place where the principal office of the national banking
association is located, at least once a week for four consecutive
weeks: Provided, That newspaper publication may be dispensed
with entirely if waived by all the shareholders and in the case
of a merger or consolidation one publication at least ten days
before the meeting shall be sufficient if publication for four
weeks is waived by holders of at least two-thirds of each class
of capital stock and prior written consent of the Comptroller of
the Currency is obtained. The national banking association shall
send such notice to each shareholder of record by registered mail
or by certified mail at least ten days prior to the meeting,
which notice may be waived specifically by any shareholder.
(b) Rights of dissenting stockholders
A shareholder of a national banking association who votes
against the conversion, merger, or consolidation, or who has
given notice in writing to the bank at or prior to such meeting
that he dissents from the plan, shall be entitled to receive in
cash the value of the shares held by him, if and when the
conversion, merger, or consolidation is consummated, upon written
request made to the resulting State bank at any time before
thirty days after the date of consummation of such conversion,
merger, or consolidation, accompanied by the surrender of his
stock certificates. The value of such shares shall be determined
as of the date on which the shareholders' meeting was held
authorizing the conversion, merger, or consolidation, by a
committee of three persons, one to be selected by majority vote
of the dissenting shareholders entitled to receive the value of
their shares, one by the directors of the resulting State bank,
and the third by the two so chosen. The valuation agreed upon by
any two of three appraisers thus chosen shall govern; but, if the
value so fixed shall not be satisfactory to any dissenting
shareholder who has requested payment as provided herein, such
shareholder may within five days after being notified of the
appraised value of his shares appeal to the Comptroller of the
Currency, who shall cause a reappraisal to be made, which shall
be final and binding as to the value of the shares of the
appellant. If, within ninety days from the date of consummation
of the conversion, merger, or consolidation, for any reason one
or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the
Comptroller shall upon written request of any interested party,
cause an appraisal to be made, which shall be final and binding
on all parties. The expenses of the Comptroller in making the
reappraisal, or the appraisal as the case may be, shall be paid
by the resulting State bank. The plan of conversion, merger, or
consolidation shall provide the manner of disposing of the shares
of the resulting State bank not taken by the dissenting
shareholders of the national banking association.
<PAGE>
APPENDIX C
CARSON MEDLIN CO
January 11, 1995
The Board of Directors
Aiken County National Bank
142 Chesterfield Street S.E.
Aiken, South Carolina 29801
Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, of the consideration to be received by
the unaffiliated shareholders of Aiken County National Bank (the
"Bank" or "ACNB") under the terms of a merger of ACNB with and
into Carolina First Bank, a wholly-owned subsidiary of Carolina
First Corporation (Carolina First Bank and Carolina First
Corporation being collectively referred to herein as "CAFC")
pursuant to an Agreement and Plan of Reorganization and an
Agreement of Merger, as amended, both dated October 13, 1994
among ACNB and CAFC (collectively, the "Agreements") (the
"Merger"). Upon the effective date of the Merger, each of the
approximately 402,500 outstanding shares of the Bank's common
stock will be converted into the right to receive 1.125 shares of
CAFC common stock. The foregoing summary of the Merger is
qualified in its entirety by reference to the Agreements.
The Carson Medlin Company (Carson Medlin) is a National
Association of Securities Dealers, Inc. (NASD) member investment
banking firm which specializes in the securities of southeastern
United States financial institutions. As a part of our
investment banking activities, we are regularly engaged in the
valuation of southeastern United States financial institutions
and transactions relating to their securities. We regularly
publish our research on independent community banks regarding
their financial and stock price performance. We are familiar
with the commercial banking industry in the Southeast and the
major commercial banks operating in this region. We have been
retained by the Bank in a financial advisory capacity to render
our opinion hereunder, for which we will receive compensation.
In reaching our opinion, we have analyzed the respective
financial positions, both current and historical, of the Bank and
CAFC. We have reviewed (i) the Merger Agreement; (ii) the Annual
Reports to shareholders, including the audited financial
statements of ACNB and the unaudited financial statements of
ACNB, and the Annual and Quarterly Reports on Forms 10-K and 10-Q
of CAFC, for the five years ended December 31, 1993 and the nine
months ended September
<PAGE>
30, 1994; (iii) monthly interim financial
statements of ACNB for the period January to November 1994; (iv)
certain financial and operating information with respect to the
business, operations and prospects of ACNB and CAFC; and (v) the
Proxy Statement/Prospectus.
Carson Medlin also (a) held discussions with members of the
senior management of ACNB and CAFC regarding the historical and
current business operations, financial condition and future
prospects of their respective companies; (b) reviewed the
historical market prices and trading activity for the common
stocks of ACNB and CAFC and compared them with the historical
prices and trading activities of certain publicly-traded
companies which it deemed to be relevant: (c) compared the
results of operations of ACNB and CAFC with those of certain
banking companies which it deemed to be relevant; (d) compared
the proposed financial terms of the Merger with the financial
terms, to the extent publicly available, of certain other recent
business combinations of commercial banking organizations; (e)
analyzed the pro forma financial impact of the Merger on CAFC;
and (f) conducted such other studies, analyses, inquiries and
examinations as Carson Medlin deemed appropriate.
We have relied upon and assumed without independent verification
the accuracy and completeness of all information provided to us.
We have not performed or considered any independent appraisal or
evaluation of the assets of the Bank or of CAFC. The opinion we
express herein in necessarily based upon market, economic and
other relevant considerations as they exist and can be evaluated
as of the date of this letter.
Based upon the foregoing, it is our opinion that the total
consideration to be received by the unaffiliated shareholders of
Aiken County National Bank pursuant to the Merger is fair, from a
financial point of view, to the unaffiliated shareholders of
Aiken County National Bank.
Very truly yours,
THE CARSON MEDLIN COMPANY
<PAGE>
Appendix D
Condensed Summary of Earnings
Carolina First Corporation
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30
<S> <C> <C> <C> <C>
1991 1992 1993 1994
Interest income . . . . . . . . .$ 35,305 $ 38,174 $48,692 $49,728
Interest expense . . . . . . . . . 22,439 20,335 21,749 20,864
Net interest income. . . . . . .$ 12,866 17,819 26,943 28,864
Provision for loan losses. . . . . . 1,423 1,453 909 450
Net interest income after provision
for loan losses. . . . . . . . . . .11,443 16,366 26,034 28,414
Noninterest income. . . . . . . . . . .2,286 3,456 6,252 6,203
Noninterest expenses. . . . . . . . . 11,607 16,145 25,178 27,186
Income before income taxes . . . . .2,122 3,677 7,108 7,431
Income taxes . . . . . . . . . . . . . .442 1,160 2,173 2,184
Net income. . . . . . . . . . . . . .1,680 2,517 4,935 5,247
Dividends on preferred stock. . . . . . . . 625 1,930 1,702
Net income applicable
to common shareholder $ 1,680 $ 1,892 $ 3,005 $ 3,545
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Condensed Summary of Earnings
Carolina First Bank
Nine months ended
Years ended December 31,
September 30
1991 1992 1993 1994
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . $ 23,646 $ 24,495 $36,713 $ 38,518
Interest expense . . . . . . . . . . .14,647 11,953 15,688 15,630
Net interest income. . . .$ 8,999 12,542 21,025 22,888
Provision for loan losses. . . . . . 1,108 1,309 809 450
Net interest income after provision
for loan losses. . . . . . . . . . .7,891 11,233 20,216 22,438
Noninterest income. . . . . . . . . . . 2,228 3,361 5,394 3,907
Noninterest expenses. . . . . . . . . . 8,530 11,864 20,028 21,219
Income before income taxes . . . . .1,589 2,730 5,582 5,125
Income taxes . . . . . . . . . . . . .284 819 1,709 1,641
Net income. . . . . . . . . . . $ 1,305 $ 1,911 $ 3,873 $ 3,484
</TABLE>
2
<PAGE>
Condensed Summary of Earnings
Aiken County National Bank
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31,
September 30
1991 1992 1993 1994
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . $ 3,719 $ 3,528 $ 3,068 $ 2,296
Interest expense . . . . . . . . . 2,291 1,979 1,437 898
Net interest income. . . . . . . $ 1,429 1,550 1,630 1,398
Provision for loan losses. . . . . . . 264 375 52 30
Net interest income after provision
for loan losses. . . . . . . . .1,165 1,174 1,578 1,368
Noninterest income. . . . . . . . . . .187 235 211 213
Noninterest expenses. . . . . . . 1,282 1,544 1,677 1,354
Income before income taxes . . . . .70 (134) 112 227
Income taxes . . . . . . . . . . . . .12 -- -- 71
Net income. . . . . . . . . .$ 59 $ (134) $ 112 $ 156
</TABLE>
3
<PAGE>
Condensed Balance Sheet
Carolina First Corporation
<TABLE>
<CAPTION>
December 31, September 30
1992 1993 1994
<S> <C> <C> <C>
Assets:
Cash and due from banks. . . . . . . .$ 22,096 $ 27,320 $43,444
Federal funds sold . . . . . . . . . . . .2,216 54,121 8,904
Investment securities. . . . . . . . . . 78,300 114,726 116,538
Loans. . . . . . . . . . . . . . . . . .400,500 567,379 817,404
Less unearned income . . . . . . . . . (3,943) (2,221) (1,063)
Less allowance for loan losses . . . . (4,263) (5,688) (5,029)
Net loans. . . . . . . . . . . . . .392,294 559,470 811,312
Premises and equipment . . . . . . . . . 12,560 28,990 36,389
Other assets . . . . . . . . . . . . . . 21,597 31,703 51,077
Total assets . . . . . . . . . . . . .$ 529,063 $ 816,421 $ 1,067,664
Liabilities and stockholders' equity:
Liabilities
Deposits
Noninterest-bearing. . . . . . . $ 39,563 $ 67,776 $ 108,575
Interest bearing . . . . . . . . . 436,705 656,809 831,700
Total deposits . . . . . . . . . 476,268 724,585 940,275
Borrowed deposits. . . . . . . . . . . 3,859 17,993 31,926
Other liabilities. . . . . . . . . . . .4,711 10,974 8,439
Total Liabilities. . . . . . . . . .484,838 753,552 980,640
Total stockholders' equity . . . . . . . . 44,225 62,869 87,024
Total liabilities and stockholders'
equity. . $ 529,063 $ 816,421 $ 1,067,664
</TABLE>
4
<PAGE>
PART-II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20: Indemnification of Directors and Officers
Reference is made to Chapter 8, Article 5 of Title 33 of the 1976
Code of Laws of South Carolina, as amended, which provides for
indemnification of officers and directors of South Carolina
corporations in certain instances in connection with legal proceedings
involving any such persons because of being or having been an officer
or director. Carolina First Corporation's Bylaws provide (i) that the
Corporation shall indemnify any individual made a party to a proceeding
because he is or was a Director of the Corporation against liability
incurred in the proceeding to the fullest extent permitted by law, and
(ii) that the Corporation shall pay for or reimburse the reasonable ex-
penses incurred by a Director who is a party to a proceeding in advance
of final disposition of the proceeding to the fullest extent permitted
by law. Carolina First Corporation has entered into indemnification
agreements with each of its Directors, which generally makes the above-
referenced Bylaws provisions the basis of a contract between Carolina
First Corporation and each director.
Chapter 8, Article 5 of Title 33 of the 1976 Code of Laws of South
Carolina, as amended, also permits a corporation to purchase and
maintain insurance on behalf of a person who is or was an officer or
director. Carolina First Corporation maintains directors' and
officers' liability insurance.
Reference is made to Chapter 2 of Title 33 of the 1976 Code of Laws
of South Carolina, as amended, respecting the limitation in a
corporation's articles of incorporation of the personal liability of a
director for breach of the director's fiduciary duty. Reference is
made to Carolina First Corporation's Articles of Amendment filed with
the South Carolina Secretary of State on April 18, 1989 which state:
"A director of the corporation shall not be personally liable to the
corporation or any of its shareholders for monetary damages for breach
of fiduciary duty as a director, provided that this provision shall not
be deemed to eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involved gross negligence, intentional misconduct, or a knowing
violation of law, (iii) imposed under Section 33-8-330 of the South
Carolina Business Corporation Act of 1988 (improper distribution to
shareholder), or (iv) for any transaction from which the director
derived an improper personal benefit."
Item 21: Exhibits and Financial Statement Schedules
(a) Listing of Exhibits:
Exhibit
2.1 -- Reorganization Agreement dated as of October 13, 1994 between
and among Carolina First Corporation, Carolina First Bank and
ACNB: Included as Appendix A to this filing.
3.1 -- Articles of Incorporation.
3.2 -- Bylaws: Incorporated by reference to Exhibit 4.2 of Carolina
First Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, Commission File No.
0-15083.
4.1 -- Specimen Common Stock certificate: Incorporated by reference
to Exhibit 4.1 of Carolina First Corporation's Registration
Statement on Form S-1, Commission File No. 33-7470.
4.2 -- Specimen Noncumulative Convertible Preferred Stock Series
1993 certificate: Incorporated by reference to Exhibit 4.3
from Carolina First Corporation's Registration Statement on
Form S-2, Commission File No. 33-57110.
II-1
<PAGE>
4.3 -- Specimen Convertible Preferred Stock Series 1993B
certificate: Incorporated by reference to Exhibit 4.3 from
Carolina First Corporation's Registration Statement on
Form S-2, Commission File No. 33-75458.
4.4 -- Specimen Noncumulative Convertible Preferred Stock Series
1994 certificate: Incorporated by reference to Exhibit 4.12
from Carolina First Corporation's Registration Statement on
Form S-2, Commission File No. 33-75458.
4.5 -- Articles of Incorporation: Included as Exhibit 3.1.
4.6 -- Bylaws: Included as Exhibit 3.2.
4.7 -- Series 1993 Preferred Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina First
Corporation's Registration Statement on Form S-3, Commission
File No. 33-72868.
4.8 -- Common Stock Dividend Reinvestment Plan: Incorporated by
reference to the Prospectus in Carolina First Corporation's
Registration Statement on Form S-3, Commission File No.
33-73280.
4.9 -- Series 1994 Preferred Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina First
Corporation's Registration Statement on Form S-3, Commission
File No. 33-79774.
4.10 -- Shareholders' Rights Agreement: Incorporated by reference to
Exhibit 2 of Carolina First Corporation's Current Report on
Form 8-K dated November 9, 1993, Commission File No. 0-15083.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding
legality of shares of Carolina First Corporation.
8.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding
federal income tax matters.
10.1 -- Carolina First Restricted Stock Plan: Incorporated by
reference to Exhibit 28.1 of Carolina First Corporation's
Registration Statement on Form S-8, Commission File No.
33-36411, filed with the Commission on August 17, 1990.
10.2 -- Carolina First Corporation Employee Stock Ownership Plan:
Incorporated by reference to Exhibit 10.2 of Carolina First
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 0-15083.
10.3 -- Carolina First Corporation Incentive Stock Option Plan:
Incorporated by reference to Exhibit 28.1 of Carolina First
Corporation's Registration Statement on Form S-8, Commission
File No. 33-36412, filed with the Commission on August 17,
1990.
10.4 -- Carolina First Corporation Salary Reduction Plan:
Incorporated by reference to Exhibit 28.1 of Carolina First
Corporation's Registration Statement on Form S-8, Commission
File No. 33-25424, filed with the Commission on November 9,
1988.
10.5 -- Noncompetition and Severance Agreement dated November 9,
1993, between Carolina First Corporation and Mack I. Whittle,
Jr.: Incorporated by reference to Exhibit 10.1 of Carolina
First Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, Commission File No.
0-15083.
10.6 -- Noncompetition and Severance Agreement dated November 9,
1993, between Carolina First Corporation and William S.
Hummers III: Incorporated by reference to Exhibit 10.2 of
Carolina First Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, Commission File No.
0-15083.
10.7 -- Noncompetition and Severance Agreement dated November 9,
1993, between Carolina First Corporation and James W. Terry,
Jr.: Incorporated by reference to Exhibit 10.3 of Carolina
First Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, Commission File No.
0-15083.
10.8 -- Reorganization Agreement entered into as of November 14, 1994
by and among Carolina First Bank, Carolina First Corporation
and Midlands National Bank.
