<PAGE>
As filed with the Securities and Exchange Commission on July 30, 1997.
Registration No. 333-______
-------------------------------------------------------------------------------
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)
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South Carolina 6711 57-0824914
<S> <C> <C>
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number Identification No.)
</TABLE>
102 South Main Street
Greenville, South Carolina 29601
(864) 255-7900
(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
(864) 255-7913
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William P. Crawford, Jr., Esq.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602-0728
(864) 242-8200 (telephone)
(864) 235-8900 (facsimile)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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. |_|
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CALCULATION OF REGISTRATION FEE
=============================================================================================================================
Proposed Maximum Proposed Maximum Amount
Title of Each Class Amount to Offering Price Aggregate of Registration
of Securities to be Registered be Registered Per Unit (1) Offering Price(1) Fee (2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 5,265,885 $14.81 $77,987,756.85 $23,632.62
(par value $1.00 per share)
=============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f). Pursuant to Rule 457(f)(1), the Proposed
Maximum Aggregate Offering Price has been determined based upon the
market value of the First Southeast Financial Corporation common stock
to be received by Carolina First Corporation in the Merger. The market
value of the First Southeast Financial Corporation common stock to be
received by Carolina First Corporation in the Merger has been calculated
based upon the average of the high and low sales prices of the First
Southeast Financial Corporation common stock as reported on the Nasdaq
National Market on July 23, 1997.
(2) Calculated pursuant to Rule 457(f).
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 that 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>
FIRST SOUTHEAST FINANCIAL CORPORATION
201 North Main Street
Anderson, South Carolina 29621
August 10, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
First Southeast Financial Corporation ("First Southeast Special Meeting") to be
held at the main office of First Southeast Financial Corporation ("First
Southeast") located at 201 North Main Street, Anderson, South Carolina 29621, on
Monday, September 15, 1997, at 10:00 a.m., local time.
At the First Southeast Special Meeting you will be asked to consider and
vote upon the Reorganization Agreement ("Reorganization Agreement") by and among
First Southeast, First Federal Savings and Loan Association of Anderson ("First
Federal"), Carolina First Corporation and Carolina First Bank, dated as of July
1, 1997. If the Reorganization Agreement is approved by holders of a majority of
the outstanding shares of common stock of First Southeast (and certain other
conditions are met), First Southeast will be merged with and into a subsidiary
of Carolina First Corporation ("Merger"), which will then be merged into
Carolina First Corporation. As soon as practicable thereafter, First Federal
will be merged into Carolina First Bank, with Carolina First Bank as the
surviving bank. In connection with the Merger, First Southeast shareholders will
receive 1.00 share of Carolina First Corporation common stock for each share of
First Southeast common stock held by them, subject to possible adjustments under
certain circumstances depending on the average closing prices of Carolina First
Corporation common stock during a ten trading-day period immediately prior to
the closing date. On July 23, 1997, the last reported sale price of Carolina
First Corporation common stock on the Nasdaq National Market was $17.50 per
share. In connection with the Reorganization Agreement, the current operations
of First Federal (First Southeast's wholly-owned thrift subsidiary) would become
part of the banking operations of Carolina First Bank (Carolina First
Corporation's wholly-owned commercial bank subsidiary). The Reorganization
Agreement is described in detail in the accompanying Joint Proxy
Statement/Prospectus and is attached as Exhibit A thereto.
Enclosed herewith are the Notice of Special Meeting of Shareholders, a
Joint Proxy Statement/Prospectus and a Proxy for use in connection with the
First Southeast Special Meeting. The Joint 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, First Southeast and First Federal, and other information. You are urged to
consider carefully the entire Joint Proxy Statement/Prospectus, including the
exhibits thereto.
THE BOARD OF DIRECTORS OF FIRST SOUTHEAST BELIEVES THAT THE REORGANIZATION
AGREEMENT IS IN THE BEST INTERESTS OF FIRST SOUTHEAST AND ITS SHAREHOLDERS AND
RECOMMENDS A VOTE FOR THE APPROVAL OF THE REORGANIZATION AGREEMENT.
Because the affirmative vote of holders of at least a majority of the
issued and outstanding shares of First Southeast common stock is required to
approve the Reorganization Agreement, it is important that your shares of First
Southeast common stock be represented at the First Southeast Special Meeting,
whether or not you are personally able to attend. A failure to vote, either by
not returning the enclosed Proxy or by checking the "Abstain" box thereon, will
have the same effect as a vote against the Reorganization Agreement. 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 First Southeast Special Meeting,
you may vote shares of which you are the record owner in person, even if you
have already returned your Proxy.
Sincerely,
David C. Wakefield, III
President and Chief Executive Officer
<PAGE>
FIRST SOUTHEAST FINANCIAL CORPORATION
201 North Main Street
Anderson, South Carolina 29621
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 1997
TO THE SHAREHOLDERS OF FIRST SOUTHEAST FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of First
Southeast Financial Corporation ("First Southeast Special Meeting") to be held
at the main office of First Southeast Financial Corporation ("First Southeast")
located at 201 North Main Street, Anderson, South Carolina 29621, on Monday,
September 15, 1997, at 10:00 a.m., local time, for the following purposes:
1. Consideration of the Reorganization Agreement. To consider and vote
upon a proposal to adopt the Reorganization Agreement ("Reorganization
Agreement") dated as of July 1, 1997, between Carolina First Corporation,
Carolina First Bank, First Southeast and First Federal Savings and Loan
Association of Anderson ("First Federal"), pursuant to which First Southeast
will be merged into a subsidiary of Carolina First Corporation and First
Southeast shareholders will receive Carolina First Corporation common stock in
exchange for their shares of First Southeast common stock ("Merger"), all on and
subject to the terms and conditions contained therein.
2. Other Business. To transact such other business as may properly come
before the First Southeast Special Meeting or any adjournments thereof.
Only shareholders of record at the close of business on August 1, 1997,
are entitled to notice of and to vote at the First Southeast Special Meeting or
any adjournments thereof. The affirmative vote of the holders of at least a
majority of the issued and outstanding shares of First Southeast common stock is
required to approve the Reorganization Agreement. All shareholders, whether or
not they expect to attend the First Southeast 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 the record shareholder (i) by
giving written notice to the Secretary of First Southeast at any time before it
is voted, (ii) by submitting a proxy having a later date, or (iii) by such
person appearing at the First Southeast Special Meeting and giving notice of
revocation to the corporate officers responsible for maintaining the list of
shareholders.
By Order of the Board of Directors,
August 10, 1997 David C. Wakefield, III
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE FIRST SOUTHEAST SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
CAROLINA FIRST CORPORATION
102 South Main Street
Greenville, South Carolina 29601
August 10, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Carolina First Corporation ("CFC Special Meeting") to be held at the offices of
Carolina First Corporation located at 200 East Camperdown Way, Greenville, South
Carolina 29601, on Monday, September 15, 1997 at 4:00 p.m., local time.
At the CFC Special Meeting you will be asked to consider and vote upon the
Reorganization Agreement ("Reorganization Agreement") between Carolina First
Corporation, Carolina First Bank, First Southeast Financial Corporation ("First
Southeast"), and First Federal Savings and Loan Association of Anderson ("First
Federal"), dated as of July 1, 1997. If the Reorganization Agreement is approved
by holders of a majority of the shares of Carolina First Corporation common
stock present at the CFC Special Meeting (and certain other conditions are met),
First Southeast will be merged with and into a subsidiary of Carolina First
Corporation ("Merger"), and in connection therewith, First Southeast
shareholders would become entitled to receive 1.00 share of Carolina First
Corporation common stock for each share of First Southeast common stock held by
them, subject to possible adjustments under certain circumstances depending on
the average closing prices of Carolina First Corporation common stock during a
ten trading-day period immediately prior to the closing date. As a result of the
Reorganization Agreement, the First Southeast common stock will be canceled and
Carolina First Corporation will be the surviving parent corporation. In
connection with the Reorganization Agreement, the current operations of First
Federal (First Southeast's wholly-owned thrift subsidiary) would become part of
the banking operations of Carolina First Bank (Carolina First Corporation's
wholly-owned commercial bank subsidiary). The Reorganization Agreement is
described in detail in the accompanying Joint Proxy Statement/Prospectus, and is
attached as Exhibit A thereto.
At the CFC Special Meeting, you will also be asked to vote to set the
Carolina First Corporation Board of Directors at 13 persons and elect three
current First Southeast board members to the Board of Directors of Carolina
First Corporation. You will also be asked to vote upon amendments to Carolina
First Corporation's Stock Option Plan and Restricted Stock Agreement Plan
increasing to 1,500,000 and 500,000, respectively, the number of shares of
common stock authorized to be issued pursuant to such plans.
Enclosed herewith are the Notice of Special Meeting of Shareholders, a
Joint Proxy Statement/Prospectus and a Proxy for use in connection with the CFC
Special Meeting. The Joint 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, First
Southeast and First Federal, and other information. You are urged to consider
carefully the entire Joint Proxy Statement/Prospectus, including the exhibits
thereto.
THE BOARD OF DIRECTORS OF CAROLINA FIRST CORPORATION BELIEVES THAT THE
REORGANIZATION AGREEMENT IS IN THE BEST INTERESTS OF CAROLINA FIRST CORPORATION
AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE
REORGANIZATION AGREEMENT, FOR SETTING THE CAROLINA FIRST CORPORATION BOARD OF
DIRECTORS AT 13 PERSONS AND FOR THE THREE NOMINEES, AND FOR THE PROPOSED
AMENDMENTS TO CAROLINA FIRST CORPORATION'S STOCK OPTION PLAN AND RESTRICTED
STOCK AGREEMENT PLAN.
It is important that your shares of Carolina First Corporation common
stock be represented at the CFC 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 CFC Special Meeting, you may vote shares of which you are the record owner
in person, even if you have already returned your Proxy.
Sincerely,
Mack I. Whittle, Jr.
President and Chief Executive Officer
<PAGE>
CAROLINA FIRST CORPORATION
102 South Main Street
Greenville, South Carolina 29601
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 1997
TO THE SHAREHOLDERS OF CAROLINA FIRST CORPORATION:
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders of
Carolina First Corporation ("Carolina First Corporation") ("CFC Special
Meeting") will be held at the offices of Carolina First Corporation located at
200 East Camperdown Way, Greenville, South Carolina 29601, on Monday, September
15, 1997 at 4:00 p.m., local time, for the following purposes:
1. Consideration of the Reorganization Agreement. To consider and vote
upon a proposal to adopt the Reorganization Agreement ("Reorganization
Agreement") dated as of July 1, 1997, between Carolina First Corporation,
Carolina First Bank ("Carolina First Bank"), First Southeast Financial
Corporation ("First Southeast") and First Federal Savings and Loan Association
of Anderson ("First Federal"), pursuant to which First Southeast will be merged
into a subsidiary of Carolina First Corporation and First Southeast shareholders
will receive Carolina First Corporation common stock in exchange for their
shares of First Southeast common stock ("Merger"), all on and subject to the
terms and conditions contained therein.
2. Expansion of Board of Directors; Election of Three Directors. To
consider and vote upon a proposal to set the number of the Carolina First
Corporation Board of Directors at 13 and to elect three persons (currently
members of the First Southeast Board of Directors) to the Carolina First
Corporation Board of Directors.
3. Amendments to Stock Option Plan and Restricted Stock Agreement Plan. To
consider and vote upon amendments to Carolina First Corporation's Stock Option
Plan and Restricted Stock Agreement Plan increasing to 1,500,000 and 500,000,
respectively, the number of shares of common stock authorized to be issued
pursuant to such plans.
4. Other Business. To transact such other business as may properly come
before the CFC Special Meeting or any adjournments thereof.
Only shareholders of record at the close of business on August 1, 1997 are
entitled to notice of and to vote at the CFC Special Meeting or any adjournments
thereof. All shareholders, whether or not they expect to attend the CFC 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 the record
shareholder (i) by giving written notice to the Secretary of Carolina First
Corporation at any time before it is voted, (ii) by submitting a proxy having a
later date, or (iii) by such person appearing at the CFC Special Meeting and
giving notice of revocation to the corporate officers responsible for
maintaining the list of shareholders.
By Order of the Board of Directors,
August 10, 1997 Mack I. Whittle, Jr.
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE CFC SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
Joint Proxy Statement/Prospectus
CAROLINA FIRST CORPORATION
Prospectus for 5,265,885 Shares of Common Stock $1.00 Par Value
Proxy Statement for Special Meeting of Shareholders
FIRST SOUTHEAST FINANCIAL CORPORATION
Proxy Statement for Special Meeting of Shareholders
This Joint Proxy Statement/Prospectus relates to the issuance by Carolina
First Corporation of up to 5,265,885 shares ("Carolina First Corporation
Shares") of its $1.00 par value common stock ("Carolina First Corporation common
stock") in connection with the proposed merger ("Merger") of First Southeast
Financial Corporation ("First Southeast") with and into a wholly-owned
subsidiary of Carolina First Corporation formed solely to effect the Merger
("CFC Acquisition Company"). Upon consummation of the Merger, each outstanding
share of First Southeast common stock will be converted into 1.00 share of
Carolina First Corporation common stock, subject to possible adjustments under
certain circumstances depending on the average closing prices of Carolina First
Corporation common stock during a ten trading-day period immediately prior to
the consummation of the Merger ("Closing Date"). The Carolina First Corporation
Shares are offered to the First Southeast shareholders subject to the terms and
conditions specified in the Reorganization Agreement, dated as of July 1, 1997
("Reorganization Agreement") and entered into by and among Carolina First
Corporation, Carolina First Bank, First Southeast and First Federal Savings and
Loan Association of Anderson ("First Federal"), a wholly-owned thrift subsidiary
of First Southeast. The Reorganization Agreement provides that as a result of
the transactions specified in the Reorganization Agreement, the First Southeast
common stock will be canceled and Carolina First Corporation will be the
surviving parent corporation. Upon consummation of the transactions specified in
the Reorganization Agreement, the current operations of First Federal (First
Southeast's wholly-owned thrift subsidiary) would become part of the banking
operations of Carolina First Bank (Carolina First Corporation's wholly-owned
commercial bank subsidiary). Cash will be paid in lieu of fractional shares to
which a First Southeast shareholder becomes entitled. See "THE PROPOSED
TRANSACTION -- General Description of the Terms of the Reorganization
Agreement."
This Joint Proxy Statement/Prospectus serves as the Proxy Statement of
First Southeast in connection with the solicitation of proxies to be used at the
Special Meeting of Shareholders of First Southeast ("First Southeast Special
Meeting") to be held on September 15, 1997 for the purposes described herein.
This Joint Proxy Statement/Prospectus is first being sent to First Southeast
shareholders on or about August 10, 1997.
This Joint Proxy Statement/Prospectus serves as the Proxy Statement of
Carolina First Corporation in connection with the solicitation of proxies to be
used at the Special Meeting of Shareholders of Carolina First Corporation ("CFC
Special Meeting," and together with the First Southeast Special Meeting, the
"Special Meetings") to be held on September 15, 1997 for the purposes described
herein. This Joint Proxy Statement/Prospectus is first being sent to Carolina
First Corporation shareholders on or about August 10, 1997.
Consummation of the transactions contemplated in the Reorganization
Agreement is subject to certain conditions, including, among others, approval by
the respective shareholders of First Southeast and Carolina First Corporation at
the Special Meetings and approval by applicable regulatory authorities.
See "RISK FACTORS" for a discussion of certain factors that should be
considered by shareholders of First Southeast.
FIRST SOUTHEAST'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE THE REORGANIZATION AGREEMENT. CAROLINA FIRST CORPORATION'S BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE REORGANIZATION AGREEMENT,
FOR THE PROPOSAL SETTING THE CAROLINA FIRST CORPORATION BOARD OF DIRECTORS AT 13
PERSONS AND FOR THE THREE NOMINEES, AND FOR THE PROPOSED AMENDMENTS TO CAROLINA
FIRST CORPORATION'S STOCK OPTION PLAN AND RESTRICTED STOCK AGREEMENT PLAN.
The Carolina First Corporation common stock is traded on the Nasdaq
National Market under the Nasdaq market symbol "CAFC." On June 30, 1997 (the
last business day prior to the announcement of the execution of the
Reorganization Agreement), the closing bid price of the Carolina First
Corporation common stock, as reported by Nasdaq, was $14.75 per share. The First
Southeast common stock is traded on the Nasdaq National Market under the Nasdaq
market symbol "FSFC." On June 30, 1997 (the last business day prior to the
announcement of the execution of the Reorganization Agreement), the closing bid
price of the First Southeast common stock, as reported by Nasdaq, was $10.00 per
share.
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 JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE CAROLINA FIRST CORPORATION SHARES OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS AND LOAN
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
OTHER GOVERNMENTAL AGENCY.
The date of this Joint Proxy Statement/Prospectus is August ___, 1997.
<PAGE>
TABLE OF CONTENTS
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AVAILABLE INFORMATION................................................................................................5
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE....................................................................5
OTHER INFORMATION....................................................................................................6
SUMMARY..............................................................................................................7
Introduction......................................................................................................7
Time, Place and Purposes of the Special Meetings..................................................................7
Parties to the Reorganization Agreement...........................................................................7
General Terms of the Proposed Transaction.........................................................................8
Vote Required and Record Date.....................................................................................8
Recommendation of Board of Directors..............................................................................9
Rights of Dissenting Shareholders.................................................................................9
Certain Differences in Shareholders' Rights.......................................................................9
Conditions and Regulatory Approvals...............................................................................9
Termination of the Reorganization Agreement.......................................................................9
Effective Time of the Merger.....................................................................................10
Opinion of Financial Adviser.....................................................................................10
Certain Federal Income Tax Consequences..........................................................................10
Interests of Certain Persons.....................................................................................10
Restrictions on Resales by Affiliates............................................................................11
Accounting Treatment.............................................................................................11
Market Prices and Dividends......................................................................................11
Selected Consolidated Financial Data.............................................................................12
Comparative Per Share Data.......................................................................................15
RISK FACTORS........................................................................................................16
Profitable Deployment of Funds...................................................................................16
Size of Acquisition..............................................................................................16
Dependence on Senior Management..................................................................................16
Litigation.......................................................................................................16
Growth Through Acquisitions......................................................................................17
Antitakeover Measures............................................................................................17
INFORMATION CONCERNING THE SPECIAL MEETINGS.........................................................................18
First Southeast Special Meeting..................................................................................18
Purpose of the First Southeast Special Meeting...........................................................18
First Southeast Record Date and Voting Rights............................................................18
Proxies..................................................................................................18
Recommendation...........................................................................................19
CFC Special Meeting..............................................................................................19
Purpose of the CFC Special Meeting.......................................................................20
Carolina First Corporation Record Date and Voting Rights.................................................20
Proxies..................................................................................................20
Recommendation...........................................................................................21
THE PROPOSED TRANSACTION............................................................................................22
General Description of the Terms of the Reorganization Agreement.................................................22
Background of and Reasons for the Reorganization Agreement.......................................................23
First Southeast Reasons..................................................................................23
Carolina First Corporation Reasons.......................................................................26
Opinion of First Southeast's Financial Adviser...................................................................27
Prospective Acquirors....................................................................................31
Opinion of Carolina First Corporation's Financial Adviser........................................................33
2
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Exchange of First Southeast Stock Certificates...................................................................36
Conditions to Consummation of the Merger.........................................................................37
Termination......................................................................................................38
Amendment........................................................................................................38
Conduct of First Southeast's and Carolina First Corporation's Business Prior to the Effective Time...............38
Required Regulatory Approvals....................................................................................39
Operations After the Merger......................................................................................40
Interests of Certain Persons in the Merger.......................................................................40
Directors................................................................................................40
Indemnification; Advancement of Expenses; Directors' and Officers' Insurance.............................40
Employment Agreements....................................................................................40
Other Matters Related to Employees and Employee Benefit Plans............................................41
Accounting Treatment.............................................................................................42
Certain Federal Income Tax Consequences..........................................................................42
Fractional Share Interests...............................................................................43
Restrictions on Resales by Affiliates............................................................................43
No Appraisal/Dissenters' Rights..................................................................................44
Recommendations of Boards of Directors...........................................................................44
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION..................................................................45
INFORMATION ABOUT CAROLINA FIRST CORPORATION........................................................................50
General .........................................................................................................50
Capital Adequacy.................................................................................................51
Recent Developments..............................................................................................53
EXPANSION OF THE CAROLINA FIRST CORPORATION BOARD OF DIRECTORS;
ELECTION OF THREE DIRECTORS......................................................................................55
Conditioned Approval.............................................................................................56
CAROLINA FIRST CORPORATION MANAGEMENT...............................................................................56
Business Experience of Directors and Nominees....................................................................56
Meetings and Committees of the Board of Directors................................................................57
Security Ownership of Certain Beneficial Owners and Management...................................................58
Certain Relationships and Related Transactions...................................................................59
Compensation of Directors and Executive Officers.................................................................59
Board Compensation Committee Report on Executive Compensation....................................................61
Stock Options and Long-Term Incentive Plan Awards................................................................64
Employment Contracts.............................................................................................64
Performance Graph................................................................................................65
Independent Public Accountants...................................................................................65
APPROVAL OF AMENDMENTS TO STOCK OPTION PLAN
AND RESTRICTED STOCK AGREEMENT PLAN..............................................................................65
Reasons for Approval.............................................................................................66
Material Features of the Restricted Stock Plan...................................................................67
Federal Income Tax Consequences Associated with the Plans.......................................................69
Plan Benefits....................................................................................................70
INFORMATION ABOUT FIRST SOUTHEAST...................................................................................71
General .........................................................................................................71
History and Business.............................................................................................71
Recent Developments..............................................................................................72
Management and Principal Shareholders of First Southeast.........................................................75
Certain Transactions.............................................................................................76
COMPARATIVE RIGHTS OF SHAREHOLDERS..................................................................................77
3
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General .........................................................................................................77
Authorized Capital...............................................................................................77
Amendment of Articles/Certificate of Incorporation or Bylaws.....................................................78
Size and Classification of Board of Directors....................................................................78
Shareholder Nomination of Directors..............................................................................79
Removal of Directors by Shareholders.............................................................................79
Director Exculpation.............................................................................................79
Director and Officer Indemnification.............................................................................80
Related Party Transactions and Director Conflict of Interest Transactions........................................81
Shareholder Meetings.............................................................................................82
Shareholder Voting in General....................................................................................83
Shareholder Voting in Certain Business Combinations..............................................................83
Change in Control, Business Combinations and Anti-Takeover Provisions............................................84
Restrictions on 10% Beneficial Ownership.........................................................................86
Action by Shareholders Without a Meeting.........................................................................86
Dissenters' or Appraisal Rights..................................................................................87
Shareholder Inspection Rights....................................................................................87
Dividends........................................................................................................88
Dissolution......................................................................................................89
CAROLINA FIRST CORPORATION CAPITAL STOCK............................................................................89
Common Stock.....................................................................................................89
Preferred Stock..................................................................................................89
Certain Matters..................................................................................................90
Shareholders' Rights Agreement...........................................................................90
Management Contracts.....................................................................................91
Board of Directors.......................................................................................91
Voting...................................................................................................92
Control Share Acquisition/Business Combination Statutes..................................................93
Transfer Agent...........................................................................................93
Dividend Reinvestment Plan...............................................................................93
LEGAL MATTERS.......................................................................................................93
EXPERTS.............................................................................................................93
OTHER MATTERS.......................................................................................................94
EXHIBITS
Reorganization Agreement....................................................................................Exhibit A
Opinion of Trident Financial Corporation....................................................................Exhibit B
Opinion of Interstate/Johnson Lane Corporation..............................................................Exhibit C
Financial Statement of CFC Acquisition Company..............................................................Exhibit D
</TABLE>
4
<PAGE>
AVAILABLE INFORMATION
Carolina First Corporation and First Southeast are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
("Exchange Act") and, in accordance therewith, file reports, proxy statements
and other information with the Securities and Exchange Commission
("Commission"). Such reports, proxy statements and other information filed with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048 and Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. 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, upon the payment of fees at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
(including Carolina First Corporation and First Southeast) that file
electronically with the Commission.
Carolina First Corporation has filed with the Commission a Registration
Statement (which shall include any amendments thereto) on Form S-4
("Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with respect to the Carolina First Corporation Shares
offered hereby. This Joint Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement and the exhibits and schedules thereto are available for
inspection and copying as set forth in the preceding paragraph. For further
information with respect to Carolina First Corporation, First Southeast and the
Carolina First Corporation Shares offered hereby, reference is hereby made to
the Registration Statement, including the exhibits and schedules thereto.
All information contained or incorporated by reference in this Joint
Proxy Statement/Prospectus with respect to Carolina First Corporation has been
supplied by Carolina First Corporation, and all information contained or
incorporated by reference in this Joint Proxy Statement/Prospectus with respect
to First Southeast has been supplied by First Southeast.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Joint Proxy Statement/Prospectus incorporates documents by
reference with respect to Carolina First Corporation and First Southeast 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 to whom this Joint Proxy Statement/Prospectus is delivered upon oral
or written request to: with respect to Carolina First Corporation, William S.
Hummers III, Executive Vice President, Carolina First Corporation, 102 South
Main Street, Greenville, SC 29601, telephone number (864) 255-7900; with respect
to First Southeast, John L. Biediger, Executive Vice President, First Southeast,
201 North Main Street, Anderson, SC 29621, telephone number (864) 260-6257. In
order to ensure timely delivery of the documents, any request should be made by
September 8, 1997.
The following documents filed with the Commission by Carolina First
Corporation and First Southeast pursuant to Section 13(a) or 15(d) of the
Exchange Act are incorporated herein by reference:
Carolina First Corporation documents:
(i) Carolina First Corporation's Annual Report on Form 10-K for
the fiscal year ended December
5
<PAGE>
31, 1996;
(ii) Carolina First Corporation's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997;
(iii) Carolina First Corporation's Current Reports on Form 8-K dated
December 13, 1996 and July 11, 1997; and
(iv) The description of the Carolina First Corporation common stock
which is contained in Carolina First Corporation's Form 8-A
filed with the Commission on or about October 20, 1986,
including any amendment or report filed for the purpose of
updating such description.
First Southeast documents:
(i) First Southeast's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996;
(ii) First Southeast's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, December 31, 1996 and March
31, 1997;
(iii) First Southeast's Current Report on Form 8-K dated July 8,
1997; and
(iv) The following portions from First Southeast's Annual Report to
Security Holders for the year ended June 30, 1996:
(A) Information regarding market price of and dividends
on First Southeast's common stock and related
stockholder matters;
(B) Selected Consolidated Financial Data; and
(C) Management's Discussion and Analysis of Financial
Condition and Results of Operations.
All documents filed by Carolina First Corporation or First Southeast
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date hereof and prior to the Special Meetings shall be deemed to be incorporated
by reference in this Joint 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 Joint 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 Joint Proxy
Statement/Prospectus.
OTHER INFORMATION
This Joint Proxy Statement/Prospectus does not cover any resales of the
Carolina First Corporation common stock offered hereby to be received by
shareholders deemed to be "affiliates" of Carolina First Corporation or First
Southeast upon consummation of the Merger. No person is authorized to make use
of this Joint Proxy Statement/Prospectus in connection with such resales,
although such securities may be traded without the use of this Joint Proxy
Statement/Prospectus by those shareholders of Carolina First Corporation not
deemed to be "affiliates" of Carolina First Corporation or First Southeast.
No person is authorized to give any information or to make any
representation not contained in or incorporated by reference in this Joint Proxy
Statement/Prospectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Carolina First
Corporation or First Southeast. This Joint Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any of the
securities offered hereby to any person or 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 in such jurisdiction. Neither the
delivery of this Joint Proxy Statement/Prospectus nor any sale hereunder shall
under any circumstances create any implication that the information contained
herein is correct as of any date subsequent to the date hereof or that there has
been no change in the affairs of Carolina First Corporation or First Southeast
since such date.
6
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint 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 Joint Proxy
Statement/Prospectus, the accompanying exhibits, and the documents incorporated
herein by reference and included herewith. A copy of the Reorganization
Agreement (excluding the schedules attached thereto) is attached hereto as
Exhibit A and is incorporated herein by reference. As used herein, the terms
"Carolina First Corporation" and "First Southeast" refer to Carolina First
Corporation and First Southeast Financial Corporation, respectively, and unless
the context otherwise requires, to their respective consolidated subsidiaries.
Introduction. This Joint Proxy Statement/Prospectus is furnished in
connection with (i) the issuance by Carolina First Corporation of the Carolina
First Corporation Shares, (ii) the solicitation of proxies by the Carolina First
Corporation Board of Directors with respect to the CFC Special Meeting to be
held on September 15, 1997 and at any adjournment thereof and (iii) the
solicitation of proxies by the First Southeast Board of Directors with respect
to the First Southeast Special Meeting to be held on September 15, 1997 and at
any adjournment thereof. The Special Meetings are being held for the purpose of
considering and voting upon the Reorganization Agreement. This Joint Proxy
Statement/Prospectus is first being mailed to Carolina First Corporation and
First Southeast shareholders on or about August 10, 1997.
Time, Place and Purposes of the Special Meetings. The First Southeast
Special Meeting will be held on September 15, 1997 at 10:00 a.m., local time, at
First Southeast's main office, 201 North Main Street, Anderson, South Carolina.
At the First Southeast Special Meeting, shareholders of First Southeast will
consider and vote on the proposal to approve the Reorganization Agreement, which
provides for the Merger of First Southeast into CFC Acquisition Company (a
subsidiary of Carolina First Corporation formed to effect the Merger) and the
exchange of First Southeast common stock for Carolina First Corporation common
stock. See "INFORMATION CONCERNING THE SPECIAL MEETINGS."
The CFC Special Meeting will be held on September 15, 1997 at 4:00 p.m.,
local time, at Carolina First Corporation's offices located at 200 East
Camperdown Way, Greenville, South Carolina. At the CFC Special Meeting,
shareholders of Carolina First Corporation will consider and vote on (i) the
proposal to approve the Reorganization Agreement, (ii) the expansion of the
Carolina First Corporation Board of Directors to 13 persons and the election of
three additional persons (current First Southeast Board members) to the Board of
Directors of Carolina First Corporation and (iii) proposed amendments to
Carolina First Corporation's Stock Option Plan and Restricted Stock Agreement
Plan, increasing to 1,500,000 and 500,000, respectively, the number of shares of
common stock authorized to be issued pursuant thereto. See "INFORMATION
CONCERNING THE SPECIAL MEETINGS."
Parties to the Reorganization Agreement. 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 three operating subsidiaries: (1) Carolina First Bank, a South
Carolina-chartered commercial bank headquartered in Greenville, South Carolina,
(2) Carolina First Mortgage Company, a mortgage loan origination and servicing
company headquartered in Columbia, South Carolina and (3) Blue Ridge Finance
Company, Inc., an automobile finance company headquartered in Greenville, South
Carolina. Carolina First Corporation is a South Carolina corporation which was
organized in 1986. At March 31, 1997, it had total consolidated assets of
approximately $1.61 billion. Its principal executive offices are located at 102
South Main Street, Greenville, South Carolina 29601, and its telephone number is
(864) 255-7900. See "INFORMATION ABOUT CAROLINA FIRST CORPORATION."
CFC Acquisition Company. CFC Acquisition Company is a wholly-owned
subsidiary of Carolina First Corporation, into which First Southeast will be
merged. CFC Acquisition Company was formed solely for the purpose of effecting
the Merger.
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 51 locations which are located
throughout South Carolina. It began its operations in December 1986 and at March
31, 1997 had
7
<PAGE>
total assets of approximately $1.59 billion, total loans net of unearned income
of approximately $1.2 billion and total deposits of approximately $1.3 billion.
Carolina First Bank's deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC"). See "INFORMATION ABOUT CAROLINA FIRST CORPORATION."
First Southeast. First Southeast is a savings and loan holding company
headquartered in Anderson, South Carolina which conducts business primarily
through its sole direct subsidiary, First Federal. First Southeast is a Delaware
corporation organized in 1993 upon the conversion of First Federal from a
federal mutual to a federal stock savings and loan association. At March 31,
1997, First Southeast had total assets of approximately $335 million. Its
principal executive offices are located at 201 North Main Street, Anderson,
South Carolina 29621, and its telephone number is (864) 224-3401. See
"INFORMATION ABOUT FIRST SOUTHEAST" and the documents that accompany this Joint
Proxy Statement/Prospectus.
First Federal. First Federal is a federal savings and loan association,
the deposit accounts of which are insured by the FDIC through the Savings
Association Insurance Fund ("SAIF"). It conducts its business through 11 offices
located in and around Anderson County, South Carolina. It began its operations
in 1922 as a South Carolina mutual savings and loan association and as of March
31, 1997, First Federal had total assets of approximately $335 million, total
loans of approximately $262 million, and total deposits of approximately $283
million. See "INFORMATION ABOUT FIRST SOUTHEAST."
General Terms of the Proposed Transaction. Pursuant to the terms of the
Reorganization Agreement, upon consummation of the Merger, holders of First
Southeast's common stock will be entitled to receive 1.00 share of Carolina
First Corporation common stock for each outstanding share of First Southeast
common stock held by them ("Conversion Ratio"). The Conversion Ratio will remain
fixed at 1.00 so long as the average of the closing prices as quoted on the
Nasdaq National Market for Carolina First Corporation common stock for the ten
days in which Carolina First Corporation common stock was traded immediately
prior to the Closing Date ("Ending Price") is equal to or greater than $13.6913
and equal to or less than $16.7338. If the Ending Price is below $13.6913, the
Conversion Ratio shall equal $13.6913 divided by the Ending Price and if the
Ending Price is above $16.7338, the Conversion Ratio shall equal $16.7338
divided by the Ending Price. If the Ending Price exceeds $19.0156, or is less
than $11.4094, then either First Southeast or Carolina First Corporation can
terminate the transaction.
Also, in the event that on the Closing Date, (i) Carolina First
Corporation has executed a letter of intent or entered into a definitive
agreement providing for a "change of control transaction" or (ii) a bona fide
offer to acquire a majority of the outstanding shares of Carolina First
Corporation common stock is outstanding from a financial institution having the
ability and intention to consummate such offer, then the Conversion Ratio shall
not be less than 1.00. A "change of control transaction" shall mean, with
respect to Carolina First Corporation, a transaction in which a majority of the
surviving entity of such transaction (or a majority of the entity holding
substantially all of the assets of Carolina First Corporation) is not owned by
persons holding Carolina First Corporation common stock immediately prior to
such transaction. See "THE PROPOSED TRANSACTION -- General Description of the
Terms of the Reorganization Agreement."
Vote Required and Record Date. Only First Southeast shareholders of
record at the close of business on August 1, 1997 ("Record Date") will be
entitled to notice of and to vote at the First Southeast Special Meeting. The
Merger must be approved by the affirmative vote of the holders of at least a
majority of the outstanding shares of First Southeast common stock eligible to
vote at the First Southeast Special Meeting. As of the Record Date, there were
4,388,231 shares of First Southeast's common stock entitled to vote. As of the
date hereof, the directors and executive officers of First Southeast and their
affiliates beneficially owned 592,791 shares, or approximately 13.5% of First
Southeast's common stock. Upon consummation of the transactions contemplated
hereby (and assuming no adjustment of the Conversion Ratio), such persons will
beneficially own 592,791 shares of Carolina First Corporation common stock, or
_____% of the outstanding Carolina First Corporation common stock.
Only Carolina First Corporation shareholders of record at the close of
business on the Record Date will be entitled to notice of and to vote at the CFC
Special Meeting. The Merger must be approved by the affirmative vote of the
holders of at least a majority of the shares of Carolina First Corporation
common stock present in person or by proxy at the CFC Special Meeting. As of the
Record Date, there were ___________
8
<PAGE>
shares of Carolina First Corporation's common stock entitled to vote. As of the
date hereof, the directors and executive officers of Carolina First Corporation
and their affiliates beneficially owned _________ shares, or approximately
____%, of Carolina First Corporation's common stock. Upon consummation of the
transactions contemplated hereby, such persons will beneficially own _____% of
the outstanding Carolina First Corporation common stock. See "THE PROPOSED
TRANSACTION."
Recommendation of Board of Directors.
The Board of Directors of First Southeast has approved the
Reorganization Agreement and believes that the Reorganization Agreement is in
the best interests of First Southeast and its shareholders. It recommends that
First Southeast's shareholders vote FOR the Reorganization Agreement. See "THE
PROPOSED TRANSACTION -- Recommendation of Board of Directors."
The Board of Directors of Carolina First Corporation has approved the
Reorganization Agreement and believes that the Reorganization Agreement is in
the best interests of Carolina First Corporation and its shareholders. It
recommends that Carolina First Corporation's shareholders vote FOR the
Reorganization Agreement, FOR the increase in the number of Carolina First
Corporation Board of Directors to 13 and the three nominees named herein, and
FOR the proposed amendments to Carolina First Corporation's Stock Option Plan
and Restricted Stock Agreement Plan. See "THE PROPOSED TRANSACTION --
Recommendation of Board of Directors."
Rights of Dissenting Shareholders. Neither Carolina First Corporation
shareholders nor First Southeast shareholders have dissenters' rights or
appraisal rights with respect to the Merger.
Certain Differences in Shareholders' Rights. Upon effectiveness of the
Merger, the former First Southeast shareholders will become shareholders of
Carolina First Corporation, and their rights as shareholders will be determined
by Carolina First Corporation's Articles of Incorporation and Bylaws. The rights
of shareholders of Carolina First Corporation differ from the rights of
shareholders of First Southeast in several important respects, including, among
other things, with respect to required shareholder votes on certain matters and
the existence of certain antitakeover provisions, as well as other differences
resulting from Carolina First Corporation being a South Carolina corporation
instead of a Delaware corporation (like First Southeast). See "COMPARATIVE
RIGHTS OF SHAREHOLDERS."
Conditions and Regulatory Approvals. Consummation of the transactions
contemplated by the Reorganization Agreement is subject to various conditions,
including receipt of the necessary regulatory approvals (including, without
limitation, the approval by the FDIC and the South Carolina State Board of
Financial Institutions ("State Board")), and the requisite shareholder approvals
of Carolina First Corporation and First Southeast. [Applications to the
necessary regulatory authorities seeking approval of the proposed transaction
have been filed.] The parties expect that such applications will be approved.
Carolina First Corporation and First Southeast 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 "THE PROPOSED TRANSACTION -- Required Regulatory
Approvals."
Termination of the Reorganization Agreement. The Reorganization
Agreement may be terminated at any time prior to the Closing Date: (a) by mutual
consent of the parties; (b) by either Carolina First Corporation or First
Southeast, at that party's option, (i) 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, or (ii) if the requisite Carolina First Corporation and
First Southeast shareholder approvals are not received at the Special Meetings;
(c) by either Carolina First Corporation or First Southeast if the other party
(or its subsidiaries) has failed to comply with the agreements or fulfill the
conditions contained in the Reorganization Agreement (except that any such
failure of compliance or fulfillment must result in a "material adverse event"
(as defined in the Reorganization Agreement) and the breaching party must be
given notice of the failure to comply and a reasonable period of time to cure);
(d) by either Carolina First Corporation or First Southeast in the event that
9
<PAGE>
closing has not occurred by March 31, 1998; (e) by either Carolina First
Corporation or First Southeast if the Ending Price is above $19.0156 or below
$11.4094 (as such price shall be subject to equitable adjustment for stock
splits, stock dividends, reverse stock splits and similar items). The
Reorganization Agreement may be amended by mutual written consent of all the
parties.
Effective Time of the Merger. The effective time of the Merger will be
the time and date specified in the Articles of Merger ("Effective Time") that
are delivered for filing to the Secretary of State of South Carolina. The
Effective Time will occur after all conditions specified in the Reorganization
Agreement have been satisfied or waived, on such date as Carolina First
Corporation shall notify First Southeast in writing not less than five days
prior thereto, which date shall not be more than 30 days after all conditions
have been satisfied or waived in writing. The Effective Time currently is
anticipated to be approximately November 1, 1997, although delays in the
satisfaction of the conditions to consummation of the Merger could result in a
later Effective Time. See "THE PROPOSED TRANSACTION -- Conditions to
Consummation of the Merger."
Opinion of Financial Adviser. Trident Financial Corporation ("Trident")
has served as financial adviser to First Southeast in connection with the
Reorganization Agreement and has rendered an opinion to the First Southeast
Board of Directors that the consideration to be received by shareholders of
First Southeast is fair from a financial point of view to the First Southeast
shareholders. For additional information concerning Trident and its opinion, see
"THE PROPOSED TRANSACTION -- Opinion of First Southeast's Financial Adviser" and
the opinion of Trident attached as Exhibit B to this Joint Proxy
Statement/Prospectus.
Interstate/Johnson Lane Corporation ("Interstate") has rendered an
opinion to the Carolina First Corporation Board of Directors that the terms of
the Merger are fair from a financial point of view to the Carolina First
Corporation shareholders. See "THE PROPOSED TRANSACTION -- Opinion of Carolina
First Corporation's Financial Adviser," and the opinion of Interstate attached
as Exhibit C to this Joint Proxy Statement/Prospectus.
Certain Federal Income Tax Consequences. First Southeast will receive an
opinion of counsel to Carolina First Corporation stating that the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
("Code"), subject to certain conditions. However, this opinion of counsel is not
binding on the Internal Revenue Service ("IRS"). In such opinion, counsel will
opine that if certain conditions are met, no taxable gain or loss for federal
income tax purposes will be recognized by First Southeast shareholders upon the
exchange of First Southeast common stock solely for Carolina First Corporation
common stock. To the extent that shareholders receive cash consideration for
fractional shares, such shareholders will be taxed to the extent that the cash
exceeds such shareholder's allocated basis in such First Southeast 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 shareholder of First Southeast consult his
or her tax adviser concerning the federal (and any applicable state, local or
other) tax consequences of the Merger.
Interests of Certain Persons. In accordance with the Reorganization
agreement, Carolina First Corporation will seek shareholder approval to expand
the number of directors on its Board of Directors from 10 to 13 and nominate
three current First Southeast directors to fill the new seats on the Board.
Carolina First Corporation has also agreed under the Reorganization Agreement to
nominate one of these First Southeast directors for reelection at the next
Carolina First Corporation annual shareholders meeting. The Reorganization
Agreement provides that Carolina First Corporation will indemnify First
Southeast directors and executive officers against certain liabilities and will
maintain such directors' and officers' insurance for these persons after the
Closing Date as shall be obtainable for annual premiums of $50,000. David C.
Wakefield, III, the Chief Executive Officer of First Southeast, and John L.
Biediger, the Executive Vice President of First Southeast will receive certain
payments and benefits provided for in their employment agreements with First
Southeast because the Merger constitutes a change of control giving rise to a
right to those payments and benefits under those employment contracts. Pursuant
to the Reorganization Agreement, Carolina First Corporation and First Southeast
will cooperate to develop staffing plans which will result in the retention of
as many First Southeast and First Federal managers and employees as is
practical. Carolina First Corporation has also specifically agreed to honor or
assume (as applicable) First Southeast's obligations under its various existing
benefit plans.
10
<PAGE>
See "THE PROPOSED TRANSACTION -- Interests of Certain Persons in the Merger."
Restrictions on Resales by Affiliates. First Southeast has agreed that,
prior to closing, it will use its best efforts to cause certain affiliates of
First Southeast to deliver written agreements to Carolina First Corporation that
they will not dispose of any shares of Carolina First Corporation common stock
received upon consummation of the Merger except in compliance with the
Securities Act and rules and regulations promulgated thereunder. See "THE
PROPOSED TRANSACTION -- Restrictions on Resales by Affiliates."
Accounting Treatment. The Merger will be accounted for as a "purchase"
of First Southeast by Carolina First Corporation under generally accepted
accounting principles. See "THE PROPOSED TRANSACTION -- Accounting Treatment."
Market Prices and Dividends. Carolina First Corporation common stock is
traded on the Nasdaq National Market. Carolina First Corporation currently pays
a regular quarterly dividend of $.07 per share. Although Carolina First
Corporation currently expects to continue payment of its regular cash dividend
on the Carolina First Corporation 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
Carolina First Corporation 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.
First Southeast common stock is traded on the Nasdaq National Market.
First Southeast currently pays a regular quarterly dividend of $.06 per share.
The information presented in the following table reflects the last
reported sales prices for Carolina First Corporation common stock on June 30,
1997, the last trading day prior to the public announcement of the proposed
Merger, and the First Southeast common stock on an equivalent per share basis,
calculated by multiplying the closing price of the Carolina First Corporation
common stock on such date by the Conversion Ratio (1.00). As noted above, the
Conversion Ratio is subject to adjustment if the Ending Price is greater than
$16.7338 or less than $13.6913. The table also reflects the last reported sales
price for Carolina First Corporation common stock on July 23, 1997:
<TABLE>
<CAPTION>
Market Values Per Share
Carolina First Corporation First Southeast
Historical Historical Equivalent
<S> <C> <C> <C>
June 30, 1997 $14.75 $10.00 $14.75
July 23, 1997 17.50 14.75 $__.__
</TABLE>
First Southeast shareholders are advised to obtain current market
quotations for the Carolina First Corporation common stock. The market price of
Carolina First Corporation common stock at the Effective Time may be higher or
lower than the market price at the time the Reorganization Agreement was
executed, at the date of mailing this Joint Proxy Statement/Prospectus, or at
the time of the Special Meeting.
First Southeast paid cash dividends of $0.1875 per share in 1994, $0.38
per share in 1995 and $10.33 per share in 1996. Such dividends were paid on a
calendar year rather than on a fiscal year basis. Of the dividends paid 1996,
$10.00 resulted from a one-time, special cash dividend paid on June 27, 1996.
Delaware and federal banking regulations restrict the amount of dividends that
First Southeast can pay to shareholders. See "COMPARATIVE RIGHTS OF SHAREHOLDERS
- -- Dividends."
11
<PAGE>
Selected Consolidated Financial Data
The following tables present selected unaudited historical financial
information and selected unaudited combined pro forma financial information of
Carolina First Corporation (consolidated) and First Southeast (consolidated).
This information is derived from the historical financial statements of Carolina
First Corporation (consolidated) and First Southeast (consolidated), and should
be read in conjunction with such historical financial statements and the notes
thereto either contained elsewhere in this Joint Proxy Statement/Prospectus, the
documents that accompany this Joint Proxy Statement/Prospectus or incorporated
herein by reference. The pro forma financial data is presented using the
purchase method of accounting. The selected pro forma combined unaudited
financial information showing the combined results of Carolina First Corporation
(consolidated) and First Southeast (consolidated) is provided for informational
purposes only. It is not necessarily indicative of actual results that would
have been achieved had the Reorganization Agreement 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, see "PRO
FORMA COMBINED FINANCIAL INFORMATION."
Carolina First Corporation
<TABLE>
<CAPTION>
Three Months
Years Ended December 31, Ended March 31,
1992 1993 1994 1995 1996 1996 1997
(Dollars in thousands, except per share data and footnotes)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Net interest income $ 20,749 $ 29,358 $ 43,260 $ 50,772 $ 57,070 $ 13,427 $ 15,452
Provision for loan losses 2,318 1,106 1,197 6,846 10,263 1,500 2,952
Noninterest income, excluding
securities transactions 3,483 6,085 8,151 16,557 20,955 4,207 3,008
Securities transactions 633 680 75 769 386 83 84
Noninterest income 4,116 6,765 8,226 17,326 21,341 4,290 3,092
Noninterest expenses (1) 18,897 27,294 51,839 46,882 51,675 12,679 12,866
Net income (loss) (1) 2,466 5,418 (1,740) 9,414 10,474 2,228 1,717
Dividends on preferred stock 625 1,930 2,433 2,752 63 16 --
Net income (loss) applicable
to common shareholders (1) 1,841 3,488 (4,173) 6,662 10,411 2,212 1,717
Balance Sheet Data (Period End)
Total assets $616,288 $904,474 $1,204,350 $1,414,922 $1,574,204 $1,401,739 $1,613,906
Securities and temporary
investments 100,221 190,683 137,091 187,029 271,396 194,700 278,185
Loans, net of unearned income 455,650 623,646 923,068 1,062,660 1,124,775 1,029,602 1,183,443
Allowance for loan losses 5,276 6,679 6,002 8,661 11,290 9,093 12,039
Nonperforming assets 5,631 5,366 4,722 4,868 5,880 4,819 5,109
Total earning assets 555,871 814,579 1,059,455 1,249,689 1,396,171 1,224,302 1,461,628
Total deposits 555,624 804,549 1,001,748 1,095,491 1,281,050 1,156,921 1,257,005
Borrowed funds 2,591 16,779 106,074 186,789 145,189 108,525 171,379
Long-term debt 1,492 1,274 1,162 26,347 26,442 26,355 26,476
Preferred stock 10,319 15,662 37,014 32,909 943 1,002 --
Shareholders' equity 51,288 70,415 86,482 94,967 104,964 96,564 105,339
Per Share Data (1)(2)
Net income (loss) per common share:
Primary $ 0.34 $ 0.63 $ (0.59) $ 0.87 $ 0.96 $ 0.23 $ 0.15
Fully diluted 0.34 0.63 (0.59) 0.85 0.92 0.20 0.15
Cash dividends declared -- 0.04 0.17 0.21 0.25 0.06 0.07
Book value per common
share (period end) 7.27 7.70 6.61 7.61 9.26 8.63 9.28
Common shares outstanding:
Weighted average - primary 5,453,681 5,505,461 7,004,214 7,676,206 10,839,708 9,540,718 11,443,468
Weighted average - fully
diluted 6,401,692 8,208,935 10,114,812 11,129,623 11,371,547 11,323,128 11,478,383
Period end 5,472,979 6,969,484 7,079,866 7,820,839 11,225,568 9,224,149 11,355,443
Financial Ratios
Return on average assets 0.44 % 0.69% (0.16)% 0.74% 0.71% 0.62% 0.44%
Return on average equity 5.22 8.27 (1.99) 10.43 10.56 9.29 6.50
Net interest margin 4.01 4.16 4.65 4.54 4.35 4.26 4.52
</TABLE>
- ---------------------------
(1) Includes fourth quarter 1994 restructuring charges of $12,214,000
(pre-tax).
(2) Adjusted for stock dividends and the six-for-five stock split effected in
the form of a dividend declared December 18, 1996.
