<PAGE>
Filed Pursuant to Rule 424(b)(1)
File Number 333-50329
RESOURCE PROCESSING GROUP, INC.
101 Executive Center Drive
Columbia, South Carolina 29210
May 1, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
of Resource Processing Group, Inc. (the "RPGI Special Meeting") to be held at
101 Executive Center Drive, Columbia, South Carolina on June 1, 1998 at 9:00
A.M. local time.
At the RPGI Special Meeting you will be asked to consider and vote upon
the Agreement and Plan of Merger (the "Merger Agreement") entered into by and
among Resource Processing Group, Inc. ("RPGI"), Carolina First Corporation and
CFC Merger Sub, Inc. ("Interim"), and dated as of March 9, 1998. If the Merger
Agreement is approved by holders of a majority of the outstanding shares of
common stock of RPGI (and certain other conditions are met), Interim will be
merged with and into RPGI (the "Merger"), and RPGI will become a wholly-owned
subsidiary of Carolina First Corporation. In connection with the Merger, RPGI
shareholders who do not dissent from the Merger will receive $1.237 for each
share of RPGI common stock held by them, such amount to be paid in the form of
shares of common stock, $1.00 par value per share, of Carolina First
Corporation, which will be valued at the average closing price of Carolina First
Corporation common stock as reported on the Nasdaq National Market for the 20
trading days immediately prior to the date of the closing of the Merger. Certain
additional consideration may also be payable in shares of Carolina First
Corporation common stock if certain performance-related criteria are met with
respect to Carolina First Corporation's credit card portfolio. Cash will be paid
in lieu of any fractional shares. On April 24, 1998, the last reported sale
price of Carolina First Corporation common stock on the Nasdaq National Market
was $28.75 per share. The Merger Agreement is described in detail in the
accompanying Proxy Statement/Prospectus and is attached as Exhibit A thereto.
Enclosed herewith are the Notice of Special Meeting of Shareholders, a
Proxy Statement/Prospectus and a Proxy for use in connection with the RPGI
Special Meeting. The Proxy Statement/Prospectus includes a description of the
terms and conditions of the Merger Agreement and related agreements, financial
and other information about Carolina First Corporation, Interim and RPGI, and
other information. You are urged to consider carefully the entire Proxy
Statement/Prospectus, including the exhibits thereto.
THE BOARD OF DIRECTORS OF RPGI BELIEVES THAT THE MERGER AGREEMENT
IS IN THE BEST INTERESTS OF RPGI AND ITS SHAREHOLDERS AND RECOMMENDS A
VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
Because the affirmative vote of holders of at least a majority of the
issued and outstanding shares of RPGI common stock is required to approve the
Merger Agreement, it is important that your shares of RPGI common stock be
represented at the RPGI 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 Merger 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
RPGI Special Meeting, you may vote in person the shares of RPGI common stock of
which you are the record owner, even if you have already returned your Proxy.
Sincerely,
Angelo R. Palombi
President and Chief Executive Officer
<PAGE>
RESOURCE PROCESSING GROUP, INC.
101 Executive Center Drive
Columbia, South Carolina 29210
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 1998
TO THE SHAREHOLDERS OF RESOURCE PROCESSING GROUP, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Resource Processing Group, Inc. (the "RPGI Special Meeting") will be held at 101
Executive Center Drive, Columbia, South Carolina on June 1, 1998 at 9:00 A.M.
local time, for the following purposes:
1. CONSIDERATION OF THE MERGER AGREEMENT. To consider and vote upon a
proposal to adopt the Agreement and Plan of Merger ("Merger Agreement") dated as
of March 9, 1998, among Carolina First Corporation, CFC Merger Sub, Inc.
("Interim"), and Resource Processing Group, Inc. ("RPGI") pursuant to which
Interim, a subsidiary of Carolina First Corporation, will be merged with and
into RPGI and RPGI will become a wholly-owned subsidiary of Carolina First
Corporation. In connection with the Merger, RPGI shareholders who do not dissent
from the Merger will receive $1.237 for each share of RPGI common stock held by
them, such amount to be paid in the form of shares of common stock, $1.00 par
value per share, of Carolina First Corporation, which will be valued at the
average closing price of Carolina First Corporation common stock as reported on
the Nasdaq National Market for the 20 trading days immediately prior to the date
of the closing of the Merger. Certain additional consideration may also be
payable in shares of Carolina First Corporation common stock if certain
performance-related criteria are met with respect to Carolina First
Corporation's credit card portfolio. Cash will be paid in lieu of any fractional
shares. Holders of RPGI common stock may be entitled to assert dissenters'
rights with respect to this action.