10.9 -- Short-Term Performance Plan: Incorporated by reference to
Exhibit 10.3 of Carolina First Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
II-2
<PAGE>
11.1 -- Computation of Per Share Earnings.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank,
Carolina First Savings Bank, F.S.B. and Carolina First
Mortgage Company.
23.1 -- Consents of Wyche, Burgess, Freeman & Parham, P.A.: Contained
in Exhibits 5.1 and 8.1.
23.2 -- Consents of Elliott Davis & Co: Contained in Part II at II-6
and II-7.
23.3 -- Consent of The Carson Medlin Company: Contained in Part II
at II-8.
24.1 -- The Power of Attorney: Contained on the signature page of the
initial filing of this Registration Statement.
27.1 -- Financial Data Schedules.
99.1 -- Form of Proxy
(b) Financial Statement Schedules: See Financial Statements of
Aiken County National Bank.
(c) Report, Opinion or Appraisal: The opinion of Carson-Medlin
is attached to the Proxy Statement/Prospectus as an Appendix.
Item 22: Undertakings
(a) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed
to be a new Registration Statement relating to the Securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for
by the other Items of the applicable forms.
(c) The Registrant hereby undertakes that every prospectus (i) that
is filed pursuant to paragraph (b) above, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will
not be used until such amendment has become effective, and that for the
purpose of determining liabilities under the Act, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
(e) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
Prospectus pursuant to items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the Registration Statement when it became
effective.
(g) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement:
PROVIDED, HOWEVER that paragraphs (g)(1)(i) and (g)(1)(ii) do
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Greenville, State of South Carolina, on
January 16, 1995.
CAROLINA FIRST CORPORATION
By: /s/ William S. Hummers III
William S. Hummers III
Executive Vice President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
belowconstitutes and appoints Mack I. Whittle, Jr. and William S. Hummers,
III, and each of them, as true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all
which said attorneys-in-fact and agents or any of them, or their or his or
her substitute or substitutes, may lawfully do, or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ William R. Timmons, Jr. Chairman of the Board January 16, 1995
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. President, Chief Executive Officer January 16, 1995
Mack I. Whittle, Jr. and Director (Principal Executive Officer)
/s/ William S. Hummers III Executive Vice President, Director January 16, 1995
William S. Hummers III (Principal Accounting and Financial
Officer)
/s/ Judd B. Farr Director January 16, 1995
Judd B. Farr
Director January , 1995
C. Claymon Grimes, Jr.
/s/ M. Dexter Hagy Director January 16, 1995
M. Dexter Hagy
/s/ Robert E. Hamby, Jr. Director January 16, 1995
Robert E. Hamby, Jr.
Director January , 1995
R. Glenn Hilliard
Director January , 1995
Richard E. Ingram
Director January , 1995
Charles B. Schooler
/s/ Elizabeth P. Stall Director January 16, 1995
Elizabeth P. Stall
Director January , 1995
William M. Webster III
</TABLE>
II-5
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated February 7, 1994, in the
Registration Statement (Form S-4) and related Prospectus of Carolina
First Corporation for the registration of 452,813 shares of its Common
Stock.
ELLIOTT, DAVIS & COMPANY, L.L.P.
Greenville, South Carolina
January 18, 1995
II-6
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 14, 1994, in the
Registration Statement (Form S-4) and related Prospectus of Aiken
County National Bank.
ELLIOTT, DAVIS & COMPANY, L.L.P.
Greenville, South Carolina
January 18, 1995
II-7
<PAGE>
CARSON MEDLIN COMPANY
CONSENT OF THE CARSON MEDLIN COMPANY
We hereby consent to the inclusion as Appendix C to the Proxy
Statement/Prospectus constituting part of the Registration
Statement on Form S-4 of Carolina First Corporation of our letter
to the Board of Directors of Aiken County National Bank of and to
the references made to such letter and to the firm in such Proxy
Statement/Prospectus. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the
rules and regulations of the Securities and Exchange Commission
thereunder.
THE CARSON MEDLIN COMPANY
Raleigh, North Carolina
January 11, 1995
II-8
<PAGE>
EXHIBIT 3.1
SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
CAROLINA FIRST CORPORATION
1. The name of the proposed corporation is Carolina First Corporation.
2. The initial registered office of the corporation is 44 E.
Camperdown Way located in the city of Greenville, county of
Greenville and the State of South Carolina and the name of its
initial registered agent at such address is Wallace K. Lightsey.
3. The period of duration of the corporation shall be perpetual.
4. The corporation is authorized to issue shares of stock as follows:
Class of Shares: Common. Authorized No. of Each Class: 1,000,000.
Par Value: $1.00.
If shares are divided into two or more classes or if any class
of shares is divided into series within a class, the relative
rights, preferences, and limitations of the shares of each
class, and of each series within a class, are as follows: N/A.
5. Total authorized capital stock: $1,000,000.
6. It is represented that the corporation will not begin business
until there has been paid into the corporation the minimum
consideration for the issue of shares, which is $1,000.00 of
which at least $500.00 is in cash.
7. The number of directors constituting the initial board of
directors of the corporation is 1, and the names and addresses
of the persons who are to serve as directors until the first
annual meeting of shareholders or until their successors be
elected and qualify are:
Mack I. Whittle, Jr.
880 S. Pleasantburg Dr., Suite 4B
Greenville, S.C. 29607
8. The general nature of the business for which the corporation is
organized is (it is not necessary to set forth in the purposes
powers enumerated in Section (33-3-10 of 1976 Code).
To promote the organization of one or more financial
institutions in accordance with applicable state and federal
law, to own or lease real estate, to borrow and lend money and
to accept mortgages and other security, and to conduct other
business permitted by state law.
9. Provisions which the incorporators elect to include in the
articles of incorporation are as follows: N/A
<PAGE>
10. The name and address of each incorporator is
Mack I. Whittle, Jr.
880 S. Pleasantburg Dr., Suite 4B
Greenville, SC
Greenville County
Dated May 20, 1986
/s/ Mack I. Whittle, Jr.
STATE OF SOUTH CAROLINA
COUNTY OF GREENVILLE
The undersigned Mack I. Whittle, Jr., does hereby certify that
he is the incorporator of Carolina First Corporation and is
authorized to execute this verification; that the undersigned for
himself does hereby further certify that he signed and was so
authorized, has read the foregoing document, understands the
meaning and purport of the statements therein contained and the
same are true to the best of his information and belief.
/s/ Mack I. Whittle, Jr.
CERTIFICATE OF ATTORNEY
11. I, Wallace K. Lightsey, an attorney licensed to practice in
the State of South Carolina, certify that the corporation, to whose
articles of incorporation this certificate is attached, has
complied with the requirements of Chapter 7 of Title 33 of the
South Carolina Code of 1976, relating to the articles of
incorporation, and that in my opinion, the corporation is organized
for a lawful purpose.
Dated May 21, 1986
/s/ Wallace K. Lightsey
P.O. Box 10207
Greenville, SC 29603
2
<PAGE>
SECRETARY OF STATE
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
CAROLINA FIRST CORPORATION
Pursuant to Authority of Section 33-15-10 the South Carolina
Code of 1976 as amended, the undersigned Corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
1. The name of the Corporation is Carolina First Corporation.
2. The Registered Office of the Corporation is 44 E. Camperdown
Way in the City of Greenville, County of Greenville and the State
of South Carolina and the name of the Registered Agent at such
address is Wallace K. Lightsey.
3. a. The following Amendment of the Articles of Incorporation
was adopted by the shareholders of the Corporation on: N/A.
b. At the date of adoption of the Amendment, the total number of
all outstanding shares of the Corporation was 40,000. The total of
such shares entitled to vote, and the vote of such shares was:
Total Number of Shares Entitled: N/A
Number of Shares Voted For: N/A
Number of Shares Voted Against: N/A
c. At the date of adoption of the Amendment, the number of
outstanding shares of each class entitled to vote as a class on the
Amendment, and the vote of such shares, was: (if inapplicable,
insert "none"): None
4. a. Prior to the organizational meeting the Corporation and
with the consent of the subscribers, the following Amendment was
adopted by the Incorporator(s) on May 22, 1986.
See attached "Minutes of Pre-Organizational Meeting of the
Incorporators of Carolina First Corporation".
b. The number of withdrawals of subscribers, if such be the
case is zero (0).
c. The number of Incorporators are one (1) and the number
voting for the Amendment was (1) and the number voting against the
Amendment was zero (0).
5. The manner, if not set forth in the Amendment, in which any
exchange, reclassification, or cancellation or issued shares
provided for in the Amendment shall be effected, is as follows:
(if not applicable, insert "no change"): No change
6. The manner in which the Amendment effects a change in the
amount of stated capital, and amount of stated capital, expressed
in dollars, as changed by the Amendment, is as follows: (if not
applicable, insert "no change")
1
<PAGE>
The amendment increases the number of authorized shares of common
stock from one million (1,000,000) to three million (3,000,000).
The amount of authorized capital, as changed by the amendment, is
now Three Million Dollars ($3,000,000).
Dated June 17, 1986
CAROLINA FIRST CORPORATION
Mack I. Whittle, Jr., President, Secretary, Director
STATE OF SOUTH CAROLINA
COUNTY OF GREENVILLE
The undersigned Mack I. Whittle, Jr., does hereby certify that
he is duly elected and acting President and Secretary of Carolina
First Corporation and is authorized to execute this document;
that the undersigned for himself does hereby further certify that
he signed and was so authorized, has read the foregoing document,
understands the meaning and purport of the statements therein
contained and the same are true to the best of his information and
belief.
Dated at Greenville, SC this 17th day of June 1986.
/s/ Mack I. Whittle, Jr.
2
<PAGE>
SECRETARY OF STATE
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
CAROLINA FIRST CORPORATION
Pursuant to Authority of Section 33-15-10 the South Carolina
Code of 1976 as amended, the undersigned Corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
1. The name of the Corporation is Carolina First Corporation.
2. The Registered Office of the Corporation is 44 E. Camperdown
Way in the City of Greenville, County of Greenville and the State
of South Carolina and the name of the Registered Agent at such
address is Wallace K. Lightsey.
3. a. The following Amendment of the Articles of Incorporation
was adopted by the shareholders of the Corporation on July 3, 1986.
The number of authorized shares of common stock of the
corporation shall be increased from three million (3,000,000)
to five million (5,000,000).
b. At the date of adoption of the Amendment, the total number of
all outstanding shares of the Corporation was 40,000. The total of
such shares entitled to vote, and the vote of such shares was:
Total Number of Shares Entitled To Vote: 40,000
Number of Shares Voted For: 40,000
Number of Shares Voted Against:
c. At the date of adoption of the Amendment, the number of
outstanding shares of each class entitled to vote as a class on the
Amendment, and the vote of such shares, was: (if inapplicable,
insert "none"): None
4. a. Prior to the organizational meeting the Corporation and
with the consent of the subscribers, the following Amendment was
adopted by the Incorporator(s) on ________________________.
b. The number of withdrawals of subscribers, if such be the
case is __________________________.
c. The number of Incorporators are __________ and the number
voting for the Amendment was __________ and the number voting
against the Amendment was __________.
5. The manner, if not set forth in the Amendment, in which any
exchange, reclassification, or cancellation or issued shares
provided for in the Amendment shall be effected, is as follows:
(if not applicable, insert "no change"): No change
6. The manner in which the Amendment effects a change in the
amount of stated capital, and amount of stated capital, expressed
in dollars, as
1
<PAGE>
changed by the Amendment, is as follows: (if not applicable,
insert "no change")
The amendment increases the number of authorized shares of common
stock from three million (3,000,000) to five million (5,000,000).
The amount of authorized capital, as changed by the amendment, is
now Five Million Dollars ($5,000,000).
Dated July 14, 1986
CAROLINA FIRST CORPORATION
Mack I. Whittle, Jr., President, Secretary, Director
STATE OF SOUTH CAROLINA
COUNTY OF GREENVILLE
The undersigned Mack I. Whittle, Jr., does hereby certify that
he is duly elected and acting President and Secretary of Carolina
First Corporation and is authorized to execute this document;
that the undersigned for himself does hereby further certify that
he signed and was so authorized, has read the foregoing document,
understands the meaning and purport of the statements therein
contained and the same are true to the best of his information and
belief.
Dated at Greenville, SC this 14th day of July 1986.
/s/ Mack I. Whittle, Jr.
2
<PAGE>
MINUTES OF PRE-ORGANIZATIONAL MEETING
OF THE INCORPORATORS OF
CAROLINA FIRST CORPORATION
Pursuant to unanimous consent, a pre-organizational
meeting of the incorporators of Carolina First Corporation was held
on May 22, 1986, at the initial registered office of the
corporation, 44 East Camperdown Way, Greenville, South Carolina.
Present was Mack I. Whittle, Jr., being the only incorporator and
director named in the Articles of Incorporation, and Wallace K.
Lightsey, the initial registered agent of the corporation. Mr.
Whittle served as Chairman of the meeting, and Mr. Lightsey served
as Secretary. The Articles of Incorporation, which had been filed
with the Secretary of State on May 21, 1986, were read. Upon
motion duly made and seconded, and by unanimous consent, it was
voted to amend the Articles of Incorporation in the following
respects: (1) to increase the authorized number of shares of
common stock from one million (1,000,000) to three million
(3,000,000); (2) to provide that holders of shares of common stock
shall not have the right to cumulate their votes in the election of
directors; (3) to provide that holders of shares of common stock
shall not have preemptive rights to subscribe for additional shares
on a pro rata basis when such additional shares are offered for
sale by the Corporation; (4) to require the affirmative vote of
the holders of not less than eighty percent (80%) of the
outstanding stock of the corporation entitled to vote for approval
if (a) this corporation merges or consolidates with any other
corporation, if such other corporation and its affiliates in the
aggregate are directly or indirectly the beneficial owners of
more than five percent (5%) of the total voting power of all
outstanding shares of the voting stock of this corporation (such
other corporation being herein referred to as a "Related
Corporation"), or if (b) this corporation sells or exchanges all
or a substantial part of its assets to or with such Related
Corporation, or if (c) this corporation issues or delivers any
stock or other securities of its issue in exchange or payment for
any properties or assets of such Related Corporation or securities
issued by such Related Corporation, or in a merger of any affiliate
of this Corporation with or into such Related Corporation or any of
its affiliates; provided, however, that the foregoing shall not
apply to any such merger, consolidation, sale or exchange, or
issuance or delivery of stock or other securities which was
approved by the affirmative vote of not less than eighty percent
(80%) of the directors, nor shall it apply to any such transaction
solely between this corporation and another corporation fifty
percent (50%) or more of the voting stock of which is owned by this
corporation. For the purposes hereof, an "affiliate" is any person
(including a corporation, partnership, trust, estate or individual)
who directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person specified. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
manage-
3
<PAGE>
ment and policies of a person, whether through the
ownership of voting securities, by contract, or
otherwise; and, in computing the percentage of
outstanding voting stock beneficially owned by any
person, the shares outstanding and the shares owned shall
be determined as of the record date fixed to determine
the stockholders entitled to vote or express consent
with respect to such proposal. The stockholder vote, if
any, required for mergers, consolidations, sales or
exchanges of assets or issuances of stock or other
securities not expressly provided for in these Articles
of Incorporation, shall be such as may be required by
applicable law. A "substantial part" of the
corporation's assets shall mean assets the book value of
which constitutes more than twenty percent (20%) of the
book value, or the fair market value of which constitutes
more than twenty percent (20%) of the fair market value,
of the total assets of the corporation and its
subsidiaries taken as a whole;
(5) to provide that the Board of Directors, when evaluating any
offer of another party to (a) make a tender or exchange offer
for any equity security of this corporation, (b) merge or
consolidate this corporation with another corporation, or
(c) purchase or otherwise acquire all or substantially
all of the properties and assets of this corporation,
shall, in connection with the exercise of its judgment
in determining what is in the best interests of this
corporation and its stockholders, give due consideration
to (i) all relevant factors, including without limitation
the social, legal, environmental and economic effects on
the employees, customers, suppliers and other
constituencies of this corporation and its subsidiaries,
on the communities and geographical areas in which this
corporation and its subsidiaries operate or are located
and on any of the businesses and properties of this
corporation or any of its subsidiaries, as well as such
other factors as the directors deem relevant, and (ii)
not only the consideration being offered, in relation to
the then current market price for the corporation's
outstanding shares of capital stock, but also in relation
to the then current value of the corporation in a freely
negotiated transaction and in relation to the board of
directors' estimate of the future value of this
corporation (including the unrealized value of its
properties and assets) as an independent going concern;
(6) to provide that any shareholder entitled to vote for
the election of directors may make nominations for the
election of directors only by giving written notice to
the Secretary of the corporation at least 30 days but not
more than 60 days prior to the annual meeting of
shareholders at which directors are to be elected, unless
such requirement is waived in advance of the meeting by
the Board of Directors;
(7) to require the affirmative vote of the holders of not less
than eighty percent (80%) of the outstanding voting securities
of the corporation to remove any Director or the entire Board
of Directors without cause;
(8) to provide for staggered terms of the members of the Board of
Directors, in the following manner: When the Board of
Directors shall consist of nine
(9) or more members, in lieu of electing the whole
number of Directors annually, the Directors shall be
divided by the Board into three classes, each class to be
as nearly equal in number as possible. The term of
office of
4
<PAGE>
Directors of the first class shall expire at the first
annual meeting of shareholders after their election, that
of the second class shall expire at the second annual
meeting after their election, and that of the third class
shall expire at the end of the third annual meeting after
their election. At each annual meeting after such
classification the number of Directors equal to the
number of the class whose term expires at the time of
such meeting shall be elected to hold office until the
third succeeding annual meeting; (9) to require the
affirmative vote of the holders of not less than eighty
percent (80%) of the outstanding voting securities of the
Corporation to approve the dissolution of the
Corporation, unless not less than eighty percent (80%) of
the Directors approve such dissolution, in which case
approval by affirmative vote of the holders of a majority
of the outstanding voting securities of the corporation
shall be sufficient; and (10) to require the affirmative
vote of the holders of not less than eighty percent (80%)
of the outstanding voting securities of the Corporation
to amend the provisions of the Articles of Incorpora-
tion set forth in Paragraphs (4) through (9) hereinabove,
unless not less than eighty percent (80%) of the
Directors approve such amendment, in which case approval
by affirmative vote of the holders of two-thirds (2/3) of
the outstanding voting securities of the corporation
shall be sufficient.