12
<PAGE>
First Southeast Financial Corporation
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended June 30, March 31,
1992 1993 1994 1995 1996 1996 1997
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Net interest income $ 9,046 $ 10,751 $ 11,447 $ 11,985 $ 11,420 $ 8,479 $ 7,779
Provision for loan losses 175 805 225 180 180 135 135
Noninterest income 1,150 1,145 1,018 1,056 110 739 901
Noninterest expenses 6,003 6,136 7,756 7,376 9,390 5,585 6,357
Net income 2,676 2,863 2,901 3,577 939 2,303 1,403
Balance Sheet Data (period end)
Total assets $321,600 $317,168 $341,853 $352,288 $331,852 $359,481 $334,751
Securities and temporary investments 84,557 98,984 145,907 128,625 78,046 119,781 59,687
Loans, net of unearned income 224,972 204,714 182,402 209,710 239,570 226,129 262,373
Allowance for loan losses 270 843 914 1,062 1,233 1,179 1,311
Total earning assets 311,735 305,480 330,086 339,964 319,074 347,422 323,440
Total deposits 291,503 284,704 271,734 278,231 288,217 284,461 282,800
Borrowed funds 2,571 2,239 1,915 1,597 5,000 1,597 15,000
Total equity 24,696 27,559 66,133 68,924 33,503 70,513 34,239
Per Share Data
Net income per common share:
Primary n/a n/a n/a 0.91 0.23 0.58 0.32
Fully diluted n/a n/a n/a 0.91 0.23 0.58 0.32
Cash dividends declared n/a n/a 0.06 0.27 10.48 0.36 0.14
Book value per common share
(period end) n/a n/a 15.83 16.82 7.63 17.20 7.80
Common shares outstanding:
Weighted average-primary n/a n/a n/a 3,946,000 4,061,234 3,991,060 4,388,231
Weighted average-fully diluted n/a n/a n/a 3,946,000 4,061,234 3,991,060 4,388,231
Period end n/a n/a 4,176,900 4,096,645 4,388,231 4,100,615 4,388,231
</TABLE>
13
<PAGE>
Unaudited Pro Forma Combined Selected Financial Data
of Carolina First Corporation and First Southeast Financial Corporation
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1996 March 31, 1997
(Dollars in thousands, except per share data)
<S> <C> <C>
Statement of Income Data
Net interest income $ 68,450 $ 18,225
Provision for loan losses 10,443 2,997
Noninterest income 21,567 3,389
Noninterest expenses 64,493 14,921
Net income 8,789 2,204
Dividends on preferred stock 63 ---
Net income applicable to common shareholders 8,726 2,204
Per Share Data (1)
Net income per common share:
Primary $ 0.58 $ 0.14
Fully diluted 0.56 0.14
Cash dividends declared 0.25 0.07
Book value per common share (period end) 10.87 10.87
Common shares outstanding:
Weighted average - primary 15,103,438 15,831,699
Weighted average - fully diluted 15,635,277 15,866,614
Period end 15,613,799 15,743,674
Balance Sheet Data March 31, 1997
Total assets $1,983,706
Securities and temporary investments 316,444
Loans, net of unearned income 1,443,482
Allowance for loan losses 13,350
Total earning assets 1,780,528
Total deposits 1,539,805
Borrowed funds 186,379
Long-term debt 26,476
Shareholders' equity 171,162
</TABLE>
- ---------------------------
(1) Adjusted for the six-for-five stock split effected in the form of a
dividend declared December 18, 1996.
14
<PAGE>
Comparative Per Share Data
The following tables present at the dates and for the periods indicated
(i) certain consolidated historical and pro forma combined per share data for
the Carolina First Corporation common stock after giving effect to the
Reorganization Agreement and (ii) certain historical and pro forma data for the
First Southeast common stock. The pro forma financial data is presented using
the purchase method of accounting, and the Conversion Ratio of 1.00 share of
Carolina First Corporation common stock for each share of First Southeast 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. The data are not
necessarily indicative of actual results that would have been achieved had the
Reorganization Agreement been consummated at the beginning of the periods
presented and are not indicative of future results.
<TABLE>
<CAPTION>
Carolina First
Corporation First Southeast
Three Months Ended Three Months Ended Pro Forma First Southeast
March 31, 1997 March 31, 1997 Combined Equivalent(1)
<S> <C> <C> <C> <C>
Fully diluted earnings per
common share $ 0.15 $ 0.21 $ 0.14 $ 0.14
Cash dividends declared per
common share 0.07 0.05 0.07 0.07
Book value per common
share (3/31/97) 9.28 7.80 10.87 10.87
</TABLE>
- ------------------------
(1) Calculated by multiplying the Pro Forma Combined by the Conversion Ratio
(1.00).
<TABLE>
<CAPTION>
Carolina First
Corporation First Southeast
Year Ended Year Ended Pro Forma First Southeast
December 31, 1996 December 31, 1996(1) Combined Equivalent(2)
<S> <C> <C> <C> <C>
Fully diluted earnings (loss) per
common share $ 0.92 $ ( 0.01 ) $ 0.56 $ 0.56
Cash dividends declared per
common share 0.25 10.33(3) 0.25 0.25
Book value per common
share (year end) 9.26 7.69 10.87 10.87
</TABLE>
- ------------------------
(1) Historical earnings per share for First Southeast, which has a June 30
fiscal year end, have been adjusted to reflect a December 31 fiscal year
end by adding the subsequent six month period and subtracting the
comparable preceding year interim results from the results for the year
ended June 30, 1996.
(2) Calculated by multiplying the Pro Forma Combined by the Conversion Ratio
(1.00).
(3) Includes one-time special cash dividend of $10.00 per share paid on June
27, 1996.
15
<PAGE>
RISK FACTORS
In addition to the other information contained in this Joint Proxy
Statement/Prospectus, the following factors should be considered carefully when
evaluating Carolina First Corporation and the Carolina First Corporation common
stock.
Profitable Deployment of Funds. After the Closing Date, Carolina First
Corporation intends to sell into the secondary market approximately $150,000,000
of First Southeast's mortgage loans and redeploy the proceeds into
higher-yielding loans. The new portfolio of higher-yielding loans should more
closely resemble a commercial bank loan portfolio. Carolina First Corporation's
earnings may be materially affected by the timing, the rate earned, and the
charge-offs on the redeployed proceeds.
Size of Acquisition. The acquisition of First Southeast will represent
Carolina First Corporation's largest acquisition to date. Problems encountered
by Carolina First Corporation in assimilating First Southeast and its operations
into Carolina First Corporation's banking operations could have a material
adverse effect on Carolina First Corporation, its operations and earnings. These
could include, among others, problems related to the conversion of First
Southeast's data processing systems to Carolina First Corporation's, an
inability to profitably deploy and redeploy First Southeast's assets (including
the mortgage loans as discussed above), an inability to retain deposits and
depositor relationships, an inability to retain loan customers, and the
inability to retain key First Southeast and First Federal employees.
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.
Litigation. On November 4, 1996, a derivative shareholder action was filed
in Greenville County Court of Common Pleas against Carolina First Corporation.
The complaint, as most recently amended, names as additional defendants the
majority of the directors of Carolina First Corporation and Carolina First Bank
and certain other officers. The named plaintiffs in the amended complaint are
Carolina First Corporation, by and through certain minority shareholders.
Plaintiffs allege as causes of action the following: conversion of corporate
opportunity; fraud and constructive fraud; breach of fiduciary duty and
constructive fiduciary fraud; and negligent management. The factual basis upon
which these claims are made generally involves the payment to Mack I. Whittle,
Jr. and certain other members of management of a bonus in stock in Affinity
Technology Group, Inc. ("Affinity") held by Carolina First Corporation, alleged
inappropriate transactions between Carolina First Corporation and entities
affiliated with a former director, and certain alleged mismanagement by
management involving financial matters and employee matters. The complaint seeks
damages for the benefit of Carolina First Corporation aggregating $50 million
and rescission of the Affinity bonuses. A motion to dismiss this action is
pending.
In an action instituted by the same attorneys bringing the above-described
derivative action, on December 31, 1996, a small number of shareholders filed a
class action lawsuit against Carolina First Corporation, Carolina First Bank,
and a number of their officers and directors. In this action, plaintiffs allege
that they are former shareholders of Midlands National Bank, Prosperity, South
Carolina ("Midlands") and seek to represent a class of all Midlands shareholders
involved in the merger of Midlands into Carolina First Bank, asserting that the
defendants committed fraud, constructive fraud, and breach of fiduciary duty
against the defendants by overstating earnings and thereby adversely affecting
the consideration received by the Midlands shareholders in connection with the
merger of Midlands into Carolina First Bank. The complaint seeks compensatory
damages of approximately $1.8 million and punitive damages in an amount to be
determined by a jury, attorneys' fees and other costs. Carolina First
Corporation and the other named defendants have filed a motion to dismiss all
claims asserted in the lawsuit, which is pending.
16
<PAGE>
Carolina First Corporation and Carolina First Bank (and related parties)
are contesting the foregoing litigation vigorously and believe that they will
prevail. However, should such not be the case, any damages awarded in such
litigation could have a material adverse effect on Carolina First Corporation.
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 ("Federal Reserve"). In the
future, Carolina First Corporation may issue capital stock in connection with
additional acquisitions. Such acquisitions and related issuances of stock may
have a dilutive effect on earnings per share and ownership. Although Carolina
First Corporation is engaged from time to time in discussions relating to
possible acquisitions, Carolina First Corporation presently has no agreements or
understandings relating to any acquisitions.
Antitakeover Measures. Carolina First Corporation has certain antitakeover
measures in place. These include (i) a Shareholders' Rights Plan which, among
other things, provides for the dilution of the Carolina First Corporation common
stock holdings of certain shareholders who acquire 20% or more of the Carolina
First Corporation 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 and may
prevent shareholders from taking part in a transaction in which they could
realize a premium over the current market price of Carolina First Corporation
common stock. See "CAROLINA FIRST CORPORATION CAPITAL STOCK."
17
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETINGS
First Southeast Special Meeting
This Joint Proxy Statement/Prospectus is being furnished to shareholders
of First Southeast as of the Record Date in connection with the solicitation of
proxies by the Board of Directors of First Southeast for use at the First
Southeast Special Meeting and at any adjournments thereof. The First Southeast
Special Meeting is to be held on September 15, 1997 at 10:00 a.m., local time,
at the main office of First Southeast, 201 North Main Street, Anderson, South
Carolina. Holders of First Southeast common stock are requested to complete,
date and sign the accompanying Proxy and return it promptly to First Southeast
in the enclosed postage-paid envelope.
As a result of having entered into the Reorganization Agreement, First
Southeast has not scheduled its annual meeting of shareholders, which usually is
held in late October. In the event that the Merger is not approved by
shareholders at the First Southeast Special Meeting, First Southeast expects
that it would hold its 1997 Annual Meeting as soon as practicable thereafter.
Purpose of the First Southeast Special Meeting. The purpose of the First
Southeast Special Meeting is to consider and take action with respect to
approval of the Reorganization Agreement. As required by Delaware law, approval
of the Reorganization Agreement will require the affirmative vote of the holders
of a majority of the outstanding shares of First Southeast common stock entitled
to vote on the Reorganization Agreement. See "--First Southeast Record Date and
Voting Rights." This Joint Proxy Statement/Prospectus, Notice of Special Meeting
and the Proxy are first being mailed to shareholders of First Southeast on or
about August 10, 1997.
First Southeast Record Date and Voting Rights. Only the holders of First
Southeast common stock on the Record Date are entitled to receive notice of and
to vote at the First Southeast Special Meeting and at any adjournments thereof.
On the Record Date, there were 4,388,231 shares of First Southeast common stock
outstanding, which were held by approximately 892 holders of record. Each share
of First Southeast common stock outstanding on the Record Date is entitled to
one vote as to each of the matters submitted at the First Southeast Special
Meeting.
A majority of the shares entitled to be voted at the First Southeast
Special Meeting constitutes a quorum. If a share is represented for any purpose
at the First Southeast 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," 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 First Southeast Special Meeting.
The Merger must be approved by the affirmative vote of the holders of at
least a majority of the outstanding shares of First Southeast common stock
eligible to vote at the First Southeast Special Meeting. Accordingly, proxies
marked "Abstain" and shares that are not voted (including broker non-votes) will
have the same effect as votes against the Reorganization Agreement.
On August 1, 1997, the directors and executive officers of First
Southeast and their affiliates owned a total of 592,791 shares, or approximately
13.5% of First Southeast's common stock.
Proxies. The accompanying Proxy is for use at the First Southeast
Special Meeting. A record shareholder may use this Proxy if he is unable to
attend the First Southeast Special Meeting in person or wishes to have his
shares voted by proxy even if he does attend the First Southeast 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 Reorganization Agreement. The Board of Directors of First
Southeast is not aware of any other matters that may
18
<PAGE>
be presented for action at the First Southeast Special Meeting, but if other
matters do properly come before the First Southeast 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.
If a quorum is not obtained, or if fewer shares of First Southeast
common stock are voted in favor of approval of the Reorganization Agreement than
the number required for approval, it is expected that the First Southeast
Special Meeting will be postponed or adjourned for the purpose of allowing
additional time for obtaining additional proxies or votes, and, at any
subsequent reconvening of the First Southeast Special Meeting, all proxies will
be voted in the same manner as such proxies would have been voted at the
original convening of the meeting (except for any proxies which have theretofore
effectively been revoked).
The presence of a record shareholder at the First Southeast Special
Meeting will not automatically revoke such shareholder's proxy. The proxy may be
revoked by the record shareholder (i) by giving written notice to the Secretary
of First Southeast at any time before it is voted, (ii) by submitting a proxy
having a later date, or (iii) by such person appearing at the First Southeast
Special Meeting and giving notice of revocation to the corporate officers
responsible for maintaining the list of shareholders.
Solicitation of proxies may be made in person or by mail, or by
telephone or other electronic means, by directors, officers and regular
employees of First Southeast, 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. First Southeast will
bear the costs associated with the solicitation of proxies and other expenses
associated with the First Southeast Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Joint Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by First Southeast, Carolina
First Corporation or any other person. The delivery of this Joint Proxy
Statement/Prospectus will not, under any circumstances, create any implication
that there has been no change in the affairs of First Southeast or Carolina
First Corporation since the date of this Joint Proxy Statement/Prospectus.
Recommendation. The First Southeast Board of Directors has approved the
Reorganization Agreement and believes that the proposed transaction is fair to
and in the best interests of First Southeast and its shareholders. The First
Southeast Board of Directors recommends that First Southeast's shareholders vote
FOR approval of the Reorganization Agreement.
CFC Special Meeting
This Joint Proxy Statement/Prospectus is being furnished to shareholders
of Carolina First Corporation as of the Record Date in connection with the
solicitation of proxies by the Carolina First Corporation Board of Directors for
use at the CFC Special Meeting and at any adjournments thereof. The CFC Special
Meeting is to be held on September 15, 1997 at 4:00 p.m., local time, at the
offices of Carolina First Corporation located at 200 East Camperdown Way,
Greenville, South Carolina. Holders of Carolina First Corporation common stock
are requested to complete, date and sign the accompanying Proxy and return it
promptly to Carolina First Corporation in the enclosed postage-paid envelope.
19
<PAGE>
Purpose of the CFC Special Meeting. The purposes of the CFC Special
Meeting are as follows:
(1) to consider and take action with respect to approval of the
Reorganization Agreement;
(2) to consider and vote upon a proposal to set the number of
directors on the Carolina First Corporation Board of
Directors at 13 and to elect the three persons set forth
below (current First Southeast Board members) to the
Carolina First Corporation Board of Directors; and
(3) to vote upon amendments to Carolina First Corporation's
Stock Option Plan and Restricted Stock Agreement Plan
increasing to 1,500,000 and 500,000, respectively, the
number of shares of common stock authorized to be issued
pursuant to such plans.
Director Nominees 1. David C. Wakefield, III (Class of 1995;
term expiring in 1998)
2. William R. Phillips (Class of 1996; term
expiring in 1999)
3. Vernon E. Merchant, Jr. (Class of 1997;
term expiring in 2000)
Carolina First Corporation has also agreed in the Reorganization Agreement to
nominate David C. Wakefield, III for director for the Class of 1998 for a term
expiring in 2001.
As required by the Bylaws of the Nasdaq Stock Market and by South
Carolina law, both the approval of the Reorganization Agreement and the setting
of the number of the Carolina First Corporation Board of Directors at 13 will
require the affirmative vote of a majority of the shares of Carolina First
Corporation common stock present at the CFC Special Meeting. As required by
South Carolina law, directors will be elected by a plurality of votes cast at
the CFC Special Meeting. Abstentions and broker non-votes will not be considered
to be either affirmative or negative votes. As required by the Bylaws of the
National Association of Securities Dealers, Inc. (the "NASD"), the amendments to
the Stock Option Plan and Restricted Stock Agreement Plan will require the
approval of majority of the total votes cast on the proposal. Abstentions and
broker non-votes are not considered to be either affirmative or negative votes.
See "--Carolina First Corporation Record Date and Voting Rights." This Joint
Proxy Statement/Prospectus, Notice of Special Meeting and the Proxy are first
being mailed to shareholders of Carolina First Corporation on or about August
10, 1997.
Carolina First Corporation Record Date and Voting Rights. Only the
holders of Carolina First Corporation common stock on the Record Date are
entitled to receive notice of and to vote at the CFC Special Meeting and at any
adjournments thereof. On the Record Date, there were ________ shares of Carolina
First Corporation common stock outstanding, which were held by approximately
_________ holders of record. Each share of Carolina First Corporation common
stock outstanding on the Record Date is entitled to one vote as to each of the
matters submitted at the CFC Special Meeting.
A majority of the shares entitled to be voted at the CFC Special Meeting
constitutes a quorum. If a share is represented for any purpose at the CFC
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," 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 CFC Special
Meeting.
At August 1, 1997, the directors and executive officers of Carolina
First Corporation and their affiliates owned a total of _______ shares, or
approximately ____% of Carolina First Corporation common stock.
Proxies. The accompanying Proxy is for use at the CFC Special Meeting. A
record shareholder may use this Proxy if he is unable to attend the CFC Special
Meeting in person or wishes to have his shares voted by proxy even if he does
attend the CFC 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 Reorganization Agreement, FOR setting
the Carolina First Corporation Board of Directors at 13 persons and the
director-nominees stated herein and FOR the amendment of Carolina First
Corporation's Stock Option Plan and Restricted Stock Agreement Plan. The Board
of Directors of Carolina First Corporation is not aware of any other matters
that may be
20
<PAGE>
presented for action at the CFC Special Meeting, but if other matters do
properly come before the CFC 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.
If a quorum is not obtained, it is expected that the CFC Special Meeting
will be postponed or adjourned for the purpose of allowing additional time for
obtaining additional proxies or votes, and, at any subsequent reconvening of the
CFC Special Meeting, all proxies will be voted in the same manner as such
proxies would have been voted at the original convening of the meeting (except
for any proxies which have theretofore effectively been revoked).
The presence of a record shareholder at the CFC Special Meeting will not
automatically revoke such shareholder's proxy. The proxy may be revoked by the
record shareholder (i) by giving written notice to the Secretary of Carolina
First Corporation at any time before it is voted, (ii) by submitting a proxy
having a later date, or (iii) by such person appearing at the CFC Special
Meeting and giving notice of revocation to the corporate officers responsible
for maintaining the list of shareholders.
Solicitation of proxies may be made in person or by mail, or by
telephone or other electronic means by directors, officers and regular employees
of Carolina First Corporation, 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. Carolina First
Corporation will bear the costs associated with the solicitation of proxies and
other expenses associated with the CFC Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Joint Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by Carolina First
Corporation, First Southeast or any other person. The delivery of this Joint
Proxy Statement/Prospectus will not, under any circumstances, create any
implication that there has been no change in the affairs of Carolina First
Corporation or First Southeast since the date of this Joint Proxy
Statement/Prospectus.
Recommendation. The Carolina First Corporation Board of Directors has
approved the Reorganization Agreement and believes that the proposed transaction
is fair to and in the best interests of Carolina First Corporation and its
shareholders. The Carolina First Corporation Board of Directors recommends that
Carolina First Corporation's shareholders vote FOR approval of the
Reorganization Agreement, FOR setting the Carolina First Corporation Board of
Directors at 13 persons and the director- nominees stated herein, and FOR the
amendments to Carolina First Corporation's Stock Option Plan and Restricted
Stock Agreement Plan.
21
<PAGE>
THE PROPOSED TRANSACTION
The following description of the terms and provisions of the
Reorganization Agreement is qualified in its entirety by reference to the
Reorganization Agreement, which is set forth in full as Exhibit A to this Joint
Proxy Statement/Prospectus and incorporated herein by reference.
General Description of the Terms of the Reorganization Agreement
The Reorganization Agreement provides for the merger of First Southeast
with and into CFC Acquisition Company, a wholly-owned subsidiary of Carolina
First Corporation formed solely for the purpose of effecting the acquisition.
Immediately following the Effective Time of the merger of First Southeast into
CFC Acquisition Company, CFC Acquisition Company will be liquidated. As a result
of the Merger, the separate corporate existence of First Southeast will cease
and Carolina First Corporation, as the surviving entity, will possess all
rights, franchises and interests of First Southeast. As of the Effective Time of
the Merger, certificates of First Southeast common stock will represent only the
right to receive the requisite number of shares of Carolina First Corporation
common stock and cash for any fractional shares. The Reorganization Agreement
also provides for the merger of First Federal with and into Carolina First Bank
(in which case, the separate corporate existence of First Federal will cease and
Carolina First Bank, as the surviving entity, will possess all rights,
franchises and interests of First Federal). However, the Reorganization
Agreement also provides that Carolina First Corporation may restructure the
transactions contemplated therein, provided that any such restructuring shall
not (i) alter the type of consideration to be issued to the holders of First
Southeast common stock as provided for in the Reorganization Agreement, (ii)
reduce the value of such consideration, (iii) adversely affect the intended
tax-free treatment to First Southeast's shareholders as a result of receiving
such consideration or prevent the parties from obtaining the tax opinion of
Wyche, Burgess, Freeman & Parham, P.A. referred to herein, (iv) materially
impair the ability to receive the required regulatory approvals, or (v)
materially delay the closing. It is possible that Carolina First Corporation may
restructure the proposed merger of First Federal into Carolina First Bank as a
purchase and assumption transaction between First Federal and Carolina First
Bank (in which case the charter of First Federal would be preserved).
Pursuant to the terms of the Reorganization Agreement, upon consummation
of the Merger, holders of First Southeast's common stock will be entitled to
receive (as the Conversion Ratio) 1.00 share of Carolina First Corporation
common stock for each outstanding share of First Southeast common stock held by
them, which Conversion Ratio shall be subject to adjustment as follows:
1. In the event that the Ending Price is above $16.7338, then the
Conversion Ratio shall be reduced so that each holder of the First
Southeast common stock shall receive the number of shares of Carolina
First Corporation common stock equal to $16.7338 divided by the Ending
Price, for each share of First Southeast common stock.
2. In the event that the Ending Price is below $13.6913, then the
Conversation Ratio shall be increased so each holder of First Southeast
common stock shall receive the number of shares of Carolina First
Corporation common stock equal to $13.6913 divided by the Ending Price,
for each share of First Southeast common stock.
3. In the event that on the Closing Date, (i) Carolina First Corporation
has executed a letter of intent or entered into a definitive agreement
providing for a "change of control transaction" or (ii) a bona fide
offer to acquire a majority of the outstanding shares of Carolina First
Corporation common stock is outstanding from a financial institution
having the ability and intention to consummate such offer, then the
Conversion Ratio shall not be less than 1.00. A "change of control
transaction" shall mean, with respect to Carolina First Corporation, a
transaction in which a majority of the surviving entity of such
transaction (or a majority of the entity holding substantially all of
the assets of Carolina First Corporation) is not owned
22
<PAGE>
by persons holding Carolina First Corporation common stock immediately
prior to such transaction.
The Ending Price is the average of the closing prices as quoted on the Nasdaq
National Market for Carolina First Corporation common stock for the ten days in
which Carolina First Corporation common stock was traded immediately prior to
the Closing Date. All of the stock prices set forth above are subject to
equitable adjustment for stock splits, stock dividends, reverse stock splits and
similar items.
Because the number of shares of Carolina First Corporation common stock
to be received by First Southeast shareholders will depend on the market price
of Carolina First Corporation common stock, the exact number of shares to be
received by First Southeast shareholders will not be known until the Effective
Date. On _____ __, 1997, the most recent date for which it was practicable to
obtain information prior to the printing of this Prospectus/Joint Proxy
Statement, the closing price per share of Carolina First Corporation common
stock, as reported on the Nasdaq National Market, was $_____. First Southeast
shareholders should note, however, that the market price of the Carolina First
Corporation common stock they receive will continue to be subject to market
fluctuations, as well as the future results of operations and financial
condition of Carolina First Corporation, among other factors, and therefore may
be worth less than, or more than, such amount as of the date they receive their
Carolina First Corporation common stock certificates.
No fractional shares of Carolina First Corporation common stock will be
issued as a result of the Merger. In lieu of the issuance of fractional shares,
cash will be paid to the holders of the First Southeast common stock in respect
of any fractional share that would otherwise be issuable based on the Ending
Price.
The Reorganization Agreement generally provides that Carolina First
Corporation and First Southeast will each bear and pay their own costs and
expenses incurred in connection with the transactions contemplated in the
Reorganization Agreement, including fees of attorneys and accountants. The
Reorganization Agreement specifically provides that Carolina First Corporation
will bear the cost of the filing fees for the Registration Statement and the
cost for all filing fees associated with obtaining necessary regulatory
approvals.
The Merger will become effective at the Effective Time, which will be
specified in the Articles of Merger to be filed with the South Carolina
Secretary of State. At the Effective Time, by operation of law, First Southeast
shareholders will no longer be owners of First Southeast common stock and (to
the extent that they receive Carolina First Corporation common stock as
consideration) will automatically become owners of Carolina First Corporation
common stock. After the Effective Time, each outstanding certificate
representing shares of First Southeast common stock prior to the Effective Time
shall be deemed for all corporate purposes (other than the payment of dividends
and other distributions by First Southeast to which the former shareholders of
First Southeast common stock may be entitled) to evidence only the right of the
holder thereof to surrender such certificate and receive the consideration as
provided in the Reorganization Agreement.
Background of and Reasons for the Reorganization Agreement
First Southeast Reasons. First Southeast is headquartered in Anderson,
South Carolina and conducts its business through its eleven office facilities in
Anderson County and the nearby Counties of Abbeville and Greenwood. First
Southeast's principal business consists of attracting deposits from the general
public through a variety of deposit programs and originating loans secured by
owner-occupied residential properties as well as consumer loans.
On October 7, 1993, First Southeast converted from the mutual to the
stock form of ownership (the "Conversion") and issued 4,326,400 shares of First
Southeast common stock at a price of $10.00 per share. As a direct result of the
Conversion, First Southeast's capital level rose to approximately 20%, far
exceeding regulatory requirements. This high capital level made it difficult for
First Southeast to earn a competitive rate of return on equity.
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In connection with its normal strategic planning process, First
Southeast continuously reviewed its strategic business alternatives, devoting
particular attention to the continuing consolidation and increasing competition
in the banking and financial services industries in South Carolina. In the
recent years, competition in the local banking and financial services industries
has intensified. In efforts to increase First Southeast's ability to remain
competitive in this environment, the management of First Southeast has
periodically analyzed various potential strategic options, including possible
acquisitions of or business combinations with other smaller financial
institutions with market areas proximate to the market area served by First
Southeast, as well as de novo branching.
In the Fall of 1995, the Board of Directors and management of First
Southeast believed that its prospects for making an acquisition of or business
combination with other smaller financial institutions were becoming limited. At
this time, the Board of Directors and management felt it would be in the best
interests of its shareholders to analyze First Southeast's strategic
alternatives to maximize returns to shareholders. As a result, First Southeast
began discussions with Trident regarding its future prospects. In January 1996,
First Southeast retained Trident to serve as its financial adviser. Trident made
a detailed examination of First Southeast and its prospects and presented a
report to the Board of Directors on March 6, 1996. Based on the results of its
study, Trident advised the Board of Directors that if First Southeast continued
to operate under its existing business plan, shareholder values were projected
to decline on a present value basis. Also at that meeting, Trident assessed the
value of First Southeast's shares in a sale of control transaction and advised
the Board of Directors of the valuation range. Trident estimated the acquisition
value of First Southeast at that time to be in the range of $19.00 to $22.00 per
share (prior to the Restructuring discussed below).
In light of the information and analyses prepared by Trident, the Board
of Directors evaluated the options available to First Southeast and concluded
that it would be appropriate to consider alternatives to remaining independent,
and also determined to solicit proposals for a possible affiliation with First
Southeast. Trident identified certain financial institutions it believed most
likely to be interested in acquiring First Southeast. After reviewing the list
of potential acquirors, and their anticipated interest in First Southeast, the
Board of Directors, with advice from Trident, selected five potential acquirors
from which to solicit preliminary indications of interest. Trident prepared a
confidential information memorandum ("Information Memorandum") for distribution
to the prospective acquirors. In the Information Memorandum, First Southeast
stated that one of its goals was to receive merger consideration in the form of
100% marketable common stock which would qualify as a tax-free exchange for its
stockholders.
During March and April 1996, Trident submitted the Information
Memorandum to the five potential acquirors and solicited preliminary indications
of interest from them. Only one verbal indication of interest was received, as
four of the five potential acquirors declined to submit a proposal. A concern
stated by several of the potential acquirors, after a detailed review of the
Information Memorandum, was First Southeast's high level of capital and
relatively low return on equity.
On May 9, 1996 the Board of Directors held a special meeting in which
Trident reviewed the results of the solicitations and the terms of the verbal
indication of interest received, as well as background information on the
potential acquiror. The Board of Directors discussed the proposal and determined
that it was not acceptable because the merger consideration was below the
valuation range established by Trident.
Also at this meeting, the Board of Directors considered the process it
had undertaken and assessed alternative strategies. The Board considered whether
or not it was in the best interests of shareholders to continue to solicit
proposals in a sale of control of First Southeast, or to stop the process and
continue as an independent company. In assessing whether to continue the sales
strategy, First Southeast considered attempting to negotiate a higher price with
the one potential acquiror who submitted a proposal, contacting additional
potential acquirors, or changing the preference for common stock in a merger
transaction. In assessing the independence strategy, the Board of Directors
considered capital management techniques such as share repurchases, including
modified dutch auctions, or the payment of a large special dividend, as well as
implementing a business plan which
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emphasizes increased growth and profitability.
Upon review of the alternative strategies, the Board of Directors
instructed Trident to contact the potential acquiror to indicate that the
proposed price was considered too low to be acceptable and to inquire as to
whether the potential acquiror was willing to improve its price. The potential
acquiror did not change its proposal. The Board elected not to approach
additional potential acquirors as it believed it had identified and approached
those acquirors most likely to be interested in First Southeast and which would
value First Southeast the highest. Further, the Board of Directors did not
believe that changing the preference for stock as the merger consideration to be
in best interests of its shareholders.
In consideration of the above, the Board of Directors elected to cease
any further solicitations. The Board believed that, among other things, the high
level of capital was a significant impediment to providing adequate returns to
shareholders as an independent company and in the sale of control of First
Southeast. In June 1996, the Board of Directors undertook a restructuring of
First Southeast (the "Restructuring") to reduce its capital to a more
appropriate level. On June 27, 1996, First Southeast paid a $10.00 special
dividend ($44.4 million total payment). The Restructuring reduced First
Southeast's capital level approximately 50% (to 10.3% of assets) and improved
its interest rate spread as lower yielding investments were sold to fund the
dividend payment. Additional improvements in profitability were achieved as the
loan payable by the Employee Stock Purchase Plan (the "ESOP") was paid off with
the dividends received on the ESOP shares. This eliminated any future
obligations of First Southeast in funding the ESOP.
During the second half of 1996, First Southeast did have occasional
discussions with one of the potential acquirors who originally did not submit a
proposal (the "Prospect"). The Prospect renewed its interest in First Southeast
after the Restructuring given that fewer shares would now have to be issued in a
potential merger with First Southeast. Discussions with the Prospect continued
into early 1997. However, before discussions advanced to a pricing stage, the
Prospect announced in February 1997 that it had entered into an agreement to be
acquired by a regional financial institution. The Prospect indicated to First
Southeast that, despite its impending merger, it was still interested in
continuing discussions. However, the Prospect indicated that the process would
have to slow down so that its commercial bank acquiror could be made aware of
the status of such discussions and to allow its acquiror to have input into the
negotiations.
On February 20, 1997, the Board of Directors of First Southeast met to
discuss the implications of the merger announcement by the Prospect and the
uncertainties created by such an event on the status of negotiations. The Board
of Directors was concerned about the introduction of a new party into the
discussions and the additional time necessary to perform an analysis and
formulate an opinion about the potential acquisition of First Southeast.
Given the Board of Directors' concerns and the uncertainties surrounding
the status of the discussions with the Prospect, the Board of Directors
instructed Trident to approach other potential acquirors while at the same time
continue working with the Prospect and its acquiror to finalize its proposal.
Trident identified certain financial institutions it believed most likely to be
interested in acquiring First Southeast. After reviewing the list of potential
acquirors, and their anticipated interest in First Southeast, the Board of
Directors, with advice from Trident, selected four other potential acquirors
from which to solicit proposals. Of the four additional potential acquirors, two
had been contacted during the previous round of solicitations. At the direction
of the Board of Directors, Trident updated and distributed the Information
Memorandum to the new potential acquirors and met with each potential acquiror
to present the merits of a combination with First Southeast and to discuss First
Southeast's goals and objectives in a merger transaction.
On April 15, 1997, the Board of Directors held a meeting to review the
results of the second round of solicitations and to discuss alternative
strategies. The Prospect and its acquiror proposed a price below Trident's
previous valuation range (adjusted for the $10.00 per share special dividend)
and none of the other four potential acquirors chose to make a proposal, citing
various reasons. After consideration of the results to date, the Board
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of Directors, along with Trident, reviewed a list of additional potential
acquirors which had not been contacted. Upon review of this list, the Board of
Directors instructed Trident to contact Carolina First Corporation and inquire
as to whether or not Carolina First Corporation would be interested in
discussing a potential acquisition of First Southeast. Up to this point, the
Board of Directors, with advice from Trident, believed Carolina First
Corporation would have limited interest in First Southeast given the required
use of the purchase method of accounting for any acquisition of First Southeast
due to the Restructuring. Upon contact by Trident, Carolina First Corporation
indicated an interest in a potential acquisition of First Southeast and signed a
confidentiality agreement on April 21, 1997.
On April 25, 1997, Trident met with the management of Carolina First
Corporation. At that meeting, Trident provided Carolina First Corporation with
background information on First Southeast and discussed First Southeast's goals
and objectives in a possible merger with Carolina First Corporation. Carolina
First Corporation expressed an interest in continuing discussions regarding the
acquisition of First Southeast. Trident, with the assistance of First Southeast
management, provided Carolina First Corporation with additional information
about First Southeast on April 30, 1997.
On May 9, 1997, Carolina First Corporation contacted Trident and
verbally outlined the terms of a possible combination. At that time, Carolina
First Corporation indicated that it would be willing to offer between $14.75 and
$15.25 of Carolina First Corporation stock, or 0.9375 shares of Carolina First
Corporation stock for every share of First Southeast stock. Carolina First
Corporation also offered two seats on Carolina First Bank's Board of Directors.
Later that afternoon, Trident met telephonically with First Southeast's Board of
Directors to review Carolina First Corporation's preliminary proposal.
On May 13, 1997, First Southeast's Board of Directors again met
telephonically with Trident and First Southeast's legal counsel to discuss
Carolina First Corporation's preliminary proposal. At that meeting, First
Southeast's Board of Directors directed Trident to ask Carolina First
Corporation for a fixed rate of exchange (without a range), and seats on
Carolina First Corporation's Board of Directors, in addition to seats on
Carolina First Bank's Board, as well as a commitment by Carolina First
Corporation to honor First Southeast's employee and other benefit plans.
On May 14, 1997, Trident contacted Carolina First Corporation to discuss
First Southeast's proposal. At that time, Carolina First Corporation verbally
offered a one-for-one exchange ratio and agreed in principle to honor First
Southeast's benefit plans. Carolina First Corporation also agreed to consider
offering seats on Carolina First Corporation's Board of Directors.
On May 28, 1997, Carolina First Corporation submitted a preliminary term
sheet that outlined the proposed terms of a possible merger. Based on a review
of the terms contained in the preliminary term sheet, the Board of Directors
authorized management, Trident and First Southeast's legal counsel to continue
negotiations on all terms of a proposed merger.
On June 30, and July 1, 1997, the Board of Directors met to review the
terms of the Reorganization Agreement as summarized by Trident and First
Southeast's legal counsel. Trident reported that it had completed its due
diligence review of Carolina First Corporation and rendered to the First
Southeast Board of Directors its Opinion as to the fairness, from a financial
point of view, of the Conversion Ratio, as of the date of such Opinion.
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 strengthening its presence in the Anderson area. Carolina First
Corporation's goal is to be the leading South Carolina-headquartered, state-wide
financial institution, and having a strong market presence in First Southeast's
market areas is an important step in achieving this goal. Carolina First
Corporation believes that acquiring an existing institution is a superior means
of expanding in First Southeast's markets, as compared
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to branching de novo, primarily because of the acquisition of the established
customer relationships. Carolina First Corporation believes that First Southeast
has valuable community relationships which it will be able to use to expand its
banking operations in First Southeast's market areas. Carolina First Corporation
also believes that terms of the proposed Merger are fair from its point of view
and from a financial perspective. Carolina First Corporation has received a
fairness opinion from Interstate that the Merger is fair, from a financial point
of view, to the shareholders of Carolina First Corporation.
Opinion of First Southeast's Financial Adviser
First Southeast retained Trident in January 1996 to act as its financial
adviser and to render a fairness Opinion in connection with the Merger. As part
of its engagement, Trident performed a valuation analysis of First Southeast in
an acquisition context. On March 6, 1996, Trident presented its valuation report
("Valuation Report") to First Southeast's Board of Directors.
On July 1, 1997, Trident met with First Southeast's Board of Directors
to review the proposed terms of the Reorganization Agreement. At that time,
Trident presented a report ("Analysis of Merger Proposal and Report of Due
Diligence") to First Southeast's Board of Directors summarizing the financial
terms of the Merger and providing updated market information with respect to
thrift mergers and acquisitions. Trident also analyzed the advantages and
disadvantages of the Merger from a financial point of view. In addition, Trident
updated its valuation since March 1996 and rendered its written Opinion to First
Southeast's Board of Directors to the effect that, as of that date, the
consideration to be received by First Southeast's stockholders pursuant to the
Reorganization Agreement was fair to them from a financial point of view (the
"Opinion"). The financial fairness standard employed by Trident in rendering its
Opinion was whether such consideration was within the range of the economic
values of consideration that companies having the characteristics of First
Southeast and Carolina First Corporation might negotiate in comparable
circumstances, not whether the consideration proposed in the Reorganization
Agreement is at or approaching the higher end of such range.
Trident confirmed and delivered its Opinion to First Southeast's Board
of Directors as of the date of this Joint Proxy Statement/Prospectus that the
consideration to be received by the shareholders of First Southeast in the
Merger is fair from a financial point of view, as of such date. A copy of the
Opinion, which sets forth certain assumptions made, matters considered and
limitations on the reviews undertaken, is attached to this Joint Proxy
Statement/Prospectus as Exhibit B. Trident has consented to the inclusion of
such Opinion and summaries of the Valuation Report and Proposal Analysis in the
Joint Proxy Statement/Prospectus, which will be circulated to First Southeast's
stockholders.
TRIDENT'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF FIRST
SOUTHEAST AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW,
OF THE CONSIDERATION TO BE RECEIVED BY FIRST SOUTHEAST'S SHAREHOLDERS BASED ON
CONDITIONS AS THEY EXISTED AND COULD BE EVALUATED AS OF THE DATE OF THE OPINION.
TRIDENT'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY FIRST SOUTHEAST
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING, NOR
DOES TRIDENT'S OPINION ADDRESS THE UNDERLYING BUSINESS DECISION TO EFFECT THE
MERGER. THIS SUMMARY OF TRIDENT'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION, WHICH IS ATTACHED TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AS EXHIBIT B. SHAREHOLDERS ARE URGED TO READ
TRIDENT'S OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE AND
MATTERS CONSIDERED AND THE LIMITS ON THE REVIEW UNDERTAKEN IN RENDERING SUCH
OPINION.
In connection with rendering its Opinion, Trident reviewed and analyzed,
among other things, the following: (i) the Reorganization Agreement; (ii) this
Joint Proxy Statement/Prospectus; (iii) certain publicly
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available information concerning First Southeast, including the audited
financial statements of First Southeast for each of the years in the three-year
period ended June 30, 1996 and the unaudited financial statements of First
Southeast for the nine months ended March 31, 1997; (iv) certain publicly
available information concerning Carolina First Corporation, including the
audited financial statements of Carolina First Corporation for each of the years
in the three-year period ended December 31, 1996 and the unaudited financial
statements of Carolina First Corporation for the three months ended March 31,
1997; (v) certain other internal information, primarily financial in nature,
concerning the business and operations of First Southeast and Carolina First
Corporation furnished to Trident by First Southeast and Carolina First
Corporation for purposes of Trident's analysis; (vi) information with respect to
the trading market for First Southeast common stock and Carolina First
Corporation common stock; (vii) certain publicly available information with
respect to other companies that Trident believed to be comparable to First
Southeast and Carolina First Corporation and the trading markets for such other
companies' securities; and (viii) certain publicly available information
concerning the nature and terms of other transactions that Trident considered
relevant to its inquiry. Trident also met with certain officers and employees of
First Southeast and Carolina First Corporation to discuss the foregoing, as well
as other matters which it believed relevant to its inquiry such as: (i) the
current business operations, financial condition and future prospects of First
Southeast and Carolina First Corporation; (ii) the results of Trident's due
diligence examination of Carolina First Corporation; and (iii) the cost savings
expected to result from the Merger. No limitations were imposed by either First
Southeast or its Board or management with respect to the investigation made or
procedures followed by Trident.
In its review and analysis and in arriving at its Opinion, Trident
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided to it by First Southeast and Carolina First
Corporation, or that was publicly available, the accuracy of the representations
and warranties of the officers and the employees of First Southeast and Carolina
First Corporation with whom Trident held discussions, and the accuracy of the
representations and warranties of First Southeast and Carolina First Corporation
in the Reorganization Agreement, and did not attempt independently to verify any
such information. Trident further assumed that there are no conditions in the
regulatory approvals of the Reorganization Agreement that will have a material
adverse effect upon the contemplated economic benefits of the Merger. The
financial information provided to Trident by First Southeast was of the type
normally produced by the management of First Southeast and reviewed by First
Southeast's Board of Directors at its regular meetings and the Board and
management of First Southeast have represented to Trident that they have no
reason to believe that Trident's reliance thereon was unreasonable. First
Southeast's Board, however, did not specifically review the information,
assumptions and other information provided by management to Trident for accuracy
and completeness. Trident did not conduct a physical inspection of the
properties or facilities of First Southeast, nor did it make or obtain any
independent evaluations or appraisals of any of such properties or facilities.
In conducting its analyses and arriving at its Opinion as expressed
herein, Trident considered such financial and other factors as it deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial condition and results of operations of
First Southeast and Carolina First Corporation, including interest income,
interest expenses, net interest income, net interest margin, interest
sensitivity, noninterest expenses, earnings, dividends, book value, return on
assets, return on equity, capitalization, the amount and type of non-performing
assets and the reserve for loan losses; (ii) the business prospects of First
Southeast and Carolina First Corporation; (iii) the economies in First
Southeast's and Carolina First Corporation's market areas; (iv) the historical
and current market for First Southeast common stock and for Carolina First
Corporation's common stock and for the equity securities of certain other
companies that Trident believed to be comparable to First Southeast and Carolina
First Corporation; and (v) the nature and terms of certain other acquisition
transactions that Trident believed to be relevant. Trident also took into
account its assessment of general economic, market, financial and regulatory
conditions and trends, as well as its knowledge of the financial institutions
industry, its experience in connection with similar transactions, and its
knowledge of securities valuation generally. Trident's Opinion necessarily was
based upon conditions in existence and subject to evaluation on the respective
dates of its Opinion. Trident's Opinion is, in any event, limited to the
fairness, from a financial point of view, of the consideration to be received by
the holders of First Southeast
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common stock in the Merger and does not address First Southeast's underlying
business decision to effect the Merger.
The summaries set forth below reflect all the material analyses, factors
and assumptions considered by Trident and the material valuation methodologies
used by Trident in arriving at its Opinion as to fairness described above. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial or summary description. Trident believes that its
analyses and the summary set forth below must be considered as a whole and that
selecting portions of its analyses, without considering all of the analyses, or
all of the above summary, without considering all factors and analyses, would
create an incomplete view of the processes underlying the analyses set forth in
Trident's reports and its Opinion. Therefore, the ranges of valuations resulting
from any single analysis described below should not be taken to be Trident's
view of the actual value of First Southeast or the combined company. In
performing its analyses, Trident made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of First Southeast or Carolina
First Corporation. The results of the specific analyses performed by Trident may
differ from First Southeast's or Carolina First Corporation's actual values or
actual future results as a result of changing economic conditions or changes in
company strategy and policies, as well as a number of other factors. Such
individual analyses were prepared to provide valuation guidance solely as part
of Trident's overall valuation analysis and the determination of the fairness of
the consideration to be paid to First Southeast's shareholders. The analyses do
not purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. In addition, as described above, Trident's
Opinion and presentations to First Southeast's Board of Directors were among the
many factors taken into consideration by First Southeast's Board of Directors in
making its determination to approve the Reorganization Agreement.
Trident met or engaged in discussions with the Board of Directors of
First Southeast at various times between March 1996 and July 1997 to present
analyses contained in a series of reports which serve as the basis for Trident's
Opinion. Two key reports presented by Trident were the Valuation Report dated
March 6, 1996 and the Analysis of Merger Proposal and Report of Due Diligence
dated June 30, 1997. The following is a brief summary of the Valuation Report
presented by Trident to the Board of Directors of First Southeast on March 6,
1996:
Financial Analysis of First Southeast. Trident examined First
Southeast's financial performance for the period June 30, 1992 through
December 31, 1995 by analyzing the composition of its balance sheet,
adjusting and normalizing its earnings, and calculating a variety of
operating and financial ratios for First Southeast. Trident also studied
the trading market for First Southeast's common stock and the
composition of its shareholder base.
Peer Group Analysis. Trident evaluated First Southeast's strengths and
weaknesses by comparing the financial performance of First Federal to
that of the following groups of SAIF-insured, Office of Thrift
Supervision-regulated thrift institutions based on financial information
as of September 30, 1995 (unless otherwise noted): (i) all United States
institutions; (ii) all institutions in the Southeast; (iii) all South
Carolina institutions; (iv) all United States institutions with total
assets between $250 million and $500 million; and (v) Southeast
institutions with total assets between $250 million and $500 million
(the "Aggregates"). This analysis compared a number of First Southeast's
historical financial ratios to those of the Aggregates, including but
not limited to: (i) the balance sheet composition as a percentage of
total; (ii) the loan portfolio as a percentage of total assets; (iii)
the investment portfolio as a percentage of total assets; and (iv) asset
quality. Trident also compared First Southeast's growth rates between
December 31, 1992 and September 30, 1995, its yields on assets and costs
of liabilities and its income and expense data for 1994 and for the nine
months ended September 30, 1995 to those of the Aggregates.
Comparison to Actively-Traded Thrifts. Trident compared First Southeast
to the following groups of actively-traded thrifts as of February 29,
1996: (i) all United States thrifts; (ii) United States thrifts with
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assets between $250 million and $500 million; (iii) all South Carolina
thrifts; (iv) thrifts with tangible capital between 18% and 22%; (v)
thrifts with a return on assets during the trailing four quarters
between 0.90% and 1.10%; (vi) thrifts with a return on equity during the
trailing four quarters between 4% and 6%; (vii) thrifts with a market
capitalization between $50 million and $100 million; and (viii) twelve
actively-traded thrifts Trident believed were most similar to First
Southeast in terms of size, capital structure, profitability and asset
quality. Trident compared First Southeast to the aforementioned groups
of actively-traded thrifts on the basis of its balance sheet, GAAP
capital, regulatory capital, asset quality, loan loss reserves, asset
and deposit growth, return on average assets, return on average equity,
and the components of earnings during the trailing four quarters.
Financial Projections. With input from First Southeast's management,
Trident prepared six-year financial projections for First Southeast
beginning December 31, 1995. The projections were prepared assuming a
declining interest rate environment and a gradually increasing spread.
Over the projection period, loans were projected to achieve a 5.2%
compound annual growth rate, while overall assets were projected to grow
at a 2.9% compound annual rate. Deposits were projected to experience
3.0% annual growth. Shareholders' equity as a percentage of assets was
projected to remain relatively constant while dividends were projected
to increase $.04 annually. Profitability exhibited a modest improvement
as return on equity remained in the 6.0% to 6.3% range throughout the
later years of the projection period.
State of the Market. Trident briefly reviewed the current and historical
trading market for thrift and bank equities, and current and historical
trends in the acquisition markets for banks and thrifts. Trident focused
on the acquisition market for thrifts with particular attention to the
segments of the market which it believed to be the most relevant to
First Southeast, such as thrifts of similar size and profitability,
thrifts with similar capital structures and asset quality, and thrifts
located in the same geographic region.
Control Valuation for First Southeast's Common Stock. Trident estimated
the fair market value of First Southeast in an acquisition context. In
valuing First Southeast, Trident utilized the asset approach, the income
approach and the market approach, and then reconciled the values derived
therefrom. The reference ranges, as well as the final reconciliation of
value, contained in the Valuation Report were estimated before First
Southeast paid a $10.00 per share special dividend as part of the
Restructuring.
The asset approach considers the market value of a company's assets
and liabilities, as well as any intangible value the company may have. Trident
estimated First Southeast's net asset value by adjusting the carrying value of
its assets and liabilities to reflect current market values. In addition,
Trident increased First Southeast's net asset value for the assumed exercise of
outstanding options to purchase First Southeast common stock, and reduced its
net asset value for the cost of terminating certain long-term contracts and
benefit plans, the expected one time charge to recapitalize the SAIF and other
merger expenses. Based on the adjustments discussed above, Trident estimated
First Southeast's fully-diluted net asset value to be approximately $73.4
million, or $16.72 per share. After determining First Southeast's net asset
value, Trident added an intangible premium to reflect the estimated value of its
customer relationships. Based on a branch purchase methodology and intangible
("core deposit") premiums observed in the market for thrift acquisitions, as
well as Trident's knowledge of First Southeast, Trident applied premiums equal
to 5% and 9% of core deposits to First Southeast's estimated fully-diluted net
asset value. Using the asset approach, Trident established a reference range of
$19.50 to $22.00 per share of First Southeast common stock.
Trident also used an income approach in its valuation of First Southeast
by discounting First Southeast's projected future earnings plus merger cost
savings of 15% to 50% of First Southeast's operating expenses, resulting from an
assumed acquisition of First Southeast. The projected earnings were discounted
to the present rates of 13%, 15% and 17%. The discount rates chosen were
estimates of the required rates of return for holders or prospective holders of
shares of financial institutions similar to First Southeast, based on a number
of factors including prevailing interest rates, the pricing ratios of publicly
traded financial institutions, and the financial condition and operating results
of First Southeast, as well as Trident's general knowledge of valuation,
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the securities markets, and acquisition values in other mergers of financial
institutions. Trident adjusted the resulting values to reflect the cost of
certain merger-related expenses. Using the income approach, Trident established
a reference range of $9.00 to $13.00 per share of First Southeast common stock.