2. OTHER BUSINESS. To transact such other business as may properly come
before the RPGI Special Meeting or any adjournments thereof.
Only shareholders of record at the close of business on April 29, 1998
are entitled to notice of and to vote at the RPGI Special Meeting or any
adjournments thereof. The affirmative vote of the holders of at least a majority
of the issued and outstanding shares of RPGI common stock is required to approve
the Merger Agreement. All shareholders, whether or not they expect to attend the
RPGI 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 RPGI at any
time before it is voted, (ii) by submitting a proxy having a later date or (iii)
by appearing at the RPGI Special Meeting and giving notice of revocation to the
corporate officers responsible for maintaining the list of shareholders.
May 1, 1998 By Order of the Board of Directors,
Michael T. Smith
Secretary
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES THAT YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND
THE RPGI SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
Proxy Statement/Prospectus
CAROLINA FIRST CORPORATION
Prospectus for 577,270 Shares of Common Stock
RESOURCE PROCESSING GROUP, INC.
Proxy Statement for Special Meeting of Shareholders
This Proxy Statement/Prospectus relates to the issuance by Carolina
First Corporation ("CFC") of up to 577,270 shares ("CFC Shares") of its $1.00
par value common stock ("CFC common stock") in connection with the proposed
merger (the "Merger") of CFC Merger Sub, Inc. ("Interim"), a wholly-owned
subsidiary of CFC formed solely to effect the Merger with and into Resource
Processing Group, Inc. ("RPGI"). Upon consummation of the Merger, RPGI
shareholders who do not dissent from the Merger will receive (i) $1.237 for each
share of RPGI common stock held by them, such amount to be paid in the form of
shares of CFC common stock valued at the average closing price of CFC common
stock as reported on the Nasdaq National Market for the 20 trading days
immediately prior to the consummation of the Merger (the "Closing Date"), and
(ii) certain additional consideration also payable in shares of CFC common stock
subject to the achievement of certain performance-related criteria by CFC credit
card portfolios. Cash will be paid in lieu of any fractional shares which would
otherwise be issuable.
The CFC Shares are offered to the RPGI shareholders subject to the
terms and conditions specified in the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of March 9, 1998 and entered into by and among CFC, RPGI
and Interim. The Merger Agreement provides that as a result of the transactions
specified in the Merger Agreement, Interim will merge with and into RPGI, the
RPGI common stock will be canceled, and RPGI will continue to operate as a
wholly-owned subsidiary of CFC. See "THE PROPOSED TRANSACTION--General
Description of the Terms of the Merger Agreement." Consummation of the
transactions contemplated in the Merger Agreement is subject to certain
conditions, including, among others, approval by the shareholders of RPGI at the
Special Meeting of the Shareholders of RPGI to be held on June 1, 1998 for the
purposes described herein (the "RPGI Special Meeting") and approval by
applicable regulatory authorities.
This Proxy Statement/Prospectus serves as the Proxy Statement of RPGI
in connection with the solicitation of proxies to be used at the RPGI Special
Meeting. This Proxy Statement/Prospectus is first being sent to RPGI
shareholders on or about May 1, 1998.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY SHAREHOLDERS OF RPGI.