There being no further business, the meeting was adjourned.
/s/ Wallace K. Lightsey
Acting Secretary
ATTEST:
/s/ Mack I. Whittle, Jr.
Acting Chairman
5
<PAGE>
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code,
as amended, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:
1. The name of the corporation is Carolina First Corporation.
2. On April 5, 1989, the corporation adopted the following
Amendment(s) of its Articles of Incorporation:
A director of the corporation shall not be personally liable
to the corporation or any of its shareholders for monetary
damages for breach of fiduciary duty as a director, provided
that this provision shall not be deemed to eliminate or limit
the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or
which involve gross negligence, intentional misconduct, or a
knowing violation of laws; (iii) imposed under Section
33-8-330 of the Act (improper distribution to shareholder); or
(iv) for any transaction from which the director derived an
improper personal benefit."
3. The manner, if not set forth in the amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the Amendment shall be effected, is as follows: (if
not applicable, insert "not applicable" or "NA"). N/A
4. Complete either a or b, whichever is applicable.
X a. Amendment(s) adopted by shareholder action. At the date
of adoption of the amendment, the number of outstanding shares of
each voting group entitled to vote separately on the Amendment, and
the vote of such shares was:
Voting Group: N/A
Number of Outstanding Shares: 1,615,000
Number of Votes Entitled to be Cast: 1,615,000
Number of Votes Represented at the Meeting: 1,356,070
Number of Undisputed* Shares Voted For: 1,289,052
Number of Undisputed* Shares Voted Against: 59,548
(7,470 abstaining)
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively state the total number of undisputed shares cast
for the amendment by each voting group together with a statement
that the number of votes cast for the amendment by each voting
group was sufficient for approval by that voting group.
b. The Amendment(s) was duly adopted by the incorporators or
board of directors without shareholder approval pursuant to section
mark 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South
Carolina Code as amended, and shareholder action was not required.
1
<PAGE>
5. Unless a delayed date is specified, the effective date of these Arti-
cles of Amendment shall be the date of acceptance for filing by the
Secretary of State (See section mark 33-1-230(b)):
Dated: April 17, 1989
Carolina First Corporation
/s/ William S. Hummers III
Senior Vice President, Secretary and Treasurer
2
<PAGE>
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to section mark Section 33-10-106 of the 1976 South Carolina
Code, as amended, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:
1. The name of the corporation is Carolina First
Corporation.
2. On April 9, 1991, the corporation adopted the following
Amendments to its Articles of Incorporation:
Amendment #1.
The text set forth on pages 2 and 3 of the "Minutes of Pre-
Organizational Meeting of Incorporators of Carolina First Corpo-
ration" (incorporated into the Company's Articles of Incorpora-
tion by the Articles of Amendment filed on June 18, 1986) begin-
ning with the third line on page 2 and ending with the word
"specified" on the eleventh line on page 3 is hereby replaced
with the text set forth below. The language being replaced by
this Amendment #1 is set forth on Exhibit A attached hereto. The
text of the Amendment is as follows:
(4) to require the affirmative vote of the holders of not
less than eighty percent (80%) of the outstanding stock of the
corporation entitled to vote for approval if (a) this corporation
merges or consolidates with any other corporation, or if (b) this
corporation sells or exchanges all or a substantial part of its
assets to or with any other corporation, or if (c) this corpora-
tion issues or delivers any stock or other securities of its
issue in exchange or payment for any properties or assets of any
other corporation, or securities issued by any other corporation,
or in a merger of any subsidiary of this corporation (80% or more
of the common stock of which is held by this corporation) with or
into any other corporation; provided, however, that the foregoing
shall not apply to any plan of merger or consolidation, or sale
or exchange of assets, or issuance or delivery of stock or other
securities which was approved (or adopted) and recommended
without condition by the affirmative vote of not less than eighty
percent (80%) of the directors, nor shall it apply to any such
transaction solely between this corporation and another corpora-
tion fifty percent (50%) or more of the voting stock of which is
owned by this corporation. The Board of Directors shall be
permitted to condition its approval (or adoption) of any plan of
merger or exchange of assets, or issuance or delivery of stock or
securities upon the approval of holders of eighty percent (80%)
of the outstanding stock of this corporation entitled to vote on
such plan of merger or consolidation, or sale or exchange of
assets, or issuance or delivery of stock or securities.
1
<PAGE>
Amendment #2.
The Articles of Incorporation are hereby amended to
increase the authorized common stock of the Company from five
million (5,000,000) to twenty million (20,000,000).
The Articles of Incorporation are hereby amended to authorize
for issuance, ten million (10,000,000) shares of preferred stock.
The relative rights, preferences and limitations of such pre-
ferred stock shall be determined by the Company's Board of
Directors in its sole discretion. The Company's Board of Direc-
tors shall have the sole authority to issue shares of such
preferred stock to whomever and for whatever purposes it, in its
sole discretion, deems appropriate. The Board is expressly
authorized to divide such preferred shares into separate series,
with each series separately designated so as to distinguish the
shares thereof from the shares of all other series. Each share
of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the
other shares of the same series. Among other things, the Board
may designate the following variations among any of the various
series of preferred stock without further action of the share-
holders of the Company:
(a) the distinctive serial designation and the number of
shares constituting such series; (b) the dividend rate or the
amount of dividends to be paid on the shares of such series,
whether dividends shall be cumulative and, if so, from which
date(s) the payment date(s) for dividends, and the participating
or other special rights, if any, with respect to dividends;(c)
the voting powers, full or limited, if any, of shares of such
series; (d) whether the shares of such series shall be redeemable
and, if so, the price(s) at which, and the terms and conditions
on which, such shares may be redeemed; (e) the amount(s) payable
upon the shares of such series in the event of voluntary or
involuntary liquidation, dissolution, or winding up of the
association; (f) whether the shares of such series shall be
entitled to the benefit of a sinking or retirement fund to be
applied to the purchase or redemption of such shares, and if so
entitled, the amount of such fund and the manner of its applica-
tion, including the price(s) at which such shares may be redeemed
or purchased through the application of such fund; (g) whether
the shares of such series shall be convertible into, or exchange-
able for, shares of any other class or classes of stock of the
association and, if so, the conversion price(s) or the rate(s) of
exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange; (h) the price or other
consideration for which the shares of such series shall be
issued; and (i) whether the shares of such series which are
redeemed or converted shall have the status of authorized but
unissued shares of serial preferred stock and whether such shares
may be reissued as shares of the same or any other series of
serial preferred stock.
2
<PAGE>
3. The manner, if not set forth in the amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the Amendment shall be effected, is as
follows: N/A
4. Complete either a or b, whichever is applicable.
a. [X] Amendments adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote
separately on the Amendment, and the vote of such shares
was:
Amendment #1
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented at Shares Voted
Group Shares to be Cast the Meeting For Against
<S> <C> <C> <C> <C> <C>
Common 2,681,540 2,681,540 2,336,042 2,165,150 170,892
Stock
</TABLE>
Amendment #2
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented at Shares Voted
Group Shares to be Cast the Meeting For Against
<S> <C> <C> <C> <C> <C>
Common 2,681,540 2,681,540 2,336,042 2,163,011 173,031
Stock
</TABLE>
b. [ ] The Amendment(s) was duly adopted by the incorporators or
board of directors without shareholder approval pursuant
to section mark 33-6-102(d), 33-10-102 and 33-10-105 of
the 1976 South Carolina Code as amended, and shareholder
action was not required.
5. Unless a delayed date is specified, the effective date of
these Articles of Amendment shall be the date of acceptance
for filing by the Secretary of State (See section mark
33-1-230(b)):
Date: May 3, 1991 Carolina First Corporation
(Name of Corporation)
By: /s/ William S. Hummers III
William S. Hummers III
Executive Vice President
3
<PAGE>
Exhibit A
Text of Articles being replaced
(4) to require the affirmative vote of the holders of not less
than eighty percent (80%) of the outstanding stock of the
corporation entitled to vote for approval if (a) this corporation
merges or consolidates with any other corporation, if such
other corporation and its affiliates in the aggregate are
directly or indirectly the beneficial owners of more than five
percent (5%) of the total voting power of all outstanding shares
of the voting stock of this corporation (such other corporation
being herein referred to as a "Related Corporation"), or if (b)
this corporation sells or exchanges all or a substantial part of
its assets to or with such Related Corporation, or if (c) this
corporation issues or delivers any stock or other securities of
its issue in exchange or payment for any properties or assets of
such Related Corporation, or securities issued by such Related
Corporation, or in a merger of any affiliate of this Corporation
with or into such Related Corporation or any of its affiliates;
provided, however, that the foregoing shall not apply to any such
merger, consolidation, sale or exchange, or issuance or delivery
of stock or other securities which was approved by the
affirmative vote of not less than eighty percent (80%) of the
directors, nor shall it apply to any such transaction solely
between this corporation and another corporation fifty percent
(50%) or more of the voting stock of which is owned by this
corporation. For the purposes hereof, an "affiliate" is any
person (including a corporation, partnership, trust, estate or
individual) who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
<PAGE>
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles
of Amendment to its Articles of Incorporation:
1. The name of the corporation is Carolina First Corporation.
2. On April 24, 1992, the corporation adopted the following
Amendment of its Articles of Incorporation:
The Articles of Incorporation of Carolina First Corporation
are hereby amended to establish a series of Preferred Stock of
the Corporation consisting of 460,000 shares, no par value,
designated "Cumulative Convertible Preferred Stock Series 1992"
having the preferences, limitations and relevant rights set forth
below.
Section I. Dividend Rights
(a) The holders of the Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors, out
of funds legally available therefor, quarterly cumulative cash
dividends, payable on the first day of January, April, July and
October in each year (a "Quarterly Dividend Payment Date")
commencing on the first Quarterly Dividend Payment Date after
Preferred Stock is first issued, in the following amounts:
(i) $0.52 per share, plus
(ii) an amount per share equal to the excess, if any, over
$.78 of (A) the aggregate per share amount of all cash dividends
declared on the Company's $1 par value Common Stock (the "Common
Stock") since the immediately preceding Quarterly Dividend
Payment Date (or with respect to the June 1, 1992 Quarterly
Dividend Payment Date, since December 31, 1991) multiplied by (B)
the number of shares of Common Stock into which a share of
Preferred Stock is convertible on the Quarterly Dividend Payment
Date on which the dividend is to be paid.
(b) In its discretion, the Corporation may offer, and the
holders of the Preferred Stock may, upon their election, receive,
Common Stock of the Corporation in lieu of receiving the cash
dividends to which they are otherwise entitled to pursuant to
this Section I, provided, however, that if the Corporation elects
to offer payment of Common Stock in lieu of cash dividends, the
Corporation and the holders of Preferred Stock shall take all
such actions as shall be necessary to comply with all applicable
law, including without limitation, the federal securities laws of
the United States and any applicable state blue sky laws.
(c) Dividends for the first Quarterly Dividend Payment Date
shall be pro rated based on the number of days that shall have
elapsed since the original issuance of the Preferred Stock.
Dividends payable on the Preferred Stock shall be computed based
on a 360-day year consisting of
<PAGE>
twelve 30-day months. Dividends will be payable to holders of
record as they appear on the stock books of the Corporation on
such record date, not more than 60 days nor less than 10 days
preceding the Quarterly Dividend Payment Date, from time to time
fixed in advance by the Board of Directors of the Corporation, or
if no record date is fixed, to holders of record as of the close
of business on the date on which the dividend is declared.
(d) As long as any Preferred Stock is outstanding, the
Corporation may not declare or pay any dividends (whether in
cash or property) on shares of the Common Stock or shares of a
class of stock ranking junior to the Preferred Stock, unless all
dividends on all outstanding Preferred Stock, for all past
dividend periods, have been paid, or declared and sums
sufficient for the payment thereof set apart. Any dividends paid
in part on the shares of the Preferred Stock and any shares of
other Preferred Stock ranking on a parity, as to dividends, with
the Preferred Stock, must be paid ratably in proportion to the
accrued but unpaid dividends to which the holders of all such
parity shares are respectively entitled. No interest or sum of
money in lieu of interest will be payable in respect of any
dividend payment or payments on Preferred Stock.
(e) For purposes of Section I, unless the context otherwise
requires, "dividend," as it pertains to Common Stock, shall mean
the transfer of cash or property without consideration, to the
holder of Common Stock, whether by way of dividend or otherwise,
other than Common Stock of the Corporation, or the purchase or
redemption of Common Stock or other preferred stock of this
Corporation (other than redemptions set forth in Section II below
or repurchases of common stock held by employees or consultants
of this Corporation upon termination of their employment or
services pursuant to agreements providing for such repurchase)
for cash or property, including any such transfer, purchase or
redemption by a subsidiary of this Corporation.
Section II. Redemption Provisions
(a) Subject to the terms and conditions set forth below,
the Corporation may, at any time after June 1, 1992 upon payment
of all unpaid dividends thereon, including accrued dividends,
whether or not declared, at the option of the Board of Directors,
redeem all or part of the outstanding shares of the Preferred
Stock, provided that the Corporation shall give written notice by
mail, postage prepaid, to the holders of the Preferred Stock to
be redeemed at least thirty (30) days, but not more than sixty
(60) days, prior to the date specified for redemption (the
"Redemption Date"). Such notice shall be addressed to each such
shareholder at the address of such holder appearing on the books
of the Corporation or given by such holder to the Corporation for
the purpose of notice, or if no such address appears or is so
given, at the place where the principal office of the Corporation
is located. Such notice, which shall be deemed to have been given
on the date that it is first placed in the U.S. Mail, shall state
the Redemption Date, the Redemption Price (as hereinafter
defined), the number of shares of Preferred Stock of such holders
to be redeemed and the date of termination of the right to
convert the shares of Preferred Stock of such holder to Common
Stock pursuant to Section III hereof and shall call upon such
holder to surrender such holder's Preferred Stock to the
Corporation on or before the Redemption Date at the place
designated in the notice. On or after the Redemption Date, each
holder of shares of
<PAGE>
Preferred Stock called for redemption shall surrender the
certificate evidencing such shares to the Corporation (except
that such number of shares shall be reduced by the number of
shares which have been converted in accordance with the
provisions hereof) and shall thereupon be entitled to receive
payment of the Redemption Price. If less than all of the
outstanding shares of Preferred Stock are to be redeemed, then
the Corporation shall redeem a pro rata portion from each holder
of Preferred Stock.