In the market approach, Trident analyzed certain median pricing ratios
(e.g., price to book value, price to tangible book value, price to reported
earnings, price to assets, and the premium paid over tangible book value as a
percentage of core deposits) resulting from selected completed thrift merger
transactions, as well as recently announced pending transactions. In applying
the market approach, Trident considered the pricing ratios for the following
groups of thrift merger transactions: (i) all pending thrift merger transactions
(52 transactions); (ii) all pending thrift mergers announced during the 90 days
prior to February 26, 1996 (the date of the market data) (17 transactions);
(iii) all pending thrift mergers involving thrifts located in the Southeast (11
transactions); (iv) all pending thrift mergers involving actively-traded thrifts
(26 transactions); (v) all pending thrift mergers in which the aggregate
consideration was between $50 million and $120 million (seven transactions);
(vi) all pending thrift mergers in which the target thrift had assets between
$250 million and $500 million (nine transactions); (vii) all pending thrift
mergers in which the target thrift had a return on assets of between 0.80% and
1.00% (11 transactions); (viii) all pending thrift mergers in which the target
thrift had a return on equity of between 3% and 6% (18 transactions); and (ix)
all pending thrift mergers in which the target thrift had a tangible equity
ratio of between 15% and 25% of assets (nine transactions). Trident also
considered the pricing ratios for 11 pending or completed thrift merger
transactions in which the target thrift was of similar size and capital
structure as First Southeast, and in which the target thrift had similar
profitability and asset quality. Trident then compared a number of financial
ratios for First Southeast to those of the target thrift institutions. Based on
First Southeast's financial condition and results of operations, as well as
other factors, relative to the groups of thrift mergers noted above, Trident
chose ranges of pricing ratios to apply to First Southeast. Trident chose price
to book value ratios of 115% to 135%, resulting in per share values of $19.75 to
$23.25; price to tangible book value ratios of 115% to 135%, also resulting in
per share values of $19.75 to $23.25; price to earnings ratios of 24 to 28 times
trailing four quarter earnings, resulting in per share values of $19.25 to
$22.50; price to assets ratios of 22% to 26%, resulting in per share values of
$19.00 to $22.50; and premiums over tangible book value as a percentage of core
deposits of 5.0% to 8.0%, resulting in per share values of $20.25 to $22.00.
Based on these derived ranges of value, Trident established a reference range of
$19.50 to $22.50 per share using the market approach.
Trident then reviewed the results from the three approaches, and after
consideration of all relevant facts, determined a final range of $19.00 to
$22.00 (the "Initial Valuation Range") per share for the acquisition value of
First Southeast. This range of value was later updated to reflect the $10.00 per
share special dividend paid as part of the Restructuring, as well as changes in
First Southeast's financial condition, operating results and changes in market
conditions. (See "-- Updated Valuation" below.) Trident did not apply specific
weights to the three individual approaches, but Trident gave greater
consideration to the asset and market approaches in its final range of value for
First Southeast.
Prospective Acquirors. Trident presented First Southeast with a list of
other financial institutions with operations in the Southeast which it believed
to be prospective acquirors (a total of 18 companies). These prospective
acquirors were categorized based on Trident's perceived level of interest from
the acquiror and "fit" with First Southeast. Trident also presented summary
financial statements and merger and acquisition histories for each of the
companies which were considered the best prospects to acquire First Southeast
(13 companies).
The following is a summary of the Analysis of Merger Proposal and Report
of Due Diligence presented to the Board of Directors of First Southeast on June
30, 1997:
Summary of Proposed Transaction. Trident presented a summary of the
financial terms of the Merger. Trident also compared the pricing ratios
for the Merger with the median pricing ratios for selected groups of
pending thrift mergers and acquisitions. Trident discussed the
advantages and disadvantages of the Merger from a financial point of
view.
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Updated Valuation. Trident updated the Initial Valuation Range to
reflect the Restructuring, which occurred in June 1996, and to "roll
forward" the Initial Valuation Range to reflect the financial condition
of First Southeast based on financial statements as of and for the nine
months ended March 31, 1997 (the "Final Valuation Range"). To determine
the Final Valuation Range, Trident made the following adjustments to the
Initial Valuation Range: (i) $10.00 was deducted to reflect the payment
of the $10.00 per share special dividend received by First Southeast's
shareholders as part of the Restructuring, (ii) $1.11 was added to
reflect the increase in book value per share of First Southeast (after
accounting for the Restructuring) from December 31, 1995 to March 31,
1997, and (iii) $1.00 per share was added to reflect the improved market
conditions and financial performance of First Southeast since December
31, 1995. After adjusting the Initial Valuation Range, Trident
established the Final Valuation Range of between $11.00 and $14.00 per
share. Trident's estimate of fair market value is based on a
reasonable range of assumed cost savings and synergies achievable in
an acquisition of FSFC as estimated by Trident, with input from
management. Therefore, the range of estimated fair market values
established by Trident does not include all possible values of FSFC to
all potential acquirors. As such, the value to each buyer can be greater
or less than the range of fair market values established by Trident due
to the specific factors and other considerations unique to that buyer.
Review of Due Diligence Examination of Carolina First Corporation (dated
June 25, 1997). Trident presented a summary of its on-site due diligence
examination of Carolina First Corporation. Carolina First Corporation's
historical balance sheets and income statements were presented, along
with a variety of financial ratios that analyzed Carolina First
Corporation's financial condition and operating results through March
31, 1997. Trident discussed Carolina First Corporation's business
strategy, strengths and weaknesses, peer group comparisons,
profitability, dividends, financial condition, loan portfolio
composition, asset quality, loan loss reserve coverage, asset
classifications, pending litigation, past financial performance, current
and previous acquisitions and its subsidiary activities, as well as
recent bank analysts' reports on Carolina First Corporation, and other
issues.
Carolina First Corporation's Stock Pricing. Trident examined the pricing
of Carolina First Corporation's common stock as of June 19, 1997 in
relation to other regional commercial banks, commercial banks of a
similar size and all actively-traded commercial banks. Additionally, as
part of the evaluation, Trident adjusted Carolina First Corporation's
book value and tangible book value to reflect Carolina First
Corporation's investment in Affinity Technology as well as Carolina
First Corporation's interest in Net.B@nk, Inc. upon the completion of
its upcoming initial public offering (the "Adjusted Book Values").
Trident then compared Carolina First Corporation's stock price to the
Adjusted Book Values and compared these pricing ratios to other regional
commercial banks, commercial banks of a similar size and all
actively-traded commercial banks.
Trident reported that during its investigation, it did not discover any
conditions that would prevent it from rendering its fairness opinion to First
Southeast's Board of Directors. As discussed above, Trident relied, without
independent verification, upon the accuracy and completeness of all of the
financial and other information provided by Carolina First Corporation.
Trident, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwriting, and valuations for corporate
and other purposes. Trident has extensive experience with the valuation of
financial institutions. First Southeast's Board of Directors selected Trident as
its financial adviser because Trident is a nationally recognized investment
banking firm specializing in financial institutions and because of its
substantial experience in transactions similar to the Merger. Trident is not
affiliated with either First Southeast or Carolina First Corporation.
For its services as financial adviser, First Southeast paid Trident a
retainer of $5,000, a fee of $10,000 upon the delivery of the Valuation Report,
and a fee of $25,000 upon execution of the Reorganization Agreement. An
additional fee equal to 0.50% of the aggregate merger consideration, less the
amounts First Southeast previously paid Trident as discussed above, will be
payable to Trident upon consummation of the Merger (a balance due of
approximately $289,117 based on a $15.00 per share price for Carolina First
Corporation common stock). First Southeast has also agreed to reimburse Trident
for its reasonable out-of-pocket expenses and to indemnify Trident against
certain liabilities, including certain liabilities under federal securities
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laws.
Opinion of Carolina First Corporation's Financial Adviser
Interstate has been engaged by Carolina First Corporation to render an
opinion with respect to the fairness from a financial point of view to the
holders of Carolina First Corporation common stock of the consideration proposed
to be paid by Carolina First Corporation in the Merger with First Southeast.
Interstate is a recognized investment banking firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Carolina First
Corporation selected Interstate to render its opinion on the basis of
its experience and expertise in merger transactions, and its reputation in
the banking and investment communities. In the ordinary course
of its business, Interstate trades the equity securities of Carolina First
Corporation and First Southeast for its own account and for the accounts of its
customers, and, accordingly, may at any time hold a long or short position in
such securities.
In connection with its engagement, an oral opinion was delivered by
Interstate to the Carolina First Corporation Board of Directors on July 10, 1997
(as used in this section, "the Board") to the effect that, as of such date and
based upon and subject to certain matters, the consideration to be paid by
Carolina First Corporation in the Merger to the holders of the First Southeast
common stock was fair to Carolina First Corporation from a financial point
of view. Interstate has confirmed its oral opinion, by delivery of a
written opinion contained herein in Exhibit C. Interstate updated certain
of its analyses, as necessary, and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith.
THE FULL TEXT OF INTERSTATE'S WRITTEN OPINION TO THE BOARD DATED JULY
23, 1997 AND THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH
THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF REVIEW BY
INTERSTATE, IS ATTACHED HERETO AS APPENDIX C AND IS INCORPORATED HEREIN BY
REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH
THIS JOINT PROXY STATEMENT/PROSPECTUS. THE FOLLOWING SUMMARY OF INTERSTATE'S
OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION. INTERSTATE'S OPINION, WHICH IS ADDRESSED TO THE CAROLINA FIRST
CORPORATION BOARD, IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW TO THE HOLDERS OF CAROLINA FIRST CORPORATION COMMON STOCK OF THE
CONSIDERATION TO BE PAID BY CAROLINA FIRST CORPORATION IN THE MERGER AND
DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED
TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS
TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE CAROLINA FIRST CORPORATION
SPECIAL MEETING.
In connection with its opinion, Interstate, among other things: (i)
reviewed certain publicly available financial and other data with respect to
Carolina First Corporation and First Southeast, including the consolidated
financial statements of Carolina First Corporation and First Southeast for
recent fiscal years and interim periods to March 31, 1997, and certain other
relevant financial and operating data relating to Carolina First Corporation and
First Southeast made available to Interstate from published sources and from the
internal records of Carolina First Corporation and First Southeast; (ii)
reviewed the Reorganization Agreement and certain related documents provided to
Interstate by Carolina First Corporation; (iii) reviewed the Current Reports on
Form 8-K, filed by First Southeast and Carolina First Corporation on July 8 and
July 11, 1997, respectively, with respect to the Merger; (iv) reviewed a draft
of this Joint Proxy Statement/Prospectus; (v) reviewed certain historical market
prices and trading volumes of Carolina First Corporation and First Southeast as
reported by The Nasdaq Stock Market; (vi) compared First Southeast from a
financial point of view with certain other public companies which Interstate
deemed to be relevant; (vii) considered the financial terms, to the extent
publicly available, of selected
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business combinations in the thrift industry; (viii) reviewed and discussed with
representatives of management of Carolina First Corporation and First Southeast
certain information regarding the business and financial issues of the Merger,
including financial forecasts relating to cost savings and other potential
synergies anticipated to result from the Merger and related assumptions; (ix)
made inquiries regarding and discussed the due diligence review of First
Southeast conducted by Carolina First Corporation with senior executives of
First Southeast; (x) made inquiries regarding and discussed the Merger, the
Reorganization Agreement and other matters related thereto with Carolina First
Corporation's counsel; and (xi) performed such other analyses and examinations
as Interstate deemed appropriate.
In connection with its review, Interstate did not assume any obligation
to verify any of the foregoing information and relied on all such information
being complete and accurate in all material respects. With respect to the
financial forecasts for Carolina First Corporation and First Southeast prepared
by their respective managements, Interstate assumed, with Carolina First
Corporation's consent, for purposes of its opinion that such forecasts were
reasonably prepared on bases reflecting at the time of preparation the best
available estimates and judgments of their respective managements, as to the
cost savings, revenue enhancements and other potential synergies (including the
timing, amount and achievability thereof) anticipated to result from the Merger,
and that such forecasts provided a reasonable basis upon which Interstate could
form its opinion. Interstate also assumed, with Carolina First Corporation's
consent, that there were no material changes in Carolina First Corporation's or
First Southeast's assets, financial condition, results of operations, business
or prospects since the respective dates of their last financial statements
reviewed by Interstate and that off-balance-sheet activities of Carolina First
Corporation and First Southeast will not materially and adversely affect the
future financial position or results of operations of Carolina First Corporation
or First Southeast. Interstate further assumed, with Carolina First
Corporation's consent, that in the course of obtaining the necessary regulatory
and third party consents for the Merger, no restriction will be imposed that
will have a material adverse effect on the contemplated benefits of the Merger
or the transactions contemplated thereby. Interstate further assumed, with
Carolina First Corporation's consent, that the Merger will be consummated in
accordance with the terms and provisions of the Reorganization Agreement,
without any amendments to, and without any waiver by Carolina First Corporation
of, any of the material conditions to its obligations thereunder. Interstate
noted that it is not an expert in the evaluation of loan portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
Interstate assumed, with Carolina First Corporation's consent, that such
allowances for each of Carolina First Corporation and First Southeast are in the
aggregate adequate to cover such losses. In addition, Interstate did not assume
responsibility for reviewing any individual credit files or making an
independent evaluation, appraisal or physical inspection of the assets or
individual properties of Carolina First Corporation or First Southeast, nor was
Interstate furnished with any such evaluations or appraisals. Finally,
Interstate's opinion was based on economic, monetary and market and other
conditions as in effect on, and the information made available to Interstate as
of, the date thereof. Although Interstate evaluated the consideration to be paid
by Carolina First Corporation in the Merger to the holders of the First
Southeast common stock from a financial point of view, Interstate was
not requested to, and did not, recommend the specific consideration payable
in the proposed Merger. No other limitations were imposed by
Carolina First Corporation on Interstate with respect to the investigations
made or procedures followed by Interstate in rendering its opinion.
Set forth below is a summary of the material analyses performed by
Interstate in connection with its opinion delivered to the Carolina First
Corporation Board on July 23, 1997.
Pro Forma Dilution Analysis. Using Interstate's estimates for Carolina
First Corporation of $1.13 in 1997 and $1.25 in 1998 and using estimates
from management of First Southeast of $0.73 in 1997 and $0.91 in 1998 and
estimates as to the cost savings and other potential synergies anticipated
to result from the Merger prepared by Carolina First Corporation's management
with respect to amortization of goodwill and the core deposit premium created
in the Merger and the future sale of the mortgage portfolio of First Southeast
and its discretionary investment securities portfolio, Interstate compared
estimated earnings per share ("EPS") for Carolina First Corporation on a
stand-alone basis to the estimated EPS for Carolina First Corporation
on a pro forma combined basis for calendar years 1997 and 1998.
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In addition, Interstate prepared pro forma balance sheets assuming the Merger
will be consummated in November 1997 and for calendar years 1997 and 1998.
Comparable Company Analysis. Based on publicly available information and
earnings estimates, Interstate reviewed and compared actual and estimated
selected financial, operating and stock market information and financial
ratios of First Southeast and a group of five thrifts
consisting of American Federal Bank; Coastal Financial Corporation; First
Financial Holdings Inc.; Palfed, Inc.; and Perpetual Bank, MHC (the
"Comparable Thrifts").
Interstate noted for Carolina First Corporation's Board that, among other
things: (i) First Southeast had a common equity to total assets ratio of
10.2% at March 31, 1997, as compared to the average for the Comparable Thrift
of 7.7%; (ii) First Southeast had a return on average assets and a return
on average equity for the quarter ended March 31, 1997 of 1.08% and 10.6%
respectively, as compared to the average for the Comparable Thrifts of .94%
and 13.2% respectively; (iii) First Southeast had an efficiency ratio
(defined as noninterest expenses divided by net interest income plus
noninterest income, before taking into account any goodwill amortization)
of 50.2% for the quarter ended March 31, 1997, as compared to the average
for the Comparable Thrifts of 61.3%; (iv) First Southeast had a price to
book ratio and a price to tangible book ratio of 1.89%, as of July 23, 1997
based on the balance sheet at March 31, 1997, as compared to the average for
the selected thrift of 2.38x and 2.46x, respectively; and (v) First
Southeast had a price to earnings ratio of 22.69x at July 23, 1997 based
on the EPS for the latest twelve months ended March 31, 1997, as compared
to the average for the selected thrifts of 28.61x.
Analysis of Selected Comparable Bank Merger Transactions. Interstate
reviewed the consideration paid in the following 17 transactions announced since
1996 with transaction values less than $500 million: First Financial Holdings
Inc./Investors Savings Bank of SC, Inc.; Regions Financial Corporation/GF
Bancshares, Inc.; FNB Corp./Home Savings Bank, SSB; Horizon Bancorp Inc./Beckley
Bancorp Inc.; 1st United Bancorp/Seaboard Savings Bank, FSB; SouthFirst
Bancshares, Inc./First Federal Savings and Loan-Chilton; Resource Bank/Eastern
American Bank, FSB; First Citizens Bancshares, Inc./First Savings Financial
Corporation; Republic Bancshares, Inc./FFO Financial Group, Inc.; P.C.B.
Bancorp, Inc./Anchor Savings Bank; Carolina First Corporation/Lowcountry Savings
Bank, Inc.; Republic Bancshares, Inc./Firstate Financial, FA; SouthTrust
Corporation/Charter Bank; BB&T Corporation/Fidelity Financial Bankshares Corp.;
Colonial BancGroup, Inc./First Family Financial Corp.; SouthTrust
Corporation/Preferred Bank, FSB and BankUnited Financial Corp./Suncoast Savings
and Loan Association (collectively, the "Comparable Transactions"). For each
company merged or to be merged in such transactions, Interstate compiled figures
illustrating, among other things, transaction price to latest 12 months earnings
per share, transaction price to book value, transaction price to tangible book
value, and the ratio of premium over tangible book value to core deposits.
The figures for the Comparable Transactions represent announced deals
in the Southeast (defined as Alabama, Arkansas, Florida, Georgia, Mississippi,
North Carolina, South Carolina, Tennessee, Virginia and West Virginia)
from June 30, 1995 through June 30, 1997. The ratios are as follows: (i)
an average excluding high and low of transaction price to latest 12 months'
earnings per share of 25.0x; (ii) an average excluding high and low of
transaction price to book value of 1.55x; (iii) an average excluding high
and low of transaction price to tangible book value of 1.55x; and (iv) an
average excluding high and low premium over tangible book value to core
deposits of 7.1%. In addition to the Comparable Transactions, Interstate
reviewed a pending thrift transaction in South Carolina, the acquisition
of American Federal Bank, FSB by CCB Financial Corporation, which resulted
in a transaction price to latest 12 months' earnings per share of 20.9x,
a transaction price to book value of 2.93x, a transaction price to tangible
book value of 3.03x and a premium over tangible book value to core deposits
of 23.5%. In comparison, based upon an assumed Exchange Ratio of .956 of
a share of Carolina First Corporation for each share of First Southeast,
representing shares of Carolina First Corporation with a value of $17.50
per share as of July 23, 1997, the consideration to be paid to the holders
of First Southeast represented a ratio of transaction price to latest
12 months' earnings per share, adjusted for certain nonrecurring items,
of 25.8x, a ratio of transaction price to book value of 2.14x, a ratio
of transaction price to tangible book value of 2.14x and a ratio of
tangible premium to core deposits of 15.6%.
No other company or transaction used in the above analysis as a
comparison is identical to Carolina First Corporation, First Southeast or the
proposed Merger. Accordingly, an analysis of the results of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the acquisition or public trading
multiples of the companies to which Carolina First Corporation, First Southeast
and the proposed Merger are being compared.
Other Analysis. Interstate also reviewed selected investment research
reports on First Southeast and Carolina First Corporation. In addition,
Interstate prepared an overview of the historical financial performance of First
Southeast and analyzed its deposit market share, its loan portfolio and a
break-down by industry classification of its commercial lending, as well as a
history of its non-performing assets.
The foregoing is a summary of the material analyses performed by
Interstate in connection with its oral opinion delivered to the Carolina First
Corporation Board on July 10, 1997 and its written opinion dated July 23,
1997. The summary set forth above does not purport to be a complete
description of the analyses performed by Interstate. The preparation of
a fairness opinion is not necessarily susceptible to partial analysis or
summary description. Interstate believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and of the factors considered, without considering all
analyses and factors, would create an incomplete view of the process underlying
the analyses. In addition, Interstate may have given various analyses more or
less
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weight than other analyses, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Interstate's
view of the actual values of Carolina First Corporation, First Southeast or the
combined company. The fact that any specific analysis has been referred to in
the summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Interstate made numerous assumptions with
respect to industry performance, regulatory, general business and economic
conditions and other matters, many of which are beyond the control of Carolina
First Corporation and First Southeast. The analyses performed by Interstate are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than those suggested by such analyses.
Such analyses were prepared solely as part of Interstate's analysis of the
fairness of the consideration to be paid by Carolina First Corporation from a
financial point of view in connection with the delivery of Interstate's opinion.
The analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future. Interstate used in its
analyses estimates by Interstate for Carolina First Corporation and estimates by
management of First Southeast for First Southeast and projections prepared by
Carolina First Corporation and First Southeast management as to the cost savings
and other potential synergies anticipated to result from the Merger. Such
projections and estimates are based on numerous variables and assumptions which
are inherently unpredictable and must be considered not certain of occurrence as
projected. Accordingly, actual results could vary significantly from those set
forth in such projections.
Pursuant to the terms of Interstate's engagement, Carolina First
Corporation has agreed to pay Interstate a fee equal to $100,000, of which
$25,000 was payable upon the signing of the Reorganization Agreement, $25,000
was payable upon delivery of the oral opinion and $50,000 is payable upon
delivery of the written opinion. Carolina First Corporation also has agreed to
reimburse Interstate for its reasonable out-of-pocket expenses, including the
fees and expenses of Interstate's legal counsel. Carolina First Corporation has
agreed to indemnify Interstate, its affiliates, and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under the federal securities
laws.
Interstate has performed various financial advisory and investment
banking services for Carolina First Corporation in the past, for which
Interstate has received compensation, and may provide such services to Carolina
First Corporation in the future.
Exchange of First Southeast Stock Certificates
As soon as practicable after the Effective Time (but in no event more
than five days after the Effective Time), Carolina First Corporation or its
transfer agent (in such capacity, the "Exchange Agent") will mail, and otherwise
make available to each former record holder of shares of First Southeast common
stock, a form of the letter of transmittal and instructions for use in effecting
surrender and exchange of certificates which immediately before the Effective
Time represented shares of First Southeast common stock ("Certificates") for
payment therefor. Adequate provisions shall be made to permit Certificates to be
surrendered and exchanged in person not later than the business day following
the Effective Time.
FIRST SOUTHEAST SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL FORMS.
Upon receipt of such notice and transmittal form, each holder of
Certificates at the Effective Time should send or provide the Certificate, or
Certificates, to the Exchange Agent, whereupon the holder shall promptly receive
the Carolina First Corporation common stock issuable to him in exchange for such
Certificates. If any portion of the payment to be made upon surrender and
exchange of a Certificate is to be paid to a person other than the person in
whose name the Certificate is registered, it shall be a condition of such
payment that the
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Certificate shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay in advance any transfer or
other taxes or establish to the satisfaction of Carolina First Corporation that
no such tax is applicable.
Carolina First Corporation is not obligated to deliver the Carolina
First Corporation common stock to which any former holder of First Southeast
common stock is entitled as a result of the Merger until such holder surrenders
his or her Certificates, 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 Carolina First Corporation or First Southeast. In addition, no dividend
or other distribution payable to the holders of record of Carolina First
Corporation common stock as of any time subsequent to the Effective Time shall
be paid to the holder of any certificate representing shares of First Southeast
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such Certificate to the Exchange Agent for exchange. However, upon
surrender of the Certificates, both the Carolina First Corporation 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 Certificates.
After the Effective Time, each outstanding Certificate shall be deemed
for all corporate purposes (other than voting and the payment of dividends and
other distributions to which the former shareholders of First Southeast 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
Carolina First Corporation common stock in exchange therefor (and cash in lieu
of fractional shares) as provided in the Reorganization Agreement.
Conditions to Consummation of the Merger
The obligations of Carolina First Corporation and Carolina First Bank to
consummate the transactions contemplated in the Reorganization Agreement are
subject to the satisfaction of the following conditions (among others) at or
before the Closing Date: (i) the compliance by First Southeast and First Federal
with their respective covenants set forth in the Reorganization Agreement and
the material accuracy, on the Closing Date, of each of the representations and
warranties of First Southeast and First Federal set forth in the Reorganization
Agreement (subject to certain limited exceptions); (ii) the receipt by Carolina
First Corporation of an counsel of First Southeast and First Federal
in form and substance reasonably satisfactory to Carolina First Corporation and
its counsel; (iii) that there shall have been no "material adverse event" (as
defined in the Reorganization Agreement) with respect to First Southeast or
First Federal through the Closing Date; (iv) the receipt of necessary regulatory
approvals; (v) the receipt of the necessary shareholder approvals of Carolina
First Corporation and First Southeast; and (vi) that immediately prior to
Closing, the First Southeast allowance for loan losses meets certain
requirements.
The obligations of First Southeast and First Federal to consummate the
transactions contemplated in the Reorganization Agreement are subject to the
satisfaction of the following conditions (among others) at or before the Closing
Date: (i) the compliance by Carolina First Corporation and Carolina First Bank
with their respective covenants set forth in the Reorganization Agreement and
the material accuracy, on the Closing Date, of each of the representations and
warranties of Carolina First Corporation and Carolina First Bank set forth in
the Reorganization Agreement (subject to certain limited exceptions); (ii) the
receipt by First Southeast of an opinion of counsel of Carolina First
Corporation and Carolina First Bank in form and substance reasonably
satisfactory to First Southeast and its counsel; (iii) that there shall have
been no "material adverse event" (as defined in the Reorganization Agreement)
with respect to Carolina First Corporation or Carolina First Bank through the
Closing Date; (iv) the receipt of necessary regulatory approvals; (v) the
receipt of the necessary shareholder approvals of Carolina First Corporation and
First Southeast; and (vi) the receipt of a tax opinion from Wyche, Burgess,
Freeman & Parham, P.A., reasonably satisfactory to First Southeast, opining,
subject to reasonable
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qualifications, that the Merger shall, upon compliance with reasonable
conditions, qualify as a tax-free reorganization under Section 368(a) of the
Code.
Carolina First Corporation and First Southeast may waive certain of the
conditions imposed with respect to their respective obligations to consummate
the Reorganization Agreement.
Termination
The Reorganization Agreement may be terminated at any time prior to the
Closing Date: (a) by mutual consent of the parties; (b) by either Carolina First
Corporation or First Southeast, at that party's option, (i) 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, or (ii) if the requisite Carolina First
Corporation and First Southeast shareholder approvals are not received at the
Special Meetings; (c) by either Carolina First Corporation or First Southeast if
the other party (or its subsidiaries) has failed to comply with the agreements
or fulfill the conditions contained in the Reorganization Agreement except that
any such failure of compliance or fulfillment must result in a "material adverse
event" (as defined in the Reorganization Agreement) and the breaching party must
be given notice of the failure to comply and a reasonable period of time to
cure; (d) by either Carolina First Corporation or First Southeast in the event
that closing has not occurred by March 31, 1998; (e) by either Carolina First
Corporation or First Southeast if the Ending Price is above $19.0156 or below
$11.4094 (as such price shall be subject to equitable adjustment for stock
splits, stock dividends, reverse stock splits and similar items).
Amendment
The Reorganization Agreement may be amended or supplemented in writing
by mutual agreement of Carolina First Corporation, Carolina First Bank, First
Southeast and First Federal.
Conduct of First Southeast's and Carolina First Corporation's Business Prior to
the Effective Time
Under the terms of the Reorganization Agreement, First Southeast and
First Federal each has agreed with respect to the conduct of its respective
businesses pending closing, among other things: (a) to carry on its business
only in the ordinary course and to use all reasonable efforts to preserve intact
its business organization and goodwill, maintain the services of its present
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings; (b) not to amend its charter or bylaws; (c)
not to issue or acquire any shares of its capital stock of any class or any
securities convertible into its capital stock or declare or pay any dividends or
distributions, or make any change in its capital structure (except that it may
pay its customary $0.06 per share quarterly cash dividend prior to closing); (d)
to promptly advise Carolina First Corporation of any material adverse change in
the business of First Southeast or First Federal; (e) not to breach the
Reorganization Agreement or cause any of the representations of First Southeast
or First Federal contained in the Reorganization Agreement to become untrue; (f)
not to incur any indebtedness other than in the ordinary course of business; (g)
except for Merger-related expenses and current contractual obligations, not to
incur any expense in excess of $100,000; (h) not to grant any executive officers
any increase in compensation (except in the ordinary course of business) or
enter into any employment agreement; (i) not to engage in acquisitions, mergers
or other reorganizations; (j) except as may be directed by any regulatory
authority or in certain other limited instances, not change its lending,
investment, liability management or other material banking or other policies in
any material respect, or implement or adopt any change in accounting principles,
practices or methods; or (k) except in limited instances, not impose, or permit
or suffer the imposition of any liens on any
38
<PAGE>
of its assets, including its shares of capital stock of First Federal.
Under the terms of the Reorganization Agreement, Carolina First
Corporation has agreed, with respect to the conduct of its business pending
closing, among other things: (i) to carry on its business in substantially the
same manner as heretofore conducted; (ii) not to amend its Articles of
Incorporation or Bylaws in any manner that will adversely affect the First
Southeast shareholders in any material respect; (iii) to promptly advise First
Southeast of any material adverse change in its business; and (iv) not to take
any action that would be contrary to or breach any of the terms or provisions of
the Reorganization Agreement, or which would cause Carolina First Corporation's
representations in the Reorganization Agreement to become untrue in any material
respect.
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 acquisition of First Southeast and First Federal as contemplated
herein is subject to approval of the FDIC pursuant to both the Bank Merger Act
(12 U.S.C. ss. 1828 et seq.) ("BMA") and Section 5(d)(3) of the Federal Deposit
Insurance Act ("FDI Act"). The BMA requires that the relevant regulatory agency
take into consideration, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and needs
of the communities to be served. The BMA prohibits the FDIC from approving the
acquisition (i) if such transaction would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (ii) if
the effect of such transaction in any section of the country may be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless the relevant
regulatory agency finds that the anticompetitive effects of such merger are
clearly outweighed by the public interest and by the probable effect of the
transaction 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 BMA provides that no bank merger may be consummated until the 15th day after
approval, during which time the United States Department of Justice ("DOJ") may
challenge the Reorganization Agreement on antitrust grounds. Carolina First
Corporation has submitted an application to the FDIC for approval to consummate
the Merger.
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 its 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 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.
[Carolina First Corporation has filed a request with the Federal Reserve
under 12 C.F.R. ss. 225.12(d)(2) requesting a waiver of the Federal Reserve's
review of this transaction. The Federal Reserve has granted such waiver.]
39
<PAGE>
First Southeast is required to provide prior notice of the Merger to the
Office of Thrift Supervision ("OTS") under various OTS regulations. [This notice
has been provided.]
Carolina First Corporation and First Southeast 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 or would not delay consummation of the Merger.
Operations After the Merger
After consummation of the Merger, it is expected that a substantial
majority of the former First Federal banking locations will be operated as
branch locations of Carolina First Bank and such locations are expected to
conduct their business in generally the same manner as prior to the Merger. It
is generally expected that the retained First Federal officers and employees
will continue in similar positions of Carolina First Bank in an at-will
employment capacity. In general, retained First Southeast and First Federal
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. After consummation of
the Merger, it is anticipated that Carolina First Bank will continue to conduct
its business in generally the same manner in which it is now conducted. See
"--Interests of Certain Persons in the Merger."
Interests of Certain Persons in the Merger
Directors. In accordance with the Reorganization Agreement, Carolina
First Corporation is nominating the three existing First Southeast directors
listed below to Carolina First Corporation's board of directors and recommends
their election to the Carolina First Corporation shareholders:
1. David C. Wakefield, III (Class of 1995; term expiring in 1998)
2. William R. Phillips (Class of 1996; term expiring in 1999)
3. Vernon E. Merchant, Jr. (Class of 1997; term expiring in 2000)
Carolina First Corporation has also agreed that at its 1998 annual meeting of
shareholders, Carolina First Corporation will nominate David C. Wakefield, III
to a three-year term beginning in 1998.
Indemnification; Advancement of Expenses; Directors' and Officers'
Insurance. The Reorganization Agreement provides that Carolina First Corporation
will indemnify the First Southeast directors and executive officers against
certain liabilities (and will advance certain expenses) to the fullest extent
that such persons would have been entitled to indemnification (or advancement of
expenses) under the laws of the State of Delaware and the First Southeast
Certificate of Incorporation and Bylaws as in effect on the date of the
Reorganization Agreement. The Reorganization Agreement also provides that prior
to closing, First Southeast shall use its best efforts to extend its existing
directors' and officers' liability insurance policy past the Closing Date
(spending up to $50,000) and after closing, Carolina First Corporation shall
take no action to terminate prematurely such policy.
Employment Agreements. David C. Wakefield, III, the Chief Executive
Officer of First Southeast, and John L. Biediger, the Executive Vice President
of First Southeast (the "Officers"), have employment contracts with First
Southeast which provide for certain payments, among other things, in connection
with the termination of their employment after a change in control (as defined
in such agreements). In the Reorganization Agreement, Carolina First Corporation
acknowledges the transactions contemplated therein constitute a change in
control for purposes of the employment agreements and further acknowledges that
the Officers are entitled to receive the certain payments and benefits provided
for therein upon a change in control of First Southeast or First Federal.
40
<PAGE>
In the Reorganization Agreement, First Southeast has agreed, on or before the
Effective Time, to cause such employment contracts to be amended so that at the
election of the Officers (i) the payments and benefits to be provided under such
employment agreements shall be payable or provided to the Officer over a period
sufficient to reduce the present value of such payments or benefits to an amount
which is one dollar less than three times the Officers' "base amount" under
Section 280G(b)(3) of the Code or (ii) the payments or benefits to be provided
to the Officers shall be reduced to the extent necessary to avoid treatment as
an excess parachute payment with the allocation of the reduction among such
payments and benefits and the period over which such payments and benefits are
to be provided to be determined by the Officers. The parties agree that the
payments and benefits to be paid or provided to each of the Officers under the
employment contracts shall have an aggregate present value, determined as of the
Effective Time, of not less than $537,933 (in the case of Mr. Wakefield) and
$350,504 (in the case of Mr. Biediger).
It is currently contemplated that Carolina First Corporation and David
C. Wakefield, III will enter into a consulting agreement that will be effective
upon consummation of the Merger, whereby Mr. Wakefield, as an independent
contractor, will assist Carolina First Corporation in the assimilation of First
Southeast. Compensation under such agreement is expected to be at a rate not in
excess of his current total compensation and will include the provision of
health and other employee benefits to Mr. Wakefield and his family.
Carolina First Corporation and John L. Biediger are expected to enter
into an employment agreement that will be effective upon consummation of the
Merger which will have a term of one year, will provide that Mr. Biediger will
work in an officer's capacity and will earn compensation substantially similar
to that earned by him prior to the Merger.
Other Matters Related to Employees and Employee Benefit Plans. In the
Reorganization Agreement, Carolina First Corporation, First Southeast and First
Federal agreed to cooperate to develop staffing plans which will result in
retention of as many First Southeast and First Federal managers and employees as
is practical (as determined by Carolina First Corporation). Carolina First
Corporation agreed that First Southeast and First Federal employees shall also
be eligible for consideration for any other available positions for which they
are qualified at Carolina First Corporation and its subsidiaries. Carolina First
Corporation agreed that those former First Southeast or First Federal employees
who are employed by Carolina First Corporation or its subsidiaries immediately
following the Closing Date: (i) will be eligible, on the same basis as current
Carolina First Corporation employees, for all Carolina First Corporation Benefit
Plans (as defined in the Reorganization Agreement); and (ii) will receive past
service credit for eligibility and vesting (but not benefit accrual) purposes
under Carolina First Corporation Benefit Plans for years of service with First
Southeast and First Federal as if such service had been with Carolina First
Corporation or its subsidiaries. Carolina First Corporation agreed that First
Southeast may elect to fully vest its employees under some or all First
Southeast Benefit Plans prior to consummation of the Merger. Any First Southeast
Benefit Plans that are intended to be qualified under Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code will be terminated by
proper action of the Board of Directors of First Southeast or First Federal
prior to the Effective Time. Carolina First Corporation agreed to assume all of
First Southeast's obligations under its Post-Retirement Health Benefit Plan with
respect to First Federal employees eligible to receive benefits under such Plan
at the Effective Time based on their age and years of service with First
Federal. Carolina First Corporation further agrees that those former First
Southeast or First Federal employees who are employed by Carolina First
Corporation or its subsidiaries immediately following the Closing Date will not
be subject to any pre-existing condition exclusion under Carolina First
Corporation's medical Benefit Plans. Carolina First Corporation agrees that,
upon the Mergers, it will assume or honor (as appropriate) First Southeast's and
First Federal's Director Emeritus Plan, Deferred Compensation Plan for Key
Employees and Non-employee Directors, Employee Severance Compensation Plan and
Pay to Stay program and the obligations to pay benefits in accordance with the
terms of such plans and any elections by participants thereunder; provided that
Carolina First Corporation's total obligations under the Pay to Stay program
shall not exceed $75,000.
41
<PAGE>
Accounting Treatment
Carolina First Corporation will account for the acquisition of First
Southeast as a "purchase" under generally accepted accounting principles. Under
the purchase method of accounting, the assets and liabilities of First Southeast
will be adjusted to their estimated market values and combined with the assets
and liabilities of Carolina First Bank. Stockholders' equity and cash will be
adjusted to reflect common stock and cash issued for the purchase price. The
excess of the purchase price over the estimated market value of the net assets
acquired will be recorded as intangible assets, which will be amortized over 10
to 25 years using accelerated and straight-line methods. Prior period statements
will not be restated.
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
First Southeast 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 First Southeast 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 First Southeast shareholders who
acquired their shares of First Southeast'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 advisers 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 Reorganization Agreement, First Southeast
will receive the opinion of Wyche, Burgess, Freeman & Parham, P.A., dated as of
the Effective Time, 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 Reorganization Agreement and assuming the Merger occurs in
accordance with the Reorganization Agreement and conditioned on the accuracy of
certain representations made by First Southeast and Carolina First Corporation,
for federal income tax purposes:
1. The Merger will qualify as a reorganization under the provisions
of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code,
provided that substantially all of the assets of First Southeast
are acquired in such a Merger.
2. No gain or loss will be recognized either to Carolina First
Corporation or First Southeast as a result of the Merger.
3. No gain or loss will be recognized to the shareholders of First
Southeast upon their receipt of shares of Carolina First
Corporation common stock in the Merger (disregarding for this
purpose any cash received for whole or fractional shares or
otherwise in connection with the Merger).
4. The receipt of cash by First Southeast shareholders in the Merger
in exchange for fractional shares will be treated for federal
income tax purposes as a redemption of such shares.
5. The tax basis of the Carolina First Corporation common stock so
received by First Southeast shareholders in connection with the
Merger will be the same as the basis in the First Southeast
common stock surrendered in exchange for such Carolina First
Corporation common stock as set forth above.
6. The holding period of the Carolina First Corporation common stock
received by a First Southeast shareholder will include the
holding period of the shares of First Southeast surrendered
therefor provided that the First Southeast shares are capital
assets in the hand of the shareholder at the time
42
<PAGE>
of the Merger.
Fractional Share Interests. A First Southeast shareholder who receives
cash in lieu of a fractional share interest in Carolina First Corporation 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 First Southeast 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 Carolina First
Corporation common stock received, determined as set forth above, is longer than
one year.
THE FEDERAL 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 JOINT PROXY STATEMENT/PROSPECTUS, WITHOUT
CONSIDERATION OF THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER.
SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISERS 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 Carolina First Corporation Shares has been
registered under the Securities Act. Accordingly, resales of the Carolina First
Corporation Shares by non-affiliates of First Southeast will not require
registration. However, under existing law, any person who is an "affiliate" of
First Southeast (as defined below) at the time the proposed exchange is
submitted to a vote of the First Southeast shareholders who wishes to sell
Carolina First Corporation Shares will be required either to (a) register the
sale of the Carolina First Corporation 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 First
Southeast affiliates resell their Carolina First Corporation Shares pursuant to
certain of the requirements of Rule 144 under the Securities Act if such
Carolina First Corporation Shares are sold within one year after receipt
thereof. After one year, 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 First Southeast affiliate may freely
sell the Carolina First Corporation Shares without limitation. After two years
from the issuance of the Carolina First Corporation 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 Carolina First
Corporation Shares without limitation, regardless of the status of Carolina
First Corporation's periodic securities law filings. First Southeast has agreed
that it will use its best efforts to cause affiliates of First Southeast to
agree in writing that they will not sell the Carolina First Corporation common
stock to be received by them except as provided above. Stop transfer
instructions will be given by Carolina First Corporation to the Exchange Agent
with respect to the Carolina First Corporation 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 First Southeast, 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, First Southeast at the time of
consummation of the Merger. In this context, an "affiliate" will generally
include the following persons: directors or executive officers, and the holders
of 10% or more of First Southeast common stock (and any relative or spouse of
any such person having the same home as such person and any trusts, estates,
corporations, or other entities in which such persons have a 10% or greater
beneficial or equity interest).
43
<PAGE>
No Appraisal/Dissenters' Rights
Neither Carolina First Corporation shareholders nor First Southeast
shareholders have dissenters' rights or appraisal rights as a result of the
Merger.
Recommendations of Boards of Directors
The Board of Directors of First Southeast has concluded that the Merger
is in the best interests of First Southeast and has authorized consummation
thereof, subject to approval of the First Southeast shareholders, receipt of all
requisite regulatory approvals, and satisfaction of certain other conditions.
The Board of Directors of First Southeast recommends that shareholders vote FOR
approval of the Reorganization Agreement.
The Board of Directors of Carolina First Corporation has concluded that
the Merger is in the best interests of Carolina First Corporation and has
authorized consummation thereof, subject to approval of the Carolina First
Corporation shareholders, receipt of all requisite regulatory approvals, and
satisfaction of certain other conditions. The Board of Directors of Carolina
First Corporation recommends that shareholders vote FOR approval of the
Reorganization Agreement.
44
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Condensed Balance Sheet is based on
combining the historical consolidated balance sheet for Carolina First
Corporation at March 31, 1997 with the historical consolidated balance sheet of
First Southeast at March 31, 1997, adjusting for the issuance of additional
shares expected to be issued in the Merger. 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
March 31, 1997 with the historical consolidated capitalization of First
Southeast at March 31, 1997, adjusting for the issuance of additional shares
expected to be issued in the Merger.
The unaudited Pro Forma Combined Condensed Statement of Income is based
on combining the historical consolidated statements of income of Carolina First
Corporation for the year ended December 31, 1996 with the historical
consolidated statements of income of First Southeast for the twelve months ended
December 31, 1996, and the historical consolidated statements of income of
Carolina First Corporation for the three months ended March 31, 1997 with the
historical consolidated statements of income of First Southeast for the three
months ended March 31, 1997. Historical earnings for First Southeast, which has
a June 30 fiscal year, have been adjusted to reflect a December 31 fiscal
year-end by adding the subsequent six-month period and subtracting the
comparable preceding year interim results from the results for the year ended
June 30, 1996.
The Merger is expected to be accounted for under the purchase method of
accounting, and pro forma data are derived in accordance with such method.
The pro forma data do not, given the operational and market overlap
between Carolina First Corporation and First Southeast, reflect any potential
benefits from potential cost savings or synergies expected to be achieved
following the Merger. The pro forma data also exclude merger costs related to
the Merger.
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.
45
<PAGE>
Unaudited Pro Forma Combined Capitalization
At March 31, 1997
<TABLE>
<CAPTION>
March 31, 1997 Purchase
Carolina First First Accounting Pro Forma
Corporation Southeast Adjustments Combined
(Dollars in thousands)
<S> <C> <C> <C> <C>
Long-term debt:
Subordinated notes $ 25,393 $ -- $ -- $ 25,393
Mortgage debt 1,083 -- -- 1,083
Total long-term debt 26,476 -- -- 26,476
Shareholders' equity:
Common stock 11,355 44 4,344 (a) 15,743
Surplus 84,721 19,137 42,329 (a) 146,187
Retained earnings 10,337 15,089 (15,089) (a) 10,337
Nonvested restricted stock and
guarantee of ESOP debt (697) -- -- (697)
Unrealized loss on securities
available for sale (377) (31) -- (408)
Total shareholders' equity 105,339 34,239 31,584 171,162
Total capitalization $131,815 $34,239 $31,584 $197,638
</TABLE>
- ------------------------
(a) To reflect the effect of issuing 4,388,231 shares of Carolina First
Corporation common stock based on an assumed market price of $15.00 per
share of Carolina First Corporation common stock.
46
<PAGE>
Unaudited Pro Forma Combined Condensed Balance Sheet
<TABLE>
<CAPTION>
March 31, 1997 Purchase
Carolina First First Accounting Pro Forma
Corporation Southeast Adjustments Combined
(Dollars in thousands, except share data and footnotes)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 62,111 $ 3,648 $ (329)(a) $ 65,430
Interest-earning deposits 16,809 3,793 -- 20,602
Investment securities 261,376 55,894 (826)(b) 316,444
Loans 1,198,332 269,946 (2,334)(c) 1,465,944
Less unearned income (14,889) (7,573) -- (22,462)
Less allowance for loan losses (12,039) (1,311) -- (13,350)
Net loans 1,171,404 261,062 (2,334) 1,430,132
Premises and equipment 30,509 5,015 438 (d) 35,962
Intangible assets 16,014 -- 37,600 (e) 53,614
Other assets 55,683 5,339 500 (d) 61,522
Total assets $1,613,906 $334,751 $ 35,049 $1,983,706
Liabilities and shareholders' equity:
Liabilities
Deposits
Noninterest-bearing $ 210,350 $ 1,909 $ -- $ 212,259
Interest-bearing 1,046,655 280,891 -- 1,327,546
Total deposits 1,257,005 282,800 -- 1,539,805
Borrowed funds 197,855 15,000 -- 212,855
Other liabilities 53,707 2,712 863 (f) 59,884
1,164 (g)
1,438 (h)
Total liabilities 1,508,567 300,512 3,465 1,812,544
Total shareholders' equity 105,339 34,239 31,584 (i) 171,162
Total liabilities and shareholders' equity $1,613,906 $334,751 $35,049 $1,983,706
</TABLE>
- -----------------------------------
(a) To record the payment of transaction fees.
(b) To adjust the investment securities of First Southeast to estimated
market value.
(c) To adjust the loan portfolio of First Southeast to estimated market
value.
(d) To adjust the fixed assets and property of First Southeast to estimated
market value.
(e) To record the excess cost of acquisition over the estimated market
value of the net assets acquired (goodwill of $31,944,000) and the core
deposit premium ($5,656,000).
(f) To adjust the deferred tax liabilities as a result of the purchase
accounting adjustments using Carolina First Corporation's statutory tax
rate of 38%.
(g) To record the liability for a benefit plan for First Southeast's
directors.
(h) To record the buyout of employment contracts and severance payments.
(i) To give effect to the acquisition of First Southeast, assuming the
issuance of 4,388,231 shares of Carolina First Corporation common
stock, $1.00 par value per share, based on an assumed market price of
$15.00 per share of Carolina First Corporation common stock and an
Conversion Ratio of 1.00 share of Carolina First Corporation common
stock for each share of First Southeast common stock. The total value
of Carolina First Corporation common stock exchanged would be
$65,823,000.
47
<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997 Purchase
Carolina First First Accounting Pro Forma
Corporation Southeast Adjustments Combined
(Dollars in thousands, except share data)
<S> <C> <C> <C> <C>
Interest income $30,392 $ 6,232 $ 113 (a) $ 36,737
Interest expenses 14,940 3,572 -- 18,512
Net interest income 15,452 2,660 113 18,225
Provision for loan losses 2,952 45 -- 2,997
Net interest income after
provision for loan losses 12,500 2,615 113 15,228
Noninterest income 3,092 297 -- 3,389
Noninterest expenses 12,866 1,474 257 (b) 14,921
320 (c)
4 (d)
Income before income taxes 2,726 1,438 (468) 3,696
Income taxes 1,009 539 (56) (e) 1,492
Net income 1,717 899 (412) 2,204
Dividends on preferred stock -- -- -- --
Net income applicable to
common shareholders $ 1,717 $ 899 $ (412) $ 2,204
Net income per common share
Primary $ 0.15 $ 0.21 $ -- $ 0.14
Fully diluted 0.15 0.21 -- 0.14
Average shares outstanding
Primary 11,443,468 4,388,231 -- 15,831,699
Fully diluted 11,478,383 4,388,231 -- 15,866,614
</TABLE>
- ---------------------------------------
(a) To amortize the securities and loan market-to-market adjustment over a
period of seven years.
(b) To amortize the core deposit premium based on a sum-of-the-year's
digits method over 10 years.
(c) To amortize goodwill over a 25-year period using the straight-line
method.
(d) To increase depreciation expense from mark-up of First Southeast
premises and equipment to an estimated market value.
(e) To show impact of taxes at 38% tax rate.
48
<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Earnings
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Purchase
Carolina First First Accounting Pro Forma
Corporation Southeast Adjustments Combined
(Dollars in thousands, except share data)
<S> <C> <C> <C> <C>
Interest income $116,872 $ 25,235 $ 451 (a) $142,558
Interest expenses 59,802 14,306 -- 74,108
Net interest income 57,070 10,929 451 68,450
Provision for loan losses 10,263 180 -- 10,443
Net interest income after
provision for loan losses 46,807 10,749 451 58,007
Noninterest income 21,341 226 -- 21,567
Noninterest expenses 51,675 10,497 1,028 (b) 64,493
1,278 (c)
15 (d)
Income before income taxes 16,473 478 (1,870) 15,081
Income taxes 5,999 518 ( 225) (e) 6,292
Net income 10,474 (40) (1,645) 8,789
Dividends on preferred stock 63 -- -- 63
Net income applicable to
common shareholders $ 10,411 $ (40) $ (1,645) $ 8,726
Net income per common share
Primary $ 0.96 $ (0.01) $ -- $ 0.58
Fully diluted 0.92 (0.01) -- 0.56
Average shares outstanding
Primary 10,839,708 4,263,730 -- 15,103,438
Fully diluted 11,371,547 4,263,730 -- 15,635,277
</TABLE>
- ----------------------------
(a) To amortize the securities and loan market-to-market adjustment over a
period of seven years.
(b) To amortize the core deposit premium based on a sum-of-the-year's
digits method over 10 years.
(c) To amortize goodwill over a 25-year period using the straight-line
method.
(d) To increase depreciation expense from mark-up of First Southeast
premises and equipment to an estimated market value.
(e) To show impact of taxes at 38% tax rate.
49
<PAGE>
INFORMATION ABOUT CAROLINA FIRST CORPORATION
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 three operating subsidiaries: (1) Carolina First
Bank, a South Carolina-chartered bank headquartered in Greenville, South
Carolina, (2) Carolina First Mortgage Company, a mortgage loan origination and
servicing company headquartered in Columbia, South Carolina, and (3) Blue Ridge
Finance Company, Inc., an automobile finance company headquartered in
Greenville, South Carolina. Through its subsidiaries, Carolina First Corporation
provides a full range of banking services, including mortgage, trust and
investment services, designed to meet substantially all of the financial needs
of its customers. Carolina First Corporation, which commenced operations in
December 1986, currently conducts business in 54 locations in South Carolina and
is one of the largest independent South Carolina-headquartered financial
institutions. At March 31, 1997, it had total assets of approximately $1.61
billion, total loans of approximately $1.2 billion, total deposits of
approximately $1.3 billion and approximately $105 million in shareholders'
equity.