RPGI'S BOARD OF DIRECTORS (THE "RPGI BOARD") RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
The CFC common stock is traded on the Nasdaq National Market under the
Nasdaq market symbol "CAFC." On March 6, 1998 (the last business day prior to
the announcement of the execution of the Merger Agreement), the closing bid
price of the CFC common stock, as reported by Nasdaq, was $24.88 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 PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE CFC SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS AND LOAN ASSOCIATION AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is May 1, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION............................................................................................... 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE................................................................... 1
OTHER INFORMATION................................................................................................... 2
SUMMARY............................................................................................................. 3
Introduction............................................................................................... 3
Time, Place and Purposes of the Special Meeting............................................................ 3
Parties to the Merger Agreement............................................................................ 3
General Terms of the Proposed Transaction.................................................................. 3
Vote Required and Record Date.............................................................................. 4
Recommendation of the RPGI Board........................................................................... 4
Rights of Dissenting Shareholders.......................................................................... 4
Certain Differences in Shareholders' Rights................................................................ 4
Conditions and Regulatory Approvals........................................................................ 5
Termination or Amendment of the Merger Agreement........................................................... 5
Effective Time of the Merger............................................................................... 6
Opinion of Financial Adviser............................................................................... 6
Certain Federal Income Tax Consequences.................................................................... 6
Interests of Certain Persons............................................................................... 6
Restrictions on Resales by Affiliates...................................................................... 7
Accounting Treatment....................................................................................... 7
Market Prices and Dividends................................................................................ 7
Selected Financial Data.................................................................................... 9
Unaudited Pro Forma Combined Selected Financial Data of Carolina First Corporation
and Resource Processing Group, Inc..................................................................... 11
Comparative Per Share Data................................................................................. 12
RISK FACTORS........................................................................................................ 13
Acquisition of First Southeast Financial Corporation....................................................... 13
Credit Card Charge-offs.................................................................................... 13
Litigation................................................................................................. 13
Growth Through Acquisitions................................................................................ 14
Dependence on Senior Management............................................................................ 14
Antitakeover Measures...................................................................................... 14
Commercial Lending Activities.............................................................................. 14
Holding Company Structure.................................................................................. 15
Limitations on Dividends................................................................................... 15
Regulation................................................................................................. 15
Year 2000.................................................................................................. 15
INFORMATION CONCERNING THE RPGI SPECIAL MEETING..................................................................... 16
Purpose of the RPGI Special Meeting........................................................................ 16
RPGI Record Date and Voting Rights......................................................................... 16
Proxies.................................................................................................... 16
Recommendation of the RPGI Board........................................................................... 17
THE PROPOSED TRANSACTION............................................................................................ 18
General Description of the Terms of the Merger Agreement................................................... 18
Background of and Reasons for the Merger Agreement......................................................... 19
RPGI Reasons...................................................................................... 20
CFC Reasons....................................................................................... 21
Material Contacts with Company Being Acquired.............................................................. 21
Opinion of RPGI's Financial Adviser........................................................................ 22
Exchange of RPGI Stock Certificates........................................................................ 26
Conditions to Consummation of the Merger................................................................... 26
Termination................................................................................................ 27
Amendment.................................................................................................. 28
Conduct of RPGI's and CFC's Businesses Prior to the Effective Time......................................... 28
Required Regulatory Approvals.............................................................................. 29
Operations After the Merger................................................................................ 29
Interests of Certain Persons in the Merger................................................................. 29
i
<PAGE>
Indemnification; Advancement of Expenses; Directors' and Officers' Insurance...................... 29
Employment and Severance Agreements............................................................... 29
Other Matters Related to Employees and Employee Benefit Plans..................................... 30
Accounting Treatment....................................................................................... 30
Certain Federal Income Tax Consequences.................................................................... 30
Restrictions on Resales by Affiliates...................................................................... 33
Dissenters' Rights......................................................................................... 33
Recommendation of the RPGI Board of Directors ............................................................. 35
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION........................................................ 36
Unaudited Pro Forma Combined Capitalization................................................................ 37
Unaudited Pro Forma Combined Condensed Balance Sheet....................................................... 38
Unaudited Pro Forma Combined Condensed Statement of Earnings............................................... 39
INFORMATION ABOUT CAROLINA FIRST CORPORATION........................................................................ 40
General .................................................................................................. 40
Capital Adequacy........................................................................................... 41