(b) If the Corporation elects to redeem the Preferred Stock
prior to June 1, 2000, the Corporation shall pay $25 per share
plus a premium over the $25, which premium shall be 8% on June 1,
1992 and shall decline by 1% per annum from June 1, 1992 until
June 1, 2000 at which time and thereafter the Preferred Stock may
be redeemed at $25 per share (the $25 per share plus any
applicable premium being referred to hereinafter as the
"Redemption Price"). Notwithstanding the foregoing, the
Preferred Stock may not be redeemed prior to June 1, 1995,
unless, for a period of 20 consecutive business days ending
within five days of the date of the notice of redemption, the
Fair Market Price of the Common Stock has been at least 125% of
the Conversion Price (as such has been adjusted pursuant to
Section III hereof). For purposes of these Articles, "Fair
Market Price" means the average of the last reported sale prices
of the Common Stock on the preceding 20 consecutive business
days on the principal exchange on which the Common Stock is
listed or, as the case may be, the NASDAQ National Market.
(c) From and after the Redemption Date (unless default
shall be made by the Corporation in duly paying the Redemption
Price in which case all the rights of the Preferred Stock called
for redemption shall continue) the holders of the shares of the
Preferred Stock called for redemption shall cease to have any
rights as stockholders of the Corporation, except the right to
receive, without interest, the Redemption Price thereof upon
surrender of certificates representing the shares of Preferred
Stock.
(d) Notwithstanding the foregoing, if any dividends on the
Preferred Stock are in arrears, no shares of Preferred Stock
may be redeemed, unless all outstanding shares of Preferred Stock
are simultaneously redeemed and all accrued dividends paid, and
the Corporation shall not purchase or otherwise acquire any
shares of Preferred Stock; provided, however, that the foregoing
shall not prevent the purchase or acquisition of shares of
Preferred Stock by the Corporation pursuant to a purchase or
exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock.
(e) There shall be no redemption of any shares of Preferred
Stock of the Corporation where such action would be in violation
of applicable law.
Section III. Conversion Rights
(a) Shares of the Preferred Stock will be convertible at
any time at the option of the holder into fully-paid and
non-assessable shares of Common Stock of the Corporation at a
conversion price of $11.00 per share of Common Stock (equivalent
to a conversion ratio of approximately 2.273 shares of Common
Stock for each share of Preferred Stock), subject to adjustment
as described below (the "Conversion Price") (except that a share
of Preferred Stock that has been called for
<PAGE>
redemption will not be convertible after the close of business on
the third day preceding the Redemption Date unless the
Corporation shall default in making payment of the amount payable
upon such redemption).
(b) The number of shares of Common Stock into which each share
of the Preferred Stock is convertible shall be adjusted from time
to time as follows:
(i) In case the Corporation shall at any time or from
time to time declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in its Common Stock), then, and in each
such case, the number of shares of Common Stock into which each
share of the Preferred Stock is convertible shall be adjusted
so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (A) the number of shares
of Common Stock into which such share was convertible immediate-
ly prior to the occurrence of such event by (B) a fraction, the
numerator of which is the sum of (I) the number of shares of
Common Stock into which such share was convertible immediately
prior to the occurrence of such event plus (II) the number of
shares of Common Stock which such holder would have been entitled
to receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in accordance with clause (I) above. An adjustment
made pursuant to this subsection (b)(i) shall become effective
(A) in the case of any such dividend, immediately after the close
of business on the record date for the determination of holders
of Common Stock entitled to receive such dividend, or (B) in the
case of any such subdivision, at the close of business on the day
immediately prior to the day upon which such corporate action
becomes effective;
(ii) In case the Corporation at any time or from time
to time shall combine or consolidate the outstanding shares of
its Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of the
Preferred Stock is convertible shall be adjusted so that the
holder of each share thereof shall be entitled to receive, upon
the conversion thereof, the number of shares of Common Stock
determined by multiplying (A) the number of shares of Common
Stock into which such share was convertible immediately prior
to the occurrence of such event by (B) a fraction, the numera-
tor of which is the number of shares which the holder would have
owned after giving effect to such event had such share been
converted immediately prior to the occurrence of such event and
the denominator of which is the number of Common Shares into
which such share was convertible immediately prior to the
occurrence of such event. An adjustment made pursuant to this
subsection (b)(ii) shall become effective at the close of
business on the day immediately prior to the day upon which such
corporate action becomes effective;
(iii) In case the Corporation at any time or from time
to time shall issue rights or warrants to all holders of shares
of its Common Stock entitling them to subscribe for or purchase
shares of its Common Stock (or securities convertible into its
Common Stock) at a price per share (or having a conversion price
per share) less than the
<PAGE>
Fair Market Price per share of Common Stock on the date such
right or warrant is exercised then, and in each such case (unless
the holders of shares of the Preferred Stock shall be permitted
to subscribe for or purchase shares of Common Stock on the same
basis as though such shares of the Preferred Stock had been
converted into shares of Common Stock immediately prior to the
close of business on the record date fixed for the determination
of shareholders entitled to receive such right or warrant), the
number of shares of Common Stock into which each share of the
Preferred Stock is convertible shall be adjusted so that the
holder of each share thereof shall be entitled to receive, upon
the conversion thereof, the number of shares of Common Stock
determined by multiplying (A) the number of shares of Common
Stock into which such share was convertible immediately prior to
such event by (B) a fraction, the numerator of which shall be the
sum of (I) the number of shares of Common Stock outstanding on
such record date plus (II) the number of additional shares of
Common Stock actually purchased pursuant to such rights or
warrants, and the denominator of which shall be the sum of (I)
the number of shares of Common Stock outstanding on such record
date plus (II) the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total
number of shares of Common Stock so sold would purchase at such
Fair Market Price on such record date. An adjustment made
pursuant to this subsection (b)(iii) shall be made upon the close
of the period during which shareholders may subscribe for or
purchase shares of Common Stock. Holders of Preferred Stock who
exercise their conversion rights during the period during which
outstanding warrants or rights may be exercised shall receive the
additional shares of Common Stock as provided in this subsection
(b)(iii). For purposes of this subsection (b)(iii), the granting
of rights to purchase Common Stock (whether treasury shares or
newly issued shares) pursuant to any employee benefit or
compensation plan or any plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation,
and the investment of additional optional amounts, in shares of
Common Stock, in any such case at a price per share of not less
than 95% of the fair market price (determined as provided in such
plans) per share of Common Stock, shall not be deemed to
constitute an issue of rights or warrants by the Corporation
within the meaning of this subsection (b)(iii); and
(iv) In case the Corporation at any time or from time to
time shall declare, order, pay or make a dividend or other
distribution on its Common Stock, (including, without limitation,
any distribution of other or additional securities or property or
rights or warrants to subscribe for, at less than fair market
value as determined in good faith by the Board of Directors,
other securities of the Corporation or any of its subsidiaries by
way of dividend or spin-off, reclassification, recapitalization
or similar corporate rearrangement) other than a dividend payable
in cash or shares of the Corporation's Common Stock or rights or
warrants to subscribe for shares of the Corporation's Common
Stock, then, and in each such case (unless the holders of shares
of the Preferred Stock shall receive any such dividend or other
distribution on the same basis as though such shares of the
Preferred Stock had been converted into shares of Common Stock
immediately prior to the close of business on the record date for
the determination of holders of Common Stock entitled to receive
such dividend or other distribution), the number of shares of
Common Stock into which each share of the Preferred Stock is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (A) the
<PAGE>
number of shares of Common Stock into which such share was
convertible immediately prior to the close of business on the
record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or distribution by (B) a
fraction, the numerator of which shall be the Fair Market Price
per share of Common Stock on the record date fixed for the
determination of holders of Common Stock entitled to receive such
dividend or distribution, and the denominator of which shall be
such Fair Market Price per share of Common Stock less the fair
value of such dividend or distribution (as determined in good
faith by the Board of Directors of the Corporation, a certified
resolution with respect to which shall be filed with each
transfer agent for the Preferred Stock) payable in respect of one
share of Common Stock. An adjustment made pursuant to this
subsection (b)(iv) shall be made upon the opening of business on
the next business day following the date on which any such
dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the
record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or distribution;
(c) The holder of any shares of Preferred Stock may
exercise the conversion rights as to such shares or any part
thereof by delivering to the Corporation during regular business
hours, at the office of any transfer agent of the Corporation for
the Preferred Stock, or at the principal office of the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed for transfer to the Corporation (if
required by it), accompanied by written notice stating that the
holder elects to convert such shares. Conversion shall be deemed
to have been effected on the date when such delivery is made, and
such date is referred to herein as the "Conversion Date." As
promptly as practicable thereafter, the Corporation shall issue
and deliver to such holder, a certificate or certificates for the
number of full shares of Common Stock to which such holder is
entitled and, as provided in Subsection III(d) hereof, a check
for cash with respect to any fractional interest in a share of
Common Stock. The holder shall be deemed to have become a
shareholder of record on the applicable Conversion Date unless
the transfer books of the Corporation are closed on the date, in
which event he shall be deemed to have become a Common Stock
shareholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that
in effect on the Conversion Date. Upon conversion of only a
portion of the number of shares of Preferred Stock represented by
a certificate surrendered for conversion, the Corporation shall
issue and deliver upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of
Preferred Stock representing the unconverted shares of the
certificate so surrendered.
(d) No fractional shares of Common Stock or scrip shall be
issued upon conversion of shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of
Preferred Stock so surrendered. Instead of any fractional shares
of Common Stock which would otherwise be issuable upon conversion
of any shares of Preferred Stock, the Corporation shall pay a
cash adjustment in respect of such fractional interest equal to
the Fair Market Price of such fractional interest.
<PAGE>
(e) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the
Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all Preferred Stock from time
to time outstanding.
(f) If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Preferred Stock require
registration or listing with, or approval of, any governmental
authority, stock exchange, or other regulatory body under any
federal or state law or regulation or otherwise, before such
shares may be validly issued or delivered upon conversion, the
Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration, listing or approval, as the
case may be.
(g) All shares of Common Stock which may be issued upon
conversion of the shares of Preferred Stock will, upon issuance
by the Corporation, be validly issued, fully paid and
nonassessable.
(h) Upon conversion of any shares of the Preferred Stock,
the holder thereof shall not be entitled to receive any
accumulated, accrued or unpaid dividends in respect of the shares
so converted, provided that such holder shall be entitled to
receive any dividends on such shares of the Preferred Stock
declared prior to such conversion if such holder held such shares
on the record date fixed for the determination of holders of
the Preferred Stock entitled to receive payment of such dividend.
Shares of Preferred Stock surrendered for conversion after the
record date next preceding a dividend payment date for the
Preferred Stock and before the dividend payment date must be
accompanied by payment of an amount equal to the dividend to be
accrued thereon between the date surrendered for conversion and
such dividend payment date.
Section IV. Voting
(a) Except as otherwise expressly required by applicable
law or as described below, holders of the Preferred Stock shall
not be entitled to vote on any matter, and shall not be
entitled to notice of any meeting of shareholders of the
Corporation. Except as otherwise expressly required by
applicable law, whenever the approval or other action of holders
of the Preferred Stock is required by applicable law or by the
Corporation's Articles of Incorporation, each share of the
Preferred Stock shall be entitled to one vote and the affirmative
vote of a majority of such shares at a meeting at which a
majority of such shares are present or represented shall be
sufficient to constitute such approval or other action.
(b) Unless a higher percentage is otherwise expressly
required by applicable law, approval of a majority of Preferred
Stock outstanding may and shall be required to amend the Articles
of Incorporation of the Corporation (i) to create or authorize
any class of stock ranking prior or equal to the Preferred Stock
in respect of dividends or distribution of assets on liquidation
or otherwise alter or abolish the liquidation preferences or any
other preferential right of the Preferred Stock, (ii) to reduce
the Redemption Price or otherwise alter any redemption rights of
the Preferred Stock, (iii) to alter or abolish any right of the
Preferred Stock to receive dividends, or (iv) to exclude or limit
the voting rights as to these matters.
<PAGE>
(c) If at any time the Corporation is in arrears in the
payment of dividends on the Preferred Stock in an aggregate
amount at least equal to the full accrued dividends for six
quarterly dividend periods, the number of directors of the
Company will be increased by two and the holders of the Preferred
Stock, voting separately as a single class, will have the right
to elect two directors to fill the positions so created, and such
right will continue until all dividends in arrears for any past
dividend period have been paid in full.
(d) In the event any vacancy shall occur in the case of a
director elected by holders of Preferred Stock voting as a
class, a special meeting of the holders of shares of Preferred
Stock shall be called promptly to fill any such vacancy. Such
meeting shall be held within 40 days after such call at a place
and upon notice as provided for the holding of meetings of
stockholders, except that no such special meeting shall be
required to be called if any such vacancy shall occur less than
90 days before the date fixed for the Annual Meeting of
Stockholders. The directors elected by the class vote of holders
of Preferred Stock shall serve until the next Annual Meeting of
Stockholders or until their successors shall be elected and
qualified; provided, however, that whenever during the term of
office of the directors so elected, all accumulated dividends
shall have been paid or declared and funds set aside for payment,
the term of office of such directors shall forthwith terminate.
Section V. Liquidation
(a) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the
holders of shares of the Preferred Stock then outstanding shall
be entitled to be paid, out of the assets of the Corporation
available for distribution to its stockholders whether from
capital, surplus or earnings and before any payment shall be made
in respect of the Corporation's Common Stock or on any other
class of stock ranking junior to the Preferred Stock, an amount
equal to $25.00 per share, plus all unpaid dividends (whether or
not declared) accrued thereon to the date fixed for distribution.
After setting apart or paying in full the preferential amounts
due the holders of the Preferred Stock, the remaining assets of
the Corporation available for distribution to stockholders, if
any, shall be distributed exclusively to the holders of Common
Stock or as otherwise provided in the Corporation's Articles of
Incorporation. If upon liquidation, dissolution, or winding up
of the Corporation, the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the
holders of the Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of the Preferred
Stock shall share ratably in any distribution of assets.
(b) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the
Corporation shall, within ten (10) days after the date the Board
of Directors approves such action, or at least twenty (20) days
prior to any shareholders' meeting called to approve such action,
or within twenty (20) days after the commencement of any
involuntary proceeding, whichever is earlier, give each holder of
shares of Preferred Stock initial written notice of the proposed
action. Such initial written notice shall describe the material
terms and conditions of such proposed action, including a de-
scription of the stock, cash, and property to be received by the
holders of shares of Preferred Stock upon consummation of the
proposed
<PAGE>
action and the date of delivery thereof. If any material change
in the facts set forth in the initial notice shall occur, the
Corporation shall promptly give written notice to each holder of
shares of Preferred Stock of such material change. The
Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation before
the expiration of thirty (30) days after the mailing of the
initial notice or ten (10) days after the mailing of any
subsequent written notice, whichever is later, provided that any
such thirty-day or ten-day period may be shortened upon the
written consent of the holders of all of the outstanding shares
of Preferred Stock.
(c) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation which
will involve the distribution of assets other than cash, the
Corporation shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed
to the holders of shares of Preferred Stock. The Corporation
shall, upon receipt of such appraise's valuation, give prompt
written notice to each holder of shares of Preferred Stock of the
appraiser's valuation.
Section VI. Reacquired Shares
Any shares of the Preferred Stock redeemed or purchased or
otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock to be created
by resolution or resolutions of the Board of Directors, subject
to the conditions or restrictions on issuance set forth herein.
Section VII. Adjustments For Consolidation, Merger, Etc.