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 four
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); Georgetown and Horry counties (located in the northern coastal
region of South Carolina); and the Charleston metropolitan area (located in the
central coastal region of South Carolina). Carolina First Corporation's market
areas are located in the four largest Metropolitan Statistical Areas of the
state. Carolina First Corporation also has branch locations in other counties in
South Carolina.
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 February 3,
1995), the acquisition of 12 branch locations of Republic National Bank in March
1993, in which deposits of approximately $190 million were assumed, and the
acquisition of Lowcountry Savings Bank, Inc. in July 1997. 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
50
<PAGE>
revenues is dividends from its subsidiaries.
Carolina First Bank. Carolina First Bank is a South Carolina-chartered,
Federal Reserve non-member bank and a wholly-owned subsidiary of Carolina First
Corporation. It currently engages in a general banking business through 51
locations, which are located throughout South Carolina. It began its operations
in December 1986 and at March 31, 1997 had total assets of approximately $1.59
billion, total loans of approximately $1.2 billion and total deposits of
approximately $1.3 billion. Its deposits are insured by the FDIC.
Carolina First Mortgage Company. Carolina First Mortgage Company is a
South Carolina corporation which principally originates and services one-to-four
family mortgage loans through its six offices located in South Carolina. It is
headquartered in Columbia, South Carolina. At March 31, 1997, Carolina First
Mortgage Company was servicing or subservicing approximately 15,000 loans having
an aggregate principal balance of approximately $1.3 billion.
Blue Ridge Finance Company. On December 29, 1995, Carolina First
Corporation acquired Blue Ridge Finance Company, an automobile finance company
headquartered in Greenville, South Carolina. Blue Ridge operates from one
location and, at March 31, 1997, had approximately $15 million in total assets.
Blue Ridge is engaged primarily in indirect automobile lending.
CF Investment Company. Carolina First Corporation has formed a
wholly-owned subsidiary, CF Investment Company, which has filed an application
with the United States Small Business Administration ("SBA") to become licensed
as a "small business investment company." To date, CF Investment Company has not
engaged in any operations. Carolina First Corporation expects to receive the SBA
license in the third quarter of 1997 and expects to capitalize CF Investment
Company with a contribution of $3.0 million.
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 March 31,
1997, Carolina First Corporation was in compliance with both the risk-based
capital guidelines and the minimum leverage capital ratio.
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 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 March 31, 1997,
51
<PAGE>
Carolina First Corporation and Carolina First Bank were both in compliance with
each of the applicable regulatory capital requirements.
Pro Forma Regulatory Capital. The following tables sets forth Carolina
First Bank's and Carolina First Corporation's regulatory capital position at
March 31, 1997, on a historical basis as well as a pro forma basis assuming
consummation of the Merger. See "PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION."
<TABLE>
<CAPTION>
Carolina First Bank At March 31, 1997
Historical Pro Forma
(Dollars in thousands)
<S> <C> <C> <C> <C>
Shareholders' Equity .... $ 123,183 7.74% $ 189,006 9.64%
Regulatory Capital
Tier I risk-based:
Actual ......... $ 109,822 8.85 $ 137,282 9.77%
Required* ...... 49,609 4.00 52,033 4.00
Excess ......... $ 60,213 4.85% $ 85,249 5.77%
Total risk-based:
Actual ......... $ 120,859 9.74% $ 149,630 10.65%
Required* ...... 99,218 8.00 104,065 8.00
Excess ......... $ 21,641 1.74% $ 45,565 2.65%
Leverage:
Actual ......... $ 109,822 6.96% $ 137,282 7.19%
Required* ...... 63,101 4.00 66,231 4.00
Excess ......... $ 46,721 2.96% $ 71,051 3.19%
Total risk-based assets . $1,240,277 $1,405,003
Total assets ... $1,591,135 $1,960,935
</TABLE>
* For capital adequacy purposes.
<TABLE>
<CAPTION>
Carolina First Corporation At March 31, 1997
Historical Pro Forma
(Dollars in thousands)
<S> <C> <C> <C> <C>
Shareholders' Equity $ 105,339 6.53% $ 171,162 8.63%
Regulatory Capital
Tier I risk-based:
Actual $ 89,204 7.07% $ 116,664 8.18%
Required* 50,439 4.00 52,821 4.00
Excess $ 38,765 3.07 $ 63,843 4.18%
Total risk-based:
Actual $ 126,636 10.04% $ 155,407 10.90%
Required* 100,878 8.00 105,643 8.00
Excess $ 25,758 2.04% $ 49,764 2.90%
Leverage:
Actual $ 89,204 5.58% $ 116,664 6.04%
Required* 63,916 4.00 66,836 4.00
Excess $ 25,288 1.58% $ 49,828 2.04%
Total risk-based assets $1,260,970 $1,425,696
Total assets $1,613,906 $1,983,706
</TABLE>
* For capital adequacy purposes.
52
<PAGE>
Recent Developments
Second Quarter Earnings. Net income for the second quarter of 1997 was
$4.7 million compared with $2.7 million for the second quarter of 1996. Net
income per fully diluted share increased to $0.41 from $0.24 for the second
quarter of 1996. Second quarter 1997 earnings included $1.5 million (after-tax),
or $0.13 per fully diluted share, from a gain associated with the sale of five
branches.
Net interest income for the second quarter of 1997 increased
approximately 14% to $15.9 million from $13.9 million for the year earlier
period. The increase in net interest income was attributable to higher average
earning assets, which increased 13%, and a higher net interest margin.
Noninterest income included a gain of $2.2 million from the sale of branches and
a gain of $798,000 from the sale of securities. These increases were partially
offset by an increase in the provision for loan losses and lower loan
securitization income, primarily from higher credit card charge-offs than those
historically experienced. Noninterest income, excluding gains on the sale of
branches and securities and loan securitization income, increased 20% over the
same quarter last year. Noninterest expenses for the second quarter of 1997
increased 5% to $12.2 million from $11.7 million for the second quarter of 1996.
For the six months ended June 30, 1997, net income was $6.4 million, a
30% increase over the $4.9 million reported for the same period a year earlier.
Net income per fully diluted share for the six months was $0.56 compared with
$0.43 during the same period last year.
Acquisition of Lowcountry. On July 18, 1997, Carolina First Corporation
acquired Lowcountry Savings Bank, Inc., a South Carolina-chartered savings bank
headquartered in Mt. Pleasant, South Carolina ("Lowcountry"), through the merger
of Lowcountry with and into Carolina First Bank. The Lowcountry transaction was
accounted for as a purchase and resulted in the payment of $12,950,000 for the
outstanding shares of Lowcountry common stock. Of this amount, $5,097,000 was
paid in cash and $7,853,000 was paid in the form of the issuance of
approximately 486,000 shares of Carolina First Corporation common stock. At June
30, 1997, Lowcountry operated through five locations in the Mt.
Pleasant/Charleston area and had approximately $80 million in assets. In
connection with the Lowcountry transaction, Carolina First Bank received
approximately $73 million in loans and approximately $64 million in deposits.
For the years ended September 30, 1995 and 1996, Lowcountry had net income of
approximately $183,000 and $252,000, respectively.
Net.B@nk. On April 25, 1997, Net.B@nk, Inc. ("Net.B@nk") filed a
registration statement on Form S-1 with the Commission for 3,450,000 shares of
common stock (including underwriters' over-allotment option). Upon consummation
of the offering, Net.B@nk will own and operate the Atlanta Internet Bank,
F.S.B., an FDIC-insured federal savings bank that provides banking services to
consumers utilizing the Internet for their commercial and financial services.
Currently, Atlanta Internet Bank services are being offered as a product of
Carolina First Bank. Upon completion of the offering, assuming exercise of
over-allotment options, Carolina First Corporation is expected to be the largest
shareholder owning 1,175,000 shares, or approximately 19%, of the Net.B@nk's
common stock. Under the terms of certain regulatory approvals received by
Net.B@nk, certain affiliates of Net.B@nk (including Carolina First Corporation)
may not sell their shares in Net.B@nk until the third anniversary of the initial
public offering. The initial public offering of Net.B@nk may or may not be
completed as outlined in the registration statement.
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 currently
have any definitive understandings or agreements for any acquisitions material
to Carolina First Corporation. However, Carolina First
53
<PAGE>
Corporation anticipates that it will continue to expand by acquisition in the
future.
54
<PAGE>
EXPANSION OF THE CAROLINA FIRST CORPORATION BOARD OF DIRECTORS;
ELECTION OF THREE DIRECTORS
Item 2 on the Carolina First Corporation Proxy
Carolina First Corporation's Board of Directors is currently comprised
of ten persons. Carolina First Corporation has determined to seek shareholder
approval to expand its Board to 13 persons and shareholder approval of the
nominees listed below to fill the vacancies created by such expansion.
Consummation of the Merger is conditioned receipt of the necessary shareholder
approval of this Item 2.
Carolina First Corporation's Articles of Incorporation provide that in
the event that the Board of Directors is comprised of nine or more persons the
Board of Directors shall be divided into three classes of Directors with each
class being elected for staggered three-year terms. Directors will be elected by
a plurality of votes cast at the CFC Special Meeting. Abstentions and broker
non-votes with respect to nominees will not be considered to be either
affirmative or negative votes.
Management proposes to nominate to the Board of Directors the three
persons listed as nominees in the table below. Each of the nominees is currently
serving as a Director of First Southeast. Each nominee, if elected, will serve
until the expiration of his respective term and until his successor is duly
qualified. Management believes that all such nominees will be available and able
to serve as Directors. However, should any nominee become unable to accept
election, it is the intention of the person named in the Proxy, unless otherwise
specifically instructed in the Proxy, to vote for the election of such other
persons as management may recommend. The following table sets forth the names
and ages of the nominees for Directors and the Directors continuing in office,
the positions and offices with Carolina First Corporation held by each such
person, and the period that each such person has served as a Director.
<TABLE>
<CAPTION>
Name Age Position or Office Director Since
<S> <C>
Nominees
David C. Wakefield, III 53 --- (1)
William R. Phillips 78 --- (1)
Vernon E. Merchant, Jr. 66 --- (1)
Carolina First Corporation Directors Continuing In Office
(Terms expiring in 2000)
M. Dexter Hagy 53 Director 1993
H. Earle Russell, Jr. 55 Director 1997
William R. Timmons, Jr. 73 Chairman of the Board of Directors 1986
(Terms expiring in 1999)
William S. Hummers III 51 Executive Vice President, Secretary, Director 1990
Charles B. Schooler 68 Director 1990
Eugene E. Stone IV 58 Director 1996
(Terms expiring in 1998)
Judd B. Farr 71 Director 1994
C. Claymon Grimes, Jr. 74 Director 1990
Elizabeth P. Stall 65 Director 1986
Mack I. Whittle, Jr. 48 President, Chief Executive Officer, Director 1986
</TABLE>
(1) Currently serving as First Southeast directors.
Mr. Wakefield is being nominated to be in the Class of 1995 (term
expiring in 1998); Mr. Phillips is being nominated to be in the Class of 1996
(term expiring in 1999); and Dr. Merchant is being nominated to be in the Class
of 1997 (term expiring in 2000). Carolina First Corporation has agreed in the
Reorganization Agreement to nominate Mr. Wakefield for election to the Class of
1998 (term expiring in 2001) at the next Carolina First Corporation annual
shareholders meeting. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE." For details of the ownership interest in Carolina
First Corporation
55
<PAGE>
that the nominees will have upon consummation of the Merger, see "MANAGEMENT
INFORMATION."
Conditioned Approval
The approval of the matter set forth in this Item 2 is conditioned upon
receiving the requisite Carolina First Corporation shareholder vote at the CFC
Special Meeting and the requisite First Southeast shareholder vote at the First
Southeast Special Meeting on Item 1. Accordingly, if either such approval is not
received, the Carolina First Corporation Board of Directors will not be expanded
to 13 persons and the above-referenced nominees will not be elected to the
Carolina First Corporation Board of Directors.
CAROLINA FIRST CORPORATION MANAGEMENT
Business Experience of Directors and Nominees
Mr. Wakefield has been President and Chief Executive Officer of First
Southeast since its formation in 1993 and President and Chief Executive Officer
of First Federal since 1991. Prior thereto, Mr. Wakefield served as Chief
Operating Officer of First Federal from 1990 to 1991 and in various capacities
since 1976. He also is a past director of the Community Financial Institutions
of South Carolina and serves as Chairman of the Board of Visitors of Anderson
College.
Mr. Phillips is a retired stockbroker from J.C. Bradford & Co. Mr.
Phillips is a retired colonel of the South Carolina National Guard, past
President of the Anderson County Foundation, past President and Chairman of the
Board of United Way, past Treasurer of the Chamber of Commerce and was a charter
member of Appalachian Regional Council of Governors.
Dr. Merchant retired in March 1997 after being a self-employed physician
and surgeon for over 37 years. Dr. Merchant is a past Director of the State Free
Cancer Clinic and is a former State Cancer Liaison-Fellow to the American
College of Surgeons. He also serves as an assistant clinical professor at the
Medical University of South Carolina.
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.
Mr. Hagy is a principal of Vaxa Capital Management, LLC, an investment
management firm formed in 1995, and President of Vaxa Corporation, an investment
holding company formed in 1987, located in Greenville, South Carolina. Since
January 1996, Mr. Hagy has been Chairman and Chief Executive Officer of BPM
Technology, Inc., a development stage producer of printing equipment used in
engineering design offices.
Mr. Hummers joined Carolina First Corporation 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.
Dr. Russell is a surgeon in Greenville, South Carolina.
Dr. Schooler is an optometrist in Georgetown, South Carolina.
Ms. Stall is a private investor in Greenville, South Carolina.
56
<PAGE>
Mr. Stone has served as the CEO of Stone Manufacturing Company, a
company which owns Umbro International, a world-wide soccer company, and Stone
Apparel, an apparel company, since 1977. Mr. Stone is a director of Liberty
Corporation.
Mr. Timmons is Chairman of Canal Insurance Company, a nationwide insurer
of commercial motor vehicles ("Canal"). From 1947 until 1993, Mr. Timmons served
as Canal's First Vice President and Secretary.
Mr. Whittle has been President and CEO of Carolina First Corporation
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) from 1982 until May 1986, when he resigned his position in order to
organize Carolina First Corporation.
Meetings and Committees of the Board of Directors
The Board held eight meetings in 1996. No Director attended less than
75% of such meetings.
The Board has an Audit Committee which reviews the audit plan, the
results of the audit engagement of Carolina First Corporation's accountants, the
scope and results of Carolina First Corporation's procedures for internal
auditing and internal control, and the internal audit reports of Carolina First
Corporation's subsidiaries. The Audit Committee is currently comprised of
Messrs. Grimes, Schooler and Russell. The Audit Committee met twice during 1996.
All current members were present at each of the meetings.
The Board has a Compensation Committee which reviews Carolina First
Corporation's compensation policies and makes recommendations regarding senior
management compensation. Its report is set forth herein. The Compensation
Committee is currently comprised of Mr. Stone and Ms. Stall. The Compensation
Committee met twice during 1996. All current members were present at both
meetings. No members of the Compensation Committee are officers or employees of
Carolina First Corporation or its subsidiaries.
The Board has a Nominating Committee comprised of Mr. Whittle, Mr.
Timmons, Ms. Stall and Mr. Hagy. The Nominating Committee did not meet during
1996. The Nominating Committee will consider nominees recommended by security
holders. Any such recommendations should be made in writing and delivered to
Carolina First Corporation's principal offices before December 1 of each year.
57
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of August 1, 1997 information with
respect to the Carolina First Corporation common stock owned beneficially or of
record by each of the Directors and nominees individually, by Carolina First
Corporation's CEO and each of the four most highly compensated executive
officers other than the CEO (collectively 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. There are no persons known to Carolina
First Corporation to own beneficially 5% or more of its common stock.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership of Class (1)
<S> <C> <C>
Existing Directors and Executive Officers
Judd B. Farr [111,045] (2) *
C. Claymon Grimes, Jr. [59,969] (3) *
M. Dexter Hagy [10,731] (4) *
William S. Hummers III [58,979] (5) *
David L. Morrow [21,448] (6) *
Joseph C. Reynolds [22,970] (7) *
H. Earle Russell, Jr. [4,696] (8) *
Charles B. Schooler [35,053] (9) *
Elizabeth P. Stall [44,856] (10) *
Eugene E. Stone IV [1,920] (11) *
James W. Terry, Jr. [33,635] (12) *
William R. Timmons, Jr. [297,480] (13) [2.62%]
Mack I. Whittle, Jr. [168,853] (14) [1.49%]
Director Nominees
David C. Wakefield, III [101,532] (15) *
William R. Phillips [32,523] (15) *
Vernon E. Merchant, Jr. [37,173] (15) *
All Directors/Executive Officers as a Group (16 persons) _____ ____%
</TABLE>
* Less than 1%.
(1) The calculation is based on 12,105,841 shares of common stock outstanding.
Pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended, percentages of total outstanding shares have been
computed on the assumption that shares of common stock that can be
acquired within 60 days upon the exercise of options by a given person are
outstanding, but no other shares similarly subject to acquisition by other
persons are outstanding.
(2) This includes 3,720 shares of common stock issuable pursuant to an option
granted under the Directors' Stock Option Plan ("DSOP").
(3) This includes 3,720 shares of common stock issuable pursuant to an option
granted under the DSOP.
(4) This includes 3,720 shares of common stock issuable pursuant to an option
granted under the DSOP.
(5) This includes 10,306 shares of common stock owned by Mr. Hummers through
the Restricted Stock Plan and 7,242 shares of common stock issuable to Mr.
Hummers under outstanding options.
(6) This includes 5,580 shares of common stock owned by Mr. Morrow through the
Restricted Stock Plan and 4,141 shares of common stock issuable to Mr.
Morrow under outstanding options.
(7) This includes 6,398 shares of common stock owned by Mr. Reynolds through
the Restricted Stock Plan and 4,360 shares of common stock issuable to Mr.
Reynolds under outstanding options.
(8) This includes 3,720 shares of common stock issuable pursuant to an option
granted under the DSOP.
(9) This includes 3,090 shares of common stock issuable pursuant to an option
granted under the DSOP.
(10) This includes 3,720 shares of common stock issuable pursuant to an option
granted under the DSOP.
(11) This includes 1,200 shares of common stock issuable pursuant to an option
granted under the DSOP.
(12) This includes 6,912 shares of common stock owned by Mr. Terry through the
Restricted Stock Plan and 5,630 shares of common stock issuable to Mr.
Terry under outstanding options.
58
<PAGE>
(13) This includes 186,799 shares of common stock owned by Canal, of which Mr.
Timmons is an officer, and 3,720 shares of common stock issuable to Mr.
Timmons pursuant to an option granted under the DSOP.
(14) This includes 17,636 shares of common stock owned by Mr. Whittle through
the Restricted Stock Plan and 11,867 shares of common stock issuable to
Mr. Whittle under outstanding options.
(15) These shares are shares of First Southeast common stock which will be
converted into Carolina First Corporation common stock in the Merger.
Certain Relationships and Related Transactions
Carolina First Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with Carolina First
Corporation's Directors and officers and their associates, on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated third parties. Such loans have not
involved more than normal risks of collectibility nor have they presented any
other unfavorable features. Under banking regulations applicable to state banks,
any loan made by such a bank to any of its officers or Directors must be
collaterally secured. The aggregate dollar amount of these loans was
approximately $14,796,000 at December 31, 1996. During 1996, approximately
$14,955,000 in new loans were made and payments totaled approximately
$12,664,000.
Carolina First Bank is a party to a servicing agreement with Resource
Processing Group, Inc. ("Resource"), pursuant to which Resource services
Carolina First Bank's credit card portfolio. The servicing agreement may be
terminated at any time upon 180 days' notice and upon payment of certain
amounts. Under the terms of this servicing agreement, Resource receives a
monthly servicing fee equal to approximately 3.56% per annum of the average
daily balance on the credit card accounts, plus certain other expenses. Such fee
is subject to adjustment in certain cases. In 1996, Carolina First Bank paid
approximately $3,957,000 in servicing fees to Resource under this servicing
agreement. Edward J. Sebastian is Chairman and CEO of Resources Bancshares
Corporation, which was the parent corporation of Resource in 1996. Mr. Sebastian
was a director of Carolina First Corporation during a portion of 1996, but
resigned as a part of Carolina First Corporation's agreement with the Federal
Reserve which permitted Carolina First Corporation to retain its ownership in
Affinity. Carolina First Corporation has an application pending seeking Federal
Reserve approval to permit Mr. Sebastian to serve on both Carolina First
Corporation's and Affinity's Boards.
In 1996, Carolina First Bank purchased approximately $64 million in lease
contracts from Republic Leasing Company, Inc. ("Republic Leasing"), a subsidiary
of Resource Bancshares Corporation. In connection with such transaction,
Carolina First Bank paid a premium of 6% of the principal amount of lease
contracts acquired. Republic Leasing continues to service the lease contracts on
Carolina First Bank's behalf for a servicing fee which totaled approximately
$1,066,000 in 1996.
In 1996, Resource mailed four million applications in a credit card
solicitation on behalf of Carolina First Bank. From such solicitation,
approximately 25,000 credit card accounts were opened. In connection with such
solicitation, Carolina First Bank paid Republic $10 per new account, for an
aggregate of approximately $170,000.
Compensation of Directors and Executive Officers
Compensation Of Directors
During 1996, non-officer Directors received an annual fee of $13,200, plus
$500 for each Board of Directors' meeting attended. Directors who attended
committee meetings received $250 per meeting. Pursuant to the DSOP,
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all non-employee Directors received options to purchase 1,200 shares (adjusted
for a six-for-five stock split effected in the form of a dividend) on May 3,
1996, which options had an exercise price equal to the fair market value of the
common stock on the date of grant.
Summary of Cash and Certain Other Compensation
The following table sets forth information concerning all compensation
paid by Carolina First Corporation and its subsidiaries during the fiscal years
ended December 31, 1994, 1995 and 1996, to the Named Executive Officers for
services rendered in all capacities to Carolina First Corporation and its
subsidiaries.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Salary Bonus Compen- Awards Options/ Payouts Compensation
Principal Position Year ($) ($) sation ($) ($) SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C>
Mack I. Whittle, Jr. 1996 274,520 28,342 (1) -- -- -- 408,559(3)
President, Chief Executive 1995 264,340 40,320 (1) 87,413 (2) 11,867 87,404 33,877
Officer 1994 244,989 125,875 (1) 150,000 (2) -- -- 30,324
William S. Hummers III 1996 171,145 17,006 (1) -- -- -- 127,459 (5)
Executive Vice President 1995 163,485 24,360 (1) 52,815 (4) 7,242 52,807 30,437
1994 152,450 75,525 (1) 90,000 (4) -- -- 29,724
James W. Terry, Jr. 1996 175,920 18,530 (1) -- -- -- 25,806 (7)
President 1995 174,515 55,874 (1) 41,055 (6) 5,630 41,059 26,612
Carolina First Bank 1994 161,350 71,050 (1) 60,000 (6) -- -- 25,761
David L. Morrow 1996 144,790 12,754 (1) -- -- -- 23,177 (9)
Executive Vice President 1995 133,700 36,085 (1) 30,205 (8) 4,141 30,198 14,369
Carolina First Bank 1994 126,450 44,686 (1) 60,000 (8) -- -- 15,324
Joseph C. Reynolds 1996 148,110 22,788 (1) -- -- -- 12,115 (11)
President, Carolina First 1995 136,500 111,282 (1) 31,780 (10) 4,360 31,788 14,825
Mortgage Company 1994 128,200 13,382 (1) 60,000 (10) -- -- 13,824
</TABLE>
(1) Certain amounts may have been expended by Carolina First Corporation
which may have had value as a personal benefit to the executive officer.
However, the total value of such benefits did not exceed the lesser of
$50,000 or 10% of the annual salary and bonus of such executive officer.
(2) Pursuant to Carolina First Corporations's Restricted Stock Plan, Mr.
Whittle was awarded 12,600 shares and 5,994 shares in 1994 and 1995,
respectively (as adjusted for stock dividends and stock split). Each of
these awards was granted for nominal consideration and vests 20% per year
over a period of five years from the date of the award. At December 31,
1996, Mr. Whittle held a total of 17,636 shares of restricted stock
awarded pursuant to the Restricted Stock Plan having a market value as of
December 31, 1996 of $284,670. Dividends are payable on the restricted
stock to the extent paid on Carolina First Corporation's common stock
generally.
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(3) This amount is comprised of (i) $9,200 contributed to Carolina First
Corporation's 401(k) Plan by Carolina First Corporation on behalf of Mr.
Whittle to match fiscal 1996 pre-tax deferral contributions, all of which
was vested, (ii) $2,937 contributed to Carolina First Corporation's
Employee Stock Ownership Plan (the "ESOP"), (iii) $15,000 in premiums
paid by Carolina First Corporation on behalf of Mr. Whittle with respect
to insurance not generally available to all Carolina First Corporation
employees, and (iv) 433,434 shares of common stock of Affinity awarded to
Mr. Whittle by Carolina First Corporation. The value of the Affinity
award was determined by an independent third-party appraisal to be $0.88
per share as of the date of grant. Mr. Whittle received this special
one-time grant to reward his efforts in obtaining Carolina First
Corporation's ownership position in Affinity.
(4) Pursuant to the Restricted Stock Plan, Mr. Hummers was awarded 7,560
shares and 3,622 shares in 1994 and 1995, respectively (as adjusted for
stock dividends and stock split). Each of these awards was granted for
nominal consideration and vests 20% per year over a period of five years
from the date of the award. At December 31, 1996, Mr. Hummers held a
total of 10,306 shares of restricted stock awarded pursuant to the
Restricted Stock Plan having a market value as of December 31, 1996 of
$166,414. Dividends are payable on the restricted stock to the extent
paid on Carolina First Corporation's common stock generally.
(5) This amount is comprised of (i) $6,914 contributed to Carolina First
Corporation's 401(k) Plan by Carolina First Corporation on behalf of Mr.
Hummers to match fiscal 1996 pre-tax deferral contributions, all of which
was vested, (ii) $2,937 contributed to the ESOP, (iii) $15,000 in
premiums paid by Carolina First Corporation on behalf of Mr. Hummers with
respect to insurance not generally available to all Carolina First
Corporation employees, and (iv) 116,600 shares of Affinity common stock
awarded to Mr. Hummers by Carolina First Corporation. The value of the
Affinity award was determined by an independent third-party appraisal to
be $.88 per share as of the date of grant. Mr. Hummers received this
special one-time grant to reward his efforts in obtaining Carolina First
Corporation's ownership position in Affinity.
(6) Pursuant to the Restricted Stock Plan, Mr. Terry was awarded 5,040 shares
and 2,815 shares in 1994 and 1995, respectively (as adjusted for stock
dividends and stock split). Each of these awards was granted for nominal
consideration and vests 20% per year over a period of five years from the
date of the award. At December 31, 1996, Mr. Terry held a total of 6,912
shares of restricted stock awarded pursuant to the Restricted Stock Plan
having a market value at December 31, 1996 of $111,601. Dividends are
payable on the restricted stock to the extent paid on Carolina First
Corporation's common stock generally.
(7) This amount is comprised of (i) $7,869 contributed to Carolina First
Corporation's 401(k) Plan by Carolina First Corporation on behalf of Mr.
Terry to match fiscal 1996 pre-tax deferral contributions, of which all
was vested, (ii) $2,937 contributed to the ESOP, and (iii) $15,000 in
premiums paid by Carolina First Corporation on behalf of Mr. Terry with
respect to insurance not generally available to all Carolina First
Corporation employees.
(8) Pursuant to the Restricted Stock Plan, Mr. Morrow was awarded 5,040
shares and 2,071 shares in 1994 and 1995, respectively (as adjusted for
stock dividends and stock split). Each of these awards was granted for
nominal consideration and vests 20% per year over a period of five years
from the date of the award. At December 31, 1996, Mr. Morrow held a total
of 5,580 shares of restricted stock awarded pursuant to the Restricted
Stock Plan having a market value at December 31, 1996 of $90,095.
Dividends are payable on the restricted stock to the extent paid on
Carolina First Corporation's common stock generally.
(9) This amount is comprised of (i) $5,240 contributed to Carolina First
Corporation's 401(k) Plan by Carolina First Corporation on behalf of Mr.
Morrow to match fiscal 1996 pre-tax deferral contributions, of which 80%
was vested, (ii) $2,937 contributed to the ESOP, and (iii) $15,000 in
premiums paid by Carolina First Corporation on behalf of Mr. Morrow with
respect to insurance not generally available to all Carolina First
Corporation employees.
(10) Pursuant to the Restricted Stock Plan, Mr. Reynolds was awarded 5,040
shares and 2,179 shares in 1994 and 1995, respectively (as adjusted for
stock dividends and stock split). This award was granted for nominal
consideration and vests 20% per year over a period of five years from the
date of the award. At December 31, 1996, Mr. Reynolds held a total of
6,398 shares of restricted stock awarded pursuant to the Restricted Stock
Plan having a market value at December 31, 1996 of $103,308. Dividends
are payable on the restricted stock to the extent paid on Carolina First
Corporation's common stock generally.
(11) This amount is comprised of (i) $6,178 contributed to Carolina First
Corporation's 401(k) Plan by Carolina First Corporation on behalf of Mr.
Reynolds to match fiscal 1996 pre-tax deferral contributions, of which
60% was vested, and (ii) $2,937 contributed to the ESOP.
Board Compensation Committee Report on Executive Compensation
Decisions with respect to the compensation of Carolina First
Corporation's Named Executive Officers are made by the Compensation Committee of
the Board. Each member of the Compensation Committee is a non-employee director.
All decisions of the Compensation Committee relating to compensation are
reviewed by the full Board of Directors. Set forth below is a report submitted
by the Compensation Committee which addresses Carolina First Corporation's
compensation policies for 1996 with respect to Mr. Whittle as CEO, as well as
the Named Executive Officers as a group.
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Compensation Committee Report
General Compensation Policies and Specific Guidelines. The Compensation
Committee believes that compensation programs and practices should reflect and
reinforce the basic mission and nature of Carolina First Corporation, its
management and operating philosophies, and its business strategies. Accordingly,
Carolina First Corporation's compensation programs and actual pay practices
should be consistent with and supportive of executives who are entrepreneurial,
innovative, visionary, and profit and growth driven. Carolina First
Corporation's compensation programs and practices also are designed to
compensate executives for actions deemed to promote long-term shareholder value.
These beliefs require that compensation arrangements be structured to: (1)
provide competitive levels of compensation opportunity which are reflective of
the degree of risk inherent in Carolina First Corporation's business plan and
the contributions expected from senior executives; (2) integrate pay with
Carolina First Corporation's business strategies, short-term and long-term
performance goals, and results; (3) reward corporate and business unit
performance achievements; and (4) recognize and reward individual initiative,
responsibility and achievements. These beliefs also require that the
Compensation Committee pay specific attention to the facts and circumstances
associated with corporate, business unit and individual performance achievements
and take such actions as necessary to ensure that appropriate compensation is
provided through Carolina First Corporation's regular compensation programs or
through special arrangements as may be required.
The Compensation Committee endorses the position that equity ownership by
management, and equity- based performance compensation arrangements, are
beneficial in aligning management's and shareholders' interest. It is Carolina
First Corporation's policy not to pay compensation in excess of the amounts
referenced in Section 162(m)(4) of the Internal Revenue Code of 1986, as
amended.
In determining 1996 compensation, the Compensation Committee utilized,
among other things, guidelines set forth in Carolina First Corporation's
Short-Term Management Performance Plan ("Short- Term Plan") and Carolina First
Corporation's Long-Term Management Performance Plan ("Long-Term Plan"). The
Short-Term Plan is designed to aid the Board of Directors and the Compensation
Committee in determining appropriate levels of bonus compensation for key
employees based on the short-term performance achieved by Carolina First
Corporation, the business unit and the individual. The purpose of such
short-term bonus compensation is to recognize and reward those key employees of
Carolina First Corporation who contribute substantially to Carolina First
Corporation's achievement of short-term objectives which may be financial,
operational and/or strategic in nature. The Long-Term Plan is designed so that
it can be used by the Compensation Committee in the manner which best supports
Carolina First Corporation's long-term strategies and provides rewards to senior
executives which are commensurate with the degree of performance risk inherent
in the business strategy and the actual performance achieved. Compensation
payable under the Long-Term Plan is comprised principally of equity.
Base salaries are set by the Board, after recommendation by the
Compensation Committee, and are intended to reflect individual performance and
responsibility and to represent compensation believed by the Compensation
Committee to be appropriate if the Named Executive Officers perform in a fully
acceptable manner. Consideration is given to compensation paid to executives of
financial institutions similar in size and character to Carolina First
Corporation.
Carolina First Corporation does not have "executive officers" other than
the Named Executive Officers. However, compensation under the Short-Term Plan
and Long-Term Plan is payable to both executive and non-executive officers.
Relationship of Performance to Executive Compensation. Company performance
is an integral part in determining the compensation of Named Executive Officers.
A significant portion of the Named Executive Officers' total compensation is
incentive compensation as determined under the Short-Term Plan and the Long-Term
Plan.
The Short-Term Plan establishes a point system which determines cash bonus
awards based on the extent to which Carolina First Corporation met certain
performance goals. These performance goals, which were recommended by the
Compensation Committee and adopted by the Board, were set at the beginning of
1996 and were designed to represent what the Compensation Committee considered
to be outstanding
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<PAGE>
levels of Company performance. The Short-Term Plan provides that the Named
Executive Officers will receive from 35% to 50% of their base salary in
incentive cash compensation if 100% of the performance goals are met. Incentive
compensation generally becomes payable on a graduated scale when Carolina First
Corporation (or in certain cases a Company subsidiary) achieves 85% of the
established performance goals. The performance goals under the Short-Term Plan
for 1996 related to (i) earnings per share, (ii) return on average equity, (iii)
development of retail banking alternative delivery systems, (iv) nonperforming
assets as a percentage of total loans (asset quality goal), and (v) noninterest
expenses as a percentage of net interest income plus noninterest income
(efficiency goal).
The Long-Term Plan is structured with three-year "performance cycles" with
compensation payable at the end of such cycles. The first performance cycle
ended December 1995 and compensation was paid to the Named Executive Officers
with respect to this cycle in January 1996. In 1994, the Board of Directors
adopted goals for the second cycle, which covers 1995 through 1997. The
performance goals under the Long-Term Plan for the 1995-1997 cycle relate to (i)
earnings growth, (ii) presence in certain markets in the state, (iii)
nonperforming assets as a percentage of total loans, and (iv) noninterest
expenses as a percentage of net interest income plus noninterest income.
Compensation Paid during 1996. Compensation paid the Named Executive
Officers in 1996 consisted of the following elements: base salary, bonus,
options, restricted stock, matching contributions paid with respect to Carolina
First Corporation's 401(k) Plan, payments made pursuant to Carolina First
Corporation's ESOP and, for certain officers, special Affinity stock awards.
Payments under Carolina First Corporation's 401(k) Plan and ESOP are made to all
employees on a non-discriminatory basis. Carolina First Corporation also has
certain broad based employee benefit plans in which Named Executive Officers
participate, as well as certain executive officer retirement, life and health
insurance plans. The value of these items is set forth in the Summary
Compensation Table above under "All Other Compensation." Named Executive
Officers also may have received perquisites in connection with their employment.
However, such perquisites totaled less than 10% of their cash compensation in
1996. Except for bonuses, options and restricted stock, the foregoing benefits
and compensation are not directly or indirectly tied to Company performance.
During 1996, under the Short-Term Plan, Carolina First Corporation
achieved 88% of its earnings per share goal, 96% of its return on average equity
goal, 100% of its retail banking alternative delivery systems goal, 114% of its
asset quality goal, and 99% of its efficiency goal. Based on Company
performance, the Named Executive Officers received bonuses ranging from 10.25%
to 17.54% of their annual base salaries (excluding automobile allowances). All
bonuses were determined in accordance with the terms of the Short- Term Plan.
Mr. Whittle's 1996 Compensation. Mr. Whittle's 1996 compensation consisted
of a base salary, cash bonus, the value of previously-granted restricted stock
which became transferrable, certain perquisites (which did not exceed 10% of his
base salary and bonus), a special Affinity stock award, and the various forms of
other compensation set forth in the preceding paragraph which were available
generally to all employees. Mr. Whittle's base salary of $274,250 (which
includes an automobile allowance of $24,250) was determined by the Compensation
Committee at the beginning of 1996. It was based in part on compensation levels
of other chief executive officers and is believed to be comparable thereto. Mr.
Whittle's cash bonus was determined in accordance with the Short-Term Plan. Mr.
Whittle's bonus, if all applicable Company performance goals were fully
achieved, would have been 50% of his base salary (excluding his automobile
allowance), or $125,000. As weighted for Mr. Whittle, the performance results
resulted in a cash bonus of $28,342.
Special Affinity Stock Awards. On January 24, 1996, the Board of Directors
awarded 6,289 shares (before a 106-for-1 stock split) of common stock of
Affinity to Mr. Whittle, Mr. Hummers, and one non- executive officer of Carolina
First Corporation, who were deemed to be most responsible for Carolina First
Corporation's investment in Affinity. The value of the Affinity award was
determined by an independent third-party appraisal to be $.88 per share as of
the date of grant, for an aggregate award of approximately $587,000. The Board
determined that the Affinity stock awards were appropriate to reward
entrepreneurial behavior, to keep quality officers from leaving Carolina First
Corporation for greater personal reward when presented with entrepreneurial
opportunities like the Affinity investment, and to encourage officers to
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continue to locate Affinity-type investments. The Committee believes that
granting Affinity stock to these officers instead of cash or other consideration
was appropriate insofar as it caused the value of this one-time bonus to track
the value that the officers had created for Carolina First Corporation.
The Committee believes that Carolina First Corporation's strong
performance during 1996 was directly related to Mr. Whittle's and the other
Named Executive Officers' leadership and believes that all compensation paid to
Mr. Whittle and the other Named Executive Officers was warranted.
Compensation Committee: Elizabeth P. Stall, Eugene E. Stone IV
Stock Options and Long-Term Incentive Plan Awards
Carolina First Corporation did not grant any stock options under any
stock option plan or award any amounts under the Long-Term Plan to any executive
officer in 1996.
Employment Contracts
Carolina First Corporation has entered into substantially similar
Noncompetition, Severance and Employment Agreements (individually, the
"Agreement") with Mack I. Whittle, Jr., William S. Hummers III, James W. Terry,
Jr. and David L. Morrow (each an "Executive"). The Agreement is summarized
below. However, this summary is qualified in its entirety by reference to the
Agreement itself, a copy of which may be obtained, without charge, by written
request to Carolina First Corporation at its principal executive offices, Attn:
William S. Hummers III. The Agreement has a rolling term of three years (the
"Term") and extends automatically unless either party causes the Term to be a
fixed three-year term. Under the Agreement, the Executive is given duties and
authority typical of similar executives and Carolina First Corporation is
obligated to pay the Executive an annual salary determined by the Board, such
incentive compensation as may become payable to the Executive under Carolina
First Corporation's Short-Term Plan and Long-Term Plan, and certain other
typical executive benefits.
The Executive may terminate the Agreement if (i) Carolina First
Corporation breaches the Agreement, (ii) there is a Voluntary Termination, or
(iii) there is an Involuntary Termination (clauses (i), (ii) and (iii) being
hereinafter referred to as "Legitimate Executive Reasons"). If an Executive
terminates his employment other than for Legitimate Executive Reasons, Carolina
First Corporation's obligations under the Agreement cease as of the date of such
termination and the Executive becomes subject to the noncompetition provisions
described below. If an Executive terminates his employment as a result of
clauses (i) or (iii) of the Legitimate Executive Reasons, the Executive is
entitled to receive an amount generally equal to three years compensation. If an
Executive terminates his employment pursuant to clause (ii) of the Legitimate
Executive Reasons, the Executive is entitled to receive an amount generally
equal to one year's compensation. "Involuntary Termination" is defined as the
Executive's termination of his employment following a change in control (as
defined in the Agreement) due to (i) a change in the Executive's
responsibilities, position or authority, (ii) a change in the Term, (iii) a
reduction in the Executive's compensation, (iv) a forced relocation of the
Executive outside the Executive's area, (v) a significant increase in the
Executive's travel requirements, (vi) an attempted termination for "cause" that
violates the Agreement, (vii) Carolina First Corporation's insolvency, or (viii)
Carolina First Corporation's breach of the Agreement. "Voluntary Termination" is
defined as the Executive's termination of his employment following a change in
control which is not the result of any of clauses (i) through (viii) set forth
in the definition of Involuntary Termination above. Carolina First Corporation
may terminate the Agreement at any time during its Term (i) for "cause" (as
defined in the Agreement), (ii) if the Executive becomes disabled (generally
unable to perform Company duties on a full-time basis for six months), or (iii)
upon the Executive's death (clauses (i), (ii) and (iii) being hereinafter
referred to as "Legitimate Company Reasons"). If Carolina First Corporation
terminates an Executive's employment for Legitimate Company Reasons, Carolina
First Corporation's obligations under the Agreement cease as of the date of
termination, except that if the Executive is terminated for cause after a change
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in control, then such termination shall be treated as a Voluntary Termination.
If Carolina First Corporation terminates an Executive other than for Legitimate
Company Reasons after a change in control, the Executive is entitled to receive
as severance upon such termination, such amounts as would be payable in the
event of an Involuntary Termination. If Carolina First Corporation terminates
the Executive other than for Legitimate Company Reasons but in the absence of a
change in control, the Executive shall be entitled to receive as severance upon
such termination, the aggregate compensation and benefits that would have been
payable under the Agreement for the remaining Term of this Agreement. In the
event of termination pursuant to clauses (i) or (iii) of the Legitimate
Executive Reasons, or in the event of termination other than for Legitimate
Company Reasons, (A) all rights of Executive pursuant to awards of share grants
or options granted by Carolina First Corporation generally become vested and
released from all conditions and restrictions, and (B) the Executive is credited
with Company service for the remaining Term of the Agreement for the purposes of
Carolina First Corporation's benefit plans.
In the event that an Executive's employment is terminated before a
change in control voluntarily by the Executive or by Carolina First Corporation
for cause, then the Executive may not, for a period of one year following such
termination of employment, become employed by any insured depository institution
which conducts certain business activities in South Carolina or interfere with
or otherwise compete against Carolina First Corporation or its operations in
violation of the provisions set forth in the Agreement. The Agreement also
imposes certain confidentiality obligations on the Executive.
Performance Graph
The following graph sets forth the performance of Carolina First
Corporation's Common Stock for the five-year period from December 31, 1991
through December 31, 1996 as compared to the Nasdaq Market Composite Index and
an index comprised of all NASDAQ commercial banks and bank holding companies.
All stock prices reflect the reinvestment of cash dividends.
[GRAPH APPEARS HERE. SEE THE TABLE BELOW FOR PLOT POINTS.]
<TABLE>
<CAPTION>
12/91 12/92 12/93 12/94 12/95 12/96
<S> <C> <C> <C> <C> <C> <C>
Carolina First Corporation 100.000 157.461 168.611 193.482 253.516 280.961
Nasdaq Market 100.000 116.378 133.595 130.587 184.674 227.164
Nasdaq Bank Stocks 100.000 145.551 165.989 165.385 246.319 325.600
</TABLE>
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Independent Public Accountants
KPMG Peat Marwick LLP ("KPMG") served as Carolina First Corporation's
independent public accountants for the 1996 current fiscal year. KPMG has
indicated that it plans to have a representative present at the CFC Special
Meeting. Such representative will have the opportunity to make a statement and
will be available to respond to appropriate questions from shareholders. The
Board of Directors has selected KPMG as the independent public accountants for
Carolina First Corporation for the 1997 fiscal year.
APPROVAL OF AMENDMENTS TO STOCK OPTION PLAN
AND RESTRICTED STOCK AGREEMENT PLAN
Item 3 on Carolina First Corporation's Proxy
Carolina First Corporation proposes to amend its existing Stock Option
Plan ("Option Plan") to increase the number of shares which may be subject to
options thereunder from 661,500 shares to 1,500,000 shares. Carolina First
Corporation also proposes to amend its existing Restricted Stock Agreement Plan
("Restricted Stock Plan") to increase the number of shares which may be subject
to stock grants thereunder from 330,750 shares to 500,000 shares. For the
reasons set forth below, the Board of Directors unanimously recommends a vote
FOR the approval of such amendments.
Reasons for Approval
There are currently 347,312 shares available for issuance under the
Option Plan which are not subject to outstanding options, and 116,392 shares
available for issuance under the Restricted Stock Plan which are not subject to
outstanding stock grant agreements. The Board believes that the amendments
increasing the available shares are necessary and appropriate in order to fund
the option and restricted stock grants that would become issuable in the future
in accordance with Carolina First Corporation's existing compensation plans. The
increase is necessary largely as a result of the continued expansion of Carolina
First Corporation, including the expansion in connection with the acquisition of
First Southeast. If such amendments are not approved, the Option Plan and
Restricted Stock Plan will continue in effect unamended.
Material Features of the Option Plan
The Option Plan is summarized below. However, this summary is qualified
in its entirety by reference to the text of the Option Plan, a copy of which may
be obtained, without charge, by written request to Carolina First Corporation,
Post Office Box 1029, Greenville, South Carolina 29602, Attention: William S.
Hummers III.
Administration and Eligibility. The Option Plan generally provides that
a committee of the Board ("Committee") comprised solely of members thereof who
are "disinterested persons" within the meaning of Section 16 of the Exchange Act
may grant either incentive stock options or nonqualified options to such
employees as the Committee has determined to have the greatest impact on the
Carolina First Corporation's long-term performance. Non-employee Board members
are not eligible to acquire stock under the Option Plan. The Committee is also
empowered to administer the Option Plan and to take all such actions as may be
necessary thereunder.
In making any determination as to the employees to whom options shall
be granted hereunder and as to the number of shares to be subject thereto, the
Committee must take into account, in each case, the level and responsibility of
the person's position, the level of the person's performance, the person's level
of compensation, the assessed potential of the person and such additional
factors as the Committee shall deem relevant to the accomplishment of the
purposes of the Option Plan. The Committee may also utilize guidelines set forth
in other compensation plans of Carolina First Corporation in determining any
matters related to the grant of options under the Option Plan. There are
currently approximately 80 persons that the Committee has deemed eligible to
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participate in the Option Plan. These persons include nonexecutive officers, as
well as executive officers of Carolina First Corporation or a Carolina First
Corporation subsidiary.
Exercise and Duration of Options. The exercise price of such options
shall be equal to the fair market value per share (as defined in the Option
Plan) of Carolina First Corporation's Common Stock on the date the option is
granted. Unless the Committee expressly states otherwise, options shall be
exercisable on a cumulative basis for 20% of the shares covered thereby on each
of the first five anniversaries of the grant thereof. Option periods are
generally ten years from the date of grant, except that options may not be
exercised after an optionee's termination of employment (except in certain
instances involving death, disability or voluntary retirement). Subject to
certain limited exceptions, options granted under the Option Plan may generally
be exercised, if otherwise timely, within three months after retirement
resulting from disability or retirement for any reason after age 60. Subject to
certain exceptions in cases of disability or death (where options become fully
exercisable), the option may not be exercised for more than the number of
shares, if any, as to which it was exercisable by the optionee immediately
before such retirement. In general, if an optionee dies while employed by
Carolina First Corporation or within three months after retirement, such option
may be exercised to the extent that the optionee would have been entitled to do
so at the date of his death by the legatees or personal representatives within
one year of the date of the optionee's death.
In the event that Carolina First Corporation is involved in a "change
in control", the expiration date and the dates on which any part of the option
shall be exercisable for all of the shares covered thereby may be accelerated,
but the effectiveness of such acceleration, and any exercise of the option
pursuant thereto in excess of the number of shares for which it would have been
exercisable in the absence of such acceleration, shall be conditioned upon the
consummation of the transaction resulting in the change in control. A "change in
control" is generally deemed to occur where Carolina First Corporation is
involved in a transaction in which it, in substance, is not the surviving
entity.
Assignability. Options granted under the Option Plan are assignable
only in limited instances in accordance with applicable law.
Amendment. The Committee may modify and amend the Option Plan, except
that it may not increase the maximum number of shares for which options may be
granted under the Option Plan, reduce the minimum exercise prices established
under the Option Plan, or extend the period or periods during which options may
be granted or exercised.
Effective Date. The original effective date of the Option Plan was the
date of its adoption by the Board in 1986. It was amended and restated as of
April 20, 1994. Assuming shareholder approval is received at the CFC Special
Meeting, the Option Plan will be amended effective as of such date. If such
approval is not received, the Option Plan, unamended, will continue in effect.
Shareholder Approval. Approval of the Option Plan by holders of a
majority of the votes cast on the proposal is required under the Bylaws of the
NASD, to which Carolina First Corporation is subject because its common stock is
traded on the Nasdaq National Market. Abstentions and broker non-votes are not
considered to be either affirmative or negative votes.
Material Features of the Restricted Stock Plan
The Restricted Stock Plan is summarized below. However, this summary is
qualified in its entirety by reference to the text of the Restricted Stock Plan,
a copy of which may be obtained, without charge, by written request to Carolina
First Corporation, Post Office Box 1029, Greenville, South Carolina 29602,
Attention: William S. Hummers III.
In general, the Restricted Stock Plan provides that a committee of the
Board ("Committee") composed
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solely of members thereof who are "disinterested persons" within the meaning of
Section 16 of the Exchange Act may, on behalf of Carolina First Corporation,
enter into restricted stock agreements with certain key employees which provide
for the acquisition by such persons of common stock ("Shares") upon the terms
and conditions set forth in the restricted stock agreement. The Restricted Stock
Plan provides that the Committee has complete authority to interpret all terms
and provisions of the Restricted Stock Plan consistent with law and adopt, amend
and rescind general and special rules and regulations for the Restricted Stock
Plan's administration and make all other determinations necessary or advisable
for the administration of this Plan.
Eligibility. The Committee, in its sole discretion, determines which
employees shall receive restricted stock agreements and the terms and provisions
of restrictions to which such agreements shall be subject. Members of Carolina
First Corporation's Board of Directors who are also employees of Carolina First
Corporation are eligible to receive Shares under the Restricted Stock Plan. In
making any determination as to the persons to whom restricted stock agreements
shall be granted and as to the number and price of Shares to be subject thereto
and all other terms thereof, the Committee must take into account, in each case,
the person's level of responsibility, performance, assessed potential and
compensation and such additional factors as the Committee shall deem relevant to
the accomplishment of the purposes of the Restricted Stock Plan. The Committee
may also utilize guidelines set forth in other compensation plans of Carolina
First Corporation in determining any matters related to the grant of Shares
hereunder. There are currently approximately 17 persons that the Committee has
deemed eligible to participate in the Restricted Stock Plan. All of these
persons are participants because of their participation in Carolina First
Corporation's Long-Term Incentive Compensation Plan.