Recent Developments........................................................................................ 44
INFORMATION ABOUT RPGI.............................................................................................. 45
General.................................................................................................... 45
Risk Factors Relating to the Business of RPGI.............................................................. 45
Competition................................................................................................ 47
Regulation................................................................................................. 48
Employees.................................................................................................. 48
Properties................................................................................................. 48
Legal Proceedings.......................................................................................... 48
Management's Discussion and Analysis of Financial Condition and Results Of Operations...................... 48
General........................................................................................... 48
Sources and Recognition of Revenue................................................................ 49
Results of Operations............................................................................. 50
Revenues.......................................................................................... 51
Operating Expenses................................................................................ 51
Income from Operations............................................................................ 52
Net Interest Income or (Expense).................................................................. 52
Provision for Income Taxes........................................................................ 53
Net Income........................................................................................ 53
Liquidity and Capital Resources................................................................... 53
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
RPGI............................................................................................................. 54
Beneficial Owners of Five Percent or More of RPGI Common Stock............................................. 54
Stock Ownership of RPGI's Directors and Executive Officers................................................. 55
COMPARATIVE RIGHTS OF SHAREHOLDERS.................................................................................. 56
General .................................................................................................. 56
Authorized Capital......................................................................................... 56
Amendment of Articles of Incorporation or Bylaws........................................................... 56
Size and Classification of Board of Directors.............................................................. 57
Shareholder Nomination of Directors........................................................................ 57
Removal of Directors by Shareholders....................................................................... 58
Standards for Director Liability........................................................................... 58
Director and Officer Indemnification....................................................................... 58
Shareholder Meetings....................................................................................... 58
Shareholder Voting in General.............................................................................. 59
Shareholder Voting in Certain Business Combinations........................................................ 59
Change in Control, Business Combinations and Anti-Takeover Provisions...................................... 60
Action by Shareholders Without a Meeting................................................................... 62
Dissolution ............................................................................................... 62
CAROLINA FIRST CORPORATION CAPITAL STOCK............................................................................ 62
Common Stock............................................................................................... 62
Preferred Stock............................................................................................ 62
ii
<PAGE>
Certain Matters............................................................................................ 63
Shareholders' Rights Agreement.................................................................... 63
Board of Directors................................................................................ 64
Voting............................................................................................ 65
Transfer Agent.................................................................................... 65
Dividend Reinvestment Plan........................................................................ 65
LEGAL MATTERS....................................................................................................... 65
EXPERTS............................................................................................................. 66
OTHER MATTERS....................................................................................................... 66
INDEX TO FINANCIAL STATEMENTS....................................................................................... F-1
EXHIBITS
A-Merger Agreement..................................................................................A-1
B-Opinion of First Annapolis Capital, Inc...........................................................B-1
C-Financial Statement of CFC Merger Sub, Inc........................................................C-1
D-South Carolina Dissenters' Rights Statute.........................................................D-1
</TABLE>
iii
<PAGE>
AVAILABLE INFORMATION
CFC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance therewith,
files 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 CFC) that file electronically with the Commission.
CFC 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 CFC
Shares offered hereby. This 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 CFC and the CFC 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 Proxy
Statement/Prospectus with respect to CFC has been supplied by CFC.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WITH RESPECT TO CFC 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 DOCUMENT) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS
IS DELIVERED UPON ORAL OR WRITTEN REQUEST TO WILLIAM S. HUMMERS III, EXECUTIVE
VICE PRESIDENT, CAROLINA FIRST CORPORATION, 102 SOUTH MAIN STREET, GREENVILLE,
SC 29601, TELEPHONE NUMBER (864) 255-7900. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 15, 1998. Copies of documents
incorporated by reference herein are also available at CFC's Web site
(http://www.carolinafirst.com).
The following documents filed with the Commission by CFC pursuant to
Section 13(a) or 15(d) of the Exchange Act are incorporated herein by reference:
(i) CFC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(ii) CFC's Current Reports on Form 8-K dated February 12, 1998 and
February 13, 1998; and
(iii) The description of the CFC common stock which is contained in
CFC'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.
All documents filed by CFC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the RPGI Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained herein or in a document incorporated
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
1
<PAGE>
OTHER INFORMATION
This Proxy Statement/Prospectus does not cover any resales of the CFC
common stock offered hereby to be received by shareholders deemed to be
"affiliates" of CFC or RPGI upon consummation of the Merger. No person is
authorized to make use of this Proxy Statement/Prospectus in connection with
such resales, although such securities may be traded without the use of this
Proxy Statement/Prospectus by those shareholders of CFC not deemed to be
"affiliates" of CFC or RPGI.
No person is authorized to give any information or to make any
representation not contained in or incorporated by reference in this Proxy
Statement/Prospectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by CFC or RPGI. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, any securities 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 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 CFC or RPGI since such date.