In case the Corporation, (i) shall consolidate with or merge
into any other entity and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii)
shall permit any other entity to consolidate with or merge into
the Corporation and the Corporation shall be the continuing or
surviving entity, but, in connection with such consolidation or
merger, the Common Stock shall be changed into or exchanged for
stock or other securities of any other entity or cash or any
other property, (iii) shall transfer all or substantially all of
its properties or its assets to any other entity, or (iv) shall
effect a capital reorganization or reclassification of the Common
Stock (other than a capital reorganization or reclassification
resulting in the issuance of additional shares of Common Stock
for which adjustment is provided in Section III), then, in each
such case, there will be no adjustment of the Conversion Price
but the holder of each share of Preferred Stock then outstanding
will have the right thereafter to convert such share into the
kind and amount of securities, cash or other property that the
holder would have owned or been entitled to receive immediately
after such consolidation, merger, exchange, sale or transfer if
such share had been converted into Common Stock immediately
before the effective date of such consolidation, merger,
exchange, sale or transfer. In the event that the Corporation
engages in a transaction set forth in (i)-(iv) above and the
Preferred Shareholders do not convert as provided in the
preceding sentence, then the continuing or surviving entity shall
be obligated to redeem all
<PAGE>
remaining outstanding shares of Preferred Stock, and the
Preferred Shareholders shall surrender their Preferred Shares for
redemption, all in accordance with Section II hereof.
Section VIII. Reports as to Adjustments
Whenever the number of shares of Common Stock into which the
shares of the Preferred Stock are convertible is adjusted as
provided in Section III, the Corporation shall (i) promptly
compute such adjustment and furnish to each transfer agent for
the Preferred Stock a certificate, signed by a principal
financial officer of the Corporation, setting forth the number
of shares of Common Stock into which each share of the Preferred
Stock is convertible as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the
computation thereof and when such adjustment will become
effective and (ii) promptly mail to the holders of record of the
outstanding shares of the Preferred Stock a notice stating that
the number of shares into which the shares of Preferred Stock are
convertible has been adjusted and setting forth the new number
of shares into which each share of the Preferred Stock is
convertible as a result of such adjustment and when such
adjustment will become effective.
3. The manner, if not set forth in the amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the Amendment shall be effected, is as follows:
Not Applicable
4. Complete either a or b, whichever is applicable.
a. [ ] Amendment(s) adopted by shareholder action.
b. [x] The Amendment was duly adopted by the incorporators
or board of directors without shareholder approval
pursuant to section mark 33-6-102(d), 33-10-102 and
33-10-105 of the 1976 South Carolina Code as
amended, and shareholder action was not required.
5. The effective date of these Articles of Amendment shall be the
date of acceptance for filing by the Secretary of State.
Date: April 27, 1992 CAROLINA FIRST CORPORATION
By: /s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
President and Chief Executive Officer
<PAGE>
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The name of the corporation is Carolina First Corporation.
2. On February 24, 1993, the corporation adopted the following
Amendment of its Articles of Incorporation:
The Articles of Incorporation of Carolina First
Corporation are hereby amended to establish a series of
Preferred Stock of the Corporation consisting of 621,000
shares, no par value, designated "Noncumulative Convertible
Preferred Stock Series 1993" having the preferences,
limitations and relevant rights set forth below (the "Series
1993 Preferred Stock").
Section I. Dividend Rights
(a) The holders of the Series 1993 Preferred Stock
shall be entitled to receive when, as and if declared by the
Board of Directors, in their discretion, out of funds
legally available therefor, quarterly noncumulative cash
dividends, payable on the first day of January, April, July
and October in each year (a "Quarterly Dividend Payment
Date") commencing on the first Quarterly Dividend Payment
Date after Series 1993 Preferred Stock is first issued, in
the following amounts:
(i) $0.46875 per share, plus
(ii) an amount per share equal to the excess, if
any, over $0.703125 of (A) the aggregate per share
amount of all cash dividends declared on the
Corporation's $1 par value Common Stock (the
"Common Stock") since the immediately preceding
Quarterly Dividend Payment Date (or with respect
to the July 1, 1993 Quarterly Dividend Payment
Date, since March 31, 1993) multiplied by (B) the
number of shares of Common Stock into which a
share of Series 1993 Preferred Stock is
convertible on the Quarterly Dividend Payment Date
on which the dividend is to be paid.
The Series 1993 Preferred Stock is subordinate to the Cumulative
Convertible Preferred Stock Series 1992 (the "Series 1992 Preferred
Stock") with respect to dividends. Accordingly, no dividends in cash or
property may be paid with respect to the Series 1993 Preferred Stock
unless all dividends, including accrued but unpaid dividends, with
respect to the Series 1992 Preferred Stock have been paid or sums
sufficient set aside therefor.
(b) In the event that the Corporation declares a cash dividend on
the Series 1993 Preferred Stock, the Corporation, in its discretion, may
offer, and the holders of the Series 1993 Preferred Stock may, upon
their election, receive, Common Stock of the Corporation in lieu of
receiving the cash dividends, provided, however, that if the
Corporation elects to offer payment of Common Stock in lieu of cash
dividends, the Corporation and the holders of Series 1993 Preferred
Stock shall take all such actions as shall be necessary to comply with
all applicable law, including without limitation, the federal securities
laws of the United States and any applicable state blue sky laws.
1
<PAGE>
(c) Dividends payable on the Series 1993 Preferred Stock shall
be computed based on a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they
appear on the stock books of the Corporation on such record date,
not more than 60 days nor less than 10 days preceding the
Quarterly Dividend Payment Date, from time to time fixed in advance
by the Board of Directors of the Corporation, or if no record date
is fixed, to holders of record as of the close of business on the
date on which the dividend is declared.
(d) The cash dividends on the Series 1993 Preferred Stock are
noncumulative and, accordingly, irrespective of whether or not any
regular quarterly cash dividends on the Series 1993 Preferred Stock for
past periods have been paid, the Corporation may declare and pay
dividends on shares of the Common Stock (and on the Series 1992
Preferred Stock). However, the Corporation may not pay dividends on the
Common Stock, other than dividends in Common Stock, in a particular
calendar quarter unless the regular cash dividends on the Series 1993
Preferred Stock payable on the Quarterly Dividend Payment Date within
that particular calendar quarter have been paid or sums sufficient
therefor set aside. Any dividends paid in part on the shares of the
Series 1993 Preferred Stock and any shares of other preferred stock
ranking on a parity, as to dividends, with the Series 1993 Preferred
Stock, must be paid ratably in proportion to the dividendsto which the
holders of all such parity shares are respectively entitled. No
interest or sum of money in lieu of interest will be payable in respect
of any dividend payment or payments on Series 1993 Preferred Stock.
Section II. Redemption Provisions
(a) Subject to the terms and conditions set forth below, the
Corporation may, at any time after July 1, 1993, at the option of the
Board of Directors, redeem all or part of the outstanding shares of the
Series 1993 Preferred Stock, provided that the Corporation shall give
written notice by mail, postage prepaid, to the holders of the Series
1993 Preferred Stock to be redeemed at least thirty (30) days, but not
more than sixty (60) days, prior to the date specified for redemption
(the "Redemption Date"). Such notice shall be addressed to each such
shareholder at the address of such holder appearing on the books of the
Corporation or given by such holder to the Corporation for the purpose
of notice, or if no such address appears or is so given, at the place
where the principal office of the Corporation is located. Such notice,
which shall be deemed to have been given on the date that it is first
placed in the U.S. Mail, shall state the Redemption Date, the Redemption
Price (as hereinafter defined), the number of shares of Series 1993
Preferred Stock of such holders to be redeemed and the date of
termination of the right to convert the shares of Series 1993 Preferred
Stock of such holder to Common Stock pursuant to Section III hereof and
shall call upon such holder to surrender such holder's Series 1993
Preferred Stock to the Corporation on or before the Redemption Date at
the place designated in the notice. On or after the Redemption Date,
each holder of shares of Series 1993 Preferred Stock called for
redemption shall surrender the certificate evidencing such shares to the
Corporation (except that such number of shares shall be reduced by the
number of shares which have been converted in accordance with the
provisions hereof) and shall thereupon be entitled to receive payment of
the Redemption Price. If less than all of the outstanding shares of
Series 1993 Preferred Stock are to be redeemed, then the Corporation
shall redeem a pro rata portion from each holder of Series 1993
Preferred Stock.
(b) If the Corporation elects to redeem the Series 1993 Preferred
Stock prior to July 1, 2000, the Corporation shall pay $25 per share
plus a premium over the $25, which premium shall be 8% on July 1, 1993
and shall decline by 1% per annum from July 1, 1993 until July 1, 2000
at which time and thereafter the
2
<PAGE>
Series 1993 Preferred Stock may be redeemed at $25 per share (the $25
per share plus any applicable premium being referred to hereinafter as
the "Redemption Price"). Notwithstanding the foregoing, the Series 1993
Preferred Stock may not be redeemed prior to July 1, 1996, unless, for a
period of 20 consecutive business days ending within five business days
of the date of the notice of redemption, the Fair Market Price of the
Common Stock has been at least 125% of the Conversion Price (as such has
been adjusted pursuant to Section III hereof). For purposes of these
Articles, "Fair Market Price" means the average of the last reported
sale prices of the Common Stock on the preceding 20 consecutive business
days on the principal exchange on which the Common Stock is listed or,
as the case may be, the NASDAQ National Market.
(c) From and after the Redemption Date (unless default shall be
made by the Corporation in duly paying the Redemption Price in which
case all the rights of the Series 1993 Preferred Stock called for
redemption shall continue) the holders of the shares of the Series 1993
Preferred Stock called for redemption shall cease to have any rights as
stockholders of the Corporation, except the right to receive, without
interest, the Redemption Price thereof upon surrender of certificates
representing the shares of Series 1993 Preferred Stock. (d)
Notwithstanding the foregoing, no shares of Series 1993 Preferred Stock
may be redeemed unless all outstanding shares of Series 1993 Preferred
Stock are simultaneously redeemed, and the Corporation shall not
purchase or otherwise acquire any shares of Series 1993 Preferred Stock;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of Series 1993 Preferred Stock by the Corporation
pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Series 1993 Preferred Stock.
(e) There shall be no redemption of any shares of Series 1993
Preferred Stock of the Corporation where such action would be in
violation of applicable law and subject to review by the Board of
Governors of the Federal Reserve System.
Section III. Conversion Rights
(a) Shares of the Series 1993 Preferred Stock will be convertible
at any time at the option of the holder into fully-paid and
non-assessable shares of Common Stock of the Corporation at a conversion
price of $14.375 per share of Common Stock (equivalent to a conversion
ratio of approximately 1.739 shares of Common Stock for each share of
Series 1993 Preferred Stock), subject to adjustment as described
herein (the "Conversion Price") (except that a share of Series 1993
Preferred Stock that has been called for redemption will not be
convertible after the close of business on the third day preceding the
Redemption Date unless the Corporation shall default in making payment
of the amount payable upon such redemption).
(b) The number of shares of Common Stock into which each share of the Series
1993 Preferred Stock is convertible shall be adjusted from time to time
as follows:
(i) In case the Corporation shall at any time or from time to time
declare or pay any dividend on its Common Stock payable in its Common
Stock or effect a subdivision of the outstanding shares of its Common
Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in its
Common Stock), then, and in each such case, the number of shares of
Common Stock into which each share of the Series 1993 Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof
shall be
3
<PAGE>
entitled to receive, upon the conversion thereof, the number of shares
of Common Stock determined by multiplying (A) the number of shares of
Common Stock into which such share was convertible immediately prior to
the occurrence of such event by (B) a fraction, the numerator of which
is the sum of (I) the number of shares of Common Stock into which such
share was convertible immediately prior to the occurrence of such event
plus (II) the number of shares of Common Stock which such holder would
have been entitled to receive in connection with the occurrence of such
event had such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock determined
in accordance with clause (I) above. An adjustment made pursuant to
this subsection (b)(i) shall become effective (A) in the case of any
such dividend, immediately after the close of business on the record
date for the determination of holders of Common Stock entitled to
receive such dividend, or (B) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which
such corporate action becomes effective;
(ii) In case the Corporation at any time or from time to time
shall combine or consolidate the outstanding shares of its Common Stock
into a lesser number of shares of Common Stock, by reclassification or
otherwise, then, and in each such case, the number of shares of Common
Stock into which each share of the Series 1993 Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof
shall be entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (A) the number of
shares of Common Stock into which such share was convertible immediately
prior to the occurrence of such event by (B) a fraction, the numerator
of which is the number of shares which the holder would have owned after
giving effect to such event had such share been converted immediately
prior to the occurrence of such event and the denominator of which is
the number of Common Shares into which such share was convertible
immediately prior to the occurrence of such event. An adjustment made
pursuant to this subsection (b)(ii) shall become effective at the close
of business on the day immediately prior to the day upon which such
corporate action becomes effective;
(iii) In case the Corporation at any time or from time to time
shall issue rights or warrants to all holders of shares of its Common
Stock entitling them to subscribe for or purchase shares of its Common
Stock (or securities convertible into its Common Stock) at a price per
share (or having a conversion price per share) less than the Fair Market
Price per share of Common Stock on the date such right or warrant is
exercised then, and in each such case (unless the holders of shares of
the Series 1993 Preferred Stock shall be permitted to subscribe for or
purchase shares of Common Stock on the same basis as though such shares
of the Series 1993 Preferred Stock had been converted into shares of
Common Stock immediately prior to the close of business on the record
date fixed for the determination of shareholders entitled to receive
such right or warrant), the number of shares of Common Stock into which
each share of the Series 1993 Preferred Stock is convertible shall be
adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of Common
Stock determined by multiplying (A) the number of shares of Common Stock
into which such share was convertible immediately prior to such event by
(B) a fraction, the numerator of which shall be the sum of (I) the
number of shares of Common Stock outstanding on such record date plus
(II) the number of additional shares of Common Stock actually purchased
pursuant to such rights or warrants, and the denominator of which shall
be the sum of (I) the number of shares of Common Stock outstanding on
such record date plus (II) the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total
number of shares of Common Stock so sold would purchase at such Fair
Market Price on such record date. An adjustment made
4
<PAGE>
pursuant to this subsection (b)(iii) shall be made upon the close of the
period during which shareholders may subscribe for or purchase shares of
Common Stock. Holders of Series 1993 Preferred Stock who exercise their
conversion rights during the period during which outstanding warrants or
rights may be exercised shall receive the additional shares of Common
Stock as provided in this subsection (b)(iii). For purposes of this
subsection (b)(iii), the granting of rights to purchase Common Stock
(whether treasury shares or newly issued shares) pursuant to any
employee benefit or compensation plan or any plan providing for the
reinvestment of dividends or interest payable on securities of the
Corporation, and the investment of additional optional amounts, in
shares of Common Stock, in any such case at a price per share of not
less than 95% of the fair market price (determined as provided in such
plans) per share of Common Stock, shall not be deemed to constitute an
issue of rights or warrants by the Corporation within the meaning of
this subsection (b)(iii); and
(iv) In case the Corporation at any time or from time to time
shall declare, order, pay or make a dividend or other distribution on
its Common Stock, (including, without limitation, any distribution of
other or additional securities or property or rights or warrants to
subscribe for, at less than fair market value as determined in good
faith by the Board of Directors, other securities ofthe Corporation or
any of its subsidiaries by way of dividend or spin-off,
reclassification, recapitalization or similar corporate rearrangement)
other than a dividend payable in cash or shares of the Corporation's
Common Stock or rights or warrants to subscribe for shares of the
Corporation's Common Stock, then, and in each such case (unless the
holders of shares of the Series 1993 Preferred Stock shall receive any
such dividend or other distribution on the same basis as though such
shares of the Series 1993 Preferred Stock had been converted into shares
of Common Stock immediately prior to the close of business on the record
date for the determination of holders of Common Stock entitled to
receive such dividend or other distribution), the number of shares of
Common Stock into which each share of the Series 1993 Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof
shall be entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (A) the number of
shares of Common Stock into which such share was convertible
immediately prior to the close of business on the record date fixed for
the determination of holders of Common Stock entitled to receive such
dividend or distribution by (B) a fraction, the numerator of which shall
be the Fair Market Price per share of Common Stock on the record date
fixed for the determination of holders of Common Stock entitled to
receive such dividend or distribution, and the denominator of which
shall be such Fair Market Price per share of Common Stock less the fair
value of such dividend or distribution (as determined in good faith by
the Board of Directors of the Corporation, a certified resolution with
respect to which shall be filed with each transfer agent for the Series
1993 Preferred Stock) payable in respect of one share of Common Stock.
An adjustment made pursuant to this subsection (b)(iv) shall be made
upon the opening of business on the next business day following the date
on which any such dividend or distribution is made and shall be
effective retroactively immediately after the close of business on the
record date fixed for the determination of holders of Common Stock
entitled to receive such dividend or distribution;
(c) The holder of any shares of Series 1993 Preferred Stock may
exercise the conversion rights as to such shares or any part thereof by
delivering to the Corporation during regular business hours, at the
office of any transfer agent of the Corporation for the Series 1993
Preferred Stock, or at the principal office of the Corporation, the
certificate or certificates for the shares to be converted, duly
endorsed for transfer to the Corporation (if required by it), accompa-
nied by written notice stating that the holder elects to convert such
shares.