Terms and Conditions of Restricted Stock Agreements. Each restricted
stock agreement provides for the acquisition of the Shares subject thereto by
the employee upon the satisfaction of the terms and conditions set forth in such
agreement and in the Restricted Stock Plan. The purchase price of Shares subject
thereto is set by the Committee. However, it is anticipated that the
consideration for such Shares will generally consist of the employee's services,
so that the purchase price per share will be a nominal amount. Shares subject to
restricted stock agreement shall initially be non-transferable and subject to
forfeiture as described below. The restricted stock agreement sets forth the
schedule pursuant to which the Shares become freely transferable and not subject
to the risk of forfeiture. It is generally anticipated that Shares granted to a
recipient under a restricted stock agreement shall become freely transferable
and no longer subject to forfeiture at a rate of 20% of the total number of the
Shares covered by such agreement, on each of the five anniversaries of the date
on which such agreement was granted, beginning with the first anniversary of
such grant. However, the Committee, in its sole discretion, may set a different
schedule.
Forfeiture of Right to Purchase Shares. If an employee's employment
with Carolina First Corporation is terminated for any reason other than death or
total and permanent disability (as defined in the Restricted Stock Plan) prior
to the scheduled termination of transferability restrictions as provided in the
restricted stock agreement, Shares subject to a restricted stock agreement which
are not yet freely transferable shall be canceled and returned to Carolina First
Corporation. If an employee's employment with Carolina First Corporation is
terminated as a result of his death or total and permanent disability, (i) the
risk of forfeiture of the right to purchase Shares under any restricted stock
agreement of such employee terminates, (ii) all Shares represented by such
restricted stock agreement immediately become freely transferable, and (iii)
such employee, or such employee's personal representative, has the right to
purchase the Shares covered by such agreement upon the terms set forth in such
agreement at any time within six months after such employee's death or total and
permanent disability, after which time the restricted stock agreement shall be
canceled. However, unless specifically stated otherwise, the risk of forfeiture
applicable to the right to purchase Shares under a restricted stock agreement
shall lapse upon a "Change of Control" of Carolina First Corporation. For
purposes of the Restricted Stock Plan, a "Change of Control" means a change of
control required to be reported in response to Item 5(f) of Schedule 14A
promulgated under the Exchange Act, or certain other transactions (as set forth
in the Restricted Stock Plan) in which Carolina First Corporation, in substance,
is not the surviving entity.
Assignability. Rights under a restricted stock agreement are assignable
only in limited instances in
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accordance with applicable law.
Voting Rights and Dividends. An employee has no rights with respect to
any Shares subject to a restricted stock agreement unless and until he acquires
such Shares under the terms of such agreement and certificates representing such
Shares are duly issued to him. However, upon acquisition, an employee has the
right to vote such Shares and receive any dividends (cash or otherwise) paid
thereon regardless of whether or not such Shares are freely transferable.
Termination and Amendment. The Restricted Stock Plan may be terminated
by the Board at any time. The Board or Committee may at any time and from time
to time modify and amend the Plan in any respect consistent with applicable law;
provided, however, that no such amendment shall, without the consent of an
employee, affect rights under an existing restricted stock agreement.
Effective Date. The original effective date of the Restricted Stock
Plan was the date of its adoption by the Board in 1986. It was amended and
restated as of April 20, 1994. Assuming shareholder approval is received at the
CFC Special Meeting, the Restricted Stock Plan will be amended effective as of
such date. If such approval is not received, the Restricted Stock Plan,
unamended, will continue in effect.
Shareholder Approval. Approval of the Restricted Stock Plan by holders
of a majority of the votes cast on the proposal is required under the Bylaws of
the NASD to which Carolina First Corporation is subject because its common stock
is traded on the Nasdaq National Market. Abstentions and broker non-votes are
not considered to be either affirmative or negative votes.
The Board unanimously recommends a vote FOR the approval of the
Amendments to the Stock Option Plan and Restricted Stock Plan.
Federal Income Tax Consequences Associated with the Plans.
The following discussion is intended only as a brief summary of the
federal income tax rules relevant to stock options and restricted stock awards.
The laws governing the tax aspects of awards are highly technical and such laws
are subject to change.
Nonqualified Options. Upon the grant of a nonqualified option, the
grantee will not recognize any taxable income, and Carolina First Corporation
will not be entitled to a deduction. Upon the exercise of such an option, the
excess of the fair market value of the shares acquired on the exercise of the
option over the option price (the "spread"), will constitute compensation
taxable to the grantee as ordinary income. In determining the amount of the
spread or the amount of consideration paid to the grantee, the fair market value
of the stock on the date of exercise is used. Carolina First Corporation, in
computing its federal income tax, will generally be entitled to a deduction in
an amount equal to the compensation taxable to the grantee.
Qualified Options. A grantee will not recognize taxable income on the
grant or exercise of an incentive stock option ("ISO"). However, the spread at
exercise will constitute a tax preference item includable in an alternative
minimum tax computation, and thereby may subject the grantee to the alternative
minimum tax. Upon the disposition of shares of stock acquired pursuant to the
exercise of an ISO after (i) two years from the date of grant of the ISO and
(ii) one year from the date of transfer of the shares to the grantee (the "ISO
Holding Period"), the grantee will recognize long-term capital gain or loss, as
the case may be, measured by the difference between the stock's selling price
and the exercise price. Carolina First Corporation is not entitled to any tax
deduction by reason of the grant or exercise of an ISO or by reason of a
disposition of stock received upon exercise of an ISO if the ISO Holding Period
is satisfied. If the grantee disposes of the shares of stock acquired pursuant
to the exercise of an ISO before the ISO Holding Period expires, the grantee
recognizes ordinary income in the taxable year of the disposition equal to the
excess of (a) the lower of the fair market value at date of exercise or such
value at the time of disposition over (b) the exercise price, and Carolina First
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Corporation receives a deduction in an equal amount.
Restricted Stock. A grantee who receives restricted stock may make an
election under Section 83(b) of the Code (a "Section 83(b) Election") to have
the grant taxed as compensation income at the date of receipt, with the result
that any future appreciation (or depreciation) in the value of the shares of
stock granted shall be taxed as capital gain (or loss) upon a subsequent sale of
the shares. However, if the grantee does not make a Section 83(b) Election, then
the grant will be taxed as compensation income at the full fair market value
(less any amount paid therefor by the grantee) on the date that the restrictions
imposed on the shares expire. Unless a grantee makes a Section 83(b) Election,
any dividends paid on stock subject to the restrictions are compensation income
to the grantee and compensation expense to Carolina First Corporation. Carolina
First Corporation is generally entitled to an income tax deduction for any
compensation income taxed to the grantee, subject to the provisions of Section
162(m) of the Code.
Plan Benefits
Restricted Stock Plan. There were no grants made under the Restricted
Stock Plan to any persons during 1996.
Stock Option Plan. The following table sets forth for the year ended
December 31, 1996, options granted under the Stock Option Plan by the persons
and groups indicated.
<TABLE>
<CAPTION>
Stock Option Plan
Name and Position Dollar Value ($) (1) Number of Units
<S> <C> <C>
Mack I. Whittle, Jr. --- ---
President, Chief Executive Officer
William S. Hummers III --- ---
Executive Vice President
James W. Terry, Jr. --- ---
President, Carolina First Bank
David L. Morrow --- ---
Executive Vice President, Carolina First Bank
Joseph C. Reynolds --- ---
President, Carolina First Mortgage Company
Executive Officer Group --- ---
- --------------------------------------------------------
Non-Executive Director Group -- -- (2)
Non-Executive Officer Employee Group $614,175 73,140 (3)
</TABLE>
- ------------------------
(1) Calculated by using the Black-Scholes option-pricing model with the
following assumptions: dividend yield of 3.25%, expected volatility of
38%, risk-free interest rate of 6.89% and expected lives of
7.5 years.
(2) Options to purchase a total of 19,200 shares under the Director Stock
Option Plan. These options had an exercise price of $17.50, which was
approximately the fair market value of Carolina First Corporation
common stock at the time of grant.
(3) These options had a weighted average exercise price of $15.85. Such
exercise prices were approximately the fair market value of Carolina
First Corporation common stock at the time of grant.
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INFORMATION ABOUT FIRST SOUTHEAST
General
Financial and other information relating to First Southeast, including
information relating to First Southeast's directors and executive officers, is
set forth in First Southeast's Annual Report on Form 10-K for the year ended
June 30, 1996 (which incorporates certain portions of First Southeast's Proxy
Statement for its 1996 Annual Meeting) and First Southeast's Quarterly Reports
on Form 10-Q for the quarters ended September 30, 1996, December 31, 1996 and
March 31, 1997, all of which are incorporated by reference herein, copies of
which may be obtained from First Southeast as indicated under "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
This Joint Proxy Statement/Prospectus is accompanied by a copy of First
Southeast's Annual Report on Form 10-K for the year ended June 30, 1996 and
First Southeast's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
History and Business
First Southeast. First Southeast, a Delaware corporation, was organized
on June 23, 1993 for the purpose of becoming the holding company for First
Federal in connection with First Federal's conversion from a federal mutual to a
federal stock savings and loan association, which was completed on October 7,
1993. At June 30, 1996, the Corporation had total assets of $332 million, total
deposits of $288 million and stockholders' equity of $34 million. First
Southeast has not engaged in any significant activity other than holding the
stock of First Federal.
First Federal. First Federal was organized in 1922 as a South Carolina
mutual savings and loan association under the name "Anderson Building and Loan
Association." In 1936, First Federal converted to a federally chartered savings
and loan association and changed its name to "First Federal Savings and Loan
Association of Anderson." In connection with its conversion in 1993, First
Federal became the wholly-owned subsidiary of First Southeast. First Federal is
regulated by the OTS and its deposits are insured up to applicable limits under
the SAIF of the FDIC. First Federal also is a member of the Federal Home Loan
Bank ("FHLB") System.
First Federal's principal business consists of accepting deposits from
the general public through a variety of deposit programs and originating loans
secured primarily by owner-occupied residential properties and consumer loans.
Approximately 88% of First Federal's first mortgage loans are secured by
properties located within South Carolina. First Federal's residential real
estate and consumer loans amounted to $210 million and $20 million, or 84% and
8%, respectively, of its total loan portfolio at June 30, 1996. To a
significantly lesser extent, First Federal also originates residential
construction and commercial real estate and business loans.
First Federal is the 100% owner of First Master Service Corporation
("First Master"), a South Carolina corporation, which was incorporated in 1984.
At June 30, 1996, First Federal had $1,000 invested in First Master's common
stock and $271,000 of equity interest in First Master's accumulated losses.
First Master is principally engaged in real estate development and leasing
activities. First Federal has advanced funds to First Master for acquisition of
properties and operations. These funds were advanced on an unsecured basis at a
rate of interest indexed to First Federal's costs of funds. The amount of
advances outstanding at June 30, 1996 is $987,000. During the last quarter of
the fiscal year, First Master began the operation of the Investment Center at
First Federal. The Center, which sells uninsured investment products, reached
profitable levels in its fourth month of operations. During the year ended June
30, 1996, First Master recognized net income of $3,000. The operations of First
Master are included in the First Southeast's consolidated financial statements.
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<PAGE>
Recent Developments
The following table sets forth certain information concerning the
consolidated financial position of First Southeast and results of operations at
the dates indicated. This information is qualified in its entirety by reference
to the detailed information appearing elsewhere in this Joint Proxy
Statement/Prospectus. The information at March 31, 1997 and June 30, 1997, for
the three months ended June 30, 1996 and 1997 and the years ended June 30, 1996
and 1997 is unaudited, but, in the opinion of managemnt, reflects all
adjustments, consisting of only normal recurring accruals, necessary for a fair
presentation of financial position and results of operations at the dates and
periods indicated.
At June 30, At March 31, At June 30,
1996 1997 1997
(Dollars in thousands, except per
share data and footnotes)
Balance Sheet Data
Total assets $ 331,852 $ 334,751 $ 348,528
Securities and temporary investments 78,046 59,687 62,413
Loans, net of unearned income 239,570 262,373 273,771
Allowance for loan losses 1,233 1,311 1,370
Total earning assets 319,074 323,440 337,505
Total deposits 288,217 282,800 284,779
Borrowed funds 5,000 15,000 25,000
Total equity 33,503 34,239 35,047
Per Share Data
Shares outstanding 4,388,231 4,388,231 4,388,231
Book value per share $ 7.63 $ 7.80 $ 7.99
<TABLE>
<CAPTION>
Three Months Ended Years Ended
June 30, June 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Statement of Income Data
Net interest income $ 2,941 $ 2,743 $ 11,420 $ 10,522
Provision for loan losses 45 45 180 180
Non-interest income (629) (1) 302 110 1,203
Non-interest expenses 3,805 1,539 9,390 7,896
Net income (loss) (1,364) 922 939 2,325
Per Share Data
Weighted average common equivalent shares
outstanding 4,271,918 4,388,231 4,061,324 4,388,231
Net income (loss) per share - fully diluted $ (0.32) $ 0.21 $ 0.23 $ 0.53
Cash dividends paid 10.12(2) 0.06 10.48(2) 0.20
</TABLE>
- --------------------------
(1) Includes $891,000 loss on sale of securities.
(2) On June 27, 1996, First Southeast paid a special cash dividend of $10 per
share.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General. The following discussion and analysis is intended to assist in
the understanding of First Southeast's financial condition and the results of
operations.
Financial Condition. At June 30, 1997, First Southeast's total assets
had increased by $14 million from March 31, 1997 and $17 million from June 30,
1996. Increases of $11 million in loans receivable from March
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31, 1997 and $34 million from June 30, 1996 were funded primarily from maturing
investment securities and from interest-earning deposits. Borrowed funds were
used to fund investment purchases and loans. At June 30, 1997, total
nonperforming assets amounted to $209,000, or 0.06% of total assets compared to
$624,000, or 0.19% of total assets.
Results of Operations. First Southeast's operating results depend
primarily on its net interest income, which is the difference between interest
income on interest-earning assets, primarily loans and investments, and interest
expense on interest-bearing liabilities, primarily deposits. First Southeast's
net income is also affected by the establishment of provisions for loan losses,
the level of its non-interest income and expenses and income tax provisions.
First Federal is a member of the SAIF of the FDIC. On September 30,
1996, President Clinton signed into law the Deposit Insurance Funds Act of 1996
directing the FDIC to impose a special assessment on SAIF assessable deposits to
recapitalize the SAIF. Included in the results of operations for the year ended
June 30, 1997, was a charge of $1.8 million ($1.1 million net of taxes) for
First Federal's portion of the special assessment. In addition, this Act
established a new SAIF premium schedule, which provided for a substantial
reduction in First Southeast's deposit insurance premium expense beginning in
the quarter ended December 31, 1996.
Comparison of Operating Results for the Three Months Ended June 30, 1996 and
1997.
General. Net income for the three months ended June 30, 1997 was
$922,000 compared with a loss of $1.4 million for the same period in 1996.
Charges associated with First Southeast's $10 per share special cash dividend on
June 27, 1996 exceeded First Southeast's normal operating income as discussed
below.
Net Interest Income. Net interest income decreased by $198,000 from $2.9
million during the three months ended June 30, 1996 to $2.7 million for the same
period in 1997 as a result of the combined effect of a decrease in interest
income and an increase in interest expense.
Interest Income. Interest income decreased by $86,000 from $6.5 million
during the three months ended June 30, 1996 to $6.4 million for the same period
in 1997. This decrease was the net effect of decreased interest on investments
and interest-earning deposits which was partially offset by increased interest
earned on mortgage loans.
Interest on mortgage loans increased by $533,000 primarily as a result
of increased outstanding balances. The average net mortgage loans receivable
increased by $29 million from $208 million during the three months ended June
30, 1996 to $237 million for the same period in 1997. However, the average yield
on mortgage loans decreased by 8 basis points from 8.05% for the three months
ended June 30, 1996 to 7.97% for the same period in 1997.
Interest on investments and interest-earning deposits decreased by
$560,000 primarily as a result the loss of earnings in 1997 from the
interest-earning assets used to pay First Southeast's special $10 per share cash
dividend in June 1996. In addition, funds from maturing investment securities
were used to fund the increase in mortgage loans outstanding.
Interest Expense. Total interest expense increased a net of $112,000 for
the three months ended June 30, 1997 when compared to the same period in 1996.
Interest on deposits decreased by $105,000 as the average rate paid on deposits
decreased by 10 basis points from 4.91% to 4.81%. This decrease was offset by
$217,000 of additional interest cost due to an increased average balance of
borrowed funds from $1.1 million during the three months ended June 30, 1996 to
$16.7 million for the same period in 1997. The additional borrowings were used
to fund the acquisition of investment securities and loan originations.
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<PAGE>
Provision for Loan Losses. The provision for loan losses remained
unchanged at $45,000. Provisions are made based on management's analysis of the
various factors which affect the loan portfolio and management's desire to
maintain the allowance at a level considered adequate to provide for potential
losses. The allowance for loan losses was $1.2 million at June 30, 1996 and $1.4
million at June 30, 1997, representing 206% and 656% of total nonperforming
loans, respectively.
Non-interest Income. Non-interest income for the three months ended June
30, 1996 was a loss of $629,000 which included a loss of $891,000 on the sale of
securities for the purpose of funding the $10 per share special dividend.
Non-interest Expenses. Non-interest expenses decreased by $2.3 million
primarily as a result of reduced compensation costs and deposit insurance
premium expense in 1997 when compared to 1996. Compensation costs decreased by
$2.2 million from 1996 due to the cost of First Southeast's employee stock
ownership plan ("ESOP") which, in conjunction with the special dividend, was
fully recognized by June 30, 1996. Expenses for First Southeast's deposit
insurance premiums decreased by $116,000 from $161,000 for the three months
ended June 30, 1996 to $45,000 for the same period in 1997 due to the revised
SAIF premium schedule.
Comparison of Operating Results for the Years Ended June 30, 1996 and 1997
General. Net income increased $1.4 million from $939,000 for the year
ended June 30, 1996 to $2.3 million for the same period in 1997. The results
from both years include large non-recurring charges that had material impacts on
net income. In 1996, First Southeast recognized a net loss of $891,000 from the
sale of securities and accelerated the recognition of $1.9 million of ESOP
compensation expense in conjunction with the payment of the special dividend. In
1997, First Southeast recognized a $1.8 million charge to earnings for the FDIC
special assessment as previously discussed under "Results of Operations."
Net income, excluding the effect of these non-recurring items,
increased primarily due to decreases in compensation costs and deposit insurance
premium expense which were partially offset by a decrease in net interest
income.
Net Interest Income. Net interest income decreased by $898,000 from
$11.4 million during the year ended June 30, 1996 to $10.5 million for the same
period in 1997 as a result of decreased interest income.
Interest Income. Interest income decreased by $838,000 from $25.8
million during the year ended June 30, 1996 to $24.9 million for the same period
in 1997. This decrease was due to the net effect of decreased interest on
investments and interest-earning deposits which was partially offset by
increased interest earned on mortgage loans .
Interest on mortgage loans increased by $1.9 million primarily as a
result of increased outstanding loan balances. The average net mortgage loans
receivable increased by $31 million from $196 million during the year ended June
30, 1996 to $227 million for the same period in 1997. However, the average yield
on mortgage loans decreased by 29 basis points from 8.28% for the year ended
June 30, 1996 to 7.99% for the same period in 1997 as the yields on new loan
production were less than the yields of the loans repaid during the year.
Interest on investments and interest-earning deposits decreased by $2.7
million primarily as a result of the loss of earnings in 1997 from the
interest-earning assets used to pay First Southeast's special $10 per share cash
dividend in June 1996. In addition, funds from maturing investment securities
were used to fund the increase in mortgage loans outstanding.
Interest Expense. Interest expense increased by $60,000 for the year
ended June 30, 1997 when compared to the same period in 1996. Interest on
deposits decreased by $630,000 as the average rate paid on deposits decreased by
23 basis points from 5.06% to 4.83%. This decreases was offset by $690,000 of
additional interest cost due to an increased average balance of borrowed funds
from $1.5 million during the year ended June 30, 1996 to $12.8 million for the
same period in 1997. The additional borrowings were used to fund the acquisition
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<PAGE>
of investment securities and loan originations
Non-interest Income. Non-interest income increased by $1.1 million from
$110,000 for the year ended June 30, 1996 to $1.2 million for the year ended
June 30, 1997. The $110,000 of non-interest income in 1996 included a loss of
$891,000 on the sale of securities for the purpose of funding the $10 per share
special dividend. In 1997, First Southeast commenced sales of non-FDIC insured
investment products which resulted in commissions of $117,000 for the year.
Non-interest Expenses. Non-interest expenses (excluding the effect of
the non-recurring charges of $1.9 million in 1996 and $1.8 million in 1997 as
discussed above) decreased by $1.4 million. This decrease was due to reduced
compensation and deposit insurance costs in 1997 when compared to 1996.
Compensation costs decreased by $1.1 million from 1996 due to the cost of First
Southeast's stock based compensation plans which were fully recognized by June
30, 1997. Charges to income (excluding the $1.9 million of accelerated ESOP
charges described above) during the year ended June 30, 1996 were $837,000 for
the ESOP and $257,000 for the management recognition plans.
Expenses for First Southeast's deposit insurance premiums (excluding the
$1.8 million special assessment) decreased by $268,000 from $640,000 for the
year ended June 30, 1996 to $372,000 for the same period in 1997 due to the
revised SAIF premium schedule.
Management and Principal Shareholders of First Southeast
The following table sets forth (i) as of August 1, 1997, the number and
percent of total outstanding shares of First Southeast common stock beneficially
owned by all directors and executive officers of First Southeast individually
and by all directors and executive officers of First Southeast as a group, and
(ii) pro forma upon consummation of the Merger, the number and percent of total
outstanding shares of Carolina First Corporation common stock beneficially owned
by such persons individually and as a group.
<TABLE>
<CAPTION>
Pro Forma After Merger
Number of First Number of
Name and address of Southeast Shares Bene- Percent Carolina First Corporation Percent
5% Beneficial Owner ficially Owned (1) of Class Shares Beneficially Owned of Class
<S> <C> <C> <C>
David C. Wakefield, III 101,532 2.3% 101,532 *
Charles L. Stuart 69,773 1.6% 69,773 *
James H. Barton 53,047 1.2% 53,047 *
Josiah Crudup, Jr. 45,423 1.0% 45,423 *
Vernon E. Merchant, Jr. 37,173 0.8% 37,173 *
William R. Phillips 32,523 0.7% 32,523 *
Aubrey T. Scales 34,973 0.8% 34,973 *
A.C. Terry 53,823 1.2% 53,823 *
John L. Biediger 64,695 1.5% 64,695 *
All Executive Officers and Directors
as a group (11 persons) 592,791 13.5% 592,791 ____%
</TABLE>
- ------------------------------------
* Less than 1%.
(1) Includes June 30, 1996 First Southeast ESOP allocation which is the most
recently available information from actuaries.
The following table sets forth, as of August 1, 1997, certain
information as to those persons who were beneficial owners of more than 5% of
the outstanding shares of First Southeast common stock. Management
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<PAGE>
of First Southeast knows of no persons other than those set forth below who
beneficially owned more than 5% of the outstanding shares of common stock at
August 1, 1997.
Amount and Nature Percent of
of Beneficial Common Stock
Beneficial Owner Ownership Outstanding
First Federal Employee
Stock Ownership Plan 336,896 7.7%
Information concerning the compensation of directors and executive
officers of First Southeast is set forth in First Southeast's Proxy Statement
for its 1996 Annual Meeting, which is incorporated herein by reference. See
"INCORPORATION BY REFERENCE."
Certain Transactions
First Southeast had outstanding loans to certain of First Southeast's
directors, executive officers, their associates and members of the immediate
families of such directors and executive officers. None of these loans is
designated nonaccrual, past due, restructured, or is considered to pose
potential problems. These loans were all made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
persons not affiliated with First Southeast and did not involve more than the
normal risk of collectibility or present other unfavorable features.
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COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time, the shares of First Southeast common stock will
be converted into shares of Carolina First Corporation common stock with the
exception of fractional shares, which will be exchanged for cash. Accordingly,
shareholders of First Southeast will become shareholders of Carolina First
Corporation, and their rights as Carolina First Corporation shareholders will be
determined by Carolina First Corporation's Articles of Incorporation and Bylaws.
The rights of Carolina First Corporation shareholders differ from the rights of
First Southeast's shareholders with respect to certain matters, including the
required shareholder votes as to mergers, consolidations, exchanges, sales of
assets or dissolution, removal of directors and amendments to the
articles/certificate of incorporation, nomination of directors, and statutory
and other restrictions on certain business combinations and control share
acquisitions.
A comparison of the respective rights of First Southeast's shareholders
and Carolina First Corporation's shareholders with respect to these matters is
set forth immediately below. A description of the Carolina First Corporation
common stock is set forth below under "CAROLINA FIRST CORPORATION CAPITAL
STOCK."
General
Carolina First Corporation is a bank holding corporation subject to the
provisions of the South Carolina Business Corporation Act of 1988, as amended
("SCBCA"). First Southeast is a savings and loan holding company subject to the
provisions of the Delaware General Corporations Law ("DGCL"). Shareholders of
First Southeast will, upon consummation of the Merger become shareholders of
Carolina First Corporation. The rights of such shareholders will thus be
governed by the SCBCA and the Articles of Incorporation and Bylaws of Carolina
First Corporation.
Set forth below are the material differences between the rights of a
First Southeast shareholder under the First Southeast Certificate of
Incorporation and Bylaws and the DGCL, on the one hand, and the rights of a
Carolina First Corporation shareholder under the Carolina First Corporation
Articles of Incorporation and Bylaws and the SCBCA, on the other hand.
The following summary does not reflect any rules of Nasdaq that may
apply to First Southeast or Carolina First Corporation in connection with the
matters discussed. This summary does not purport to be a complete discussion of,
and is qualified in its entirety by reference to the SCBCA, the DGCL and the
constituent documents of each corporation.
Authorized Capital
First Southeast. The authorized capital stock of First Southeast
consists of 8,000,000 shares of First Southeast common stock (par value $0.01
per share) and 2,000,000 shares of First Southeast preferred stock. As of August
1, 1997, First Southeast had 4,388,231 shares of common stock outstanding and no
shares of preferred stock outstanding.
Carolina First Corporation. The authorized capital stock of Carolina
First Corporation consists of 100,000,000 shares of Carolina First Corporation
common stock (par value $1 per share) and 10,000,000 shares of Carolina First
Corporation preferred stock. As of July 24, 1997, Carolina First Corporation had
12,105,841 shares of common stock outstanding (which includes 486,000 shares
which became issuable on July 18, 1997 in connection with the acquisition of
Lowcountry Savings Bank) and no shares of preferred stock outstanding.
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Amendment of Articles/Certificate of Incorporation or Bylaws
First Southeast. Pursuant to First Southeast's Certificate of
Incorporation, the approval of 80% of First Southeast's shareholders entitled to
vote thereon is required to amend certain provisions of the Certificate of
Incorporation. The approval of 80% of First Southeast's shareholders entitled to
vote thereon is required to amend, add to or repeal in whole or in part its
Bylaws, except that First Southeast's Bylaws may also be amended, added to or
repealed by a two-thirds vote of the First Southeast Board of Directors.
Carolina First Corporation. The SCBCA permits a corporation's board of
directors acting by majority vote at a meeting in which a quorum is present to
amend the corporation's articles of incorporation unless the SCBCA or the
corporation's articles of incorporation or bylaws specify otherwise. The SCBCA
also permits a corporation's shareholders to amend its articles if shareholders
holding 10% of the voting shares propose an amendment to the board of directors
and two-thirds of the shareholders vote to approve the amendment. Carolina First
Corporation's Articles of Incorporation require an 80% affirmative vote of
shareholders entitled to vote thereon to amend provisions of its Articles of
Incorporation relating to the following issues unless 80% of the directors
approve the amendment:
(i) supermajority voting requirements to approve certain mergers,
sales or exchanges of assets or stock exchanges (See "--
Shareholder Voting in Certain Business Combinations");
(ii) provisions regarding the Board of Director's powers to evaluate
proposals for business combinations;
(iii) provision of notice requirements for shareholder nominations of
directors;
(iv) supermajority voting requirements for removal of directors
without cause;
(v) provision of staggered terms for three classes of directors; and
(vi) supermajority voting provisions for dissolution of Carolina
First Corporation.
If 80% of the directors approve amendments pertaining to the Articles of
Incorporation listed above, then only a 2/3 affirmative vote of shareholders is
needed to approve the amendments.
Carolina First Corporation's Board of Directors may amend or repeal its
Bylaws unless: (i) the articles of incorporation or the SCBCA reserve this power
exclusively to shareholders; (ii) Carolina First Corporation shareholders in
adopting, amending or repealing any bylaw provide expressly that the board of
directors may not amend that bylaw; or (iii) the bylaw either established,
amends or deletes a supermajority shareholder quorum or voting requirement.
Amendments to the Bylaws by the Board of Directors must be proposed at a meeting
of the Board of Directors prior to the meeting at which such amendments are
adopted. Carolina First Corporation's Bylaws may also be amended by a majority
vote of Carolina First Corporation shareholders.
Size and Classification of Board of Directors
First Southeast. The DGCL permits the number of directors to be set in
the certificate of incorporation or the bylaws. The First Southeast Certificate
of Incorporation permits the Board of Directors to have from five to 25
directors. The Bylaws currently set the number of directors at eight. As
permitted by the DGCL, the First Southeast Board is divided into three classes,
each as nearly as possible equal in number, with one class being elected
annually for staggered three-year terms. The DGCL permits cumulative voting for
directors; however, the First Southeast Certificate of Incorporation provides
that there will be no cumulative voting for directors.
Carolina First Corporation. THE SCBCA permits the number of directors to
be set in the articles of incorporation or bylaws. If there are nine or more
directors, the SCBCA permits division of the directors into two or three
classes, each as nearly as possible equal in number, with one class being
elected annually. The SCBCA requires a shareholder vote to change the number of
directors by more than 30% of the existing number of directors. If a
corporation's articles or bylaws permit, the current board may vote to increase
or decrease the number of directors by 30% or less. Carolina First Corporation's
Bylaws permit the Board of Directors to add to or reduce
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the number of directors.
Carolina First Corporation's Articles of Incorporation divide the
Carolina First Corporation Board into three classes. The Bylaws provide that
either the Board of Directors or the shareholders may change the number of
directors on the Board. There are currently 10 directors, but this Proxy
Statement proposes to increase that number to 13. The SCBCA permits cumulative
voting for directors; however, the Carolina First Corporation Articles of
Incorporation provide that there will be no cumulative voting for directors. See
"EXPANSION OF THE CAROLINA FIRST CORPORATION BOARD OF DIRECTORS; ELECTION OF
THREE DIRECTORS."
Shareholder Nomination of Directors
First Southeast. Under First Southeast's Bylaws, shareholders entitled
to vote to elect directors may nominate directors for election. Nominations must
be received at the principal executive offices of First Southeast no later than
30 days and no earlier than 60 days before the annual meeting at which directors
are elected. If shareholders are given less than 31 days notice of a special
meeting, they must submit nominations within 10 days of the day on which notice
of the meeting was mailed to shareholders. Nominations must conform to
informational requirements stated in the Bylaws. Holders of First Southeast
preferred stock may elect directors under specified circumstances.
Carolina First Corporation. Under Carolina First Corporation's Bylaws,
shareholders entitled to vote to elect directors may nominate directors for
election. Nominations must be received at the principal executive offices of
Carolina First Corporation no later than 30 days and no earlier than 60 days
before the annual meeting at which directors are elected. Nominations must
conform to informational requirements stated in the Bylaws. Holders of Carolina
First Corporation preferred stock may elect directors under specified
circumstances.
Removal of Directors by Shareholders
First Southeast. In accordance with the DGCL and the First Southeast
Certificate of Incorporation, except for directors elected under specified
circumstances by holders of First Southeast preferred stock, any director or the
entire board of directors of First Southeast may be removed only for cause and
only by an affirmative vote of holders of at least 80% of the outstanding shares
of capital stock.
Carolina First Corporation. In accordance with the SCBCA and the
Carolina First Corporation Articles of Incorporation, except for directors
elected under specified circumstances by holders of Carolina First Corporation
preferred stock, any director or the entire board of directors of Carolina First
Corporation may be removed without cause by an affirmative vote of at least 80%
of the outstanding shares of capital stock. A majority of a quorum of
shareholders present at a meeting may remove a director or the entire board of
directors for cause.
Director Exculpation
First Southeast. In accordance with the DGCL, the First Southeast
Certificate of Incorporation provides for the elimination of personal liability
of each director of First Southeast except: (i) for any breach of the director's
duty of loyalty to First Southeast or its shareholders, (ii) for acts or
omissions not made in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for improper distributions, or (iv) for any
transaction from which a director derived an improper personal benefit. If the
DGCL is amended to further limit the personal liability of directors, then the
Certificate of Incorporation provides that liability is further eliminated or
limited to the fullest extent allowable by the DGCL.
Carolina First Corporation. The SCBCA permits corporations to eliminate
or limit the personal liability of directors except for the same four
circumstances listed above under the DGCL. In addition, the SCBCA prohibits a
corporation from eliminating or limiting director liability for gross
negligence. Neither the Carolina First
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Corporation Articles of Incorporation nor the Carolina First Corporation Bylaws
have any provisions providing for the elimination of personal liability of
directors.
Director and Officer Indemnification
First Southeast. Under the DGCL, a corporation has the power to
indemnify a director or officer against (i) expenses, judgments, fines and
amounts paid in settlement reasonably incurred in any proceeding (other than a
proceeding by or in the right of the corporation) if the director or officer
acted in good faith and in a manner such officer or director reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful and (ii) expenses reasonably incurred in any
proceeding by or in the right of the corporation if the director or officer
acted in good faith and in a manner such officer or director reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification of such expenses shall be made in any such proceeding in which
such person shall be adjudged to be liable to the corporation unless and only to
the extent that the court shall determine that, in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses. The First Southeast Certificate of Incorporation permits directors and
officers to be indemnified for reasonable expenses in a derivative suit. First
Southeast directors and officers are indemnified for expenses, settlements,
judgments and fines in non-derivative suits.
Under the DGCL, any indemnification permitted by the rules described in
the foregoing paragraph may be made only as authorized in the specific case upon
a determination that the individual has met the applicable standard of conduct,
which determination must be made (i) by a majority vote of directors, who are
not parties, even though less than a quorum, (ii) if there are no directors, or
if a quorum of disinterested directors so directs, by independent legal counsel,
or (iii) by the shareholders. Under the First Southeast Certificate of
Incorporation, to be indemnified an officer or director must either be
successful on the merits or have acted in good faith and in a manner he
reasonably believed not to be opposed to the interests of First Southeast. In a
derivative suit, if the officer or director is judged liable to First Southeast,
he may only be indemnified if the court in which the suit is brought permits
indemnification. In a non-derivative suit, termination by judgment, order,
settlement, conviction, or plea of nolo contendere does not create a presumption
that the officer or director failed to satisfy the standard of conduct necessary
for indemnification. In a non-derivative case involving criminal liability, an
officer or director may only be indemnified if he had no reason to believe his
actions were unlawful.
The DGCL requires that a director or officer be indemnified against
expenses reasonably incurred in connection with any proceeding in which he has
been successful on the merits or otherwise in defense of the proceeding, or in
defense of any claim, issue or matter therein. Expenses of any officer or
director in connection with any proceeding may be paid by the corporation in
advance upon receipt of an undertaking to repay such amount if it shall
ultimately be determined that such officer or director is not entitled to be
indemnified.
The DGCL permits a corporation to purchase and maintain insurance on
behalf of any officer or director against any liability, whether or not the
corporation would have the power to indemnify such officer or director against
such liability.
Carolina First Corporation. Under the SCBCA, generally a corporation may
indemnify a past or present director against liability incurred in a proceeding
if (i) the director conducted himself in good faith, (ii) the director
reasonably believed (a) in the case of conduct in his or her official capacity
with the corporation, that his or her conduct was in its best interest, and (b)
in all other cases, that his or her conduct was at least not opposed to its best
interest, and (iii) in the case of any criminal proceedings, the director had no
reasonable cause to believe his or her conduct was unlawful. However, a
corporation may not indemnify a director (a) in connection with a proceeding by
or in the right of the corporation in which the director is adjudged liable to
the corporation, or (b) in connection with any other proceeding charging
improper personal benefit to him or her in which he or she is adjudged liable on
the basis that personal benefit was improperly received by him or her.
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Under the SCBCA, unless limited by the articles of incorporation, a
corporation shall indemnify a director who is wholly successful, on the merits
or otherwise, in the defense of any proceeding to which he or she is party
because he or she is or was a director against reasonable expenses incurred by
him or her in connection with the proceeding. A corporation may pay in advance
for the reasonable litigation expenses of a director if (i) the director
furnishes the corporation a written affirmation of his good faith belief that he
or she has met the applicable standard of conduct, (ii) the director furnishes
the corporation a written undertaking to repay the advance if it is ultimately
determined that he or she did not meet the standard of conduct, and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification. Such determination, as well as
any determination that indemnification shall be paid, must be made in one of the
following ways: (i) by a majority vote of a quorum of the board of directors
consisting of directors not at the time parties to the proceeding, (ii) if a
quorum cannot be obtained, by majority vote of a committee designated by the
board of directors, consisting solely of two or more directors not at the time
parties to the proceeding, (iii) by special legal counsel (a) selected by the
board of directors or its committee in the manner prescribed above, or (b) if a
quorum of the board of directors cannot be obtained and a committee cannot be
designated, selected by majority vote of the full board of directors, or (iv) by
the shareholders, but shares owned by or voted under the control of directors
who are at the time parties to the proceeding may not be voted on the
determination.
Under the SCBCA, an officer is entitled to the benefit of the same
indemnification provisions as apply to directors, but in addition a corporation
may indemnify and advance expenses to an officer who is not a director to the
extent, consistent with public policy, provided by the corporation's articles of
incorporation, the corporation's bylaws, general or specific action of the board
of directors, or contract. Unless the corporation's articles of incorporation
provide otherwise, the SCBCA permits a court in certain circumstances to order
the payment of indemnification to a director, whether or not he met the
applicable standard of conduct, if the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances.
The SCBCA permits a corporation to purchase and maintain insurance on
behalf of any officer or director against any liability, whether or not the
corporation would have the power to indemnify such officer or director against
such liability.
Carolina First Corporation's Articles of Incorporation provide 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 shareholders, (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 SCBCA (improper
distribution to shareholder), or (iv) for any transaction from which the
director derived an improper personal benefit." The Carolina First Corporation
Bylaws provide for indemnification of officers and directors for expenses and
for the advancement of expenses to the maximum extent permitted by applicable
law.
Related Party Transactions and Director Conflict of Interest Transactions
First Southeast. Under the DGCL, any corporation may lend money to, or
guarantee any obligation of, any officer or other employee, including any
officer or employee who is a director, whenever, in the judgment of the
directors, such loan or guaranty may reasonably be expected to benefit the
corporation.
Under the DGCL, contracts or transactions between a corporation and one
or more of its directors or officers, or between a corporation and another
corporation or entity in which a director or officer has a financial interest or
is a director or officer, may be effected if (i) approved in good faith by
either (a) a majority of the disinterested directors of the board or a committee
thereof or (b) a majority of the shareholders, in each case after disclosure or
with knowledge of the material facts respecting the relationship or interest and
the contract or
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transaction or (ii) the contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the shareholders.
Carolina First Corporation. Under the SCBCA, a corporation may not
directly or indirectly lend money to, or guarantee the obligation of, any
director unless (i) the particular loan or guarantee is approved by a majority
of the votes represented by the outstanding voting shares of all classes, voting
as a single voting group, except the votes of shares owned by or voted under the
control of the benefitted director, or (ii) the corporation's board of directors
determines that the loan or guarantee benefits the corporation and either
approves the specific loan or guarantee or a general plan authorizing loans and
guarantees.
Under the SCBCA, a transaction with a corporation in which a director of
the corporation has a direct or indirect interest is not voidable by the
corporation solely because of the director's interest in the transaction if any
one of the following is true: (i) the material facts of the transaction and the
director's interest were disclosed or known to the board of directors or a
committee of the board of directors and the board or such committee authorizes,
approves or ratifies the transaction by a majority (consisting of more than one)
of the directors on the board or the committee who have no direct or indirect
interest in the transaction; or (ii) the material facts of the transaction and
the director's interest were disclosed or known to the shareholders entitled to
vote and they authorized, approved, or ratified the transaction by the
affirmative vote of a majority of the shares entitled to vote other than shares
owned by or voted under the control of the director who has a direct or indirect
interest in the transaction and other than shares owned by or voted under the
control of certain related entities; or (iii) the transaction was fair to the
corporation.
Shareholder Meetings
First Southeast. First Southeast has annual meetings, and pursuant to
First Southeast's Certificate of Incorporation and Bylaws, it may have special
meetings called by the Board of Directors. The Board of Directors chooses the
place of meetings. First Southeast must mail written notice of meetings to
shareholders of record no less than 10 days and no more than 60 days before the
meeting. The First Southeast Board of Directors sets the record date, which can
be no less than 10 days and no more than 60 days before the date on which
shareholders are to take action.
Shareholders may propose business for consideration at shareholder
meetings. Shareholders must give notice of proposals to the secretary of the
corporation, which must be received at the principal place of business of First
Southeast no more than 60 days and no less than 30 days prior to the meeting. In
the event that shareholders receive less than 31 days notice of a meeting,
notice of shareholder proposals must be received by the secretary within 10 days
following the day on which notice of the meeting was mailed to shareholders.
Carolina First Corporation. Carolina First Corporation has annual
meetings, and pursuant to Carolina First Corporation's Bylaws, it may have
special meetings called by the President, the board of directors, or by request
of holders of one-tenth of all outstanding votes of the corporation entitled to
be cast on any issue at the meeting. The board of directors chooses the place of
meetings. Except as described below for shareholder-requested special meetings,
the board of directors must send Carolina First Corporation shareholders written
notice of meetings not more than 60 and not less than 10 days before the date of
the meeting. The board of directors may set the record date for shareholders
entitled to vote at a meeting 70 days in advance of the meeting. If the board of
directors does not set a record date, the Bylaws list default record dates for
various types of meetings and business.
If shareholders wish to request a special meeting, they must first give
written notice to the secretary of the corporation requesting that a record date
be fixed. The board of directors must fix the record date within 10 days of
receipt of the request. Carolina First Corporation must receive, within 60 days
of the record date, written requests from the requisite 10% of shareholders
requesting the special meeting for the shareholder request to be valid. If an
adequate number of valid written requests are received, the board of directors
must set a new record
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date for the special meeting and give notice of the meeting to shareholders
within 30 days of the date on which the 10% written request requirement was
satisfied.
Shareholders may propose business for shareholder meetings. Shareholders
must deliver notice of their proposals to the principal place of business of
Carolina First Corporation no more than 90 days and no less than 60 days prior
to the first anniversary of the preceding years annual meeting; provided,
however, that if the annual meeting is more than 30 days before or 60 days after
the anniversary of the previous annual meeting, notice of shareholder proposals
must be delivered no more than 90 and no less than 60 days prior to the meeting
or no later than the 10th day following the announcement of the meeting. The
notice must meet certain requirements specified in the Bylaws.
Shareholder Voting in General
First Southeast. Shareholder action requires a quorum of shares entitled
to vote. Unless the DGCL, a corporation's certificate of incorporation or its
bylaws require otherwise, the DGCL states that a majority of shares entitled to
vote constitutes a quorum and an affirmative vote of a majority of shares
present suffices to approve any proposed action. If a separate vote by class or
classes is required, a majority of the outstanding shares of that class or
classes constitutes a quorum and a majority of shares of that class or classes
present suffices to approve any proposed action.
Carolina First Corporation. Shareholder action requires a quorum of
shares entitled to vote. Unless the SCBCA, a corporation's articles of
incorporation or its bylaws require otherwise, the SCBCA states that a majority
of shares entitled to vote constitutes a quorum and an affirmative vote of a
majority of shares present suffices to approve any proposed action. If a
separate vote by class or classes is required, a majority of the outstanding
shares of that class or classes constitutes a quorum and a majority of shares of
that class or classes present suffices to approve any proposed action.
Carolina First Corporation's Bylaws provide that a bylaw adding,
changing or deleting a supermajority quorum or voting requirement must be
approved by the same vote and voting groups required to take action under the
bylaws as then in effect or as in the proposed amendment, whichever requires a
greater quorum and/or vote for approval.
Shareholder Voting in Certain Business Combinations
First Southeast. Under the DGCL, an agreement of merger or consolidation
must be adopted by the affirmative vote of a majority of the outstanding stock
entitled to vote thereon, but does not require the separate vote of any class of
such stock unless the Reorganization Agreement involves an amendment to the
certificate of incorporation which would adversely affect such class. Similarly,
the DGCL requires an affirmative vote of the holders of a majority of the
outstanding stock entitled to vote thereon to authorize a sale, lease or
exchange of all or substantially all the property and assets of the corporation,
or to authorize the voluntary dissolution of the corporation. The DGCL permits
the voluntary dissolution of a corporation without the approval of the board of
directors pursuant to the written consent of all the shareholders.
The First Southeast Certificate of Incorporation requires an 80%
affirmative vote by shareholders entitled to vote to approve the following
actions unless two-thirds of the Continuing Directors (as defined below) approve
the action:
(i) any merger or consolidation of First Southeast with or into a
Related Person (as defined below) or of a Related Person with or
into First Southeast;
(ii) any sale, lease, exchange, transfer or other disposition of 25%
or more of the assets of First Southeast to a Related Person or
of 25% or more of the assets of a Related Person to First
Southeast;
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(iii) any acquisition by First Southeast of securities of a Related
Person; or
(iv) any reclassification of the common stock of First Southeast, or
any recapitalization involving the common stock of First
Southeast.
A Related Person is any person, corporation or other entity and/or its
affiliates that beneficially owns 10% or more of the common stock of First
Southeast. Continuing Directors are directors who are unaffiliated with the
Related Person and were members of the Board of Directors prior to the time a
Related Person became a Related Person. Successors of Continuing Directors are
also Continuing Directors if they are unaffiliated with the Related Person and
are recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
Carolina First Corporation. Under the SCBCA, a plan of merger must
generally be approved by the affirmative vote of the holders of at least
two-thirds of the votes entitled to be cast on the plan regardless of the class
or voting group to which the shares belong, and two-thirds of the votes entitled
to be cast on the plan within each voting group entitled to vote as a separate
voting group on the plan. A corporation's articles of incorporation may require
a lower or higher vote for approval, but the required vote must be at least a
majority of the votes entitled to be cast on the plan by each voting group
entitled to vote separately on the plan.
Under the SCBCA, to authorize the sale, lease, exchange or other
disposition of all or substantially all of the property of a corporation, other
than in the usual and regular course of business, or to voluntarily dissolve the
corporation, South Carolina law requires the affirmative vote of at least
two-thirds of all the votes entitled to be cast on the transaction. A
corporation's articles of incorporation may require a lower or higher vote for
approval, but the required vote must be least a majority of all the votes
entitled to be cast on the transaction.
The Carolina First Corporation Articles of Incorporation alter the
default rules of the SCBCA to require the affirmative vote of 80% of the
outstanding stock of Carolina First Corporation entitled to vote for approval of
the following actions unless 80% of the directors of Carolina First Corporation
have approved the action:
(i) a merger of Carolina First Corporation or any of its subsidiaries
with any other corporation;
(ii) the sale or exchange of all or a substantial part of Carolina
First Corporation's assets to or with any other corporation; or
(iii) the issue or delivery of Carolina First Corporation stock
or other Carolina First Corporation securities in
exchange or payment for properties or assets of or
securities issued by any other corporation.
Transactions solely between Carolina First Corporation and another corporation
are excluded from this 80% approval requirement if Carolina First Corporation
owns 50% or more of the other corporation's voting stock.
Change in Control, Business Combinations and Anti-Takeover Provisions
First Southeast. Section 203 of the DGCL prohibits certain transactions
between a Delaware corporation, the shares of which are listed on a national
securities exchange, and an "interested stockholder," unless the bylaws or
certificate of incorporation of the corporation contains a provision expressly
electing not to be governed by Section 203 of the DGCL. An "interested
stockholder" includes a person that is directly or indirectly a beneficial owner
of 15% or more of the voting power of the outstanding voting stock of the
corporation and such person's affiliates and associates.
The provision prohibits certain business combinations between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder became an interested stockholder, unless (i) the
business combination is approved by the corporation's board of directors prior
to the date such stockholder became an interested stockholder, (ii) the
interested stockholder acquired at least 85% of the voting stock of the
corporation in the transaction in which such stockholder became an interested
stockholder or (iii) the business combination is
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approved by a majority of the board of directors and the affirmative vote at a
shareholder meeting of two-thirds of the outstanding stock that is not owned by
the interested stockholder.
First Southeast has not opted out of Section 203 application in its
Certificate of Incorporation or Bylaws, so Section 203 is fully applicable to
First Southeast.
Carolina First Corporation. South Carolina's legislation respecting
Control Share Acquisitions (as defined in the SCBCA) and Business Combinations
(as defined herein) was enacted in 1988. The South Carolina Control Share
Acquisition law applies to several categories of South Carolina corporations,
including any South Carolina corporation, such as Carolina First Corporation,
that has a class of voting shares registered with the Securities Exchange
Commission under Section 12 of the Exchange Act, has a principal place of
business, its principal office or substantial assets in South Carolina and has a
specified shareholder presence in South Carolina. The South Carolina Business
Combination Law applies to certain South Carolina corporations, such as Carolina
First Corporation, and certain non-South Carolina corporations that have a
significant presence in South Carolina.
South Carolina Control Share Acquisitions Law. Unless a corporation has
opted out of the provisions of the South Carolina statute before the "control
share acquisition" in question through an amendment to its articles of
incorporation or bylaws, "control shares" of the corporation acquired in a
"control share acquisition" have no voting rights unless and until granted by
resolution approved by a majority of the shares of each voting group, excluding
all "interested shares." "Interested shares" are shares of the corporation voted
by an acquiring person or a member of a group with respect to a "control share
acquisition," any officer of the corporation or any employee of the corporation
who is also a director of the corporation.
If authorized by such a corporation's articles of incorporation or
bylaws before a "control share acquisition" has occurred, "control shares"
acquired in a "control share acquisition" may under certain circumstances be
subject to redemption by the corporation at the fair value thereof.
Unless otherwise provided in such a corporation's articles of
incorporation or bylaws before a "control share acquisition" has occurred, if
"control shares" acquired in a "control share acquisition" are accorded full
voting rights which will constitute a majority or more of all voting power, all
shareholders of the corporation have dissenters' rights to receive fair value
for their shares.