2
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT/PROSPECTUS. THIS SUMMARY IS NOT INTENDED TO BE A
COMPLETE STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE
DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, THE
ACCOMPANYING EXHIBITS, AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND
INCLUDED HEREWITH. A COPY OF THE MERGER AGREEMENT (EXCLUDING THE SCHEDULES
ATTACHED THERETO) IS ATTACHED HERETO AS EXHIBIT A AND IS INCORPORATED HEREIN BY
REFERENCE. AS USED HEREIN, THE TERMS "CFC" AND "RPGI" REFER TO CAROLINA FIRST
CORPORATION AND RESOURCE PROCESSING GROUP, INC., RESPECTIVELY, AND, IN THE CASE
OF CFC AND UNLESS THE CONTEXT OTHERWISE REQUIRES, TO ITS CONSOLIDATED
SUBSIDIARIES.
INTRODUCTION. This Proxy Statement/Prospectus is furnished in
connection with (i) the issuance by CFC of the CFC Shares and (ii) the
solicitation of proxies by the RPGI Board of Directors with respect to the RPGI
Special Meeting to be held on June 1, 1998 and at any adjournment thereof. The
RPGI Special Meeting is being held for the purpose of considering and voting
upon the Merger Agreement. This Proxy Statement/Prospectus is first being mailed
to the shareholders of RPGI on or about May 1, 1998.
TIME, PLACE AND PURPOSES OF THE SPECIAL MEETING. The RPGI Special
Meeting will be held on June 1, 1998 at 9:00 A.M. local time, at 101 Executive
Center Drive, Columbia, South Carolina. At the RPGI Special Meeting,
shareholders of RPGI will consider and vote on the proposal to approve the
Merger Agreement, which provides for the Merger of CFC Merger Sub, Inc.
("Interim") (a subsidiary of CFC formed to effect the Merger) into RPGI and the
exchange of RPGI common stock for CFC common stock. See "INFORMATION CONCERNING
THE RPGI SPECIAL MEETING."
PARTIES TO THE MERGER AGREEMENT. CAROLINA FIRST CORPORATION. CFC is a
bank holding company headquartered in Greenville, South Carolina which engages
in a general banking business through its four 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, (3)
Blue Ridge Finance Company, Inc., an automobile finance company headquartered in
Greenville, South Carolina and (4) CF Investment Company, a corporation licensed
as a small business investment company headquartered in Greenville, South
Carolina. CFC is a South Carolina corporation which was organized in 1986. On
December 31, 1997, it had total consolidated assets of approximately $2.2
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."
CF MERGER SUB, INC. ("INTERIM"). Interim is a South Carolina
corporation and a wholly-owned subsidiary of CFC, which will be merged with and
into RPGI. Interim was formed solely for the purpose of effecting the Merger.
RESOURCE PROCESSING GROUP, INC. RPGI provides credit card servicing,
marketing and program management services to financial institutions. RPGI is a
South Carolina corporation which was organized in 1994. On December 31, 1997,
RPGI had total assets of approximately $19 million. Its principal executive
offices are located at 101 Executive Center Drive, Columbia, South Carolina
29210, and its telephone number is (803) 798-0143. See "INFORMATION ABOUT RPGI."
GENERAL TERMS OF THE PROPOSED TRANSACTION. Pursuant to the terms of
the Merger Agreement, upon consummation of the Merger, each share of RPGI common
stock outstanding immediately before the effective time of the Merger (other
than shares owned by shareholders who dissent from the Merger) will represent
the right to receive $1.237, such amount to be paid in the form of CFC common
stock, plus the additional consideration described below. For purposes of
determining the number of shares of CFC common stock to be exchanged for each
share of RPGI common stock, the value of a share of CFC common stock will be the
average closing price of a share of CFC common stock as reported on the
3
<PAGE>
Nasdaq National Market for the 20 trading days immediately preceding the Closing
Date. Holders of RPGI common stock will receive cash in lieu of any fractional
shares of CFC common stock to which they would otherwise be entitled.
In the event that "net chargeoffs" (as defined in the Merger
Agreement) associated with certain credit card accounts owned by CFC, any of its
subsidiaries or the Carolina First Credit Card Master Trust (which is a credit
card receivable securitization trust serviced by Carolina First Bank and
subserviced by RPGI) are less than specified percentages of the weighted average
daily outstanding balance of such accounts during 1998 and 1999, holders of RPGI
common stock will be entitled to certain additional consideration as set forth
in the Merger Agreement. See "THE PROPOSED TRANSACTION -- General Description of
the Terms of the Merger Agreement."