5
<PAGE>
Conversion shall be deemed to have been effected on the date when such
delivery is made, and such date is referred to herein as the "Conversion
Date." As promptly as practicable thereafter, the Corporation shall
issue and deliver to such holder, a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled
and, as provided in Subsection III(d) hereof, a check for cash with
respect to any fractional interest in a share of Common Stock. The
holder shall be deemed to have become a shareholder of record on the
applicable Conversion Date unless the transfer books of the Corporation
are closed on the date, in which event he shall be deemed to have become
a Common Stock shareholder of record on the next succeeding date on
which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date. Upon conversion of only a
portion of the number of shares of Series 1993 Preferred Stock
represented by a certificate surrendered for conversion, the Corporation
shall issue and deliver upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of Series
1993 Preferred Stock representing the unconverted shares of the
certificate so surrendered.
(d) No fractional shares of Common Stock or scrip shall be issued
uponconversion of shares of Series 1993 Preferred Stock. If more than
one share of Series 1993 Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares
of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series 1993 Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Series 1993 Preferred Stock, the Corporation shall pay a cash adjust-
ment in respect of such fractional interest equal to the Fair Market
Price of such fractional interest.
(e) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose
of effecting the conversion of the Series 1993 Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all
Series 1993 Preferred Stock from time to time outstanding.
(f) If any shares of Common Stock to be reserved for the purpose
of conversion of shares of Series 1993 Preferred Stock require
registration or listing with, or approval of, any governmental
authority, stock exchange, or other regulatory body under any federal or
state law or regulation or otherwise, before such shares may be validly
issued or delivered upon conversion, the Corporation will in good faith
and as expeditiously as possible endeavor to secure such registration,
listing or approval, as the case may be.
(g) All shares of Common Stock which may be issued upon conversion
of the shares of Series 1993 Preferred Stock will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable.
(h) Upon conversion of any shares of the Series 1993 Preferred
Stock, the holder thereof shall not be entitled to receive any unpaid
dividends in respect of the shares so converted, provided that such
holder shall be entitled to receive any dividends on such shares of the
Series 1993 Preferred Stock declared prior to such conversion if such
holder held such shares on the record date fixed for the determination
of holders of the Series 1993 Preferred Stock entitled to receive
payment of such dividend.
Section IV. Voting
6
<PAGE>
(a) Holders of the Series 1993 Preferred Stock shall be entitled
to vote on each matter on which holders of Common Stock are entitled to
vote and shall be entitled to receive notice of any meeting of the
holders of Common Stock, and shall otherwise be accorded all voting
powers and rights of Common Stock, provided that each share of Series
1993 Preferred Stock shall have the number of votes equal to the number
of shares of Common Stock into which it is convertible. Whenever the
approval or other action of holders of the Series 1993 Preferred Stock
voting as a separate class is required by applicable law or by the
Corporation's Articles of Incorporation, each share of the Series 1993
Preferred Stock shall be entitled to one vote, and the affirmative vote
of a majority of such shares at a meeting at which a majority of such
shares are present or represented shall be sufficient to constitute such
approval or other action unless a higher percentage is required by
applicable law.
(b) Unless a higher percentage is otherwise expressly required by
applicable law, approval of a majority of Series 1993 Preferred Stock
outstanding may and shall be required to amend the Articles of
Incorporation of the Corporation (i) to create or authorize any class of
stock ranking prior or equal to the Series 1993 Preferred Stock in
respect of dividends or distribution of assets on liquidation or
otherwise alter or abolish the liquidation preferences or anyother
preferential right of the Series 1993 Preferred Stock, (ii) to reduce
the Redemption Price or otherwise alter any redemption rights of the
Series 1993 Preferred Stock, (iii) to alter or abolish any right of the
Series 1993 Preferred Stock to receive dividends, or (iv) to exclude or
limit the voting rights as to these matters.
Section V. Liquidation
(a) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the holders of shares of
the Series 1993 Preferred Stock then outstanding shall be entitled to be
paid, out of the assets of the Corporation available for distribution to
its stockholders whether from capital, surplus or earnings and before
any payment shall be made in respect of the Corporation's Common Stock
or on any other class of stock ranking junior to the Series 1993
Preferred Stock (but only after all amounts payable upon liquidation
with respect to the Series 1992 Preferred Stock have been paid), an
amount equal to $25.00 per share. After setting apart or paying in full
the preferential amounts due the holders of the Series 1993 Preferred
Stock, the remaining assets of the Corporation available for
distribution to stockholders, if any, shall be distributed exclusively
to the holders of Common Stock or as otherwise provided in the
Corporation's Articles of Incorporation. If upon liquidation,
dissolution, or winding up of the Corporation, the assets of the
Corporation available for distribution to its shareholders shall be
insufficient to pay the holders of the Series 1993 Preferred Stock the
full amounts to which they respectively shall be entitled, the holders
of the Series 1993 Preferred Stock shall share ratably in any
distribution of assets.
(b) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the Corporation shall,
within ten (10) days after the date the Board of Directors approves such
action, or at least twenty (20) days prior to any shareholders' meeting
called to approve such action, or within twenty (20) days after the
commencement of any involuntary proceeding, whichever is earlier, give
each holder of shares of Series 1993 Preferred Stock initial written
notice of the proposed action. Such initial written notice shall
describe the material terms and conditions of such proposed action,
including a description of the stock, cash, and property to be received
by the holders of shares of Series 1993 Preferred Stock upon
consummation of the proposed action
7
<PAGE>
and the date of delivery thereof. If any material change in the facts
set forth in the initial notice shall occur, the Corporation shall
promptly give written notice to each holder of shares of Series 1993
Preferred Stock of such material change. The Corporation shall not
consummate any voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation before the expiration of thirty (30) days
after the mailing of the initial notice or ten (10) days after the
mailing of any subsequent written notice, whichever is later, provided
that any such thirty-day or ten-day period may be shortened upon the
written consent of the holders of all of the outstanding shares of
Series 1993 Preferred Stock.
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which will involve the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of Series 1993
Preferred Stock. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of
shares of Series 1993 Preferred Stock of the appraiser's valuation.
Section VI. Reacquired Shares
Any shares of the Series 1993 Preferred Stock redeemed or purchased
or otherwise acquired by the Corporation in any manner whatsoever shall
be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Series 1993 Preferred Stock and may be reissued as part of a
new series of Series 1993 Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions or
restrictions on issuance set forth herein.
Section VII. Adjustments For Consolidation, Merger, Etc.
In case the Corporation, (i) shall consolidate with or merge into
any other entity and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) shall permit any
other entity to consolidate with or merge into the Corporation and the
Corporation shall be the continuing or surviving entity, but, in
connection with such consolidation or merger, the Common Stock shall be
changed into or exchanged for stock or other securities of any other
entity or cash or any other property, (iii) shall transfer all or
substantially all of its properties or its assets to any other entity,
or (iv) shall effect a capital reorganization or reclassification of the
Common Stock (other than a capital reorganization or reclassification
resulting in the issuance of additional shares of Common Stock for
which adjustment is provided in Section III), then, in each such case,
there will be no adjustment of the Conversion Price but the holder of
each share of Series 1993 Preferred Stock then outstanding will have the
right thereafter to convert such share into the kind and amount of
securities, cash or other property that the holder would have owned or
been entitled to receive immediately after such consolidation, merger,
exchange, sale or transfer if such share had been converted into Common
Stock immediately before the effective date of such consolidation,
merger, exchange, sale or transfer. In the event that the Corporation
engages in a transaction set forth in (i)-(iv) above and any holder of
the Series 1993 Preferred Stock does not convert as provided in the
preceding sentence, then the continuing or surviving entity shall be
obligated to redeem such remaining outstanding shares of Series 1993
Preferred Stock of such holder, and such holder shall surrender such
holder's Series 1993 Preferred Shares for redemption, all in accordance
with Section II hereof.
Section VIII. Reports as to Adjustments
8
<PAGE>
Whenever the number of shares of Common Stock into which the shares
of the Series 1993 Preferred Stock are convertible is adjusted as
provided in Section III, the Corporation shall (i) promptly compute such
adjustment and furnish to each transfer agent for the Series 1993
Preferred Stock a certificate, signed by a principal financial officer
of the Corporation, setting forth the number of shares of Common Stock
into which each share of the Series 1993 Preferred Stock is convertible
as a result of such adjustment, a brief statement of the facts requiring
such adjustment and the computation thereof and when such adjustment
will become effective and (ii) promptly mail to the holders of record of
the outstanding shares of the Series 1993 Preferred Stock a notice
stating that the number of shares into which the shares of Series 1993
Preferred Stock are convertible has been adjusted and setting forth the
new number of shares into which each share of the Series 1993 Preferred
Stock is convertible as a result of such adjustment and when such
adjustment will become effective.
3.The manner, if not set forth in the amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the Amendment shall be effected, is as follows:
Not Applicable
4.Complete either a or b, whichever is applicable.
a. [ ]Amendment(s) adopted by shareholder action.
b. [x]The Amendment was duly adopted by the incorporators or
board of directors without shareholder approval pursuant to
section mark 33-6-102(d), 33-10-102 and 33-10-105 of the 1976
South Carolina Code as amended, and shareholder action was not
required.
5.The effective date of these Articles of Amendment shall be the date
of acceptance for filing by the Secretary of State.
Date: February 26, 1993 CAROLINA FIRST CORPORATION
By: /s/ William S. Hummers III
William S. Hummers III
Executive Vice President
9
<PAGE>
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: /s/ William S. Hummers III
William S. Hummers III
Executive Vice President
1
<PAGE>
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The name of the corporation is Carolina First Corporation.
2. On April 8, 1994, the corporation adopted the following Amend-
ment of its Articles of Incorporation:
The Articles of Incorporation of Carolina First Corporation are
hereby amended to establish a series of Preferred Stock of the
Corporation consisting of 920,000 shares, no par value, designated
"Noncumulative Convertible Preferred Stock Series 1994" having the
preferences, limitations and relevant rights set forth below (the
"Series 1994 Preferred Stock").
Section I. Dividend Rights
(a) The holders of the Series 1994 Preferred Stock shall be
entitled to receive when, as and if declared by the Board of Directors,
in their discretion, out of funds legally available therefor, quarterly
noncumulative cash dividends, payable on the first day of January,
April, July and October in each year (a "Quarterly Dividend Payment
Date") commencing on the first Quarterly Dividend Payment Date after
Series 1994 Preferred Stock is first issued, in the following amounts:
(i) $0.4575 per share, plus
(ii) an amount per share equal to the excess, if any, over
$0.68625 of (A) the aggregate per share amount of all cash dividends
declared on the Corporation's $1 par value Common Stock (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment
Date (or with respect to the July 1, 1994 Quarterly Dividend Payment
Date, since March 31, 1994) multiplied by (B) the number of shares of
Common Stock into which a share of Series 1994 Preferred Stock is
convertible on the Quarterly Dividend Payment Date on which the dividend
is to be paid.
The Series 1994 Preferred Stock is subordinate to the Noncumulative
Convertible Preferred Stock Series 1993 (the "Series 1993 Preferred
Stock") and the Convertible Preferred Stock Series 1993B (the "Series
1993B Preferred Stock") with respect to dividends. Accordingly, no
dividends in cash or property may be paid with respect to the Series
1994 Preferred Stock in a particular quarter unless all dividends with
respect to the Series 1993 Preferred Stock and the Series 1993B
Preferred Stock for that particular quarter have been paid or sums
sufficient set aside therefor. Notwithstanding the foregoing, in the
event that any quarterly dividends on the Series 1993B Preferred Stock
is cumulated as provided in the Corporation's Articles of Amendment with
respect to the Series 1993B Preferred Stock, then no dividends in cash
or property may be paid on the Series 1994 Preferred Stock in a
particular quarter unless such cumulated dividends and the dividends for
that particular quarter have been paid.
(b) In the event that the Corporation declares a cash dividend on
the Series 1994 Preferred Stock, the Corporation, in its discretion, may
offer, and the holders of the Series 1994 Preferred Stock may, upon
their election, receive,
1
<PAGE>
Common Stock of the Corporation in lieu of receiving the cash dividends,
provided, however, that if the Corporation elects to offer payment of
Common Stock in lieu of cash dividends, the Corporation and the holders
of Series 1994 Preferred Stock shall take all such actions as shall be
necessary to comply with all applicable law, including without
limitation, the federal securities laws of the United States and any
applicable state blue sky laws.
(c) Dividends payable on the Series 1994 Preferred Stock shall be
computed based on a 360-day year consisting of twelve 30-day months.
Dividends will be payable to holders of record as they appear on the
stock books of the Corporation on such record date, not more than 60
days nor less than 10 days preceding the Quarterly Dividend Payment
Date, from time to time fixed in advance by the Board of Directors of
the Corporation, or if no record date is fixed, to holders of record as
of the close of business on the date on which the dividend is declared.
(d) The cash dividends on the Series 1994 Preferred Stock are
noncumulative and, accordingly, irrespective of whether or not any
regular quarterly cash dividends on the Series 1994 Preferred Stock for
past periods have been paid, the Corporation may declare and pay
dividends on shares of the Common Stock (and on the Series 1993
Preferred Stock and the Series 1993B Preferred Stock). However, the
Corporation may not pay dividends on the Common Stock, other than
dividends in Common Stock, in a particular calendar quarter unless the
regular cash dividends on the Series 1994 Preferred Stock payable on the
Quarterly Dividend Payment Date within that particular calendar quarter
have been paid or sums sufficient therefor set aside. Any dividends
paid in part on the shares of the Series 1994 Preferred Stock and any
shares of other preferred stock ranking on a parity, as to dividends,
with the Series 1994 Preferred Stock, must be paid ratably in proportion
to the dividends to which the holders of all such parity shares are
respectively entitled. No interest or sum of money in lieu of interest
will be payable in respect of any dividend payment or payments on Series
1994 Preferred Stock.
Section II. Redemption Provisions
(a) Subject to the terms and conditions set forth below, the
Corporation may, at any time after July 1, 1994, at the option of the
Board of Directors, redeem all or part of the outstanding shares of the
Series 1994 Preferred Stock, provided that the Corporation shall give
written notice by mail, postage prepaid, to the holders of the Series
1994 Preferred Stock to be redeemed at least thirty (30) days, but not
more than sixty (60) days, prior to the date specified for redemption
(the "Redemption Date"). Such notice shall be addressed to each such
shareholder at the address of such holder appearing on the books of the
Corporation or given by such holder to the Corporation for the purpose
of notice, or if no such address appears or is so given, at the place
where the principal office of the Corporation is located. Such notice,
which shall be deemed to have been given on the date that it is first
placed in the U.S. Mail, shall state the Redemption Date, the Redemption
Price (as hereinafter defined), the number of shares of Series 1994
Preferred Stock of such holders to be redeemed and the date of
termination of the right to convert the shares of Series 1994 Preferred
Stock of such holder to Common Stock pursuant to Section III hereof and
shall call upon such holder to surrender such holder's Series 1994
Preferred Stock to the Corporation on or before the Redemption Date at
the place designated in the notice. On or after the Redemption Date,
each holder of shares of Series 1994 Preferred Stock called for
redemption shall surrender the certificate evidencing such shares to the
Corporation (except that such number of shares shall be reduced by the
number of shares which have been converted in accordance with the
provisions hereof) and shall thereupon be entitled to receive payment of
the
2
<PAGE>
Redemption Price. If less than all of the outstanding shares of Series
1994 Preferred Stock are to be redeemed, then the Corporation shall
redeem a pro rata portion from each holder of Series 1994 Preferred
Stock.