For purposes of the Control Share Acquisition law, "control shares" are
shares, the acquisition of which would give a person, acting alone or with a
group, the power to exercise one of the following amounts of voting power in an
election of directors: (i) one-fifth or more but less than one-third of all
voting power, (ii) one-third or more but less than a majority of all voting
power or (iii) a majority or more of all voting power. For purposes of the law,
a "control share acquisition" means the acquisition, directly or indirectly, by
any person of ownership of, or the power to direct the exercise of voting power
with respect to, issued and outstanding "control shares". Among certain other
circumstances, a "control share acquisition" is deemed not to occur when the
share acquisition is pursuant to a merger or plan of share exchange where the
corporation is a party to the agreement of merger or plan of share exchange.
Accordingly, the statute would not, by its terms, apply to the Reorganization
Agreement.
South Carolina Business Combination Law. The law prohibits specified
"business combinations" with "interested shareholders" unless certain conditions
are satisfied. The act defines an "interested shareholder" as any person (other
than the corporation or any of its subsidiaries) that (i) beneficially owns 10%
or more of the corporation's outstanding voting shares or (ii) at any time
within the preceding two-year period beneficially owned 10% of the voting power
of the corporation's outstanding shares and is an affiliate or associate of the
corporation. Excluded from the statute's coverage is any "business combination"
with any person that beneficially owned in excess of 10% of the corporation's
voting shares prior to April 23, 1988.
Covered business combinations with interested shareholders or an
affiliate or associate of an interested
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shareholder include, among other transactions: (i) merger of the corporation;
(ii) sale, lease, exchange, mortgage, pledge, transfer or other disposition of
assets having a value equal to 10% or more of the value of all assets of the
corporation, the value of all outstanding shares of the corporation, or the
earning power or net income of the corporation; (iii) transfer of shares of the
corporation equaling 5% or more of the market value of all outstanding shares of
the corporation; and (iv) dissolution or liquidation of the corporation proposed
by or under an arrangement with an interested shareholder or its affiliate or
associate.
Covered business combinations are prohibited unless (i) the board of
directors of the corporation approved of the business combination before the
interested shareholder became an interested shareholder; (ii) a majority of
shares not beneficially owned by the interested shareholder approved the
combination; and (iii) certain transactional requirements are met. Covered
business combinations are prohibited for two years after an interested
shareholder becomes interested unless the board of directors of the corporation
approved of the business combination before the interested party became
interested.
Carolina First Corporation has not opted out of coverage of either the
South Carolina Control Shares Acquisition law or the South Carolina Business
Combination law.
Rights Plan. Carolina First Corporation has adopted a Shareholders'
Rights Plan, discussed below, which may serve to impede certain takeovers not
favored by the Carolina First Corporation board of directors.
Restrictions on 10% Beneficial Ownership.
First Southeast. First Southeast's Certificate of Incorporation provides
that for a period of five years from the date of completion of the conversion of
First Federal from mutual to stock form (which occurred on October 7, 1993), no
person may offer to acquire the beneficial ownership of more than 10% of the
common stock of the company. All shares owned by any person in excess of 10% are
considered excess shares and will not be counted as shares entitled to vote. In
addition, the First Southeast's Certificate of Incorporation provides that after
October 7, 1998, any person or group acting in concert that acquires more than
10% of First Southeast's common stock without the prior approval of two-thirds
of the board of directors of First Southeast will have reduced voting power with
respect to those shares in excess of 10% of the outstanding shares of voting
stock held by such person. With respect to each vote in excess of 10% of voting
power of the outstanding shares held by such person, the holder shall be
entitled to cast only one-hundredth of a vote.
Carolina First Corporation. Carolina First Corporation has no similar
limitations in its Articles of Incorporation.
Action by Shareholders Without a Meeting
First Southeast. Under the DGCL, unless a corporation's certificate of
incorporation provides otherwise, any action that is required to be or that may
be taken at a meeting of shareholders may be taken without a meeting, without
prior notice and without a vote, by the written consent of holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to take such action if a meeting of shareholders were held at which
all shares entitled to vote thereon were present and voted. All consents
required for action must be received within 60 days of the receipt by the
corporation of the first consent, and notice of the action must be given to
shareholders who did not consent.
The First Southeast Certificate of Incorporation specifically denies
shareholders the power to take action by consent without a meeting.
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Carolina First Corporation. Under the SCBCA and Carolina First
Corporation's Bylaws, any action that is required to be or that may be taken at
a meeting of shareholders may be taken without a meeting, by the written consent
of holders of outstanding shares having not less than the minimum number of
votes that would be necessary to take such action if a meeting of shareholders
were held at which all shares entitled to vote thereon were present and voted,
unless otherwise provided in the articles of incorporation. All consents
required for action must be received within 60 days of the receipt by the
corporation of the first consent. If the action were to require notice to
non-voting shareholders if taken at a meeting, similar notice of the action by
consent must be sent to non-voting shareholders 10 days before the action is
taken.
Dissenters' or Appraisal Rights
First Southeast. Under the DGCL, appraisal or dissenters' rights arise
only in connection with statutory mergers or consolidations, and the holders of
shares of a class listed on a national securities exchange or held of record by
more than 2,000 shareholders are not entitled to appraisal rights in the event
of a merger or consolidation, unless such shareholders are required by the terms
of the Reorganization Agreement to accept anything other than shares of stock of
the surviving corporation, shares of stock of another corporation which are so
listed or held by such number of record holders, cash in lieu of fractional
shares of such stock, or a combination of the shares of stock, depository
receipts and cash in lieu of fractional shares of such stock. If the shares are
not so listed or held by such number of record holders, a shareholder who did
not vote in favor of such action, and who complies with certain statutory
procedures, is entitled to receive the fair value as determined under the DGCL
of such shareholder's shares from the corporation.
Because First Southeast is listed on Nasdaq, First Southeast
shareholders do not receive dissenters' or appraisal rights.
Carolina First Corporation. Under the SCBCA, a shareholder of a
corporation who objects to (i) an amendment of the articles of incorporation
that materially and adversely affects certain of the shareholder's rights, (ii)
consummation of a plan of merger to which the corporation is a party (a) if
shareholder approval is required and the shareholder is entitled to vote on the
Reorganization Agreement or (b) if the corporation is a subsidiary that is
merged with its parent without shareholder approval or if the corporation is a
parent that causes its subsidiary to be merged into it without shareholder
approval, (iii) consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares are to be acquired, if
the shareholder is entitled to vote on the plan, (iv) consummation of a sale or
exchange of all, or substantially all, of the property of the corporation other
than in the usual and regular course of business, if the shareholder is entitled
to vote on the sale or exchange (excluding, among other matters, a sale for cash
pursuant to a plan by which all or substantially all of the net proceeds of the
sale must be distributed to the shareholders within one year after the date of
sale), is entitled to payment of the fair value as determined under the SCBCA of
such shareholder's shares by perfecting dissenters' rights pursuant to the
SCBCA.
Shareholder Inspection Rights
First Southeast. Under the DGCL, shareholders of record or their
attorney or agent may inspect a corporation's stock ledger, a list of its
shareholders, and its other books and records and make copies or extracts
therefrom. The shareholder must make a written demand stating a proper purpose
under oath. A proper purpose is a purpose reasonably related to one's interest
as a shareholder. Shareholders only have the right to inspect records during
business hours. Delaware corporations must make available 10 days before any
shareholder meeting a list of record shareholders complete with names,
addresses, and shares held.
Carolina First Corporation. Under the SCBCA, if a shareholder gives a
corporation written notice five days in advance, the shareholder may inspect
during regular business hours the corporation's (i) articles of incorporation,
(ii) bylaws, (iii) resolutions of the board of directors creating classes of
shares and fixing the shares' rights, (iv) the
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minutes of all shareholders' meetings and records of actions taken by
shareholders without a meeting in the past 10 years, (v) all written
communications to shareholders as a group within the last three years, (vi) a
list of the names and business addresses of current directors and officers, and
(vii) the corporation's most recent annual report delivered to the South
Carolina Tax Commission. If the shareholder holds at least 1% of any class of
shares, he may also inspect the corporation's federal and state income tax
returns for the past 10 years.
Under the SCBCA, if a shareholder makes a good faith demand for a proper
business purpose which is described with reasonable particularity in the demand,
the shareholder may also inspect the following records if they are directly
connected with the proper purpose: (1) excerpts from the minutes of any meeting
of the board of directors, records of any action of a committee of the board of
directors, minutes of shareholder meetings, and records of shareholder actions
taken without meeting to the extent not covered in the preceding paragraph, (2)
accounting records of the corporation, and (3) the record of shareholders.
Statutory inspection rights may not be abolished or limited by a
corporation's articles or bylaws.
South Carolina corporations must prepare alphabetical lists of record
shareholders entitled to vote at shareholder meetings. Shareholder lists must be
available for shareholder inspection beginning on the date at which notice of
the meeting is given. A shareholder or his attorney or agent may inspect and
copy the list during regular business hours at the shareholder's expense.
South Carolina corporations must furnish shareholders with annual
financial statements. If a corporation indemnifies or advances expenses to a
director, the corporation must report such action to shareholders prior to the
next shareholder meeting. If the corporation issues shares in exchange for
promissory notes or promises to perform services, it must also notify
shareholders of the action taken unless the shares were issued pursuant to a
plan approved by the shareholders and the corporation is subject to the
registration requirements of Section 12 of the Exchange Act.
Dividends
First Southeast. Under the DGCL, a corporation may, unless otherwise
restricted by its certificate of incorporation, pay dividends out of surplus, or
if no surplus exists, out of net profits for the fiscal year in which the
dividend is declared or a preceding fiscal year (provided that such payment will
not reduce capital below the amount of capital represented by all classes of
stock having a preference upon the distribution of assets). Under the DGCL,
surplus is the excess of the net assets of the corporation over the amount
determined to be capital. The amount of capital may be fixed by the board of
directors, but shall not be less than the aggregate par value of all shares
having par value, plus the stated value of any shares not having par value,
which have been issued from time to time.
Under the DGCL, a corporation may purchase or redeem its own shares only
out of surplus and only if it does not impair capital. However, a corporation
may redeem preferred stock, irrespective of whether capital is thereby impaired,
if such shares will be retired upon their redemption, and the capital of the
corporation is reduced in accordance with the DGCL. The First Southeast
Certificate of Incorporation permits dividends to be paid in cash, in property
or in First Southeast's own stock.
Carolina First Corporation. Under the SCBCA, the board of directors may
authorize and the corporation may make distributions of cash or property to its
shareholders, subject to any restriction in the articles of incorporation and
subject further to the restriction that no distribution may be made if, after
giving it effect, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business, or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of shareholders whose preferential
rights are superior
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to those receiving the distribution. The board of directors may base a
determination that a distribution is not so prohibited either on financial
statements prepared on the basis of accounting practices and principles that are
reasonable in the circumstances or on a fair valuation or other method that is
reasonable in the circumstances.
Dissolution
First Southeast. The DGCL provides that a Delaware corporation can be
dissolved if the directors propose dissolution to the shareholders and a
majority vote of all shares entitled to vote at a shareholders' meeting approves
the dissolution. A Delaware corporation can also be dissolved without action of
the directors by written consent of all shareholders entitled to vote on
dissolution.
Carolina First Corporation. The SCBCA provides that a corporation may be
dissolved upon a proposal of dissolution put to shareholders by the board of
directors and an affirmative vote of all shares entitled to vote thereon. The
board of directors must either make a recommendation on dissolution along with
its proposal or else determine that it can make no recommendation because of a
conflict of interest or other special circumstances. Unless the corporation's
articles provide otherwise, or the board of directors conditions its
recommendation of dissolution to require a different vote, a two-thirds vote of
shareholders entitled to vote on dissolution is necessary to approve the
dissolution. If holders of at least 10% of any class of voting shares proposes
dissolution, the board of directors must submit the proposal of dissolution at
the next shareholders' meeting.
CAROLINA FIRST CORPORATION CAPITAL STOCK
Common Stock
Carolina First Corporation has 100,000,000 shares of common stock
authorized, of which 12,105,841 shares were outstanding as of August 1, 1997.
The holders of the Carolina First Corporation 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." All outstanding shares of Carolina First Corporation common
stock are fully paid and nonassessable. No holder of Carolina First Corporation
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 Carolina First Corporation
common stock are entitled to receive pro rata any assets distributable to
shareholders in respect of shares held by them, subject to the rights of any
senior stock which may be issued in the future. Holders of the Carolina First
Corporation 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 ("Preferred Stock"), none of which is outstanding.
Carolina First Corporation's Board of Directors has the sole authority, without
shareholder 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 shareholders 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
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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.
Certain Matters
Shareholders' Rights Agreement. In 1993, the Carolina First Corporation
Board of Directors adopted a Shareholders' Rights Agreement, which was
subsequently amended and restated in December 1996 ("Rights Agreement"). Under
the Rights Agreement, the Board of Directors declared a distribution of one
common stock purchase right (a "Right") for each outstanding share of Carolina
First Corporation common stock outstanding on November 23, 1993 and each share
to be issued by Carolina First Corporation thereafter. Each Right entitles the
registered holder to purchase from Carolina First Corporation one-half share of
Carolina First Corporation common stock at a cash exercise price of $30.00,
subject to adjustment.
Initially, the Rights are not exercisable and no separate right
certificates are distributed. However, the Rights will separate from the
Carolina First Corporation common stock and a "Distribution Date" will occur
upon the earlier of (i) the close of business on the 10th calendar day after the
Share Acquisition Date (as defined below), or (ii) the close of business on the
10th business day after the date of (x) the commencement, by any person, other
than an "exempt person", of, or (y) the first public announcement of the
intention of any person (other than an exempt person) to commence, a tender or
exchange offer if, upon consummation thereof, such person would be an Acquiring
Person (defined as a person or group which has acquired beneficial ownership of
20% or more of the outstanding shares of the Carolina First Corporation common
stock) (the date of said announcement being referred to as the "Share
Acquisition Date"). Until the Distribution Date, (i) the Rights will be
evidenced by the Carolina First Corporation common stock certificates and will
be transferred with and only with such certificates, and (ii) the surrender for
transfer of any certificates for Carolina First Corporation common stock will
also constitute the transfer of the Rights associated with the Carolina First
Corporation common stock represented by such certificate. The Rights are not
exercisable until the Distribution Date and will expire at the close of business
on December 18, 2006, unless previously redeemed by Carolina First Corporation
as described below. As soon as practicable after the Distribution Date, rights
certificates will be mailed to holders of record of Carolina First Corporation
common stock as of the close of business on the Distribution Date and,
thereafter, the separate rights certificates alone will represent the Rights.
Except as otherwise determined by the Board of Directors, only shares of
Carolina First Corporation 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 Carolina First Corporation 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 Carolina
First Corporation 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 Carolina First Corporation 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 Acquiring Person, together with its
Affiliates and Associates, becomes the Beneficial Owner of 50% or more of the
outstanding Carolina First Corporation common stock, the Board of Directors may
exchange
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the Rights (other than Rights which have become void), in whole or in part, at
the exchange rate of one share of Carolina First Corporation common stock per
Right, subject to adjustment as provided in the Rights Agreement.
The exercise price payable, and the number of shares of Carolina First
Corporation 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 Carolina First Corporation common stock, (ii) if
holders of the Carolina First Corporation common stock are granted certain
rights or warrants to subscribe for Carolina First Corporation common stock or
securities convertible into Carolina First Corporation common stock at less than
the current market price of the Carolina First Corporation common stock, or
(iii) upon the distribution to holders of the Carolina First Corporation 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, Carolina First Corporation common stock or
other consideration deemed appropriate by the Board of Directors) by the Board
of Directors at any time prior to a 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
Person reduces his beneficial ownership to 15% or less of the outstanding shares
of Carolina First Corporation 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, a copy of which has been included in Carolina First
Corporation's public filings with the Securities and Exchange Commission.
Management Contracts. Carolina First Corporation has entered into
Noncompetition, Severance and Employment Agreements with Mack I. Whittle, Jr.,
William S. Hummers III, James W. Terry, Jr. and David L. Morrow. 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 ten persons. In accordance with its 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
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the effect of making it more difficult to replace current Directors than would
otherwise be the case. Accordingly, unless the shareholders vote to remove one
or more Directors as described below, it would take three annual meetings for
shareholders to change the members of the entire Board of Directors. Carolina
First Corporation's Articles of Incorporation also 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 Carolina
First 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.
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. Directors may be
removed for cause as provided under South Carolina law.
Limitation of Director Liability. The members of the Board of 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 SCBCA. 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 shareholders, (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 SCBCA (improper distribution to shareholder), or (iv) for any transaction
from which the director derived an improper personal benefit.
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.
Voting For Directors. Carolina First Corporation's Articles of
Incorporation provide that shareholders 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. In cases where there are more nominees
for Directors than positions available, the nominees receiving the largest
number of votes are elected.
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 (i) merge or consolidate with any other
corporation, (ii) sell or exchange all or a substantial part of its assets to or
with any other corporation, or (iii) 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%
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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 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 shares 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. The SCBCA has
business combination and control share acquisition statutes which may serve to
impede takeovers not favored by management. See "COMPARATIVE RIGHTS OF
SHAREHOLDERS -- Change in Control, Business Combinations and Anti- Takeover
Provisions."
Transfer Agent. The transfer agent for the Carolina First Corporation
common stock is Reliance Trust Company, Atlanta, Georgia.
Dividend Reinvestment Plan. Carolina First Corporation has in place a
dividend reinvestment plan with respect to the Carolina First Corporation common
stock. As set forth in the plan, holders of such shares may elect to receive
Carolina First Corporation common stock in lieu of receiving the cash dividends
to which such holder may otherwise be entitled. The plan also provides for
purchases of Carolina First Corporation common stock through optional cash
payments.
LEGAL MATTERS
Certain legal matters in connection with the Reorganization Agreement,
including the validity of the Carolina First Corporation 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 First Southeast regarding the Reorganization
Agreement. As of July 21, 1997, members and attorneys of Wyche, Burgess Freeman
& Parham, P.A. beneficially owned a total of approximately 18,168 shares of
Carolina First Corporation common stock.
Certain legal matters in connection with the Reorganization Agreement
will be passed upon for First Southeast by Breyer & Aguggia, Washington, D.C.
EXPERTS
The financial statements of First Southeast as of June 30, 1995 and
1996, and for each of the years in the three-year period ended June 30, 1996,
have been included herein and in the registration statement in reliance upon the
report of Crisp Hughes & Co., LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Carolina First Corporation as
of December 31, 1996 and 1995, and for the years then ended, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference
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herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Carolina First Corporation as
of and for the year ended December 31, 1994, have been incorporated by reference
herein and in the registration statement in reliance upon the report of Elliott,
Davis & Company, L.L.P., independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
OTHER MATTERS
The Board of Directors of First Southeast is not aware of any other
matters which may be presented for action at the First Southeast Special
Meeting, but if other matters do properly come before the meeting, it is
intended that the shares of First Southeast 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.
The Board of Directors of Carolina First Corporation is not aware of any
other matters which may be presented for action at the CFC Special Meeting, but
if other matters do properly come before the meeting, it is intended that the
shares of Carolina First Corporation 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.
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EXHIBIT A
REORGANIZATION AGREEMENT
BY AND AMONG
CAROLINA FIRST CORPORATION,
CAROLINA FIRST BANK,
FIRST SOUTHEAST FINANCIAL CORPORATION,
AND
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF ANDERSON
Dated as of July 1, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION I. DEFINITIONS...........................................................................................6
1.1. Articles of Merger.................................................................................6
1.2. Bank Merger........................................................................................6
1.3. Benefit Plans......................................................................................6
1.4. CERCLA.............................................................................................6
1.5. CFB................................................................................................6
1.6. CFC................................................................................................6
1.7. CFC Benefit Plans..................................................................................6
1.8. CFC Common Stock...................................................................................6
1.9. CFC Shareholder Approvals..........................................................................6
1.10. CFC Shareholders' Meeting..........................................................................6
1.11. Closing; Closing Date..............................................................................6
1.12. Code...............................................................................................7
1.13. Confidential Information...........................................................................7
1.14. Corporate Merger...................................................................................7
1.15. Derivative Contract................................................................................7
1.16. ERISA..............................................................................................7
1.17. Effective Time.....................................................................................7
1.19. Exchange Act.......................................................................................7
1.20. FDIC...............................................................................................7
1.21. FFA................................................................................................7
1.22. FMSC...............................................................................................7
1.23. FSFC...............................................................................................7
1.24. FSFC Benefit Plans.................................................................................7
1.25. FSFC Common Stock..................................................................................7
1.26. FSFC Shareholder Approvals.........................................................................7
1.27. FSFC Shareholders' Meeting.........................................................................7
1.28. Federal Reserve Board..............................................................................7
1.29. Federal Reserve....................................................................................7
1.30. GAAP...............................................................................................7
1.31. IRS................................................................................................7
1.32. Knowledge..........................................................................................7
1.33. Lien...............................................................................................8
1.34. Material Adverse Event; Material Adverse Effect....................................................8
1.35. Mergers............................................................................................8
1.36. OTS................................................................................................8
1.37. PBGC...............................................................................................8
1.38. Person.............................................................................................8
1.39. Plan of Merger.....................................................................................8
1.40. Proxy Statement....................................................................................8
1.41. Registration Statement.............................................................................8
1.42. Regulations........................................................................................8
1.43. Regulatory Approvals...............................................................................8
1.44. Regulatory Authority...............................................................................8
1.45. Reorganization Agreement...........................................................................8
1.46. Rights.............................................................................................8
1.47. SEC................................................................................................9
1.48. Securities Act.....................................................................................9
1.49. State Board........................................................................................9
1.50. Shareholder Approvals..............................................................................9
1.51. Shareholders' Meetings.............................................................................9
1.52. Subsidiary Plan of Merger..........................................................................9
SECTION II. THE MERGERS..........................................................................................9
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2.1. Corporate Merger...................................................................................9
2.2. Bank Merger........................................................................................9
2.3. The Closing........................................................................................9
2.4. Consideration for the Mergers......................................................................9
2.5. Shareholder Approvals; Registration Statement......................................................9
2.6. Cooperation; Regulatory Filings....................................................................9
2.7. Tax Treatment.....................................................................................10
SECTION III. REPRESENTATIONS AND WARRANTIES OF FSFC AND FFA.....................................................10
3.1. Organization, Good Standing and Conduct of Business...............................................10
3.2. Subsidiaries......................................................................................10
3.3. Corporate Authority...............................................................................11
3.4. Binding Effect....................................................................................11
3.5. Capitalization of FSFC............................................................................11
3.6. Compliance with Laws; Absence of Defaults.........................................................11
3.7. Non-Contravention and Defaults; No Liens..........................................................12
3.8. Necessary Approvals...............................................................................12
3.9. Financial Statements..............................................................................12
3.10. Tax Returns.......................................................................................12
3.11. Undisclosed Liabilities...........................................................................13
3.12. Properties, Encumbrances..........................................................................13
3.13. Litigation........................................................................................13
3.14. Reports...........................................................................................13
3.15. Brokers...........................................................................................13
3.16. Expenditures......................................................................................13
3.17. Insurance.........................................................................................13
3.18. Contracts and Commitments.........................................................................13
3.19. Employee Benefit Plans and Contracts..............................................................14
3.20. Allowance for Loan Losses.........................................................................15
3.21. Environmental Matters.............................................................................15
3.22. FSFC Information..................................................................................16
3.23. Asset Classification..............................................................................16
3.24. Derivatives Contracts, Etc........................................................................16
3.25. Labor Matters.....................................................................................16
3.26. Securities Reports................................................................................16
3.27. Ownership of CFC Common Stock.....................................................................16
3.28. Resale of CFC Common Stock........................................................................16
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB.......................................................17
4.1. Organization, Good Standing and Conduct of Business...............................................17
4.2. Subsidiaries......................................................................................17
4.3. Corporate Authority...............................................................................17
4.4. Binding Effect....................................................................................17
4.5. Capitalization of CFC.............................................................................17
4.6. Compliance with Laws; Absence of Defaults.........................................................18
4.7. Non-Contravention and Defaults; No Liens..........................................................18
4.8. Necessary Approvals...............................................................................18
4.9. Financial Statements..............................................................................19
4.10. Tax Returns.......................................................................................19
4.11. Undisclosed Liabilities...........................................................................19
4.12. Litigation........................................................................................19
4.13. Reports...........................................................................................20
4.14. Employee Benefit Plans and Contracts..............................................................20
4.15. Allowance for Loan Losses.........................................................................21
4.16. Environmental Matters.............................................................................21
4.17. Asset Classification..............................................................................21
4.18. Labor Matters.....................................................................................21
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4.19. CFC Information...................................................................................21
4.20. Securities Reports................................................................................21
4.21. Ownership of FSFC Common Stock....................................................................22
4.22. Due Diligence.....................................................................................22
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING.................................................................22
5.1. Conduct of FSFC Pending Closing...................................................................22
5.2. Conduct of CFC Pending Closing....................................................................23
SECTION VI. COVENANTS OF THE PARTIES............................................................................23
6.1. Access to Properties and Records..................................................................23
6.2. Confidentiality...................................................................................23
6.3. Cooperation.......................................................................................24
6.4. Affiliates' Letters...............................................................................24
6.5. Listing of CFC Common Stock.......................................................................24
6.6. Letters from Accountants..........................................................................24
6.7. Tax Treatment.....................................................................................24
6.8. Expenses..........................................................................................24
6.9. Material Events...................................................................................24
6.10. Acquisition Proposals.............................................................................24
6.11. Public Announcements..............................................................................25
6.12. Updating of Schedules.............................................................................25
6.13. Certain Policies of FSFC..........................................................................25
6.14. Employee Matters..................................................................................25
6.15. Directors.........................................................................................26
6.16. Charitable Contributions..........................................................................26
6.17. Prohibited Actions................................................................................26
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE...........................................................26
7.1. Performance of Acts and Representations by FSFC...................................................26
7.2. Opinion of Counsel for FSFC.......................................................................27
7.3. Conduct of Business...............................................................................27
7.4. Consents..........................................................................................27
7.5. Certificate.......................................................................................27
7.6. Shareholder Approvals.............................................................................27
7.7. IRS Ruling........................................................................................27
7.8. Securities Laws...................................................................................28
7.9. FSFC Allowance....................................................................................28
SECTION VIII. CONDITIONS TO THE OBLIGATION OF FSFC TO CLOSE......................................................28
8.1. Performance of Acts and Representations by CFC and CFB............................................28
8.2. Opinion of Counsel for CFC........................................................................28
8.3. Conduct of Business...............................................................................28
8.4. Consents..........................................................................................28
8.5. Certificate.......................................................................................29
8.6. Tax Opinion.......................................................................................29
8.7. Shareholder Approvals.............................................................................29
8.8. Securities Laws...................................................................................29
SECTION IX. TERMINATION........................................................................................29
9.1. Termination.......................................................................................29
SECTION X. INDEMNIFICATION.....................................................................................29
10.1. Information for Application and Statements.......................................................29
10.2. Indemnification of Officers and Directors........................................................30
10.3. Insurance........................................................................................30
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SECTION XI. MISCELLANEOUS......................................................................................31
11.1. Survival of Representations and Warranties.......................................................31
11.2. Entire Agreement.................................................................................31
11.3. Binding Agreement................................................................................31
11.4. Notices..........................................................................................31
11.5. Counterparts.....................................................................................31
11.6. Headings.........................................................................................32
11.7. Law Governing....................................................................................32
11.8. Amendment........................................................................................32
11.9. Waiver...........................................................................................32
APPENDICES
Appendix A Plan of Merger
Appendix B Subsidiary Plan of Merger
SCHEDULES
Schedule 3.6: Violations
Schedule 3.8: Necessary Approvals
Schedule 3.11: Material Liabilities or Obligations Not Disclosed in the FSFC Financial Statements
Schedule 3.12: Exceptions to No Liens
Schedule 3.13: Litigation
Schedule 3.16: Proposed Expenditures Exceeding $100,000
Schedule 3.17: Insurance
Schedule 3.18: Contracts or Other Commitments of FSFC; Other Material Contracts or Commitments
Schedule 3.19: FSFC Employee Benefit and Welfare Plans
Schedule 3.23: Classified Assets
Schedule 3.24: Derivatives Contracts, Etc.
Schedule 4.4: Exceptions to CFC Capitalization Representations
Schedule 4.6: Violations
Schedule 4.10: CFC Tax Matters
Schedule 4.11: Material Liabilities or Obligations Not Disclosed in the CFC Financial Statements
Schedule 4.12: Litigation
Schedule 4.14: CFC Employee Benefit and Welfare Plans
Schedule 4.17: Classified Assets
Schedule 6.16: Charitable Contributions
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This REORGANIZATION AGREEMENT is entered into as of this 1st day of
July, 1997 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, First Southeast Financial Corporation ("FSFC"), a corporation
organized and existing under the laws of the state of Delaware, and First
Federal Savings and Loan Association of Anderson ("FFA"), a federal savings and
loan association organized and existing under the laws of the United States of
America.
RECITALS
A. FSFC is a Delaware corporation headquartered in Anderson, South
Carolina, and a registered savings and loan holding company under the Home
Owners' Loan Act of 1933, as amended ("HOLA").
B. FFA is a federal savings and loan association headquartered in
Anderson, South Carolina, and a wholly-owned subsidiary of FSFC.
C. CFC is a South Carolina corporation headquartered in Greenville,
South Carolina, and a registered bank holding company under the Bank Holding
Company Act of 1956, as amended ("BHCA").
D. CFB is a South Carolina-chartered, non-member banking corporation
headquartered in Greenville, South Carolina.
E. The parties hereto desire that FSFC be merged with and into CFC (the
"Corporate Merger"), all as more particularly set forth herein.
F. Subsequent to the Corporate Merger, the parties desire that FFA be
merged with and into CFB (the "Bank Merger"), all as more particularly set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, CFC, CFB, FSFC and
FFA hereby agree as follows:
SECTION I. DEFINITIONS
1.1. Articles of Merger. The Articles of Merger to be executed by (i)
CFC and FSFC and (ii) CFB and FFA and in a form appropriate for filing with the
Secretary of State of South Carolina and the Secretary of State of Delaware, and
relating to the effective consummation of the Mergers as contemplated by the
Plan of Merger.
1.2. Bank Merger. The merger described in Section 2.2.
1.3. Benefit Plans. All employee benefit plans within the meaning of
Section 3(3) of ERISA and any related or separate contracts, plans, trusts,
annuities, programs, policies, arrangements, practices, customs and
understandings that provide benefits of economic value to any present or former
employee, or current or former beneficiary, dependent or assignee of any such
employee or former employee.
1.4. CERCLA. The Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. 9601 et seq.
1.5. CFB. Carolina First Bank, a South Carolina corporation and a
wholly-owned subsidiary of CFC.
1.6. CFC. Carolina First Corporation, a bank holding company
headquartered in Greenville, South Carolina.
1.7. CFC Benefit Plans. All Benefit Plans, and all other material
fringe benefit plans or programs, sponsored or maintained by CFC or CFB or under
which CFC or CFB may be obligated.
1.8. CFC Common Stock. The common stock, par value $1.00 per share, of
CFC.
1.9. CFC Shareholder Approvals. This term shall mean, as the context
may require, the duly authorized written consent of CFC to the Bank Merger and
the approval by the requisite vote of the shareholders of CFC at the CFC
Shareholders' Meeting of the Corporate Merger, all in accordance with this
Reorganization Agreement and the Plan of Merger and the Subsidiary Plan of
Merger.
1.10. CFC Shareholders' Meeting. The meeting of CFC shareholders at
which the Corporate Merger will be voted upon.
1.11. Closing; Closing Date. The terms "Closing" and "Closing Date"
shall have the meanings ascribed to them in Section 2.3 hereof.
1.12. Code. The Internal Revenue Code of 1986, as amended, including,
if the context permits, the applicable regulations promulgated pursuant thereto.
1.13. 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 6.1 hereof as a
result of the transactions contemplated herein, 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
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obligation to keep such information confidential, (iii) which is or becomes
known to the public (other than through a breach of this Reorganization
Agreement), (iv) of which the recipient was in possession prior to disclosure
thereof in connection with the Mergers, or (v) which was independently developed
by the recipient without the benefit of Confidential Information.
1.14. Corporate Merger. The merger described in Section 2.1 hereof.
1.15. Derivative Contract. Any exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract or any
other contract not included on a balance sheet which is a derivative contract
(including various combinations thereof).
1.16. ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
1.17. Effective Time. The date and time which the Mergers become
effective as set forth in the Articles of Merger. Subject to the terms and
conditions hereof, the Effective Time shall be such time on such date as CFC
shall notify FSFC in writing not less than five days prior thereto, which date
shall not be more than 30 days after all conditions have been satisfied or
waived in writing.
1.18. Ending Price. The average of the closing prices as quoted on the
Nasdaq National Market for CFC Common Stock for the ten days in which CFC Common
Stock was traded immediately prior to the Closing Date.
1.19. Exchange Act. The Securities Exchange Act of 1934, as amended.
1.20. FDIC. The Federal Deposit Insurance Corporation.
1.21. FFA. First Federal Savings and Loan Association of Anderson, a
federal savings and loan association organized and existing under the laws of
the United States of America. Where the context permits, FFA shall be deemed to
include FFA and FMSC.
1.22. FMSC. First Master Service Corporation, a South Carolina
corporation and wholly-owned subsidiary of FFA.
1.23. FSFC. First Southeast Financial Corporation, a corporation
organized and existing under the laws of the state of Delaware. In Section III
hereof, where the context permits, FSFC shall include FFA.
1.24. FSFC Benefit Plans. All Benefit Plans, and all other material
fringe benefit plans or programs, sponsored or maintained by FSFC or FFA or
under which FSFC or FFA may be obligated.
1.25. FSFC Common Stock. The common stock, par value $0.01 per share,
of FSFC.
1.26. FSFC Shareholder Approvals. This term shall mean, as the context
may require, the duly authorized written consent of FSFC to the Bank Merger and
the approval by the requisite vote of the shareholders of FSFC at the FSFC
Shareholders' Meeting of the Corporate Merger, all in accordance with this
Reorganization Agreement and the Plan of Merger.
1.27. FSFC Shareholders' Meeting. The meeting of FSFC shareholders at
which the Corporate Merger will be voted upon.
1.28. Federal Reserve Board. The Board of Governors of the Federal
Reserve System, or any successor thereto.
1.29. Federal Reserve. The Federal Reserve Bank of Richmond acting
under delegated authority from the Federal Reserve Board, or any successor
thereto.
1.30. GAAP. Generally accepted accounting principles consistently
applied.
1.31. IRS. The Internal Revenue Service.
1.32. Knowledge. When used in the phrase "to the knowledge" or a
similar phrase, shall mean the actual knowledge of the executive officers of the
referenced party or parties, as applicable, after reasonable inquiry of the
other executive officers and the directors of the parties and the Persons
responsible for the day-to-day operations of the parties or their subsidiaries
(although this definition shall not give rise to any duty of any independent
verification or confirmation by members of senior management or board of
directors of the entity making the representation or warranty from other
Persons).
1.33. Lien. Any lien, claim, encumbrance, security interest,
assessment, charge, restriction (including restriction on voting rights or
rights of disposition), mortgage, deed of trust, equity of any character, third
party right of whatever nature or other similar or like charge.
1.34. Material Adverse Event; Material Adverse Effect. This shall mean
an event, effect, occurrence or circumstance which, alone or when taken with
other breaches, events, effects, occurrences or circumstances existing
concurrently therewith (including without limitation, any breach of a
representation or warranty contained herein by such party) (i) has or is
reasonably expected to have a material adverse effect on the properties,
financial condition, results of operations, or business of such party and its
subsidiaries, taken as a whole, or (ii) would materially prevent such party's,
or any affiliated party's, ability to perform its obligations under this
Reorganization Agreement or the consummation of any of the transactions
contemplated hereby; provided, however, that in
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determining whether a Material Adverse Effect or Material Adverse Event has
occurred, there shall be excluded any effect the cause of which is (A) any
change in banking, tax and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (B) any change in
GAAP or regulatory accounting requirements applicable to the parties hereto, (C)
any action or omission of FSFC or CFC or a subsidiary thereof taken with the
prior written consent of CFC or FSFC, as applicable, in contemplation of the
transaction contemplated herein, (D) the actions contemplated by Section 6.13,
and (E) any changes in general economic conditions affecting financial
institutions generally, including but not limited to changes in interest rates.
1.35. Mergers. The Bank Merger and the Corporate Merger.
1.36. OTS. The Office of Thrift Supervision.
1.37. PBGC. The Pension Benefit Guaranty Corporation.
1.38. Person. An individual, a partnership, a corporation, a commercial
bank, an industrial bank, a savings association, a savings bank, a limited
liability company, an association, a joint stock company, a trust, a business
trust, a joint venture, an unincorporated organization, a governmental entity
(or any department, agency, or political subdivision thereof) or other entity.
1.39. Plan of Merger. The Plan of Merger attached to this
Reorganization Agreement as Appendix A.
1.40. Proxy Statement. The joint proxy statement/prospectus included in
the Registration Statement which shall be furnished to the FSFC shareholders and
the CFC shareholders in connection with the Shareholders' Meetings and the
matters contemplated hereby.
1.41. Registration Statement. The Registration Statement on Form S-4 to
be filed with the SEC registering the issuance of the CFC Common Stock to be
issued to the FSFC shareholders in connection with the Corporate Merger.
1.42. Regulations. The regulations issued by the IRS under the Code.
1.43. Regulatory Approvals. The order of the Federal Reserve Board (or,
if applicable, of the Federal Reserve acting under delegated authority)
approving the Mergers and the required order, approval, or exemption of the
FDIC, the OTS, the State Board, or any other Regulatory Authority approving the
Corporate Merger and/or the Bank Merger.
1.44. Regulatory Authority. Any federal or state governmental agency or
authority charged with the supervision or regulation of depository institutions
or engaged in the insurance of deposits (including, without limitation, the OTS,
the FDIC, and the Federal Reserve Board) and any other federal or state bank,
thrift or other financial institution, insurance or securities regulatory
authorities, and any and all other agencies or departments of federal, state or
local government, including without limitation the SEC.
1.45. Reorganization Agreement. This Reorganization Agreement,
including all schedules, appendices and exhibits attached hereto.
1.46. Rights. Rights shall mean warrants, calls, commitments, options,
rights (whether stock appreciation rights, conversion rights, exchange rights,
profit participation rights, or otherwise), securities or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, and other arrangements or commitments which obligate a
Person to issue, otherwise cause to become outstanding, sell, transfer, pledge,
or otherwise dispose of any of its capital stock or other ownership interests,
or any voting rights thereof or therein, or to pay monetary sums by reference to
the existence or market valuation, or in lieu and place, of any of its capital
stock or ownership interests therein.
1.47. SEC. The Securities and Exchange Commission.
1.48. Securities Act. The Securities Act of 1933, as amended.
1.49. State Board. The South Carolina State Board of Financial
Institutions.
1.50. Shareholder Approvals. The FSFC Shareholders' Approval and the
CFC Shareholders' Approval.
1.51. Shareholders' Meetings. The respective meetings of the
shareholders of FSFC and CFC at which the Corporate Merger shall be voted upon.
1.52. Subsidiary Plan of Merger. The Subsidiary Plan of Merger attached
to this Reorganization Agreement as Appendix B.
SECTION II. THE MERGERS
2.1. Corporate Merger. Subject to the terms and conditions of this
Reorganization Agreement, including the Plan of Merger, FSFC shall merge with
and into CFC (the "Corporate Merger"), the separate existence of FSFC shall
cease, and CFC shall survive and the name of the surviving Corporation shall be
"Carolina First Corporation". The parties agree that the Corporate Merger will
be effected pursuant to the terms set forth in the Plan of Merger.
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2.2. Bank Merger. On the day following the Closing Date or as soon
thereafter as CFB may deem appropriate: FFA shall be merged with and into CFB
(the "Bank Merger"), the separate existence of FFA shall cease and CFB shall
survive and the name of the surviving bank shall be "Carolina First Bank." The
parties agree that the Bank Merger will be effected pursuant to the terms set
forth in the Subsidiary Plan of Merger.
2.3. 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 March 31, 1998,
either party hereto shall have the right to terminate this Reorganization
Agreement.
2.4. Consideration for the Mergers. The manner of converting the shares
of FSFC into shares of CFC shall be as set forth in the Plan of Merger. The
manner of converting the shares of FFA into shares of CFB shall be as set forth
in the Subsidiary Plan of Merger.
2.5. Shareholder Approvals; Registration Statement. Each of CFC and
FSFC shall call their respective Shareholders' Meetings in accordance with the
applicable provisions of South Carolina law, Delaware law and federal securities
laws (as applicable) for the purpose of considering and voting on this
Reorganization Agreement and the transactions contemplated hereby. The
Shareholders' Meetings shall be held as soon as practicable. The board of
directors of each of CFC and FSFC shall recommend (subject to compliance with
their legal and fiduciary duties, as advised by counsel) to their respective
shareholders and use their best efforts to obtain the approval of this
Reorganization Agreement and the Mergers. 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 Corporate Merger. CFC and FSFC
shall jointly prepare the Proxy Statement, which shall be reasonably acceptable
to all parties. The Proxy Statement shall be mailed to the FSFC and CFC
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 Regulatory
Approvals. FSFC shall mail, at its expense, the Proxy Statement to its
shareholders. CFC shall mail, at its expense, the Proxy Statement to its
shareholders.
2.6. Cooperation; Regulatory Filings. Subject to the terms and
conditions of this Reorganization Agreement, CFC and FSFC shall cooperate, and
shall cause each of their subsidiaries to cooperate, in the preparation and
submission by CFC and FSFC, as promptly as reasonably practicable, of such
applications, petitions, and other documents and materials as any of them may
reasonably deem necessary or desirable to the SEC, the Federal Reserve, the OTS,
the appropriate Regulatory Authorities of South Carolina and Delaware, the
shareholders of FSFC and CFC, and any other Persons for the purpose of obtaining
any approvals or consents necessary to consummate the transactions contemplated
by this Reorganization Agreement. Prior to the making of any such filings with
any Regulatory Authority or the making of any written disclosures with respect
to the transactions contemplated hereby to shareholders or to any third person
(such as mailings to shareholders or press releases), the parties shall submit
to each other the material to be filed, mailed, or released. Any such materials
shall be reasonably acceptable to all parties prior to the filings with any
Regulatory Authorities or the disclosures to shareholders or to any third
person, except to the extent that any person is legally required to proceed
prior to obtaining the approvals of the other parties. CFC shall be responsible
for all filings fees associated with the Regulatory Approvals.
2.7. Tax Treatment. CFC and FSFC intend that the Mergers shall qualify
as tax-free reorganizations under Section 368(a) of the Code.
2.8. Reservation of Right to Revise Transaction. CFC may at any time
change the method of effecting the acquisition of FSFC and FFA (including
without limitation the provisions of this Section II) if and to the extent it
deems such change to be desirable; provided, however, that no such change shall
(i) alter the type of consideration to be issued to the holders of FSFC Common
Stock as provided for in this Reorganization Agreement, (ii) reduce the value of
such consideration, (iii) adversely affect the intended tax-free treatment to
FSFC's stockholders as a result of receiving such consideration or prevent the
parties from obtaining the tax opinion of Wyche, Burgess, Freeman & Parham, P.A.
referred to herein, (iv) materially impair the ability to receive the Regulatory
Approvals, or (v) materially delay the Closing.
SECTION III. REPRESENTATIONS AND WARRANTIES OF FSFC AND FFA
Each of FSFC and FFA hereby represent and warrant to CFC and CFB the
following matters on and as of the date of this Reorganization Agreement and at
the Effective Time; provided, however, that before any breach
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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 Reorganization Agreement by CFC or
CFB, such breach or inaccuracy must have a Material Adverse Effect.
3.1. Organization, Good Standing and Conduct of Business. FSFC is a
corporation, duly organized, validly existing and in good standing under the
laws of Delaware, is duly registered as a savings and loan holding company under
the HOLA, and has full power and authority and all governmental and regulatory
authorizations ("Authorizations") necessary 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 FSFC makes such license or qualification necessary. FFA
is the sole direct subsidiary of FSFC. FFA is a savings and loan association,
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
Authorizations necessary 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 FFA makes such license or qualification necessary. FFA is a savings and loan
association and is an "insured depository institution" as defined in the Federal
Deposit Insurance Act and the applicable regulations thereunder. The deposits of
FFA are insured by the Savings Association Insurance Fund of the FDIC. FFA is a
member of the Federal Home Loan Bank of Atlanta (the "FHL Bank").
3.2. Subsidiaries. (a) Other than FFA (and indirectly FMSC), FSFC
neither owns nor controls five percent (5%) or more of the outstanding equity
securities, either directly or indirectly, of any Person. FSFC is the direct,
record and beneficial owner of 100% of the outstanding shares of capital stock
of FFA. There are no contracts, commitments, understandings or arrangements by
which FSFC is or may be bound to sell or otherwise issue any shares of FFA's
capital stock, and there are no contracts, commitments, understandings or
arrangements relating to the rights of FSFC to vote or to dispose of such
shares. All of the shares of capital stock of FFA are fully paid and
nonassessable and are owned by FSFC free and clear of any Liens.
(b) Other than FMSC, FFA neither owns nor controls five percent (5%) or
more of the outstanding equity securities, either directly or indirectly, of any
Person. FFA is the direct, record and beneficial owner of 100% of the
outstanding shares of capital stock of FMSC. There are no contracts,
commitments, understandings or arrangements by which FFA is or may be bound to
sell or otherwise issue any shares of FMSC's capital stock, and there are no
contracts, commitments, understandings or arrangements relating to the rights of
FFA to vote or to dispose of such shares. All of the shares of capital stock of
FMSC are fully paid and nonassessable and are owned by FFA free and clear of any
Liens.
3.3. Corporate Authority. The execution, delivery and performance of
this Reorganization Agreement have been duly authorized by the respective Boards
of Directors of FSFC and FFA. The execution, delivery and performance of this
Reorganization Agreement have been duly authorized by the at least two-thirds of
the "Continuing Directors" as contemplated in FSFC's Certificate of
Incorporation. Other than the FSFC Shareholder Approvals, no further corporate
acts or proceedings on the part of FSFC or FFA are required or necessary to
authorize this Reorganization Agreement or the Mergers.
3.4. Binding Effect. Subject to receipt of the FSFC Shareholder
Approvals and the Regulatory Approvals, when executed, this Reorganization
Agreement will constitute valid and legally binding obligations of FSFC and FFA,
enforceable against FSFC and FFA 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 Reorganization
Agreement, when executed and delivered by FSFC and/or FFA in accordance with the
provisions hereof, shall be duly authorized, executed and delivered by FSFC
and/or FFA (as applicable) and enforceable against FSFC and/or FFA (as
applicable) in accordance with its terms, subject to the exceptions in the
previous sentence.
3.5. Capitalization of FSFC. The authorized capital stock of FSFC
consists solely of (i) 8,000,000 authorized shares of common stock ($0.01 par
value), of which 4,388,231 shares are issued and outstanding as of the date
hereof, and (ii) 2,000,000 shares of preferred stock, none of which is
outstanding. All of the issued and outstanding shares of FSFC are validly issued
and fully paid and nonassessable. There are no outstanding Rights to purchase
shares of any class of capital stock of FSFC, or outstanding agreements pursuant
to which FSFC is or may become obligated to issue any shares of its capital
stock. None of the shares of the FSFC Common Stock is
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subject to any restrictions as to the transfer thereof, except as set forth in
FSFC's Certificate of Incorporation or Bylaws and except for restrictions on
account of applicable federal or state securities laws.
3.6. Compliance with Laws; Absence of Defaults. (a) Neither FSFC nor
FFA is in default under, or in violation of, any provision of its Certificate of
Incorporation, Federal Stock Charter or Bylaws. Neither FSFC nor FFA is in
default under, or in violation of, any agreement to which either FSFC or FFA is
a party.
(b) Except as disclosed in Schedule 3.6, neither FSFC nor FFA is in
violation of any applicable law, rule or regulation. Neither FSFC nor FFA has
received any notification or communication from, or consented to or entered into
any memorandum, agreement or order with, any Regulatory Authority (i) asserting
that FSFC or FFA is not in compliance with any of the statutes, regulations,
rules or ordinances which such Regulatory Authority has promulgated or enforces,
or the internal policies and procedures of FSFC or FFA, as applicable, (ii)
threatening to revoke any Authorization, (iii) requiring or threatening to
require FSFC or FFA, or indicating that FSFC or FFA may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting or purporting to restrict or limit in
any manner the operations of FSFC or FFA, or (iv) directing, restricting or
limiting, or threatening to direct, restrict or limit in any manner the
operations of FSFC or FFA (any such notification, communication, memorandum,
agreement or order described in this sentence herein referred to as a
"Regulatory Agreement").
(c) Each of FSFC and FFA:
(i) is not required to give prior notice to any federal
banking agency regulating thrift institutions of the proposed addition
of an individual to its Board of Directors or the employment of an
individual as a senior executive;
(ii) is "well capitalized" as defined in 12 CFR 564.4 and is
not in "troubled condition" as defined in 12 CFR 574.9; and
(iii) is in compliance in all material respects with all fair
lending laws or other laws relating to discrimination, including,
without limitation, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Housing Act, the Community Reinvestment Act and
the Home Mortgage Disclosure Act and similar federal and state laws and
regulations.
3.7. Non-Contravention and Defaults; No Liens. Neither the execution or
delivery of this Reorganization 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 material agreement to which either FSFC or FFA is a party or by
which either of them may be bound, (ii) violate any provision of any law, rule
or regulation, (iii) result in the creation or imposition of any Lien on any
asset of FSFC or FFA, or (iv) violate any provisions of FSFC's or FFA's
Certificate of Incorporation, Federal Stock Charter or Bylaws. To the best of
FSFC's and FFA's knowledge, no other party to any material agreement to which
either FSFC or FFA is a party is in default thereunder or in breach of any
provision thereof. To the best of FSFC's and FFA'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.
3.8. Necessary Approvals. Each of FSFC and FFA 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 or 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. Further, there is no
reasonable basis for any such expiration, lapse, revocation, threat of
revocation or restriction. Except for any necessary Regulatory Approvals, no
consent, approval, Authorization, registration, or filing with or by any
governmental authority, foreign or domestic, is required on the part of either
FSFC or FFA in connection with the execution and delivery of this Reorganization
Agreement or the consummation by FSFC and FFA of the transactions contemplated
hereby. Except for the Regulatory Approvals, neither FSFC nor FFA is required to
procure the approval of any Person in order to prevent the termination of any
right, privilege, license or contract of FSFC or FFA as a result of this
Reorganization Agreement.
3.9. Financial Statements. The audited financial statements of FSFC at
and for each of the fiscal years ended June 30, 1994, 1995 and 1996, and the
unaudited quarterly statements subsequent to June 30, 1996 (the "FSFC 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 GAAP,
the financial position of FSFC at the dates indicated and the results of its
operations for each of the periods indicated, except with respect to the
unaudited statements,
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normal year end adjustments. The books and records of FSFC 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 FSFC.
3.10. Tax Returns. (i) FSFC files its income tax returns and maintains
its tax books and records on the basis of a taxable year ending June 30. FSFC
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, fran chises, licenses, sales, payrolls, and
trusts established by FSFC) through the date hereof, and FSFC has duly paid all
taxes with respect to the periods covered thereby and has established adequate
reserves in accordance with GAAP for the payment of all income, franchises,
property, sales, employment or other taxes anticipated to be payable after the
date hereof. FSFC 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. FSFC 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 in Schedule 3.10, FSFC 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 FSFC
which, if determined adversely, would result in the assertion of any deficiency.
(ii) To the best of FSFC's knowledge, all tax information
reported by FSFC to Federal and state authorities and other Persons, including
the tax effect of the special cash dividend of $10 per share paid in 1996, has
been accurately and timely reported.
3.11. Undisclosed Liabilities. Except for the liabilities which are
disclosed in the FSFC Financial Statements or as set forth on Schedule 3.11,
FSFC has no material liabilities or material obligations of any nature, whether
absolute, accrued, contingent or otherwise, and whether due or to become due.
Since June 30, 1996, there has been no (i) Material Adverse Event with respect
to FSFC or FFA, or (ii) any incurrence by or subjection of FSFC or FFA to any
obligation or liability (whether fixed, accrued or contingent) or commitment
material to FSFC or FFA not referred to in this Reorganization Agreement, except
such obligations or liabilities as were or may be incurred in the ordinary
course of business and which are reflected on the FSFC Financial Statements at
and for the periods subsequent to June 30, 1996.
3.12. Properties, Encumbrances. Each of FSFC and FFA has good and
marketable title to all of the real property and depreciable tangible personal
property owned by it, free and clear of any Lien, except for any Lien for (i)
current taxes not yet due and payable, (ii) pledges to secure deposits and other
Liens incurred in the ordinary course of the banking business, (iii) such
imperfections of title, easements and other encumbrances, if any, as are not
material in character, amount or extent, or (iv) such items as are set forth on
Schedule 3.12. Set forth on Schedule 3.12 are all business locations of FSFC and
FFA, including whether such locations are owned or leased and a statement of
when such locations were first occupied by FSFC or FFA. All buildings and all
fixtures, equipment, and other property and assets which are material to their
business and are held under leases or subleases by either of FSFC or FFA are
held under valid leases or subleases enforceable in accordance with their
respective terms.
3.13. Litigation. Except as shown on Schedule 3.13, there are no
claims, actions, suits or proceedings pending or threatened against FSFC or FFA,
or to its knowledge affecting FSFC or FFA, 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, and FSFC knows of no basis for any of the
foregoing. There is no order, writ, memorandum, agreement, injunction, or decree
of any court, domestic or foreign, or any Federal or state agency affecting FSFC
specifically or to which FSFC is subject.
3.14. Reports. FSFC and FFA have duly made all reports and filings
required to be made pursuant to applicable law.
3.15. Brokers. Except as provided in its contract with Trident
Financial Corporation (a copy of which has been provided to CFC), FSFC 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.
3.16. Expenditures. Schedule 3.16 sets forth any single expenditure of
$100,000 or more proposed to be made by FSFC or FFA after the date hereof and a
summary of the terms and conditions pertaining thereto. At least 20 business
days prior to the Closing Date, FSFC will advise CFC of any changes to Schedule
3.16 reflecting additions or deletions thereto since the date hereof.
3.17. Insurance. Attached hereto as Schedule 3.17 are the policies of
fire, liability, life and other types of insurance held by FSFC and FFA, 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,
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and amount of coverage. FSFC management believes that 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 FSFC taking into
account the availability and cost of such coverage. To the extent permissible
pursuant to such policies, 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 FSFC that any such policy will not be renewable on terms and
conditions as favorable as those set forth in such policy.
3.18. Contracts and Commitments. (a) Schedule 3.18 attached hereto sets
forth each contract or other commitment of FSFC or FFA which requires an
aggregate payment by FSFC or FFA after the date hereof of more than $100,000,
and any other contract or commitment that in the opinion of the FSFC management
materially adversely affects the business of FSFC or FFA. Except for the
contracts and commitments described in this Reorganization Agreement or as set
forth in Schedule 3.18, neither FSFC nor FFA is party to or subject to:
1. Any contracts or commitments which are material to its
business, operations or financial condition other than loans or
agreements with respect thereto entered into in the ordinary course of
business;
2. Any employment contract or arrangement, whether oral or
written, with any officer, consultant, director or employee which is
not terminable on 30 days' 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 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;
8. Any joint venture contract or arrangement or any other
agreement involving a sharing of profits;
9. Any license agreement in which FSFC is the licensor or
licensee;
10. Any material contract or agreement, not of the type
covered by any of the other items of this Section 3.18, 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 FSFC or FFA, or any successors or assigns prior to 30 days
from the date hereof.
3.19. Employee Benefit Plans and Contracts.
(a) Schedule 3.19 contains a complete list of all FSFC Benefit Plans.
FSFC and FFA have delivered to CFC (i) accurate and complete copies of all FSFC
Benefit Plan documents and all other material documents relating thereto,
including all summary plan descriptions, summary annual reports and insurance
contracts, (ii) accurate and complete detailed summaries of all unwritten FSFC
Benefit Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all FSFC Benefit Plans for
which financial statements or actuarial reports are required or have been
prepared, (iv) accurate and complete copies of all annual reports for all FSFC
Benefit Plans (for which annual reports are required) prepared within the last
two years, and (v) accurate and complete copies of determination letters from
the IRS for any FSFC Benefit Plan maintained or intended to be maintained under
Section 401(a) of the Code. Any FSFC Benefit Plan providing benefits that are
funded through a policy of insurance is indicated by the word "insured" placed
by the listing of the FSFC Benefit Plan on Schedule 3.19.
(b) All FSFC Benefit Plans conform in all material respects to, and are
being administered and operated in material compliance with, all applicable
requirements of ERISA and the Code. All returns, reports and disclosure
statements required to be filed or delivered under ERISA and the Code with
respect to all FSFC Benefit Plans have been filed or delivered. There have not
been any "prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA, involving any of the FSFC Benefit Plans that
could subject FSFC to any material penalty or tax imposed under the Code or
ERISA.
(c) Except as set forth in Schedule 3.19, any FSFC Benefit Plan that is
intended to be qualified under Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code has been determined by the IRS to be so
qualified, and such determination is current, remains in effect and has not been
revoked. To the best
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knowledge of FSFC and FFA, nothing has occurred since the date of any such
determination that is reasonably likely to affect adversely such qualification
or exemption, or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any FSFC
Benefit Plan.
(d) FSFC and FFA have adequately reserved for all liabilities accrued
prior to the Effective Time under FSFC's and FFA nonqualified retirement or
deferred compensation plans.
(e) Except as set forth in Schedule 3.19, neither FSFC nor FFA has any
current or contingent obligation to contribute to any multiemployer plan (as
defined in Section 3(37) of ERISA). Neither FSFC nor FFA has any liability with
respect to any employee benefit plan (as defined in Section 3(3) of ERISA) other
than with respect to the FSFC Benefit Plans.
(f) There are no pending or threatened claims by or on behalf of any
FSFC Benefit Plans, or by or on behalf of any individual participants or
beneficiaries of any FSFC Benefit Plans, alleging any breach of fiduciary duty
on the part of FSFC or FFA or any of such party's officers, directors or
employees under ERISA, the Code or any applicable regulations, or claiming
benefit payments other than those made in the ordinary operation of such plans.
The FSFC Benefit Plans are not the subject of any investigation, audit or action
by the IRS, the Department of Labor or the PBGC. FSFC and FFA have made all
required contributions under the FSFC Benefit Plans, including the payment of
any premiums payable to the PBGC and other insurance premiums. There is no
underfunding liability for any FSFC Benefit Plan that is subject to the funding
requirements of Section 412 of the Code.
(g) Neither FSFC nor FFA maintains any defined benefit plan, and
neither has incurred, or has any reason to expect that it will incur, any
liability to the PBGC or otherwise under Title IV or ERISA (including early
withdrawal liability) or under the Code with respect to any such plan. No FSFC
Benefit Plan has been subject to a reportable event for which notice would be
required to be filed with the PBGC, and no proceeding by the PBGC to terminate
any FSFC Benefit Plan has been instituted or threatened.
(h) With respect to any FSFC Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (in this subsection,
a "Welfare Plan"), (i) each such Welfare Plan for which contributions are
claimed as deductions under any provision of the Code is in material compliance
with all applicable requirements pertaining to such deduction, (ii) with respect
to any welfare benefit fund (within the meaning of Section 419 of the Code)
related to such a Welfare Plan, there is no disqualified benefit (within the
meaning of Section 4976(b) of the Code) that would result in the imposition of a
tax under Section 4976(a) of the Code, (iii) any FSFC Benefit Plan that is a
group health plan (within the meaning of Section 4980B(g)(2) of the Code)
complies, and in each and every case has complied, with all of the material
requirements of Section 4980B of the Code, ERISA, Title XXII of the Public
Health Service Act and the applicable provisions of the Social Security Act,
(iv) such Welfare Plan may be amended or terminated at any time on or after the
Closing Date, and (v) there are no benefits to be provided to retirees under a
group health plan that are subject to disclosure under Financial Accounting
Board Standard 106.
(i) Except as set forth on Schedule 3.19, as of the Closing Date, there
will be no contract, agreement, plan or arrangement covering any person that
provides for the payment of an amount that would not be deductible to CFC by
reason of Section 280G or any other provision of the Code.
(j) Each of the employment contracts between FSFC, FFA and David C.
Wakefield, III and FSFC, FFA and John L. Biediger have been extended to
September 30, 1998.
3.20. Allowance for Loan Losses. The allowance for loan losses (the
"FSFC Allowance") shown on the consolidated statements of financial condition of
FSFC as of March 31, 1997, included in the FSFC Quarterly Report on Form 10-Q as
of such date has been determined, in the opinion of management of FSFC in
accordance with GAAP, to be adequate to provide for losses relating to or
inherent in the loan portfolios of FSFC and FFA.
3.21. Environmental Matters. Each of FSFC and FFA is in material
compliance with all local, state and federal environmental statutes, laws,
rules, regulations and permits, including but not limited to CERCLA and the
Toxic Substances Control Act, 15 U.S.C. 2601 et seq. Neither FSFC nor FFA has,
nor to the best of FSFC's knowledge have other parties, used, stored, disposed
of or permitted any "hazardous substance" (as defined in CERCLA), petroleum
hydrocarbon, polychlorinated biphenyl, asbestos or radioactive material
(collectively, "Hazardous Substances") to remain at, on, in or under any of the
real property owned or leased by FSFC or FFA (including, without limitation, the
buildings or structures thereon) (the "Real Property"). Neither FSFC nor FFA
has, nor to the best of FSFC's knowledge have other parties, installed, used, or
disposed of any asbestos or asbestos-containing material on, in or under any of
the Real Property. Neither FSFC nor FFA has, nor to the best of FSFC's knowledge
have other parties, installed or used underground storage tanks in or under any
of the Real Property. FSFC has provided CFC with copies of all complaints,
citations, orders, reports, written data, notices
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or other communications sent or received by it with respect to any local, state
or federal environmental law, ordinance, rule or regulation as any of them
relate to FSFC or FFA.
3.22. FSFC Information. The written information with respect to FSFC
and its officers, directors, and affiliates which shall have been supplied by
FSFC (or any of its accountants, counsel or other authorized representatives)
specifically for use in soliciting the Shareholder Approvals, or which shall be
contained in the Registration Statement, will not, on the date the Proxy
Statement is first mailed to shareholders of FSFC and CFC or on the date of the
Shareholders' Meetings, 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.
3.23. Asset Classification. Set forth in Schedule 3.23 is a list,
accurate and complete in all material respects, of the aggregate amounts of
loans, extensions of credit or other assets of FSFC and FFA that have been
classified by it as of March 31, 1997 (the "Asset Classification"); and no
amounts of loans, extensions of credit or other assets that have been classified
as of March 31, 1997 by any regulatory examiner as "Other Loans Specially
Mentioned", "Substandard", "Doubtful", "Loss", or words of similar import are
excluded from the amounts disclosed in the Asset Classification, other than
amounts of loans, extensions of credit or other assets that were charged off by
FSFC or FFA prior to March 31, 1997.
3.24. Derivatives Contracts, Etc. Neither FSFC nor FFA is a party to or
has agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract or any other contract
not included on the balance sheet which is a derivative contract (including
various combinations thereof) (each a "Derivatives Contract") or owns securities
that (i) are referred to as "structured notes", "high risk mortgage
derivatives", "capped floating rate notes" or "capped floating rate mortgage
derivatives", or (ii) are likely to have changes in value as a result of
interest rate changes that significantly exceed normal changes in value
attributable to interest rate changes, except for those Derivatives Contracts
and other instruments legally purchased or entered into in the ordinary course
of business and set forth in Schedule 3.24, including a list, as applicable, of
any FSFC or FFA assets pledged as security for each such instrument.
3.25. Labor Matters. No material work stoppage involving FSFC or FFA is
pending or, to the best knowledge of FSFC, threatened. Neither FSFC nor FFA is
involved in, or, to the best knowledge of FSFC's management, threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which might reasonably be expected to have a Material Adverse Effect.
Employees of FSFC and FFA are not represented by any labor union, and, to the
best knowledge of FSFC's management, no labor union is attempting to organize
employees of FSFC or FFA.
3.26. Securities Reports. Within the last two (2) years, FSFC has filed
on a timely basis all reports, registrations, and statements, together with any
amendments, required under the Securities Act and the Exchange Act, all of
which, as of their respective dates, were in compliance in all material respects
with the rules and regulations of the SEC.
3.27. Ownership of CFC Common Stock. No shares of CFC Common Stock are
beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by FSFC or
FFA.
3.28. Resale of CFC Common Stock. FSFC 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 Corporate 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 FSFC Common Stock outstanding as of the
Effective Time. For purposes of this representation, shares of FSFC Common Stock
sold, redeemed or otherwise disposed of prior or subsequent to and as part of
the Corporate Merger, will be considered as shares received by shareholders of
FSFC and then disposed of by shareholders of FSFC.
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB
Each of CFC and CFB hereby represents and warrants to FSFC and FFA the
following matters on and as of the date of this Reorganization 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 Reorganization Agreement by FSFC or FFA, such breach or
inaccuracy must have a Material Adverse Effect.
4.1. Organization, Good Standing and Conduct of Business. CFC is a
corporation, duly organized, validly existing and in good standing under the
laws of South Carolina, is duly registered as a bank holding company under the
BHCA, and has full power and authority and all governmental and regulatory
authorizations ("Authorizations") necessary to own all of its properties and
assets and to carry on its business as it is presently being conducted, and
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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 CFC makes such license or qualification necessary. CFB is
a direct subsidiary of CFC. CFB is a state banking corporation, duly organized,
validly existing and in good standing under the laws of the state of South
Carolina, and has full power and authority and all Authorizations necessary 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 CFB makes such
license or qualification necessary. CFB is a state, non-member bank and is an
"insured depository institution" as defined in the Federal Deposit Insurance Act
and the applicable regulations thereunder. The deposits of CFB are insured by
the Bank Insurance Fund of the FDIC.
4.2. Subsidiaries. (a) Other than CFB, Carolina First Mortgage Company
and CF Investment Company (collectively, the "Subsidiaries") or except as
provided below, CFC neither owns nor controls five percent (5%) or more of the
outstanding equity securities, either directly or indirectly, of any Person. CFC
is the direct, record and beneficial owner of 100% of the outstanding shares of
capital stock of the Subsidiaries. There are no contracts, commitments,
understandings or arrangements by which CFC is or may be bound to sell or
otherwise issue any shares of the Subsidiaries' capital stock, and there are no
contracts, commitments, understandings or arrangements relating to the rights of
CFC to vote or to dispose of such shares. All of the shares of capital stock of
the Subsidiaries are fully paid and nonassessable and are owned by CFC free and
clear of any Liens. CFC has the right to acquire in excess of 15% of the common
stock of Affinity Technology Group, Inc., a Delaware corporation headquartered
in Columbia, South Carolina and Net.B@nk, Inc., a Georgia corporation and
savings and loan holding company headquartered in Atlanta, Georgia. None of the
Subsidiaries either owns nor controls five percent (5%) or more of the
outstanding equity securities, either directly or indirectly, of any Person.
4.3. Corporate Authority. The execution, delivery and performance of
this Reorganization Agreement have been duly authorized by the respective Boards
of Directors of CFC and CFB. Other than the CFC Shareholder Approvals, no
further corporate acts or proceedings on the part of CFC or CFB are required or
necessary to authorize this Reorganization Agreement or the Mergers.
4.4. Binding Effect. Subject to receipt of the CFC Shareholder
Approvals and the Regulatory Approvals, when executed, this Reorganization
Agreement will constitute valid and legally binding obligations 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 Reorganization
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 (as applicable) and enforceable against CFC and/or CFB (as
applicable) in accordance with its terms, subject to the exceptions in the
previous sentence.
4.5. Capitalization of CFC. The authorized capital stock of CFC
consists solely of (i) 100,000,000 authorized shares of common stock ($1.00 par
value), of which 11,355,415 shares were issued and outstanding as of the date
hereof and (ii) 10,000,000 shares of preferred stock, none of which is
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 director or employee benefit plans,
(ii) shares which may be issued pursuant to CFC's Shareholders' Rights Plan
entered into as of November 9, 1993 between CFC and CFB, as amended and restated
(the "Rights Plan"), (iii) existing dividend reinvestment plans, (iv) up to
867,714 shares of CFC Common Stock which may be issued in connection with CFC's
acquisition of Lowcountry Savings Bank, Inc. or (v) as otherwise set forth on
Schedule 4.4, there are no outstanding Rights or any outstanding securi ties 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 or the Rights Plan and except for restrictions on
account of applicable federal or state securities laws. The Common Stock to be
issued in connection with this Reorganization Agreement and the Corporate Merger
will, when issued, (i) be validly issued, fully paid and nonassessable, (ii)
have been issued pursuant to an effective registration statement and (iii) have
been properly registered for trading on the Nasdaq National Market.
4.6. Compliance with Laws; Absence of Defaults. (a) Neither CFC nor CFB
is in default under, or in violation of, any provision of its Articles of
Incorporation or Bylaws. Neither CFC nor CFB is in default under, or in
violation of, any agreement to which either CFC or CFB is a party.
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(b) Except as disclosed in Schedule 4.6, neither CFC nor CFB is in
violation of any applicable law, rule or regulation. Neither CFC nor CFB has
received any notification or communication from, or consented to or entered into
any memorandum, agreement or order with, any Regulatory Authority (i) asserting
that CFC or CFB is not in compliance with any of the statutes, regulations,
rules or ordinances which such Regulatory Authority has promulgated or enforces,
or the internal policies and procedures of CFC or CFB, as applicable, (ii)
threatening to revoke any Authorization, (iii) requiring or threatening to
require CFC or CFB, or indicating that CFC or CFB may be required, to enter into
a cease and desist order, agreement or memorandum of understanding or any other
agreement restricting or limiting or purporting to restrict or limit in any
manner the operations of CFC or CFB, or (iv) directing, restricting or limiting,
or threatening to direct, restrict or limit in any manner the operations of CFC
or CFB (any such notification, communication, memorandum, agreement or order
described in this sentence herein referred to as a "Regulatory Agreement").
(c) Each of CFC and CFB:
(i) is not required to give prior notice to any federal
banking or thrift agency of the proposed addition of an individual to
its Board of Directors or the employment of an individual as a senior
executive;
(ii) at March 31, 1997, was capitalized as set forth in its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; and
(iii) is in compliance in all material respects with all fair
lending laws or other laws relating to discrimination, including,
without limitation, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Housing Act, the Community Reinvestment Act and
the Home Mortgage Disclosure Act and similar federal and state laws and
regulations.
4.7. Non-Contravention and Defaults; No Liens. Neither the execution or
delivery of this Reorganization 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 material 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 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. Each of 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 or 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. Further, there is no
basis for any such expiration, lapse, revocation, threat of revocation or
restriction. Except for any necessary Regulatory Approvals (including 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
Reorganization Agreement or the consummation by CFC and CFB of the transactions
contemplated hereby. Except for the Regulatory Approvals, neither CFC nor CFB is
required to procure the approval of any Person in order to prevent the
termination of any right, privilege, license or contract of CFC or CFB as a
result of this Reorganization Agreement.
4.9. Financial Statements. The audited financial statements of CFC at
and for each of the fiscal years ended December 31, 1994, 1995 and 1996, and the
unaudited quarterly statements subsequent to December 31, 1996 (the "CFC
Financial Statements") all of which have been provided to FSFC, are true,
correct and complete in all material respects and present fairly, in conformity
with GAAP, the financial position of CFC at the dates indicated and the results
of its operations for each of the periods indicated. 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, payrolls, and
trusts established by CFC) through the date hereof, and CFC has duly paid
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all taxes with respect to the periods covered thereby and has established
adequate reserves in accordance with GAAP for the payment of all income,
franchises, property, sales, employment or other taxes anticipated to be payable
in respect of the period subsequent to the period ending after the date hereof.
CFC is not delinquent in the payment of any taxes, assessments or governmental
charges and no deficiencies have been asserted or assessed, which have not been
paid or for which adequate reserves have not been established and which are not
being contested in good faith. CFC does not have in effect any waiver relating
to any statute of limitations for assessment of taxes with respect to any
federal, state or local income, property, franchise, sales, license or payroll
tax. Except as set forth on Schedule 4.10, CFC does not know, or have reason to
know, of any questions which have been raised or which may be raised by any
taxing authority relating to taxes or assessments of CFC which, if determined
adversely, would result in the assertion of any deficiency.
(ii) To the best of CFC's knowledge, all tax information reported by
CFC to Federal and state authorities and other Persons has been accurately and
timely reported.
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, 1996, there has been no (i) Material Adverse Event with
respect to either CFC or CFB, or (ii) any incurrence by or subjection of CFC or
CFB to any obligation or liability (whether fixed, accrued or contingent) or
commitment material to CFC or CFB not referred to in this Reorganization
Agreement, except such obligations or liabilities as were or may be incurred in
the ordinary course of business and which are reflected on the CFC Financial
Statements at and for the periods subsequent to December 31, 1996.
4.12. Litigation. Except as set forth on Schedule 4.12, there are no
claims, actions, suits or proceedings pending or threatened against or, to its
knowledge, affecting CFC or CFB 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, and neither CFC nor CFB knows of no basis for any of
the foregoing. There is no order, writ, memorandum or agreement, injunction, or
decree of any court, domestic or foreign, or any Federal or state agency
affecting CFC or CFB or to which CFC or CFB is subject, except for (i)
agreements between CFC and the Federal Reserve regarding CFC's ownership
interest in Affinity Technology Group, Inc. and (ii) an agreement between CFC
and the Federal Reserve regarding CFC's potential ownership interest in
Net.B@nk, Inc.
4.13. Reports. CFC has duly made all reports and filings required to be
made pursuant to applicable law.
4.14. Employee Benefit Plans and Contracts.
(a) Schedule 4.14 contains a complete list of all CFC Benefit Plans.
CFC and CFB have made available to FSFC (i) accurate and complete copies of all
CFC Benefit Plan documents and all other material documents relating thereto,
including all summary plan descriptions, summary annual reports and insurance
contracts, (ii) accurate and complete detailed summaries of all unwritten CFC
Benefit Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all CFC Benefit Plans for which
financial statements or actuarial reports are required or have been prepared,
(iv) accurate and complete copies of all annual reports for all CFC Benefit
Plans (for which annual reports are required) prepared within the last two
years, and (v) accurate and complete copies of determination letters from the
IRS for any CFC Benefit Plan maintained or intended to be maintained under
Section 401(a) of the Code. Any CFC Benefit Plan providing benefits that are
funded through a policy of insurance is indicated by the word "insured" placed
by the listing of the CFC Benefit Plan on Schedule 4.14.
(b) Except as set forth in Schedule 4.14, all CFC Benefit Plans conform
in all material respects to, and are being administered and operated in material
compliance with, all applicable requirements of ERISA and the Code. All returns,
reports and disclosure statements required to be filed or delivered under ERISA
and the Code with respect to all CFC Benefit Plans have been filed or delivered.
There have not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving any of the CFC
Benefit Plans that could subject CFC to any material penalty or tax imposed
under the Code or ERISA.
(c) Except as set forth in Schedule 4.14, any CFC Benefit Plan that is
intended to be qualified under Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code has been determined by the IRS to be so
qualified, and such determination is current, remains in effect and has not been
revoked. To the best knowledge of CFC and CFB, nothing has occurred since the
date of any such determination that is reasonably likely to affect adversely
such qualification or exemption, or result in the imposition of excise taxes or
income taxes on unrelated business income under the Code or ERISA with respect
to any CFC Benefit Plan.
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(d) CFC and CFB have adequately reserved for all liabilities accrued
prior to the Effective Time under CFC's and CFB nonqualified retirement or
deferred compensation plans.
(e) Except as set forth in Schedule 4.14, neither CFC nor CFB has any
current or contingent obligation to contribute to any multiemployer plan (as
defined in Section 3(37) of ERISA). Neither CFC nor CFB has any liability with
respect to any employee benefit plan (as defined in Section 3(3) of ERISA) other
than with respect to the CFC Benefit Plans.
(f) There are no pending or threatened claims by or on behalf of any
CFC Benefit Plans, or by or on behalf of any individual participants or
beneficiaries of any CFC Benefit Plans, alleging any breach of fiduciary duty on
the part of CFC or CFB or any of such party's officers, directors or employees
under ERISA, the Code or any applicable regulations, or claiming benefit
payments other than those made in the ordinary operation of such plans. The CFC
Benefit Plans are not the subject of any investigation, audit or action by the
IRS, the Department of Labor or the PBGC. CFC and CFB have made all required
contributions under the CFC Benefit Plans, including the payment of any premiums
payable to the PBGC and other insurance premiums. There is no underfunding
liability for any CFC Benefit Plan that is subject to the funding requirements
of Section 312 of the Code.
(g) Neither CFC nor CFB maintains any defined benefit plan, and neither
has incurred, or has any reason to expect that it will incur, any liability to
the PBGC or otherwise under Title IV or ERISA (including early withdrawal
liability) or under the Code with respect to any such plan. No CFC Benefit Plan
has been subject to a reportable event for which notice would be required to be
filed with the PBGC, and no proceeding by the PBGC to terminate any CFC Benefit
Plan has been instituted or threatened.
(h) With respect to any CFC Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (in this subsection,
a "Welfare Plan"), (i) each such Welfare Plan for which contributions are
claimed as deductions under any provision of the Code is in material compliance
with all applicable requirements pertaining to such deduction, (ii) with respect
to any welfare benefit fund (within the meaning of Section 419 of the Code)
related to such a Welfare Plan, there is no disqualified benefit (within the
meaning of Section 4976(b) of the Code) that would result in the imposition of a
tax under Section 4976(a) of the Code, (iii) any CFC Benefit Plan that is a
group health plan (within the meaning of Section 4980B(g)(2) of the Code)
complies, and in each and every case has complied, with all of the material
requirements of Section 4980B of the Code, ERISA, Title XXII of the Public
Health Service Act and the applicable provisions of the Social Security Act,
(iv) such Welfare Plan may be amended or terminated at any time on or after the
Closing Date, and (v) there are no benefits to be provided to retirees under a
group health plan that are subject to disclosure under Financial Accounting
Board Standard 106.
4.15. Allowance for Loan Losses. The allowance for loan losses shown on
the consolidated statements of financial condition of CFC as of March 31, 1997,
included in the CFC Quarterly Report on Form 10-Q as of such date has been
determined, in the opinion of management of CFC in accordance with GAAP, to be
adequate to provide for losses relating to or inherent in the loan portfolios of
CFC and CFB.
4.16. Environmental Matters. Each of CFC and CFB is in material
compliance with all local, state and federal environmental statutes, laws,
rules, regulations and permits, including but not limited to CERCLA and the
Toxic Substances Control Act, 15 U.S.C. 2601 et seq. Neither CFC nor CFB has,
nor to the best of CFC's knowledge have other parties, used, stored, disposed of
or permitted any "hazardous substance" (as defined in CERCLA), petroleum
hydrocarbon, polychlorinated biphenyl, asbestos or radioactive material
(collectively, "Hazardous Substances") to remain at, on, in or under any of the
real property owned or leased by CFC or CFB (including, without limitation, the
buildings or structures thereon) (the "CFC Real Property"). Neither CFC nor CFB
has, nor to the best of CFC's knowledge have other parties, installed, used, or
disposed of any asbestos or asbestos- containing material on, in or under any of
the CFC Real Property. Neither CFC nor CFB has, nor to the best of CFC's
knowledge have other parties, installed or used underground storage tanks in or
under any of the CFC Real Property. CFC has delivered to FSFC copies of all
complaints, citations, orders, reports, written data, notices or other
communications sent or received by it with respect to any local, state or
federal environmental law, ordinance, rule or regulation as any of them relate
to CFC or CFB.
4.17. Asset Classification. Set forth in Schedule 4.17 is a list,
accurate and complete in all material respects, of the aggregate amounts of
loans, extensions of credit or other assets of CFC and CFB that have been
classified by it as of March 31, 1997 (the "Asset Classification"); and no
amounts of loans, extensions of credit or other assets that have been classified
as of March 31, 1997 by any regulatory examiner as "Other Loans Specially
Mentioned", "Substandard", "Doubtful", "Loss", or words of similar import are
excluded from the amounts disclosed in the Asset Classification, other than
amounts of loans, extensions of credit or other assets that were charged off by
CFC or CFB prior to March 31, 1997.
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4.18. Labor Matters. No material work stoppage involving CFC or CFB is
pending or, to the best knowledge of CFC, threatened. Neither CFC nor CFB is
involved in, or, to the best knowledge of CFC's management, threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which might reasonably be expected to have a Material Adverse Effect.
Employees of CFC and CFB are not represented by any labor union, and, to the
best knowledge of CFC's management, no labor union is attempting to organize
employees of CFC or CFB.
4.19. 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 the Shareholder Approvals, or which shall be
contained in the Registration Statement, will not, on the date the Proxy
Statement is first mailed to shareholders of FSFC or CFC or on the date of the
Shareholders' 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.
4.20. Securities Reports. Within the last two (2) years, CFC has filed
on a timely basis all reports, registrations, and statements, together with any
amendments, required under the Securities Act and the Exchange Act, all of
which, as of their respective dates, were in compliance in all material respects
with the rules and regulations of the SEC.
4.21. Ownership of FSFC Common Stock. No shares of FSFC Common Stock
are beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by CFC
or CFB.
4.22. Due Diligence. All information provided by CFC in connection with
the due diligence investigation by FSFC was, at the time that such information
was provided, fair, accurate and complete in all material respects. Since the
date of such provision of information, there have been no changes in such
information, which taken in the aggregate, represent a Material Adverse Event.
CFC has not failed to provide or make available to FSFC all material information
regarding CFC.
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING
5.1. Conduct of FSFC Pending Closing. During the period commencing on
the date hereof and continuing until the Closing Date, each of FSFC and FFA
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 have a Material Adverse Effect
before such breach shall be actionable or shall constitute grounds for
termination or failure to perform under this Reorganization Agreement.
(a) Each of FSFC and FFA 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 and
goodwill, maintain the services of its present officers and employees
and preserve its relationships with customers, suppliers and others
having business dealings. Neither FSFC nor FFA shall purchase or
otherwise acquire or enter into a contract to acquire servicing or
subservicing rights with respect to loans not originated by FSFC or FFA
without the written consent of CFC, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, FSFC may proceed
to open branch offices in Wal-Mart stores located in Simpsonville,
Anderson and Greenville, all as currently contemplated.
(b) Neither FSFC nor FFA will amend its Certificate of
Incorporation, Federal Stock Charter or Bylaws as in effect on the date
hereof, except as may be required by applicable law or regulation.
(c) FSFC 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 Rights to acquire any
such shares or any shares or Rights to acquire shares of FFA; nor will
it enter into any arrangement or contract with respect to the issuance
of any such shares or other Rights to acquire shares; 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 it may
pay its customary $0.06 per share quarterly cash dividend prior to
closing.
(d) FSFC will promptly advise CFC in writing of any change in
the businesses of FSFC or FFA which is or may reasonably be expected to
have a Material Adverse Effect.
(e) FSFC will not take, agree to take, or knowingly permit to
be taken (except as may be required by applicable law or regulation)
any action or do or knowingly permit to be done anything in the
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conduct of the business of FSFC or FFA, or otherwise, which would be
contrary to or in breach of any of the terms or provisions of this
Reorganization Agreement, or which would cause any of the
representations of FSFC or FFA contained herein to be or become untrue
in any material respect.
(f) Neither FSFC nor FFA will 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 Mergers and current
contractual obligations, neither FSFC nor FFA will incur any expense in
an amount in excess of $100,000 after the execution of this
Reorganization Agreement without the prior written consent of CFC.
(h) Neither FSFC nor FFA will grant any executive officers any
increase in compensation (except in the ordinary course of business 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) Neither FSFC nor FFA will 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.
(j) Except as may be directed by any Regulatory Authority, as
may be undertaken in the ordinary course of business in accordance with
past practices, or as may be reasonably appropriate in view of changes
in economic circumstances, neither FSFC nor FFA shall (1) change its
lending, investment, liability management or other material banking or
other policies in any material respect, or (2) implement or adopt any
change in accounting principles, practices or methods, other than as
may be required by GAAP.
(k) FSFC shall not impose, or permit or suffer the imposition
of any Liens on any shares of capital stock of FFA, or (except in the
ordinary course of business) on any of its or FFA's assets, other than
Liens on such other assets that, individually or in the aggregate, are
not material to the business, properties or operations of FSFC or FFA.
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 FSFC 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 have a Material Adverse Effect before
such breach shall be actionable or shall constitute grounds for termination or
failure to perform under this Reorganization 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 FSFC shareholders in any material respect.
(c) CFC will promptly advise FSFC orally and in writing
of any change in its business which is or may reasonably be expected to
be materially adverse to CFC.
(d) 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 Reorganization
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
Reorganization Agreement and the Closing Date, the parties will provide to each
other and to their respective accountants, counsel and other authorized
representatives reasonable access, 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.
6.2. Confidentiality. 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. The party gaining access to such Confidential Information shall
exercise the same degree of care with respect thereto that any such
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party uses to preserve and safeguard its own confidential proprietary
information. Confidential Information shall be used only for the purpose of and
in connection with consummating the transaction contemplated herein. If this
Reorganization Agreement is terminated, each party hereto will promptly return
all documents received by it from each other party containing Confidential
Information. 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, the
status of the Mergers. Each party shall coordinate with the other parties, any
public statements regarding the Mergers.
6.3. Cooperation. Each party shall use its respective, reasonable best
efforts to take any and all necessary or appropriate actions, and to use its
reasonable best efforts to cause its officers, directors, employees, agents, and
representatives to use their reasonable best efforts and to take all steps in
good faith within their power, to cause to be fulfilled those of the conditions
precedent to its obligations to consummate the Mergers which are dependent upon
its or their actions, including but not limited to (i) requesting the delivery
of appropriate opinions and letters from its counsel and (ii) obtaining any
consents, approvals, or waivers required to be obtained from other parties.
6.4. Affiliates' Letters. FSFC shall deliver to CFC a letter
identifying all Persons who are, at the time the Corporate Merger is submitted
to a vote of the shareholders of FSFC, "affiliates" of FSFC for purposes of Rule
145 of the General Rules and Regulations under the Securities Act. FSFC shall
use its reasonable 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 that
such Person shall not sell, pledge, transfer or otherwise dispose of any capital
stock of FSFC or any CFC Common Stock owned by such person or to be received by
such person as part of the consideration except in compliance with the
applicable provisions of the Securities Act.
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 the Nasdaq Stock Market as may be required to permit
the listing of the CFC Common Stock issued in connection with the Corporate
Merger.
6.6. Letters from Accountants. Prior to the date the Registration
Statement is declared effective and prior to the Effective Time, FSFC will
deliver to CFC letters from Crisp Hughes & 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 FSFC letters from KPMG Peat Marwick LLP, addressed to FSFC 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 FSFC, 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. FSFC and CFC shall each take such acts within their
power as may be reasonably necessary to cause the Mergers to qualify as
"reorganizations" within the meaning of Section 368(a) of the Code, except to
the extent such performance or failure would be prohibited by law or regulation.
6.8. Expenses. Except to the extent expressly provided otherwise
herein, the parties shall pay their own fees and expenses (including legal and
accounting fees) incurred in connection with the Mergers.
6.9. Material Events. At all times prior to the Closing Date, each
party shall promptly notify the other parties in writing of the occurrence of
any event which will or may result in a breach of any covenant, representation
or warranty in this Reorganization Agreement, or the failure to satisfy the
conditions specified in Section VI or Section VII of this Reorganization
Agreement or other material developments relevant to the consummation of the
Mergers, and shall use its reasonable best efforts to prevent or promptly to
remedy the same.
6.10. Acquisition Proposals. In the case of FSFC, without the prior
written consent of CFC, it shall not, and it shall cause FFA not to, solicit or
encourage inquiries or proposals with respect to, or furnish any nonpublic
information relating to or participate in any negotiations or discussions
concerning, any acquisition or purchase of all or a substantial portion of the
assets or deposits of, or a substantial equity interest in, FSFC or FFA or any
merger or other business combination with FSFC or FFA; provided, however, that
if FSFC is not otherwise in violation of this Section 6.10, the Board of
Directors of FSFC may furnish or cause to be furnished information and may
participate in such discussions and negotiations if such Board of Directors,
after having consulted with and considered the written advice of outside
counsel, has determined that the failure to provide such information or
participate in such negotiations and discussions would cause the members of such
Board of Directors to breach their fiduciary duties under applicable law. FSFC
shall instruct its and FFA's officers, directors, agents, advisors and
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affiliates to refrain from taking any action that would violate or conflict with
the foregoing; and it shall notify CFC immediately if any such inquiries or
proposals are received by, or any such negotiations or discussions are sought to
be initiated with, FSFC or FFA.
6.11. Public Announcements. At all times until after the Closing Date,
neither FSFC 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 Reorganization Agreement, without
the express prior consent of the other party, except as may be required by law
or the policies of the Nasdaq Stock Market. The parties shall cooperate to
prepare a joint press release with respect to the transactions contemplated
herein.
6.12. Updating of Schedules. FSFC and CFC shall, at the Effective Time,
prepare and deliver to each other such supplements to the schedules attached
hereto as may be necessary or appropriate to ensure the accuracy and
completeness of the information required to be disclosed in such schedules at
all times prior to the Effective Time, provided that the furnishing of any such
supplement to such Schedules shall not modify, limit, or otherwise affect any
representations or warranties of FSFC or CFC contained herein or any right of
FSFC or CFC to terminate this Reorganization Agreement. FSFC and CFC shall
provide to each other drafts of such supplemental Schedules at least three (3)
business days prior to the Closing Date.
6.13. Certain Policies of FSFC. FSFC shall, consistent with GAAP and
regulatory accounting principles, use its best efforts to record any accounting
adjustments required to conform its and FFA's loan, litigation and other reserve
and real estate valuation policies and practices (including loan classifications
and levels of reserves) so as to reflect consistently on a mutually satisfactory
basis the policies and practices of CFC; provided, however, that FSFC and FFA
shall not be obligated to record any such accounting adjustments pursuant to
this Section unless and until FSFC and FFA shall be reasonably satisfied that
all the conditions to the obligation of the parties to consummate the Mergers
will be satisfied or waived on or before the Effective Time, and (ii) in no
event until the day prior to the Closing Date. Notwithstanding any other
provision hereof, until the Effective Time, the management of FSFC and the
authority to establish and implement its business policies shall continue to
reside solely in FSFC officers and board of directors, and the election of FSFC
directors shall be solely the prerogative of FSFC shareholders.
6.14. Employee Matters. (a) CFC, FSFC and FFA agree to cooperate to
develop staffing plans which will result in retention of as many FSFC and FFA
managers and employees as is practical (as determined by CFC). CFC agrees that
FSFC and FFA employees shall also be eligible for consideration for any other
available positions for which they are qualified at CFC and its subsidiaries.
CFC agrees that those former FSFC or FFA employees who are employed by CFC or
its subsidiaries immediately following the Closing Date: (i) will be eligible,
on the same basis as current CFC employees, for all CFC Benefit Plans; and (ii)
will receive past service credit for eligibility and vesting (but not benefit
accrual) purposes under CFC Benefit Plans for years of service with FSFC and FFA
as if such service had been with CFC or its subsidiaries. CFC agrees that FSFC
may elect to fully vest its employees under some or all FSFC Benefit Plans prior
to consummation of the Mergers. Any FSFC Benefit Plans that are intended to be
qualified under Section 401(a) of the Code and exempt from tax under Section
501(a) of the Code will be terminated by proper action of the Board of Directors
of FSFC or FFA prior to the Effective Time. CFC agrees to assume all of FSFC's
obligations under its Post-Retirement Health Benefit Plan with respect to FFA
employees eligible to receive benefits under such Plan at the Effective Time
based on their age and years of service with FFA. CFC further agrees that those
former FSFC or FFA employees who are employed by CFC or its subsidiaries
immediately following the Closing Date will not be subject to any pre-existing
condition exclusion under CFC's medical Benefit Plans. CFC agrees that, upon the
Mergers, it will assume or honor (as appropriate) FSFC's and FFA's Director
Emeritus Plan, Deferred Compensation Plan for Key Employees and Non-employee
Directors, Employee Severance Compensation Plan and Pay to Stay program and the
obligations to pay benefits in accordance with the terms of such plans and any
elections by participants thereunder; provided that CFC's total obligations
under the Pay to Stay program shall not exceed $75,000 (and FSFC hereby
represents to CFC that the maximum obligations under the Pay to Stay program do
not exceed $75,000).
(b) CFC acknowledges the transactions contemplated by this
Reorganization Agreement constitutes a change in control for purposes of the
employment agreements between FSFC and FFA and David C. Wakefield,, III and John
L. Biediger (the "Officers"), respectively and further acknowledges that the
Officers are entitled to receive the payments and benefits provided for in
Section 9(g) of such employment agreements upon a change in control of FSFC or
FFA. FSFC, on or before the Effective Time, shall cause such employment
contracts to be amended so that at the election of the officer (i) the payments
and benefits to be provided under such employment agreements shall be payable or
provided to the Officer over a period sufficient to reduce the present value of
such payments or benefits to an amount which is one dollar ($1.00) less than
three (3) times the Officer's "base amount" under
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Section 280G(b)(3) of the Code or (ii) the payments or benefits to be provided
to the Officer shall be reduced to the extent necessary to avoid treatment as an
excess parachute payment with the allocation of the reduction among such
payments and benefits and the period over which such payments and benefits are
to be provided to be determined by the Officer. Notwithstanding anything in this
subparagraph (b) to the contrary, the payments and benefits to be paid or
provided to each Officer shall have an aggregate present value, determined as of
the Effective Time, of not less than $537,933 and $350,504, respectively.
6.15. Directors. At the Special Meeting, CFC will nominate the three
existing FSFC directors listed below to CFC's board of directors and recommend
their election to the CFC shareholders:
1. David C. Wakefield III (Class of 1995)
2. William R. Phillips (Class of 1996)
3. Vernon E. Merchant, Jr. (Class of 1997)
At CFC's 1998 annual meeting of shareholders, CFC shall nominate David C.
Wakefield III to the Class of 1998. CFC shall also cause such persons to be
elected to CFB's board of directors.
6.16. Charitable Contributions. CFC shall honor FSFC's obligations to
make the charitable contributions set forth on Schedule 6.16 (which
contributions shall not exceed $15,000 annually).
6.17. Prohibited Actions. (a) Except as expressly provided in this
Reorganization Agreement, as agreed to by CFC or as required by applicable law,
rules or regulations (including the fiduciary duties of the FSFC and FFA
directors under applicable law), during the period from the date of this
Reorganization Agreement to the Effective Time, FSFC shall, and shall cause its
subsidiaries to, (i) take no action which would adversely affect or delay the
ability of the parties hereto to obtain any necessary Regulatory Approvals or
Authorizations required for the transactions contemplated hereby or to perform
its covenants and agreements on a timely basis under this Reorganization
Agreement and (ii) take no action that could reasonably be expected to have a
Material Adverse Effect on FSFC or FFA.
(b) Except as expressly provided in this Reorganization Agreement, as
agreed to by FSFC or as required by applicable law, rules or regulations, during
the period from the date of this Reorganization Agreement to the Effective Time,
CFC shall, and shall cause its subsidiaries to, (i) take no action which would
adversely affect or delay the ability of the parties hereto to obtain any
necessary Regulatory Approvals or Authorizations required for the transactions
contemplated hereby or to perform its covenants and agreements on a timely basis
under this Reorganization Agreement and (ii) take no action that could
reasonably be expected to have a Material Adverse Effect on CFC.
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE
The obligation of CFC and CFB to consummate the transactions
contemplated in this Reorganization Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
7.1. Performance of Acts and Representations by FSFC. Each of the acts
and undertakings of FSFC and FFA to be performed on or before the Closing Date
pursuant to the terms of this Reorganization Agreement shall have been duly
authorized and duly performed, and each of the representations and warranties of
FSFC and FFA set forth in this Reorganization Agreement shall be true in all
material respects on the Closing Date, except as to transactions contemplated by
this Reorganization Agreement or representations which are as of a specific
date.
7.2. Opinion of Counsel for FSFC. FSFC 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) Each of FSFC and FFA is duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
incorporation (except that with respect to FFA, counsel shall be entitled to
state merely that it has no knowledge of any reason why FFA is not duly
organized); (ii) the consummation of the transactions contemplated by this
Reorganization Agreement will not (A) violate any provision of FSFC's or FFA's
Certificate of Incorporation, Federal Stock Charter or Bylaws, as applicable,
(B) violate any provision of, result in the termination of, or result in the
acceleration of any obligation under, any agreement listed on Schedule 3.18 or
any order, arbitration award, judgment or decree known to counsel to which FSFC
or FFA is a party, or by which either is bound, except as such would not, in the
aggregate, have a Material Adverse Effect, except as disclosed on schedules to
the Reorganization Agreement, or (C) violate or conflict with any other
restriction of any kind or character of which such counsel has knowledge and to
which FSFC or FFA is subject; (iii) all of the shares of FSFC Common Stock and
FFA common stock are validly authorized and issued, fully paid and
non-assessable; (iv) each of FSFC and FFA has the legal right and power, and all
authorizations and approvals required by law, to enter into this Reorganization
Agreement, and to consummate the transactions contemplated herein (except that
exception may be taken with respect to the Bank Merger) and all applicable
regulatory waiting periods have passed;
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(v) other than filings and registrations required under applicable law to be
made by CFC or CFB, all filings and registrations with, and notifications to,
all federal and state authorities required on the part of FSFC or FFA for the
consummation of the Mergers have been made; (vi) each of FSFC and FFA has full
corporate power and authority to enter into this Reorganization Agreement, and
this Reorganization Agreement has been duly authorized, executed and delivered
by each of FSFC and FFA and constitutes a valid and legally binding obligation
of FSFC and FFA enforceable against each of FSFC and FFA 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; and
(vii) to the best knowledge of such counsel, no material suit or proceeding is
pending or threatened against FSFC, FFA or other parties which would have a
Material Adverse Effect on FSFC's or FFA's business or properties or their
abilities to make the representations and warranties and perform the obligations
set forth herein.
7.3. Conduct of Business. There shall have been no Material Adverse
Event with respect to FSFC or FFA from the date hereof through the Closing Date.
7.4. Consents. All Regulatory Approvals and 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. Regulatory Approvals 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
(excluding conditions or requirements that are typically imposed in transactions
of the type contemplated herein).
7.5. Certificate. CFC shall have been furnished with such certificates
of officers of FSFC and FFA, 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. Shareholder Approvals. The Shareholder Approvals shall have been
obtained.
7.7. IRS Ruling. In the event that CFC shall have determined to
restructure the Mergers as permitted under Section 2.8 hereof and CFC determines
that it is desirable to obtain an IRS ruling with respect to such restructuring,
then it shall be a condition of Closing that CFC shall have received such IRS
ruling, which ruling shall be reasonably acceptable to CFC. Notwithstanding the
foregoing, in the event that CFC determines to pursue such IRS ruling and such
IRS ruling has not been received by January 31, 1998, then CFC shall be deemed
and required to waive this condition to Closing and proceed with Closing.
7.8. Securities Laws. The Registration Statement shall have been
declared effective. No order suspending the sale of the shares of CFC Common
Stock in any jurisdiction shall have been issued, and no proceedings for that
purpose shall have been instituted.
7.9. FSFC Allowance. Immediately prior to Closing, the FSFC Allowance
shall not be less than 0.75% of the total FSFC loans then outstanding, unless
required otherwise by GAAP or applicable law.
SECTION VIII. CONDITIONS TO THE OBLIGATION OF FSFC TO CLOSE
The obligation of FSFC to consummate the transactions contemplated in
this Reorganization 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 Reorganization Agreement shall have
been duly authorized and duly performed, and each of the representations and
warranties of CFC and CFB set forth in this Reorganization Agreement shall be
true in all material respects on the Closing Date, except as to transactions
contemplated by this Reorganization Agreement or representations which are as of
a specific date.
8.2. Opinion of Counsel for CFC. CFC shall have furnished FSFC with an
opinion of its counsel, dated as of the Closing Date, and in form and substance
reasonably satisfactory to FSFC 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 Reorganization 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
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subject; (iii) all of the shares of CFC Common Stock to be issued in connection
with the Corporate 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
Reorganization Agreement (except that exception may be taken with respect to the
Bank Merger), and to consummate the transactions contemplated herein and all
applicable regulatory waiting periods have passed; (v) all filings and
registrations with, and notifications to, all federal and state authorities
required on the part of FSFC or FFA for the consummation of the Mergers have
been made; (vi) CFC and CFB have full corporate power and authority to enter
into this Reorganization Agreement, and this Reorganization 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;
(vii) 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, and
(viii) the Registration Statement became effective on [date] and no stop order
suspending the effectiveness of the Registration Statement or any part thereof
has been issued and no proceedings for that purpose have been instituted or are
pending under the Securities Act.
8.3. Conduct of Business. There shall have been no Material Adverse
Event with respect to CFC or CFB from the date hereof through the Closing Date.
8.4. Consents. All Regulatory Approvals or other authorizations
necessary, in the reasonable opinion of counsel for FSFC, 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 FSFC, renders the consummation
of this transaction unduly burdensome (excluding conditions or requirements that
are typically imposed in transactions of the type contemplated herein).
8.5. Certificate. FSFC shall have been furnished with such certificates
of officers of CFC and CFB, in form and substance reasonably satisfactory to
FSFC, dated as of the Closing Date, certifying to such matters as FSFC may
reasonably request, including but not limited to the fulfillment of the
conditions specified in this Section VIII.
8.6. Tax Opinion. FSFC shall have received from Wyche, Burgess, Freeman
& Parham, P.A. a tax opinion, reasonably satisfactory to FSFC, opining, subject
to reasonable qualifications, that the Corporate Merger shall, upon compliance
with reasonable conditions, qualify as a tax-free reorganization under Section
368(a) of the Code.
8.7. Shareholder Approvals. The Shareholder Approvals shall have been
obtained.
8.8. Securities Laws. The Registration Statement shall have been
declared effective. No order suspending the sale of the shares of CFC Common
Stock in any jurisdiction shall have been issued, and no proceedings for that
purpose shall have been instituted.