(b) If the Corporation elects to redeem the Series 1994 Preferred
Stock prior to July 1, 2001, the Corporation shall pay $25 per share
plus a premium over the $25, which premium shall be 7% on July 1, 1994
and shall decline by 1% per annum from July 1, 1994 until July 1, 2001
at which time and thereafter the Series 1994 Preferred Stock may be
redeemed at $25 per share (the $25 per share plus any applicable premium
being referred to hereinafter as the "Redemption Price").
Notwithstanding the foregoing, the Series 1994 Preferred Stock may not
be redeemed prior to July 1, 1997, unless, for a period of 20
consecutive business days ending within five business days of the date
of the notice of redemption, the Fair Market Price of the Common Stock
has been at least 125% of the Conversion Price (as such has been
adjusted pursuant to Section III hereof). For purposes of these
Articles, "Fair Market Price" means the average of the last reported
sale prices of the Common Stock on the preceding 20 consecutive business
days on the principal exchange on which the Common Stock is listed or,
as the case may be, the Nasdaq Market.
(c) From and after the Redemption Date (unless default shall be
made by the Corporation in duly paying the Redemption Price in which
case all the rights of the Series 1994 Preferred Stock called for
redemption shall continue) the holders of the shares of the Series 1994
Preferred Stock called for redemption shall cease to have any rights as
stockholders of the Corporation, except the right to receive, without
interest, the Redemption Price thereof upon surrender of certificates
representing the shares of Series 1994 Preferred Stock.
(d) There shall be no redemption of any shares of Series 1994
Preferred Stock of the Corporation where such action would be in
violation of applicable law and subject to review by the Board of
Governors of the Federal Reserve System.
Section III. Conversion Rights
(a) Shares of the Series 1994 Preferred Stock will be convertible
at any time at the option of the holder into fully-paid and
non-assessable shares of Common Stock of the Corporation at a conversion
price of $14.64 per share of Common Stock (equivalent to a conversion
ratio of approximately 1.708 shares of Common Stock for each share of
Series 1994 Preferred Stock), subject to adjustment as described
herein (the "Conversion Price") (except that a share of Series 1994
Preferred Stock that has been called for redemption will not be
convertible after the close of business on the third day preceding the
Redemption Date unless the Corporation shall default in making payment
of the amount payable upon such redemption).
(b) The number of shares of Common Stock into which each share of the
Series 1994 Preferred Stock is convertible shall be adjusted from time
to time as follows:
(i) In case the Corporation shall at any time or from time to time
declare or pay any dividend on its Common Stock payable in its Common
Stock or effect a subdivision of the outstanding shares of its Common
Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in its
Common Stock), then, and in each such case, the number of shares of
Common Stock into which each share of the Series 1994 Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof
shall be entitled to receive, upon the conversion thereof, the number of
shares of Common
3
<PAGE>
Stock determined by multiplying (A) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event by (B) a fraction, the numerator of which is
the sum of (I) the number of shares of Common Stock into which such
share was convertible immediately prior to the occurrence of such event
plus (II) the number of shares of Common Stock which such holder would
have been entitled to receive in connection with the occurrence of such
event had such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock determined
in accordance with clause (I) above. An adjustment made pursuant to
this subsection (b)(i) shall become effective (A) in the case of any
such dividend, immediately after the close of business on the record
date for the determination of holders of Common Stock entitled to
receive such dividend, or (B) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which
such corporate action becomes effective;
(ii) In case the Corporation at any time or from time to time
shall combine or consolidate the outstanding shares of its Common Stock
into a lesser number of shares of Common Stock, by reclassification or
otherwise, then, and in each such case, the number of shares of Common
Stock into which each share of the Series 1994 Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof
shall be entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (A) the number of
shares of Common Stock into which such share was convertible immediately
prior to the occurrence of such event by (B) a fraction, the numerator
of which is the number of shares which the holder would have owned after
giving effect to such event had such share been converted immediately
prior to the occurrence of such event and the denominator of which is
the number of Common Shares into which such share was convertible
immediately prior to the occurrence of such event. An adjustment made
pursuant to this subsection (b)(ii) shall become effective at the close
of business on the day immediately prior to the day upon which such
corporate action becomes effective;
(iii) In case the Corporation at any time or from time to time
shall issue rights or warrants to all holders of shares of its Common
Stock entitling them to subscribe for or purchase shares of its Common
Stock (or securities convertible into its Common Stock) at a price per
share (or having a conversion price per share) less than the Fair Market
Price per share of Common Stock on the date such right or warrant is
exercised then, and in each such case (unless the holders of shares of
the Series 1994 Preferred Stock shall be permitted to subscribe for or
purchase shares of Common Stock on the same basis as though such shares
of the Series 1994 Preferred Stock had been converted into shares of
Common Stock immediately prior to the close of business on the record
date fixed for the determination of shareholders entitled to receive
such right or warrant), the number of shares of Common Stock into which
each share of the Series 1994 Preferred Stock is convertible shall be
adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of Common
Stock determined by multiplying (A) the number of shares of Common Stock
into which such share was convertible immediately prior to such event by
(B) a fraction, the numerator of which shall be the sum of (I) the
number of shares of Common Stock outstanding on such record date plus
(II) the number of additional shares of Common Stock actually purchased
pursuant to such rights or warrants, and the denominator of which shall
be the sum of (I) the number of shares of Common Stock outstanding on
such record date plus (II) the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total
number of shares of Common Stock so sold would purchase at such Fair
Market Price on such record date. An adjustment made pursuant to this
subsection (b)(iii) shall be made upon the close of the period
4
<PAGE>
during which shareholders may subscribe for or purchase shares of Common
Stock. Holders of Series 1994 Preferred Stock who exercise their
conversion rights during the period during which outstanding warrants or
rights may be exercised shall receive the additional shares of Common
Stock as provided in this subsection (b)(iii). For purposes of this
subsection (b)(iii), the granting of rights to purchase Common Stock
(whether treasury shares or newly issued shares) pursuant to any
employee benefit or compensation plan or any plan providing for the
reinvestment of dividends or interest payable on securities of the
Corporation, and the investment of additional optional amounts, in
shares of Common Stock, in any such case at a price per share of not
less than 95% of the fair market price (determined as provided in such
plans) per share of Common Stock, shall not be deemed to constitute an
issue of rights or warrants by the Corporation within the meaning of
this subsection (b)(iii); and
(iv) In case the Corporation at any time or from time to time
shall declare, order, pay or make a dividend or other distribution on
its Common Stock, (including, without limitation, any distribution of
other or additional securities or property or rights or warrants to
subscribe for, at less than fair market value as determined in good
faith by the Board of Directors, other securities of the Corporation or
any of its subsidiaries by way of dividend or spin-off,
reclassification, recapitalization or similar corporate rearrangement)
other than a dividend payable in cash or shares of the Corporation's
Common Stock or rights or warrants to subscribe for shares of the
Corporation's Common Stock, then, and in each such case (unless the
holders of shares of the Series 1994 Preferred Stock shall receive any
such dividend or other distribution on the same basis as though such
shares of the Series 1994 Preferred Stock had been converted into shares
of Common Stock immediately prior to the close of business on the record
date for the determination of holders of Common Stock entitled to
receive such dividend or other distribution), the number of shares of
Common Stock into which each share of the Series 1994 Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof
shall be entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (A) the number of
shares of Common Stock into which such share was convertible
immediately prior to the close of business on the record date fixed for
the determination of holders of Common Stock entitled to receive such
dividend or distribution by (B) a fraction, the numerator of which shall
be the Fair Market Price per share of Common Stock on the record date
fixed for the determination of holders of Common Stock entitled to
receive such dividend or distribution, and the denominator of which
shall be such Fair Market Price per share of Common Stock less the fair
value of such dividend or distribution (as determined in good faith by
the Board of Directors of the Corporation, a certified resolution with
respect to which shall be filed with each transfer agent for the Series
1994 Preferred Stock) payable in respect of one share of Common Stock.
An adjustment made pursuant to this subsection (b)(iv) shall be made
upon the opening of business on the next business day following the date
on which any such dividend or distribution is made and shall be
effective retroactively immediately after the close of business on the
record date fixed for the determination of holders of Common Stock
entitled to receive such dividend or distribution;
(c) The holder of any shares of Series 1994 Preferred Stock may
exercise the conversion rights as to such shares or any part thereof by
delivering to the Corporation during regular business hours, at the
office of any transfer agent of the Corporation for the Series 1994
Preferred Stock, or at the principal office of the Corporation, the
certificate or certificates for the shares to be converted, duly
endorsed for transfer to the Corporation (if required by it), accompa-
nied by written notice stating that the holder elects to convert such
shares. Conversion shall be deemed to have been effected on the date
when such delivery
5
<PAGE>
is made, and such date is referred to herein as the "Conversion Date."
As promptly as practicable thereafter, the Corporation shall issue and
deliver to such holder, a certificate or certificates for the number of
full shares of Common Stock to which such holder is entitled and, as
provided in Subsection III(d) hereof, a check for cash with respect to
any fractional interest in a share of Common Stock. The holder shall be
deemed to have become a shareholder of record on the applicable
Conversion Date unless the transfer books of the Corporation are closed
on the date, in which event he shall be deemed to have become a Common
Stock shareholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in
effect on the Conversion Date. Upon conversion of only a portion of the
number of shares of Series 1994 Preferred Stock represented by a
certificate surrendered for conversion, the Corporation shall issue and
deliver upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series 1994 Preferred Stock
representing the unconverted shares of the certificate so surrendered.
(d) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series 1994 Preferred Stock. If more than
one share of Series 1994 Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares
of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series 1994 Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Series 1994 Preferred Stock, the Corporation shall pay a cash adjust-
ment in respect of such fractional interest equal to the value of such
fractional interest as based on the closing sales price of the Common
Stock on the business day immediately preceding the Conversion Date.
(e) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose
of effecting the conversion of the Series 1994 Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all
Series 1994 Preferred Stock from time to time outstanding.
(f) If any shares of Common Stock to be reserved for the purpose
of conversion of shares of Series 1994 Preferred Stock require
registration or listing with, or approval of, any governmental
authority, stock exchange, or other regulatory body under any federal or
state law or regulation or otherwise, before such shares may be validly
issued or delivered upon conversion, the Corporation will in good faith
and as expeditiously as possible endeavor to secure such registration,
listing or approval, as the case may be.
(g) All shares of Common Stock which may be issued upon conversion
of the shares of Series 1994 Preferred Stock will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable.
(h) Upon conversion of any shares of the Series 1994 Preferred
Stock, the holder thereof shall not be entitled to receive any unpaid
dividends in respect of the shares so converted, provided that such
holder shall be entitled to receive any dividends on such shares of the
Series 1994 Preferred Stock declared prior to such conversion if such
holder held such shares on the record date fixed for the determination
of holders of the Series 1994 Preferred Stock entitled to receive
payment of such dividend.
6
<PAGE>
Section IV. Voting
(a) Holders of the Series 1994 Preferred Stock shall be entitled
to vote on each matter on which holders of Common Stock are entitled to
vote and shall be entitled to receive notice of any meeting of the
holders of Common Stock, and shall otherwise be accorded all voting
powers and rights of Common Stock, provided that each share of Series
1994 Preferred Stock shall have the number of votes equal to the number
of shares of Common Stock into which it is convertible. Whenever the
approval or other action of holders of the Series 1994 Preferred Stock
voting as a separate class is required by applicable law or by the
Corporation's Articles of Incorporation, each share of the Series 1994
Preferred Stock shall be entitled to one vote, and the affirmative vote
of a majority of such shares at a meeting at which a majority of such
shares are present or represented shall be sufficient to constitute such
approval or other action unless a higher percentage is required by
applicable law.
(b) Unless a higher percentage is otherwise expressly required by
applicable law, approval of a majority of Series 1994 Preferred Stock
outstanding may and shall be required to amend the Articles of
Incorporation of the Corporation (i) to create or authorize any class of
stock ranking prior or equal to the Series 1994 Preferred Stock in
respect of dividends or distribution of assets on liquidation or
otherwise alter or abolish the liquidation preferences or any other
preferential right of the Series 1994 Preferred Stock, (ii) to reduce
the Redemption Price or otherwise alter any redemption rights of the
Series 1994 Preferred Stock, (iii) to alter or abolish any right of the
Series 1994 Preferred Stock to receive dividends, or (iv) to exclude or
limit the voting rights as to these matters.
Section V. Liquidation
(a) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the holders of shares of
the Series 1994 Preferred Stock then outstanding shall be entitled to be
paid, out of the assets of the Corporation available for distribution to
its stockholders whether from capital, surplus or earnings and before
any payment shall be made in respect of the Corporation's Common Stock
or on any other class of stock ranking junior to the Series 1994
Preferred Stock (but only after all amounts payable upon liquidation
with respect to the Series 1993 Preferred Stock and Series 1993B
Preferred Stock have been paid), an amount equal to $25.00 per share.
After setting apart or paying in full the preferential amounts due the
holders of the Series 1994 Preferred Stock, the remaining assets of the
Corporation available for distribution to stockholders, if any, shall
be distributed exclusively to the holders of Common Stock or as
otherwise provided in the Corporation's Articles of Incorporation. If
upon liquidation, dissolution, or winding up of the Corporation, the
assets of the Corporation available for distribution to its shareholders
shall be insufficient to pay the holders of the Series 1994 Preferred
Stock the full amounts to which they respectively shall be entitled, the
holders of the Series 1994 Preferred Stock shall share ratably in any
distribution of assets.
(b) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the Corporation shall,
within ten (10) days after the date the Board of Directors approves such
action, or at least twenty (20) days prior to any shareholders' meeting
called to approve such action, or within twenty (20) days after the
commencement of any involuntary proceeding, whichever is earlier, give
each holder of shares of Series 1994 Preferred Stock initial written
notice of the proposed action. Such initial written notice shall
7
<PAGE>
describe the material terms and conditions of such proposed action,
including a description of the stock, cash, and property to be received
by the holders of shares of Series 1994 Preferred Stock upon
consummation of the proposed action and the date of delivery thereof.
If any material change in the facts set forth in the initial notice
shall occur, the Corporation shall promptly give written notice to each
holder of shares of Series 1994 Preferred Stock of such material change.
The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation before the
expiration of thirty (30) days after the mailing of the initial notice
or ten (10) days after the mailing of any subsequent written notice,
whichever is later, provided that any such thirty-day or ten-day period
may be shortened upon the written consent of the holders of all of the
outstanding shares of Series 1994 Preferred Stock.
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which will involve the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of Series 1994
Preferred Stock. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of
shares of Series 1994 Preferred Stock of the appraiser's valuation.
Section VI. Reacquired Shares
Any shares of the Series 1994 Preferred Stock redeemed or purchased
or otherwise acquired by the Corporation in any manner whatsoever shall
be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Series 1994 Preferred Stock and may be reissued as part of a
new series of Series 1994 Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions or
restrictions on issuance set forth herein.
Section VII. Adjustments For Consolidation, Merger, Etc.
In case the Corporation, (i) shall consolidate with or merge into
any other entity and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) shall permit any
other entity to consolidate with or merge into the Corporation and the
Corporation shall be the continuing or surviving entity, but, in
connection with such consolidation or merger, the Common Stock shall be
changed into or exchanged for stock or other securities of any other
entity or cash or any other property, (iii) shall transfer all or
substantially all of its properties or its assets to any other entity,
or (iv) shall effect a capital reorganization or reclassification of the
Common Stock (other than a capital reorganization or reclassification
resulting in the issuance of additional shares of Common Stock for
which adjustment is provided in Section III), then, in each such case,
there will be no adjustment of the Conversion Price but the holder of
each share of Series 1994 Preferred Stock then outstanding will have the
right thereafter to convert such share into the kind and amount of
securities, cash or other property that the holder would have owned or
been entitled to receive immediately after such consolidation, merger,
exchange, sale or transfer if such share had been converted into Common
Stock immediately before the effective date of such consolidation,
merger, exchange, sale or transfer. In the event that the Corporation
engages in a transaction set forth in (i)-(iv) above and any holder of
the Series 1994 Preferred Stock does not convert as provided in the
preceding sentence, then the continuing or surviving entity shall be
obligated to redeem such remaining outstanding shares of Series 1994
Preferred Stock of
8
<PAGE>
such holder, and such holder shall surrender such holder's Series 1994
Preferred Shares for redemption, all in accordance with Section II
hereof.