SECTION IX. TERMINATION
9.1. Termination. This Reorganization Agreement may be terminated at
any time prior to the Closing Date:
(a) by mutual consent of the parties;
(b) by either CFC or FSFC, at that party's option, (A) 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, or (B) if the Shareholder Approvals are not
received at the Shareholder Meetings;
(c) by either CFC or FSFC if the other party (or its
subsidiaries) has failed to comply with the agreements or fulfill the
conditions contained herein, provided, however, that any such failure
of compliance or fulfillment must result in a Material Adverse Event
and the breaching party must be given notice of the failure to comply
and a reasonable period of time to cure;
(d) by either CFC or FSFC as set forth in Section 2.3 hereof.
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(e) by either CFC or FSFC if the Ending Price is above
$19.0156 or below $11.4094 (as such price shall be subject to equitable
adjustment for stock splits, stock dividends, reverse stock splits and
similar items).
SECTION X. INDEMNIFICATION
10.1. Information for Application and Statements. Each of CFC and FSFC
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 FSFC 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 or 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 FSFC agrees, at any
time upon the request of the other, to furnish to the other a written letter or
statement confirming the accuracy of the information contained in any proxy
statement, registration statement, report or other application or statement, or
in any draft of any such document, and confirming that the information contained
in such document or draft was furnished expressly for use therein or, if such is
not the case, indicating the inaccuracies contained in such document or draft or
indicating the information not furnished expressly for use therein. The
indemnity agreement contained in this Section X shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
the other party.
10.2. Indemnification of Officers and Directors. (a) CFC covenants and
agrees that it will cause each person who is an officer or director of FSFC or
FFA (an "Indemnitee") on the Closing Date to be indemnified for any costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") arising out of such
person's service as an officer or director of FSFC or FFA to the fullest extent
to which such Indemnitee is entitled under the Articles of Incorporation and
Bylaws of CFC in effect on the date hereof (except that this provision shall not
be construed so as to cause CFC to violate applicable law). Without limiting the
foregoing obligation, CFC agrees that all limitations of liability existing in
favor of an Indemnitee in the Certificate of Incorporation and Bylaws of FSFC as
in effect on the date hereof, arising out of matters existing or occurring at or
prior to the Effective Time shall survive the Mergers and shall continue in full
force. CFC, upon request of such Indemnitee, shall advance expenses in
connection with such indemnification. The provisions of this Section X shall
survive the closing and shall be enforceable directly by each officer and
director of FSFC benefited by this Section X.
(b) Any Indemnitee wishing to claim indemnification under this Section
X, upon learning of such claims or liabilities, shall promptly notify CFC
thereof; provided, that the failure so to notify shall not affect the
obligations of CFC hereunder unless such failure materially increases CFC's
liability hereunder. In the event of any litigation giving rise to a claim
hereunder, (i) CFC shall have the right to assume the defense thereof, if it so
elects, and CFC shall pay all reasonable fees and expenses of counsel for the
Indemnitees promptly as statements therefor are received; provided, however,
that CFC shall be obligated pursuant to this Section to pay for only one firm of
counsel for all Indemnitees in any jurisdiction for any single action, suit or
proceeding or any group of actions, suits or proceedings arising out of or
related to a common body of facts, (ii) the Indemnitees shall cooperate in the
defense of any such matter, (iii) CFC shall not be liable for any settlement
effected without its prior written consent and (iv) CFC shall have no obligation
hereunder in the event a federal banking agency or a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of an Indemnitee in the
manner contemplated hereby is prohibited by applicable law.
10.3. Insurance. FSFC and CFC shall use their reasonable best efforts
to maintain FSFC's existing directors' and officers' liability insurance policy
(or a policy, similar to FSFC's existing policy, providing comparable coverage
on terms no less favorable) past the Closing Date covering persons who are
currently covered
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by such insurance; provided that CFC or FSFC shall not make a premium payment in
respect of such policy (or replacement policy) which exceeds $50,000 and
provided further that FSFC and CFC shall obtain the maximum amount of such
coverage as can be obtained by paying a premium of $50,000. CFC shall take no
action to terminate prematurely such policy.
SECTION XI. MISCELLANEOUS
11.1. Survival of Representations and Warranties. Except as otherwise
provided in this Reorganization Agreement, the representations, warranties and
covenants contained in this Reorganization Agreement or in any other documents
delivered pursuant hereto, shall not survive the Closing of the transactions.
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.
Each of the covenants set forth in Sections 6.2, 6.14, 6.15, 6.16, 10.2 and 10.3
shall survive the Closing Date forever (except that this sentence shall not be
construed to extend any applicable statutes of limitations). The provisions of
the foregoing sections shall survive the Closing and shall be enforeceable
directly by each person benefitted or intended to be benefitted by such
sections.
11.2. Entire Agreement. This Reorganization 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 Reorganization 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
Fax: 864-239-4605
Copy to: William P. Crawford, Jr.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602
Fax: 864-235-8900
For FSFC: David C. Wakefield III
First Southeast Financial Corporation
201 North Main Street
Anderson, South Carolina 29622
Fax: 864-260-6211
Copies to: John F. Breyer, Jr.
Breyer & Aguggia
1300 I Street, N.W., Suite 470E
Washington, D.C. 20005
Fax: 202-737-7979
11.5. Counterparts. This Reorganization 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
Reorganization Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretations of this Reorganization Agreement.
28
<PAGE>
11.7. Law Governing. This Reorganization Agreement shall be governed by
and construed in accordance with the laws of the State of South Carolina.
11.8. Amendment. This Reorganization Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
11.9. Waiver. Any term, provision or condition of this Reorganization
Agreement (other than that required by law) may be waived in writing at any time
by the party which is entitled to the benefits thereof.
END OF PAGE
29
<PAGE>
IN WITNESS WHEREOF, this Reorganization Agreement has been duly entered
as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
WITNESS:
CAROLINA FIRST CORPORATION
_________________________ By: /s/ William S. Hummers III
----------------------------
William S. Hummers III
_________________________ Executive Vice President
CAROLINA FIRST BANK
_________________________ By: /s/ William S. Hummers III
----------------------------
William S. Hummers III
_________________________ Executive Vice President and Cashier
FIRST SOUTHEAST FINANCIAL CORPORATION
_________________________ By: /s/ David C. Wakefield, III
--------------------------
David C. Wakefield, III
_________________________ President and Chief Executive Officer
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ANDERSON
_________________________ By: /s/ David C. Wakefield, III
-----------------------------
David C. Wakefield, III
_________________________ President and Chief Executive Officer
</TABLE>
[Schedules will be provided upon the request of the Commission.]
30
<PAGE>
APPENDIX A
[Original Appendix A replaced with Appendix A set forth in Addendum No. 1 to
Reorganization Agreement below]
31
<PAGE>
APPENDIX B
PLAN OF MERGER
OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF ANDERSON
WITH AND INTO
CAROLINA FIRST BANK
Pursuant to this Plan of Merger (the "Plan of Merger"), First Federal
Savings and Loan Association of Anderson ("FFA"), a federal savings and loan
association existing under the laws of the United States of America, shall be
merged with and into Carolina First Bank ("CFB"), a state banking corporation
existing under the laws of South Carolina.
ARTICLE XII. 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 CFB and FFA in a form appropriate for filing with the Secretary of
State of South Carolina and the Office of Thrift Supervision, relating to the
effective consummation of the Bank Merger as contemplated by the Plan of Merger.
1.2. "BCA" shall mean the South Carolina Business Corporation Act of
1988, as amended.
1.3. "Bank Merger" shall mean the merger of FFA with and into CFB as
more particularly set forth in the Reorganization Agreement.
1.4. "CFB Common Stock" shall mean the common stock, par value $1.00
per share, of CFB.
1.5. "CFC" shall mean Carolina First Corporation, a bank holding
company headquartered in Greenville, South Carolina.
1.6. "Effective Time" shall mean the date and time which the Bank
Merger becomes effective as more particularly set forth in Section 2.2 hereof.
Subject to the terms and conditions hereof, the Effective Time shall be such
time on such date as CFB shall notify FFA in writing not less than five days
prior thereto, which date shall not be more than 30 days after all conditions
have been satisfied or waived in writing.
1.7. FSFC. First Southeast Financial Corporation, a corporation
organized and existing under the laws of the state of Delaware.
1.8. "OTS" shall mean the Office of Thrift Supervision.
1.9. "Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
1.10. "Reorganization Agreement" shall mean the Reorganization
Agreement among CFC, CFB and FSFC dated the date hereof, to which this Plan of
Merger is attached as Appendix A.
1.11. "Shareholder Approvals" shall mean, as the context may require,
the duly authorized written consent of CFC to the merger of FFA with and into
CFB; the duly authorized written consent of FSFC to the merger of FFA with and
into CFB; the approval by the requisite vote of the shareholders of FSFC at the
FSFC Shareholders' Meeting of the merger of FSFC with and into CFC; and the
approval by the requisite vote of the shareholders of CFC at the CFC
Shareholders' Meeting of the merger of FSFC with and into CFC, all in accordance
with the Reorganization Agreement and this Plan of Merger.
1.12. "Surviving Corporation" shall mean CFB after consummation of the
Bank Merger.
ARTICLE II. THE BANK MERGER
2.1. Bank Merger. At the Effective Time, subject to the terms and
conditions of the Reorganization Agreement and this Plan of Merger, FFA shall
merge with and into CFB, the separate existence of FFA shall cease, and CFB (the
"Surviving Corporation") shall survive and the name of the Surviving shall be
"Carolina First Bank". By virtue of the Bank Merger and without any action on
the part of the holders thereof, each of the shares of FFA Common Stock issued
and outstanding immediately prior to the Effective Time, shall be converted into
the right to receive the Merger Consideration referenced in Section III below.
Each of the shares of CFB Common Stock, and any shares of any CFB subsidiary or
FFA subsidiary outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding, and shall not be converted, exchanged or
altered in any manner as a result of the Bank Merger.
B-32
<PAGE>
2.2. Effective Time. The Bank 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 and the OTS.
2.3. Capitalization. The number of authorized shares of capital stock
of the Surviving Corporation shall be the same as immediately prior to the Bank
Merger.
2.4. Articles of Incorporation. The articles of incorporation of CFB as
in effect at the Effective Time shall be and remain the articles of
incorporation 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 FFA and CFB; Management. At the
Effective Time, the separate existence and corporate organization of FFA shall
cease, and CFB shall thereupon and thereafter, to the extent consistent with
applicable law and with its articles of incorporation and the changes, if any,
provided by the Bank Merger, possess all the rights, privileges, immunities,
liabilities and franchises, of a public as well as a private nature, of FFA
without further act or deed. The directors and officers of CFB in office
immediately prior to the Bank Merger becoming effective shall be the directors
and officers of the Continuing Corporation, together with such additional
directors and officers as may thereafter be elected, who shall hold office until
such time as their successors are elected and qualified.
ARTICLE III. MERGER CONSIDERATION
3.1. Merger Consideration. In connection with the Bank Merger, all
shares of FFA Common Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Bank Merger and without any action on the
part of the holder thereof, be exchanged for and converted into ______ shares of
CFB Common Stock (the "Merger Consideration").
3.2. CFB Common Stock. None of the shares of CFB shall be converted in
the Bank Merger and the capitalization of CFB after the Bank Merger shall remain
unchanged.
3.3. Authorized or Treasury Shares. Any and all shares of FFA Common
Stock held as treasury shares by FFA or authorized but unissued shares shall be
canceled and retired at the Effective Time, and no consideration shall be issued
or given in exchange therefor.
3.4. Transfers. At the Effective Time, the stock transfer books of FFA
shall be closed and no transfer of FFA Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Merger notwithstanding, none of
the parties to the Reorganization Agreement or any affiliate of the foregoing
shall be liable to a holder of FFA Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. Issuance of CFB Certificates; Cash for Fractional Shares. After
the Effective Time, each holder of shares of FFA Common Stock issued and
outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to CFB or its transfer agent, and shall
promptly upon surrender receive in exchange therefor the Merger Consideration
provided in Section 3.1 of this Plan of Merger.
4.2. Authorized Withholdings. CFB shall not be obligated to deliver the
consideration to which any former holder of FFA Common Stock is entitled as a
result of the Bank Merger until such holder surrenders his or her certificate or
certificates representing the shares of FFA 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 CFB or FFA. In addition, no dividend or other distribution payable to
the holders of record of CFB Common Stock as of any time subsequent to the
Effective Time shall be paid to the holder of any certificate representing
shares of FFA 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 FFA Common Stock certificate both the CFB
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 FFA Shareholders. After the Effective
Time, each outstanding certificate representing shares of FFA Common Stock prior
to the Effective Time shall be deemed for all Bank purposes (other than voting
and the payment of dividends and other distributions to which the former
shareholder of FFA Common
B-33
<PAGE>
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 CFB
Common Stock in exchange therefor as provided in this Plan of Merger.
ARTICLE V. STOCK OPTIONS AND OTHER RIGHTS
5.1. Options. There are no Rights to purchase FFA Common Stock or
securities convertible into FFA Common Stock.
ARTICLE VI. MISCELLANEOUS
6.1. Conditions Precedent. Consummation of the Bank Merger is
conditioned upon receipt of the Shareholder Approvals. In addition, consummation
of the Bank Merger is conditioned upon the fulfillment of the conditions
precedent set forth in Section VII and Section VIII of the Reorganization
Agreement, subject to waiver of any such conditions, if appropriate, as provided
thereunder.
6.2. Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time as provided in Section IX of the Reorganization
Agreement.
6.3. Amendments. To the extent permitted by law, this Plan of Merger
may be amended by a subsequent writing signed by all of the parties hereto upon
the approval of the board of directors of each of the parties hereto.
Dated as of this _____ day of _______________, 1997.
B-34
<PAGE>
ADDENDUM NO. 1 TO REORGANIZATION AGREEMENT
This ADDENDUM NO. 1 to REORGANIZATION AGREEMENT is entered into as of
this 15th day of July, 1997 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, First Southeast Financial
Corporation ("FSFC"), a corporation organized and existing under the laws of the
state of Delaware, and First Federal Savings and Loan Association of Anderson
("FFA"), a federal savings and loan association organized and existing under the
laws of the United States of America.
WHEREAS the parties hereto entered into that certain Reorganization
Agreement dated as of July 1, 1997 (the "Reorganization Agreement"), which
provided for the merger of FSFC into CFC and the merger of FFA into CFB;
WHEREAS Section 2.8 of the Reorganization Agreement provides that CFC
shall be entitled to restructure the transactions contemplated in the
Reorganization Agreement (the "Transaction"), subject to compliance with the
terms of such Section;
WHEREAS CFC desires to restructure the Transaction as provided below;
NOW, THEREFORE, the parties agree and acknowledge as follows:
1. The Reorganization Agreement shall be amended so that the
structure of the Transaction shall have the following steps:
A. CFC shall form an interim subsidiary ("CFC Acquisition
Company"), into which FSFC will be merged, with CFC Acquisition Company
being the surviving company (the "Holding Company Merger"). All
references in the Reorganization Agreement to the "Corporate Merger"
shall amended to mean the Holding Company Merger.
B. Immediately following the effective time of the Holding
Company Merger, CFC Acquisition Company shall be liquidated (the
"Liquidation").
C. Immediately following the consummation of the Liquidation,
FFA (now a direct subsidiary of CFC) shall be merged with and into CFB.
2. Appendix A to the Reorganization Agreement shall be amended to be
substantially in the form attached hereto as Appendix A. Appendix C to the
Reorganization shall be as attached hereto as Appendix C.
3. The Reorganization Agreement is otherwise unamended and
remains in full force and effect.
B-35
<PAGE>
IN WITNESS WHEREOF, this Reorganization Agreement has been duly entered
as of the date first written above.
CAROLINA FIRST CORPORATION
By: ________________________________________
William S. Hummers III, Executive Vice President
CAROLINA FIRST BANK
By: ________________________________________
William S. Hummers III, Executive Vice President and Cashier
FIRST SOUTHEAST FINANCIAL CORPORATION
By: ________________________________________
David C. Wakefield III, President and Chief Executive Officer
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ANDERSON
By: ________________________________________
David C. Wakefield III, President and Chief Executive Officer
B-36
<PAGE>
APPENDIX A
PLAN OF MERGER OF
FIRST SOUTHEAST FINANCIAL CORPORATION
WITH AND INTO
CFC ACQUISITION Company
Pursuant to this Plan of Merger (the "Plan of Merger"), First Southeast
Financial Corporation ("FSFC"), a Delaware corporation headquartered in
Anderson, South Carolina, shall be merged with and into CFC Acquisition Company
("CFCAI"), a South Carolina corporation headquartered in Greenville, South
Carolina.
ARTICLE VII. 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 CFCAI and FSFC in a form appropriate for filing with the Secretary
of State of South Carolina, relating to the effective consummation of the
Holding Company Merger as contemplated by the Plan of Merger.
1.2. "BCA" shall mean the South Carolina Business Corporation Act of
1988, as amended.
1.3. CFB shall mean Carolina First Bank, a South Carolina corporation
and a wholly-owned subsidiary of CFC.
1.4. "CFC Common Stock" shall mean the common stock, par value $1.00
per share, of CFC.
1.5. "Change of Control Transaction" shall mean, with respect to CFC,
a transaction in which a majority of the surviving entity of such transaction
(or a majority of the entity holding substantially all of the assets of CFC) is
not owned by persons holding CFC Common Stock immediately prior to such
transaction.
1.6. "Conversion Ratio" shall mean the number of shares of CFC Common
Stock issuable in exchange for one share of FSFC Common Stock, as calculated
pursuant to Section 3.1 hereof.
1.7. "Holding Company Merger" shall mean the merger of FSFC with and
into CFCAI as more particularly set forth herein and in the Reorganization
Agreement.
1.8. "Effective Time" shall mean the date and time which the Holding
Company Merger becomes effective as more particularly set forth in Section 2.2
hereof. Subject to the terms and conditions hereof, the Effective Time shall be
such time on such date as CFC shall notify FSFC in writing not less than five
days prior thereto, which date shall not be more than 30 days after all
conditions have been satisfied or waived in writing.
1.9. "Ending Price" shall mean the average of the closing prices as
quoted on the Nasdaq National Market for CFC Common Stock for the ten days in
which CFC Common Stock was traded immediately prior to the Closing Date.
1.10. "FFA" shall mean First Federal Savings and Loan Association of
Anderson, a federal savings association organized and existing under the laws of
the United States of America. Where the context permits, FFA shall be deemed to
include FFA and FMSC.
1.11. "FMSC" shall mean First Master Service Corporation, a South
Carolina corporation and wholly-owned subsidiary of FFA.
1.12. "OTS" shall mean the Office of Thrift Supervision.
1.13. "Person" shall mean an individual, a partnership, a corporation,
a commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
1.14. "Reorganization Agreement" shall mean the Reorganization
Agreement among CFC, CFB, FFA and FSFC dated as of July 1, 1997, as such
Reorganization Agreement has been amended by Addendum No. 1 dated July 15, 1997,
to which this Plan of Merger is attached as Appendix A.
1.15. "Rights" shall mean warrants, calls, commitments, options, rights
(whether stock appreciation rights, conversion rights, exchange rights, profit
participation rights, or otherwise), securities or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
and other arrangements or commitments which obligate a Person to issue,
otherwise cause to become outstanding, sell, transfer, pledge, or otherwise
dispose of any of its capital stock or other ownership interests, or any voting
rights thereof or therein, or to pay monetary sums by reference to the existence
or market valuation, or in lieu and place, of any of its capital stock or
ownership interests therein.
1.16. "Shareholder Approvals" shall mean, as the context may require,
the duly authorized written consent of CFC to the merger of FFA with and into
CFB; the duly authorized written consent of CFC to the merger of FSFC with and
into CFCAI; the approval by the requisite vote of the shareholders of FSFC at
the FSFC
B-1
<PAGE>
Shareholders' Meeting of the merger of FSFC with and into CFCAI; and the
approval by the requisite vote of the shareholders of CFC at the CFC
Shareholders' Meeting of the merger of FSFC with and into CFCAI, all in
accordance with the Reorganization Agreement and this Plan of Merger.
1.17. "Shareholders' Meeting" shall mean, as applicable, the meetings
of the shareholders of FSFC and CFC at which the Holding Company Merger shall be
voted upon.
1.18. "Surviving Corporation" shall mean CFCAI after consummation of
the Holding Company Merger.
ARTICLE II. THE HOLDING COMPANY MERGER
2.1. Holding Company Merger. At the Effective Time, subject to the
terms and conditions of the Reorganization Agreement and this Plan of Merger,
FSFC shall merge with and into CFCAI, the separate existence of FSFC shall
cease, and CFCAI (the "Surviving Corporation") shall survive and the name of the
Surviving Corporation shall be "CFC Acquisition Company". By virtue of the
Holding Company Merger and without any action on the part of the holders
thereof, each of the shares of FSFC Common Stock issued and outstanding
immediately prior to the Effective Time (excluding shares held by FSFC, CFC, any
FSFC Subsidiary or any CFC Subsidiary, in each case other than in a fiduciary
capacity or as a result of debts previously contracted (the "Excluded Shares"))
shall be converted into the right to receive the Merger Consideration referenced
in Section III below. Each of the shares of CFC Common Stock (including the
rights ("CFC Rights") issued pursuant to a Shareholder Rights Agreement, dated
November November 9, 1993 (as amended, the "CFC Rights Agreement")), and any
shares of any CFC Subsidiary or FSFC Subsidiary outstanding immediately prior to
the Effective Time shall continue to be issued and outstanding, and shall not be
converted, exchanged or altered in any manner as a result of the Holding Company
Merger.
2.2. Effective Time. The Holding Company 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.
2.3. Capitalization. The number of authorized shares of capital
stock of the Surviving Corporation shall be the same as immediately prior to the
Holding Company Merger.
2.4. Articles of Incorporation. The articles of incorporation of
CFCAI as in effect at the Effective Time shall be and remain the articles of
incorporation of the Surviving Corporation.
2.5. Bylaws. The Bylaws of CFCAI, 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 FSFC and CFCAI; Management. At the
Effective Time, the separate existence and corporate organization of FSFC shall
cease, and CFCAI shall thereupon and thereafter, to the extent consistent with
applicable law and with its articles of incorporation and the changes, if any,
provided by the Holding Company Merger, possess all the rights, privileges,
immunities, liabilities and franchises, of a public as well as a private nature,
of FSFC without further act or deed. The directors and officers of CFCAI in
office immediately prior to the Holding Company Merger becoming effective shall
be the directors and officers of the Surviving Corporation, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.
ARTICLE III. MERGER CONSIDERATION
3.1. Merger Consideration. In connection with the Holding Company
Merger, each share of FSFC Common Stock issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Holding Company Merger and without
any action on the part of the holder thereof, be exchanged for and converted
into 1.000 shares of CFC Common Stock (the "Conversion Ratio"). However, the
Conversion Ratio shall be subject to adjustment as follows:
1. In the event that the Ending Price is above $16.7338, then the
Conversion Ratio shall be reduced so that each holder of the
FSFC Common Stock shall receive the number of shares of CFC
Common stock equal to $16.7338 divided by the Ending Price,
for each share of FSFC Common Stock.
2. In the event that the Ending Price is below $13.6913, then the
Conversation Ratio shall be increased so each holder of FSFC
Common Stock shall receive the number of shares of CFC Common
Stock equal to $13.6913 divided by the Ending Price, for each
share of FSFC Common Stock.
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<PAGE>
3. In the event that on the Closing Date, (i) CFC has executed a
letter of intent or entered into a definitive agreement
providing for a Change of Control Transaction or (ii) a bona
fide offer to acquire a majority of the outstanding shares of
CFC Common Stock is outstanding from a financial institution
having the ability and intention to consummate such offer,
then the Conversion Ratio shall not be less than 1.000.
All of the stock prices set forth in this Section 3.1 shall also be subject to
equitable adjustment for stock splits, stock dividends, reverse stock splits and
similar items.
3.2. CFCAI Common Stock. None of the shares of CFCAI shall be converted
in the Holding Company Merger and the capitalization of CFCAI after the Holding
Company Merger shall remain unchanged.
3.3. Authorized or Treasury Shares. Any and all shares of FSFC Common
Stock held as treasury shares by FSFC or authorized but unissued shares shall be
canceled 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
FSFC Common Stock in respect of any fractional share that would otherwise be
issuable based on the Ending Price.
3.5. Excluded Shares. Each of the Excluded Shares shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.6. Equitable Adjustments. In the event of any change in the
outstanding CFC Common Stock by reason of a stock dividend, stock split, stock
consolidation, recapitalization, reorganization, merger, split up or the like,
the Conversation Ratio and all stock prices set forth in this Article III shall
be appropriately adjusted so as to preserve, but not increase, the benefits of
this Plan of Merger to the holders of FSFC Common Stock.
3.7. Transfers. At the Effective Time, the stock transfer books of FSFC
shall be closed and no transfer of FSFC Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Merger notwithstanding, none of
the parties to the Reorganization Agreement or any affiliate of the foregoing
shall be liable to a holder of FSFC Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. Issuance of CFC Certificates; Cash for Fractional Shares. (a) As
soon as practicable after the Effective Time (but in no event more than five
days after the Effective Time), CFC or its transfer agent (in such capacity, the
"Exchange Agent") shall mail, or cause to be mailed, and otherwise make
available to each record holder of shares of FSFC Common Stock, a form of the
letter of transmittal and instructions for use in effecting surrender and
exchange of certificates which immediately before the Effective Time represented
shares of FSFC Common Stock ("Certificates") for payment therefor. Upon receipt
of such notice and transmittal form, each holder of Certificates at the
Effective Time shall surrender the Certificate or Certificates to the Exchange
Agent, and shall promptly upon surrender receive in exchange therefor the Merger
Consideration provided in Section 3 of this Plan of Merger. If any portion of
the payment to be made upon surrender and exchange of a Certificate is to be
paid to a person other than the person in whose name the Certificate is
registered, it shall be a condition of such payment that the Certificate shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay in advance any transfer or other taxes
or establish to the satisfaction of CFC that no such tax is applicable. Upon
surrender, each Certificate shall be canceled. In addition, Certificates
surrendered for exchange by any person constituting an affiliate of FSFC for
purposes of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), shall not be exchanged for certificates representing shares
of CFC Common Stock until CFC has received the written agreement from such
person as provided for in Section 6.4 of the Reorganization Agreement.
(b) Adequate provisions shall be made to permit Certificates to be
surrendered and exchanged in person not later than the business day following
the Effective Time.
4.2. Authorized Withholdings. CFC shall not be obligated to deliver the
consideration to which any former holder of FSFC Common Stock is entitled as a
result of the Merger until such holder surrenders his or her certificate or
certificates representing the shares of FSFC 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 FSFC. 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 FSFC Common Stock issued and outstanding at the Effective Time until
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<PAGE>
such holder surrenders such certificate for exchange as provided in Section 4.1
above. However, upon surrender of the FSFC 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 FSFC Shareholders. After the Effective
Time, each outstanding certificate representing shares of FSFC Common Stock
prior to the Effective Time shall be deemed for all corporate purposes (other
than voting and the payment of dividends and other distributions to which the
former shareholder of FSFC 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 (and cash in
lieu of fractional shares) as provided in this Plan of Merger.
ARTICLE V. STOCK OPTIONS AND OTHER RIGHTS
5.1. Options. There are no Rights to purchase FSFC Common Stock or
securities convertible into FSFC Common Stock.
ARTICLE VI. MISCELLANEOUS
6.1. Conditions Precedent. Consummation of the Merger is conditioned
upon receipt of the Shareholder Approvals. In addition, consummation of the
Merger is conditioned upon the fulfillment of the conditions precedent set forth
in Section VII and Section VIII of the Reorganization Agreement, subject to
waiver of any such conditions, if appropriate, as provided thereunder.
6.2. Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time as provided in Section IX of the Reorganization
Agreement.
6.3. Amendments. To the extent permitted by law, this Plan of Merger
may be amended by a subsequent writing signed by all of the parties hereto upon
the approval of the board of directors of each of the parties hereto; provided,
however, that this Plan of Merger may not be amended after the Shareholders'
Meetings except in accordance with applicable law.
Dated as of this _____ day of _______________, 1997.
B-4
<PAGE>
APPENDIX C
PLAN OF LIQUIDATION OF
CFC ACQUISITION COMPANY
THIS PLAN OF LIQUIDATION OF CFC Acquisition Company, made this ___ day
of _________, 1997, by CFC Acquisition Company, a South Carolina corporation,
("CFCAI");
W I T N E S S E T H:
WHEREAS, the Directors and Shareholders of CFCAI have approved the
dissolution and liquidation of CFCAI, all as more particularly contemplated in
that certain Reorganization Agreement entered into as of July 1, 1997 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, First Southeast Financial Corporation ("FSFC"), a corporation
organized and existing under the laws of the state of Delaware, and First
Federal Savings and Loan Association of Anderson ("FFA"), a federal savings and
loan association organized and existing under the laws of the United States of
America, as amended by that certain Addendum No. 1 dated July 15, 1997 (the
"Reorganization Agreement").
NOW, THEREFORE, CFCAI hereto adopts the following Plan of Liquidation:
1. The officers of CFCAI shall file the Articles of Dissolution with
the Secretary of State of South Carolina, effecting the dissolution of the
CFCAI, containing such necessary and desirable terms as shall be necessary to
effect the dissolution of CFCAI as contemplated in the Reorganization Agreement.
2. CFCAI, as soon as possible, shall pay all outstanding corporate
debts and costs of such dissolution.
3. Upon payment of all corporate debts, the officers of CFCAI shall
distribute the remaining assets to the sole shareholder in complete cancellation
or redemption of all its issued and outstanding capital stock, such distribution
to be made as promptly as practicable.
IN WITNESS WHEREOF, CFCAI has caused this Plan of Liquidation to be
executed all as of the day and year first above written.
CFC Acquisition Company
By: ______________________________
Its: President
ATTEST:
- -------------------------
Secretary
B-5
<PAGE>
EXHIBIT B
[TFC LETTERHEAD]
[DATE]
Board of Directors
First Southeast Financial Corporation
201 North Main Street
Anderson, SC 29622
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of common stock (the "FSFC Common Stock") of
First Southeast Financial Corporation ("FSFC") of the consideration to be
received by such shareholders in a merger (the "Merger") of FSFC with Carolina
First Corporation ("CFC"), pursuant to the Reorganization Agreement and Plan of
Merger dated July 1, 1997 (the "Agreement"). Unless otherwise noted, all terms
used herein will have the same meaning as defined in the Agreement.
As more specifically set forth in the Agreement, and subject to a
number of conditions and procedures described in the Agreement, each of the
issued and outstanding shares of FSFC Common Stock shall be exchanged for and
converted into 1.000 shares of CFC Common Stock (the "Conversion Ratio"). The
Conversion Ratio shall be subject to adjustment as follows:
1. In the event that the Ending Price (average closing price of CFC
Common Stock for ten trading days prior to the Closing Date) is
above $16.734, then the Conversion Ratio will be reduced so that
each FSFC shareholder shall receive a number of shares of CFC
Common Stock equal to $16.734 divided by the Ending Price, for
each share of FSFC Common Stock.
2. If the Ending Price is below $13.691, then the Conversion Ratio
will be increased so that the number of shares of CFC Common Stock
exchanged will equal $13.691 divided by the Ending Price, for each
share of FSFC Common Stock.
3. If on the Closing Date, (i) CFC has executed a letter of intent or
entered into a definitive agreement providing for a Change of
Control Transaction, or (ii) a bona fide offer to acquire a
majority of the outstanding shares of CFC Common Stock is
outstanding from a financial institution having the ability and
intention to consummate such offer, then the Conversion Ratio
shall not be less than 1.000.
Trident Financial Corporation ("Trident") is a financial consulting and
investment banking firm experienced in the valuation of business enterprises
with considerable experience in the valuation of thrift institutions. In the
past, Trident and its affiliates have provided financial advisory services for
FSFC and have received fees for the rendering of these services. In addition, in
the ordinary course of our business we may actively trade the securities of FSFC
or CFC for our own account and for the accounts of our customers and,
accordingly, may at any one time hold a long or short position in such
securities. Trident is not affiliated with FSFC or CFC.
In connection with rendering our opinion, we have reviewed and
analyzed, among
<PAGE>
Board of Directors
[Date]
Page 2
other things, the following:
(i) the Agreement;
(ii) the Proxy Statement dated as of the date hereof;
(iii) certain publicly available information concerning FSFC, including the
audited financial statements for each year in the three year period
ended June 30, 1996 and unaudited financial statements for the nine
months ended March 31, 1997;
(iv) certain publicly available information concerning CFC, including the
audited financial statements for each year in the three year period
ended December 31, 1996 and unaudited financial statements for the
three months ended March 31, 1997;
(v) certain other internal information, primarily financial in nature,
concerning the business and operations of FSFC and CFC furnished to us
by FSFC and CFC for purposes of our analysis;
(vi) information with respect to the trading market for FSFC and CFC Common
Stock;
(vii) certain publicly available information with respect to other companies
that we believe to be comparable to FSFC and CFC and the trading
markets for such other companies' securities; and
(viii) certain publicly available information concerning the nature and terms
of other transactions that we believe relevant to our inquiry.
We met with certain officers and employees of FSFC and CFC to discuss the
foregoing. We have also taken into account our assessment of general economic,
market, financial and regulatory conditions and trends, as well as our
knowledge of the thrift industry, experience in connection with similar
transactions and general knowledge of securities valuation.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided to us or publicly available. We have not
attempted independently to verify any such information. We have not conducted a
physical inspection of the properties or facilities of FSFC or CFC, nor have we
made or obtained any independent evaluations or appraisals of any of such
properties or facilities. We did not specifically evaluate FSFC's or CFC's loan
portfolio or the adequacy of reserves for possible loan losses. Our opinion
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof. Our opinion is, in any event, limited to the fairness, from a
financial point of view, of the consideration to be received by the holders of
FSFC Common Stock in the Merger and does not address FSFC's underlying business
decision to effect the Merger.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by the holders of FSFC Common Stock in the Merger
is fair, as of the date hereof, from a financial point of view, to such holders.
This opinion is being delivered to the Board of Directors of FSFC for its use
and is not to be reproduced, disseminated or delivered to any third party
without the express written consent of Trident Financial Corporation, except as
required by law.
Very truly yours,
TRIDENT FINANCIAL CORPORATION
<PAGE>
EXHIBIT C
FORM OF OPINION
July 23, 1997
Board of Directors
Carolina First Corporation
102 South Main Street
Greenville, SC 209601
Ladies and Gentlemen:
You have requested our opinion (collectively our "Opinion") expressed
below, on behalf of the shareholders of Carolina First Corporation, of the
consideration to be received by the Shareholders of First Southeast Financial
Corporation ("First Southeast") in the proposed merger (the "Merger")
pursuant to the Reorganization Agreement (the "Agreement") dated July 1,
1997 between Carolina First Corporation and First Southeast. Pursuant to the
Agreement and upon the effectiveness of the Merger, First Southeast will be
merged with and into Carolina First Corporation, and each of the issued and
outstanding shares of First Southeast will be converted into the right to
receive .956 share of Carolina First Corporation (the "Consideration"),
subject to change as specified in the collar arrangement.
Interstate/Johnson Lane Corporation ("Interstate") is one of the largest
independent investment banking firms headquartered in the Southeast. As part of
its regular investment banking business, Interstate evaluates securities in
connection with negotiated underwritings, leveraged buyouts, secondary
distributions, private placements, estate and gift valuations, mergers and
acquisitions, employee stock ownership plan purchases and other activities.
We have developed our Opinion on the basis of the findings and conclusions
arising from our conduct of due diligence with respect to Carolina First
Corporation and First Southeast. In arriving at our Opinion, we have, among
other things:
1) reviewed the terms and conditions of the Agreement;
2) analyzed certain historical business and financial information
relating to Carolina First Corporation and First Southeast;
3) conducted discussions with members of the senior management of
Carolina First Corporation and First Southeast with respect to the
business and prospects of the Carolina First Corporation and First
Southeast and the strategic objectives of the Merger;
4) reviewed financial and market information as to certain other
publicly traded companies believed by us to be reasonably similar
to First Southeast;
<PAGE>
5) considered the financial terms of selected mergers and acquisition
transactions in the thrift industry believed by us to be
reasonably similar to the proposed Merger;
6) Performed a pro forma dilution analysis using financial
projections for Carolina First Corporation and First Southeast in
1997 and 1998, and including potential cost savings and synergies
to estimate the impact to the shareholders of Carolina First
Corporation.
7) conducted such other financial studies, analyses and
investigations as appropriate and relevant as the basis for the
conclusions set forth in this Opinion.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information furnished to us
by Carolina First Corporation and First Southeast including, without limitation,
all financial projections of Carolina First Corporation and First Southeast.
Accordingly, we do not make any warranties, nor do we express any opinion
regarding the accuracy of such projections. We have also relied upon the
assurances of the management of Carolina First Corporation and First Southeast
that they are unaware of any facts that would make the information provided to
us incomplete or misleading.
Based upon and subject to the foregoing and such other matters as we
considered relevant, it is our opinion that as of the date hereof, the
Consideration to be paid for First Southeast is fair, from a financial point of
view, to the shareholders of Carolina First Corporation.
Our fees for rendering our Opinion are not contingent upon the Opinion
expressed herein, and neither Interstate nor any of its affiliates or employees
has a present or intended financial interest in the Company. Further,
Interstate is independent of all parties participating in the proposed Merger.
This opinion is furnished pursuant to our engagement letter dated June
24, 1997. Our opinion is directed to the Board of Directors of Carolina First
Corporation and does not constitute a recommendation to any shareholder of
Carolina First Corporation as to how such shareholder should vote in connection
with the Merger. This opinion is a summary discussion of our underlying analyses
and may be included in communications to the shareholders of Carolina First
Corporation provided that we approve of such disclosures prior to publication.
Very truly yours,
Interstate/Johnson Lane
Corporation
<PAGE>
EXHIBIT D
CFC ACQUISITION COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
July 31, 1997
(unaudited)
<S> <C>
Assets
Cash.................................................................. $ 100
$ 100
Liabilities and Shareholders' Equity
Liabilities........................................................... --
Shareholders' Equity:
Common stock...................................................... 100
Retained Earnings................................................. --
Total shareholders' equity.................................... 100
$ 100
</TABLE>
1
<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
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 that the Corporation
shall pay for or reimburse the reasonable expenses 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 make 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
(a) Listing of Exhibits
<TABLE>
<CAPTION>
Exhibit
<S> <C>
2.1 -- Agreement and Plan of Reorganization entered into as of July 1, 1997 between and among Carolina
First Bank, Carolina First Corporation, First Federal and First Southeast: Included as Exhibit A to the
Joint Proxy Statement/Prospectus.
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1 of Carolina First Corporation's
Registration Statement on Form S-4, Commission File No. 33-57389.
3.2 -- Articles of Amendment dated June 1, 1997.
3.3 -- Amended and Restated Bylaws of Carolina First Corporation, as amended and restated as of December
18, 1996: Incorporated by reference to Exhibit 3.1 of Carolina First Corporation's Current Report on
Form 8-K dated December 18, 1996, Commission File No. 0-15083.
4.1 -- Specimen Carolina First Corporation Common Stock certificate: Incorporated by reference to
Exhibit 4.1 of Carolina First Corporation's Registration Statement on Form S-1, Commission File No.
95
<PAGE>
33-7470.
4.2 -- Articles of Incorporation: Included as Exhibits 3.1 and 3.2.
4.2 -- Bylaws: Included as Exhibit 3.3.
4.3 -- Carolina First Corporation Amended and Restated 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. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by reference to Exhibit 4.1 of
Carolina First Corporation's Current Report on Form 8-K dated December 18, 1996, Commission File
No. 0-15083.
4.7 -- Form of Indenture between Carolina First Corporation and First American Trust Company, N.A., as
Trustee: Incorporated by reference to Exhibit 4.11 of Carolina First Corporation's Registration
Statement on Form S-3, Commission File No. 22-58879.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality of shares of the Carolina
First Corporation.
8.1 -- See "THE PROPOSED TRANSACTION -- Certain Federal Income Tax Consequences" for discussion
regarding tax matters.
11.1 -- Computation of Per Share Earnings: Incorporated by reference to Exhibit 11.1 of Carolina First
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, Commission File
No. 0-15083.
12.1 -- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends: Incorporated by reference to Exhibit 12.1 of Carolina First Corporation's Annual Report
on Form 10-K for the year ended December 31, 1996, Commission File No. 0-15083.
13.1 -- 1996 Annual Report to Shareholders of Carolina First Corporation. Incorporated by reference to
Exhibit 13.1 of Carolina First Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996, Commission File No. 0-15083.
15.1 -- Letter regarding Unaudited Interim Financial Information: To be filed by amendment.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank, Carolina First Mortgage Company, CF Investment
Company and Blue Ridge Finance Company.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Elliott, Davis & Company, L.L.P.
23.3 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibit 5.1.
24.1 -- The Power of Attorney: Contained on the signature page of the initial filing of this Registration
Statement.
27.1 -- Financial Data Schedule: Incorporated by reference to Exhibit 10.18 of Carolina First Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 0-15083.
99.1 -- Form of Proxies
99.2 -- 1996 Annual Report to Shareholders of First Southeast. Incorporated by reference to Exhibit 13 of First
Southeast's Annual Report on Form 10-K for the year ended June 30, 1996.
</TABLE>
(b) Certain additional financial statements. Not applicable.
(c) The information required by this paragraph is included as an Exhibit to
the Joint Proxy Statement/Prospectus.
Item 22: Undertakings
The undersigned Registrant hereby undertakes:
(a) (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 in such information in the
registration statement:
<PAGE>
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission 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.
(4) 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 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.
(5) 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.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 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.
(c) 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant 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 July 23, 1997.
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 below constitutes 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 Securities and Exchange Commission, 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>
Signature Title Date
<S> <C> <C>
/s/ William R. Timmons, Jr. Chairman of the Board July 23, 1997
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. President, Chief Executive Officer July 23, 1997
Mack I. Whittle, Jr. and Director (Principal Executive Officer)
/s/ William S. Hummers III Executive Vice President, Director July 23, 1997
William S. Hummers III (Principal Accounting and Financial Officer)
/s/ M. Dexter Hagy Director July 23, 1997
M. Dexter Hagy
/s/ Eugene E. Stone IV Director July 23, 1997
Eugene E. Stone IV
/s/ H. Earle Russell, Jr. Director July 23, 1997
H. Earle Russell, Jr.
/s/ Judd B. Farr Director July 23, 1997
Judd B. Farr
/s/ Charles B. Schooler Director July 23, 1997
Charles B. Schooler
/s/ Elizabeth P. Stall Director July 23, 1997
Elizabeth P. Stall
</TABLE>
<PAGE>
EXHIBIT INDEX
2.1 -- Agreement and Plan of Reorganization entered into as of July 1, 1997
between and among Carolina First Bank, Carolina First Corporation, First
Federal and First Southeast: Included as Exhibit A to the Joint Proxy
Statement/Prospectus.
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1 of
Carolina First Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
3.2 -- Articles of Amendment dated June 1, 1997.
3.3 -- Amended and Restated Bylaws of Carolina First Corporation, as amended and
restated as of December 18, 1996: Incorporated by reference to Exhibit
3.1 of Carolina First Corporation's Current Report on Form 8-K dated
December 18, 1996, Commission File No. 0-15083.
4.1 -- Specimen Carolina First Corporation 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 -- Articles of Incorporation: Included as Exhibits 3.1 and 3.2.
4.2 -- Bylaws: Included as Exhibit 3.3.
4.3 -- Carolina First Corporation Amended and Restated 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. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by
reference to Exhibit 4.1 of Carolina First Corporation's Current Report
on Form 8-K dated December 18, 1996, Commission File No. 0-15083.
4.7 -- Form of Indenture between Carolina First Corporation and First American
Trust Company, N.A., as Trustee: Incorporated by reference to Exhibit
4.11 of Carolina First Corporation's Registration Statement on Form S-3,
Commission File No. 22-58879.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality of
shares of the Carolina First Corporation.
8.1 -- See "THE PROPOSED TRANSACTION -- Certain Federal Income Tax Consequences"
for discussion regarding tax matters.
11.1 -- Computation of Per Share Earnings: Incorporated by reference to Exhibit
11.1 of Carolina First Corporation's Annual Report on Form 10-K for the
year ended December 31, 1996, Commission File No. 0-15083.
12.1 -- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends: Incorporated by reference to
Exhibit 12.1 of Carolina First Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996, Commission File No. 0-15083.
13.1 -- 1996 Annual Report to Shareholders of Carolina First Corporation.
Incorporated by reference to Exhibit 13.1 of Carolina First
Corporation's Annual Report on Form 10-K for the year ended December 31,
1996, Commission File No. 0-15083.
15.1 -- Letter regarding Unaudited Interim Financial Information: To be filed by
amendment.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank, Carolina First
Mortgage Company, CF Investment Company and Blue Ridge Finance Company.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Elliott, Davis & Company, L.L.P.
23.3 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibit
5.1.
24.1 -- The Power of Attorney: Contained on the signature page of the initial
filing of this Registration Statement.
27.1 -- Financial Data Schedule: Incorporated by reference to Exhibit 10.18 of
Carolina First Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996, Commission File No. 0-15083.
99.1 -- Form of Proxies
99.2 -- 1996 Annual Report to Shareholders of First Southeast. Incorporated by
reference to Exhibit 13 of First Southeast's Annual Report on Form 10-K
for the year ended June 30, 1996.
<PAGE>
Exhibit 3.2
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:
1. The name of the Corporation is Carolina First Corporation.
2. On May 23, 1997 the Corporation adopted the following amendment to its
Articles of Incorporation:
The Articles of Incorporation are hereby amended to increase the
authorized Common Stock of the Corporation from twenty million
(20,000,000) to one hundred million (100,000,000) shares.
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. [ X ] The Amendment set forth above was adopted by shareholder action.
<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 Stock 11,355,445 11,355,445 9,720,145 8,480,123 1,220,905
</TABLE>
b. [ ] The Amendment was duly adopted by the
incorporators or board of directors without
shareholder approval pursuant to ss.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: June 1, 1997. CAROLINA FIRST CORPORATION
By: /s/ William S. Hummers III
William S. Hummers III
Executive Vice President
<PAGE>
JULY 30, 1997
[WYCHE, BURGESS, FREEMAN & PARHAM, P.A. LETTERHEAD]
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
First Southeast Financial Corporation
201 North Main Street
Anderson, South Carolina 29621
RE: Registration Statement on Form S-4 with respect to 5,265,885
Shares shares of Carolina First Corporation Common Stock
Gentlemen/Ladies:
The opinions set forth herein are rendered with respect to the
5,265,885 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 First Southeast Financial Corporation ("First Southeast"), all as
set forth in that certain Reorganization Agreement entered into as of July 1 by
and among the Company, Carolina First Bank, First Southeast and First Federal
Savings and Loan Association of Anderson. 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 July 25,
1997, 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 First Southeast 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 purports to be) governed by
the laws of any other state or jurisdiction. 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.
1
<PAGE>
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.
By: /s/
William P. Crawford, Jr.
2
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Carolina First Corporation
We consent to the use of our report dated January 21, 1997 included in Carolina
First Corporation's Form 10-K for the year ended December 31, 1996, incorporated
herein by reference and to the reference to our firm under the heading "Experts"
in the Joint Proxy Statement/Prospectus for the acquisition of First Southeast
Financial Corporation.
KPMG PEAT MARWICK LLP
Greenville, South Carolina
July 24, 1997
1
<PAGE>
Exhibit 23.2
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, as of and for the year ended December 31, 1994 which
is dated February 3, 1995, in Registration Statement (Form S-4) for the
registration of 5,265,885 shares of Carolina First Corporation common stock.
Greenville, South Carolina ELLIOTT, DAVIS & COMPANY, LLP
July 24, 1997
1
<PAGE>
Exhibit 99.1
P
R
O FIRST SOUTHEAST FINANCIAL CORPORATION
X This Proxy is Solicited on Behalf of the Board of Directors
Y
Special Meeting, September 15, 1997
The undersigned stockholder of First Southeast Financial Corporation,
hereby revoking all previous proxies, hereby appoints David C. Wakefield, III
and John L. Biediger 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 Shareholders of First Southeast Financial Corporation to be
held September 15, 1997, at 10:00 a.m., local time, at 201 North Main Street,
Anderson, South Carolina 29621 and at any adjournments thereof, and to vote all
shares of First Southeast Financial Corporation 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/Prospectus as specified below.
1. To approve the Reorganization Agreement dated as of July 1, 1997,
providing for the merger of First Southeast Financial Corporation
with and into CFC Acquisition Company, a wholly-owned subsidiary of
Carolina First Corporation, and, in connection therewith, the
conversion of each share of common stock of First Southeast
Financial Corporation into the right to receive 1.00 share of
common stock of Carolina First Corporation, subject to the terms
and conditions of the Reorganization Agreement.
<TABLE>
<CAPTION>
<S> <C> <C>
FOR |_| AGAINST |_| ABSTAIN |_|
</TABLE>
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly 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.
<TABLE>
<CAPTION>
<S> <C>
Dated: ______________________, 1997
Print Name (and title if appropriate)
Signature
Print Name (and title if appropriate)
Signature
</TABLE>
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE>
P
R CAROLINA FIRST CORPORATION
O This Proxy is Solicited on Behalf of the Board of Directors
X
Y Special Meeting, September 15, 1997
The undersigned stockholder of Carolina First Corporation, hereby revoking
all previous proxies, hereby appoints Mack I. Whittle, Jr. and William S.
Hummers III 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 Shareholders of Carolina First Corporation to be held September 15,
1997, at 4:00 p.m., local time, at 200 East Camperdown Way, Greenville, South
Carolina 29601, and at any adjournments thereof, and to vote all shares of stock
of Carolina First Corporation 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/prospectus as specified below.
1. Proposal to approve the Reorganization Agreement dated as of July
1, 1997, providing for the merger of First Southeast Financial
Corporation with and into CFC Acquisition Company, a wholly-owned
subsidiary of Carolina First Corporation, and, in connection
therewith, the conversion of each share of common stock of First
Southeast Financial Corporation into the right to receive 1.00
share of common stock of Carolina First Corporation, subject to the
terms and conditions of the Reorganization Agreement.
FOR |_| AGAINST |_| ABSTAIN |_|
2. To approve a proposal to set the number of Carolina First
Corporation Board of Directors at 13, and to elect three persons
(current First Southeast Financial Corporation board members) to
the Carolina First Corporation Board of Directors:
FOR |_| AGAINST |_| ABSTAIN |_|
3. To approve amendments to Carolina First Corporation's Stock Option
Plan and Restricted Stock Agreement Plan increasing to 500,000 and
1,500,000, respectively, the number of shares of common stock
authorized to be issued thereunder.
FOR |_| AGAINST |_| ABSTAIN |_|
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly 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 PROPOSALS NUMBER
1, 2 AND 3 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.
<TABLE>
<CAPTION>
<S> <C>
Dated: ______________________, 1997
Print Name (and title if appropriate)
Signature
Print Name (and title if appropriate)
Signature
</TABLE>
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE>