Section VIII. Reports as to Adjustments
Whenever the number of shares of Common Stock into which the shares
of the Series 1994 Preferred Stock are convertible is adjusted as
provided in Section III, the Corporation shall (i) promptly compute such
adjustment and furnish to each transfer agent for the Series 1994
Preferred Stock a certificate, signed by a principal financial officer
of the Corporation, setting forth the number of shares of Common Stock
into which each share of the Series 1994 Preferred Stock is convertible
as a result of such adjustment, a brief statement of the facts requiring
such adjustment and the computation thereof and when such adjustment
will become effective and (ii) promptly mail to the holders of record of
the outstanding shares of the Series 1994 Preferred Stock a notice
stating that the number of shares into which the shares of Series 1994
Preferred Stock are convertible has been adjusted and setting forth the
new number of shares into which each share of the Series 1994 Preferred
Stock is convertible as a result of such adjustment and when such
adjustment will become effective.
3.The manner, if not set forth in the amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the Amendment shall be effected, is as follows:
Not Applicable
4.Complete either a or b, whichever is applicable.
a. [ ]Amendment(s) adopted by shareholder action.
b. [x]The Amendment was duly adopted by the incorporators or
board of directors without shareholder approval pursuant to
section mark 33-6-102(d), 33-10-102 and 33-10-105 of the 1976
South Carolina Code as amended, and shareholder action was not
required.
5.The effective date of these Articles of Amendment shall be the
date of acceptance for filing by the Secretary of State.
Date: April 8, 1994 CAROLINA FIRST CORPORATION
By: /s/ William S. Hummers III
William S. Hummers III
Executive Vice President
9
<PAGE>
EXHIBIT 5.1
January 16, 1995
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Aiken County National Bank
142 Chesterfield Street, S.E.
Aiken, South Carolina 29801
RE: Registration Statement on Form S-4 with respect to 452,813
shares of Carolina First Corporation Common Stock
Gentlemen/Ladies:
The opinions set forth herein are rendered with respect to the 452,813
shares, $1 par value per share, of the Common Stock (the "Common
Stock") of Carolina First Corporation, a South Carolina
corporation (the "Company"), which may be issued by the Company
in connection with its acquisition of Aiken County National Bank
("ACNB"), all as set forth in that certain Reorganization
Agreement entered into as of October 13, 1994 by and among the
Company, Carolina First Bank and ACNB. The Common Stock is
being registered with the Securities and Exchange Commission by
the Company's Registration Statement on Form S-4 (the
"Registration Statement") filed on or about January 17, 1994,
pursuant to the Securities Act of 1933, as amended.
We have examined the Company's Articles of Incorporation, as amended,
and the Company's Bylaws, as amended, and reviewed the records
of the Company's corporate proceedings. We have made such
investigation of law as we have deemed necessary in order to
enable us to render this opinion. With respect to matters of
fact, we have relied upon information provided to us by the
Company and no further investigation. With respect to all
examined documents, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the conformity to authentic originals of all
documents submitted to us as certified, conformed or photostatic
copies and the accuracy and completeness of the information
contained therein.
Based on and subject to the foregoing and subject to the comments,
limitations and qualifications set forth below, we are of the
opinion that the shares of Common Stock to be sold pursuant to
the Registration Statement will, when issued to the ACNB
shareholders in accordance with the Reorganization Agreement, be
legally and validly issued and fully paid and non-assessable.
The foregoing opinion is limited to matters governed by the laws of the
State of South Carolina in force on the date of this letter. We
express no opinion with regard to any matter which may be (or
<PAGE>
Carolina First Corporation
Aiken County National Bank
January 16, 1995
Page 2
purports to be) governed by the laws of any other state or jurisdic-
tion. In addition, we express no opinion with respect to any matter
arising under or governed by the South Carolina Uniform Securities
Act, as amended, any law respecting disclosure, or any law respecting
any environmental matter.
This opinion is rendered as of the date of this letter and
applies only to the matters specifically covered by this opinion, and
we disclaim any continuing responsibility for matters occurring after
the date of this letter.
Except as noted below, this opinion is rendered solely for your
benefit in connection with the Registration Statement and may not be
relied upon, quoted or used by any other person or entity or for any
other purpose without our prior written consent.
We consent to the use of this opinion as an exhibit to the
Registration Statement.
Yours truly,
Wyche, Burgess, Freeman & Parham, P.A.
/s/ William P. Crawford, Jr.
By: William P. Crawford, Jr.
<PAGE>
EXHIBIT 8.1
March ___, 1995
Aiken County National Bank
142 Chesterfield Street S.E.
Aiken, South Carolina 29801
RE:Acquisition of Aiken County National Bank by Carolina First
Corporation
Ladies and Gentlemen:
You have requested our opinion as to the federal income tax
consequences of the proposed acquisition of Aiken County National
Bank ("ACNB"), a national banking association headquartered in Aiken,
South Carolina, by Carolina First Corporation ("CFC"), a South
Carolina-chartered bank holding company headquartered in Greenville,
South Carolina, such acquisition being effected pursuant to the terms
and provisions of that certain Reorganization Agreement (the "Reorga-
nization Agreement"), dated October 13, 1994, entered into by CFC,
ACNB, and Carolina First Bank, which is a wholly-owned subsidiary of
CFC.
This opinion is delivered to you pursuant to section 8.6 of the
Reorganization Agreement. Capitalized terms used herein which are
defined in the Reorganization Agreement have the same meaning as in
the Reorganization Agreement.
The Reorganization Agreement provides that at the Effective
Time, ACNB shall be merged with and into Carolina First Bank.
Carolina First Bank will be surviving corporation in the Merger and
the separate corporate existence of ACNB will cease. The Merger will
be consummated in accordance with applicable corporate laws of South
Carolina and the federal regulations applicable to thrift institu-
tions. In the Merger, each outstanding share of ACNB common stock
shall be converted into and exchanged for 1.125 shares of CFC common
stock, except for those shares for which dissenters' rights are
perfected. Cash will be paid in lieu of any fractional shares which
result. Consummation of the Merger is subject to certain conditions
set forth in the Reorganization Agreement.
We are general counsel to CFC. We have acted as counsel to CFC
in connection with the transactions contemplated by the Reorganiza-
tion Agreement and, as such, we have participated in the negotiation
and drafting of the Reorganization Agreement. As to matters of fact
material to this opinion, we have made the following factual assump-
tions in rendering the opinion hereinafter set forth:
(a) That the Merger will be consummated in strict compliance
with the terms and conditions described in the Reorganization Agree-
ment;
<PAGE>
Aiken County National Bank
March ___, 1995
Page 2
(b) That all representations and warranties contained in the
Reorganization Agreement are true and will be true as of the Effec-
tive Time and that each party to the Reorganization Agreement will
perform all obligations, duties or other responsibilities agreed upon
by such party therein;
(c) That shareholders of ACNB will exchange, for CFC common
stock, an amount of ACNB stock which possesses at least 80% of the
total combined voting power of all classes of ACNB stock and which is
at least 80% of the total number of shares of all classes of ACNB
stock; and that such shareholders will have no plan or intention to
sell or dispose of the CFC common stock received in the Merger and
will not exercise dissenters' rights with respect to their ACNB
shares.
(d) That Carolina First Bank will acquire and hold substan-
tially all of the properties of ACNB in and after the Merger, and
that no material properties of ACNB were transferred or otherwise
disposed of prior to the Merger other than in the ordinary course of
business.
(e) That all of the shares of CFC common stock to be received
by shareholder/employees of ACNB will be received solely in exchange
for ACNB common stock not acquired pursuant to the exercise of an
employee stock option or otherwise as compensation.
Based upon the foregoing, we are of the opinion that:
(1) The Merger will constitute a tax-free reorganization under
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended, and no gain or loss for federal
income tax purposes will be recognized by the shareholders of ACNB
upon the exchange of their ACNB common stock solely for CFC common
stock (disregarding any cash received for fractional share inter-
ests or in connection with the exercise of dissenters' rights).
(2) The basis of the CFC common stock that such ACNB share-
holders will receive will be the same as their basis in the ACNB
common stock they surrender. Their holding period for such CFC
stock will include their holding period for the ACNB common stock
for which it is exchanged; provided that the ACNB common stock is
held as a capital asset at the date of the exchange.
(3) When cash is received by a ACNB shareholder in lieu of
fractional shares, such cash will be treated for federal income tax
purposes as having been received by such shareholder in redemption
of such fractional share and therefore taxable to the extent that
such distribution exceeds the shareholder's basis in such fraction-
al share.
2
<PAGE>
Aiken County National Bank
March ___, 1995
Page 3
(4) A dissenting shareholder who receives cash for his ACNB
shares will be treated for federal income tax purposes as having
received a payment in redemption for such shares and, assuming that
such payment completely terminates his interest in ACNB (taking
into account any stock attributed to such shareholder), such
payment will be taxable to the extent it exceeds such shareholder's
basis in such ACNB shares.
(5) No gain or loss will be recognized by CFC, Carolina First
Bank or ACNB in the Merger. The basis of the assets of the surviv-
ing corporation, Carolina First Bank, will be unchanged.
We express no opinion other than that stated immediately above.
This opinion is based on the current state of the law as evidenced by
applicable statutes, regulations, rulings and judicial decisions.
Any of these statutes, regulations, rulings and judicial decisions
can change at any time on a prospective or retroactive basis, in
which event some or all of the previous opinion may become inapplica-
ble.
This opinion does not cover all tax consequences that may be
relevant to ACNB shareholders subject to special federal income tax
treatment (such as insurance companies, dealers in securities,
certain retirement plans, financial institutions, tax exempt organi-
zations or foreign persons), nor does it cover state or local tax
consequences.
The opinion expressed above is solely for the benefit of ACNB,
CFC and Carolina First Bank and may not be relied on in any manner
for any other purpose by any other person.
We hereby indicate our consent to the use of this opinion as
Exhibit 8.1 to the Registration Statement on Form S-4 (No. 33-
________) filed by CFC with respect to the registration under the
Securities Act of 1933 of the CFC common stock issued in connection
with the Merger. We further indicate our consent to the reference to
our law firm as it appears under the caption "Certain Federal Income
Tax Consequences" in the Proxy Statement/Prospectus included as part
of the Registration Statement.
Very truly yours,
Wyche, Burgess, Freeman & Parham, P.A.
By:
Cary H. Hall, Jr.
3
<PAGE>
EXHIBIT 10.8
REORGANIZATION AGREEMENT
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 inGreenville, 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 setforth herein and in the Plan of Merger.
1.10. ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
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
ReorganizationAgreement as Appendix A.
1.17. Proxy Statement. The proxy statement included in the
RegistrationStatement 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.
1
<PAGE>
SECTION II. THE MERGER
2.1. General Provisions. Subject to the terms and conditions of
this Agree- ment, 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 ofWyche, 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 reasonablypracticable 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.
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 givenin 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 jurisdic- tions wherein the character of the properties or the
nature of the businesstransacted 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 inaccordance with its terms, subject to
applicable bankruptcy, insolvency, reorganiza- tion, 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 accor- dance 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 andoutstanding 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 equitysecurities 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 termsand 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, termina- tion 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, (iii) result in the
creation or imposition of any lien, charge, restriction, security
interest or
2
<PAGE>
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 existsno 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 regulato- ry 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 materialadverse effect on the
financial circumstances of Midlands. Further, there is no reasonable
basis for any such expiration, lapse, revocation, threat of revocation
orrestriction. Except for any necessary filings with, and approvals
and authoriza- tions 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
asa 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 andrecords
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 acceptedaccounting principles consistently
applied for the payment of all income, fran- chises, property, sales,
employment or other taxes anticipated to be payable after the date
hereof. Midlands is not delinquent in the payment of any taxes,
assess- ments 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, ifdetermined 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
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
opera- tions 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
arereflected 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 adverseeffect 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 orfee in the nature of a finder's, originator's or broker's
fee in connection with the transaction contemplated herein.
3
<PAGE>
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 ofthe 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 eachcontract 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 formore 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 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 ofthe 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, oris 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 orother
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 withthe 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 toprovide or make
availableto CFC all materialinformation regarding Midlands.
4
<PAGE>
3.21. Resale of CFC Common Stock. Midlands knows of no present
plan or inten- tion 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 beenreceived 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
fortermination 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 businesstransacted 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, reorganiza- tion, 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 Preferred 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
on Schedule 4.4, there are no outstanding obliga- tions, 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 effecton CFC or CFBor
their business operations orprospects.
5
<PAGE>
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 orprovisions of, or constitute a
default under, or result in a violation of, termina- tion 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
knowl- edge, 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 restriction. 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 governmen- tal authority, foreign or domestic, is required on the
part of CFC or CFB in connec- tion 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, corporation, 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 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, fran- chises,
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 andno 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
6
<PAGE>
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, 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 fortermination 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.
(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 contractu-
al 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
7
<PAGE>
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 datehereof 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 represen- tations 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 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
RegistrationStatement 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 sharehold- ers 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
8
<PAGE>
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, respec-
tively, 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 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, affili- ates, officers, directors or employees
to issue any press release or other informa- tion to the press with
respect to this Agreement, without the express prior consentof 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 re- striction 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
9
<PAGE>
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorgani- zation, 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.
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 neces- sary, 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 reasonablejudgment 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 account- ing 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
restriction 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 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 havea 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.
10
<PAGE>
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 neces- sary, 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 burden- some.
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.
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
11
<PAGE>
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 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 partieshereto 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 Counter- parts, 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.
12
<PAGE>
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.
IN WITNESS WHEREOF, this Agreement has been duly entered as of the
date first written above.
Witnesses CAROLINA FIRST CORPORATION
_________________________ By: /s/ William S. Hummers III
William S. Hummers III
_________________________ Executive Vice President
Witnesses CAROLINA FIRST BANK
_________________________ By: /s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
_________________________ Chairman
MIDLANDS NATIONAL BANK
_________________________ By: /s/ David W. Bowers
David W. Bowers
_________________________ President and Chief Executive Officer
13
<PAGE>
EXHIBIT 11.1
CAROLINA FIRST CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
(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 2,945,296 2,309,874
stock
Total common share equivalents 7,464,782 6,820,618
Fully diluted earnings per share $0.27 $0.77
</TABLE>
1
EXHIBIT 99.1
Form of Proxy
P
R
O AIKEN COUNTY NATIONAL BANK
X This Proxy is Solicited on Behalf of the Board of Directors
Y
Special Meeting, March __, 1995
The undersigned stockholder of Aiken County National Bank, hereby
revoking all previous proxies, hereby appoints _____________________ and
___________________ and either of them, the attorney or attorneys and
proxy or proxies of the undersigned, with full power of substitution, to
attend the Special Meeting of Stockholders of Aiken County National Bank
to be held March ___, 1995, at 10:30 a.m. at 142 Chesterfield Street,
S.E., Aiken South Carolina and at any adjournments thereof, and to vote
all shares of stock of Aiken County National Bank that the undersigned
shall be entitled to vote at such meeting. Said proxies are instructed
to vote on the matters set forth in the proxy statement as specified
below.
1. To approve the Reorganization Agreement dated October 13, 1994,
providing for the merger of Aiken County National Bank with and into
Carolina First Bank, a wholly-owned subsidiary of Carolina First
Corporation, and, in connection therewith, the conversion of each share
of common stock of Aiken County National Bank into the right to receive
1.125 shares of common stock of Carolina First Corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such
other business as may poperly come before the meeting.
THIS PROXY, WHEN PROPERLY SIGNED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL NUMBER 1 AS SPECIFIED ABOVE.
Please sign exactly as name appears on stock certificate. When signing
as attorney, administrator, trustee, guardian or agent, please indicate
the capacity in which you are acting. If stock is held jointly,
signature should appear for both names. If more than one trustee, all
should sign. If stock is held by a corporation, please sign in full
corporate name by authorized officer and give title of office. This
Proxy may be revoked any time prior to its exercise.
Dated: ______________________, 1995
Print Name (and title if appropriate)
Signature
Print Name (and title if appropriate)
Signature
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE- PAID ENVELOPE. 1