VOTE REQUIRED AND RECORD DATE. Only RPGI shareholders of record at the
close of business on April 29, 1998 ("Record Date") will be entitled to notice
of and to vote at the RPGI Special Meeting. The Merger must be approved by the
affirmative vote of the holders of at least a majority of the outstanding shares
of RPGI common stock eligible to vote at the RPGI Special Meeting. As of the
Record Date, there were 9,082,126 shares of RPGI common stock outstanding, each
entitled to one vote, of which the directors and executive officers of RPGI and
their affiliates beneficially owned 2,579,534 shares, or approximately 28.4%.
Upon consummation of the transactions contemplated hereby, such persons will
beneficially own approximately 164,616 shares of CFC common stock (including
shares beneficially owned prior to the Merger and assuming receipt of the base
(non-contingent) consideration only, a value of $25.00 per share of CFC common
stock and a conversion ratio of 0.0495), or less than 1% of the outstanding CFC
common stock. See "THE PROPOSED TRANSACTION."
RECOMMENDATION OF THE RPGI BOARD.
THE RPGI BOARD HAS APPROVED THE MERGER AGREEMENT AND BELIEVES THAT
THE MERGER AGREEMENT IS IN THE BEST INTERESTS OF RPGI AND ITS SHAREHOLDERS. IT
RECOMMENDS THAT RPGI'S SHAREHOLDERS VOTE FOR THE MERGER AGREEMENT. SEE "THE
PROPOSED TRANSACTION -- RECOMMENDATION OF THE RPGI BOARD."
RIGHTS OF DISSENTING SHAREHOLDERS. Pursuant to Chapter 13 of the
South Carolina Business Corporation Act of 1988, as amended (the "South Carolina
Dissenters' Rights Statute"), the holders of shares of RPGI common stock are
entitled to dissent from the approval of the Merger Agreement and to receive
payment of the fair value of their shares of RPGI common stock in the event the
Merger is consummated, upon compliance with the provisions of the South Carolina
Dissenters' Rights Statute. Holders of RPGI common stock who wish to assert
their dissenters' rights must (i) deliver to RPGI, before the vote on the Merger
Agreement is taken, written notice of their intent to demand payment for their
shares in the event the Merger is consummated, (ii) not vote such shares in
favor of the Merger and the Merger Agreement and (iii) comply with the further
provisions of the South Carolina Dissenters' Rights Statute. The delivery of a
proxy or a vote against approval of the Merger Agreement will not constitute
adequate notice of an intent to demand payment, but a failure to vote against
such approval will not constitute a waiver of dissenters' rights. Any deviation
from the procedures set forth in the South Carolina Dissenters' Rights Statute
could result in the forfeiture of dissenters' rights. Accordingly, shareholders
of RPGI wishing to dissent from approval of the Merger Agreement are urged to
read carefully "THE PROPOSED TRANSACTION -- Dissenters' Rights" and the copy of
the South Carolina Dissenters' Rights Statute set forth as Exhibit D to this
Proxy Statement/Prospectus and to consult with their own legal advisors.
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS. Upon the effectiveness
of the Merger, the former RPGI shareholders who do not dissent from the Merger
will become shareholders of CFC, and their rights as shareholders will be
determined by CFC's Articles of Incorporation and Bylaws. The rights of
shareholders of CFC differ from the rights of shareholders of RPGI in several
important respects, including, among other things, the amendment of articles of
incorporation, shareholder approval of certain
4
<PAGE>
business combinations, the removal of directors and standards for director
liability. See "COMPARATIVE RIGHTS OF SHAREHOLDERS."
CONDITIONS AND REGULATORY APPROVALS. Consummation of the transactions
contemplated by the Merger Agreement is subject to various conditions, including
receipt of the requisite approval by the shareholders of RPGI and receipt of the
necessary regulatory approvals (including the filing of a notice with the Board
of Governors of the Federal Reserve System (the "Federal Reserve"). All
necessary applications and notices to the necessary regulatory authority
regarding the proposed transaction have been filed, approved and accepted, as
the case may be. CFC and RPGI may waive certain of the conditions to their
respective obligations to consummate the Merger, other than conditions imposed
by law. See "THE PROPOSED TRANSACTION -- Conditions to Consummation of the
Merger" and "THE PROPOSED TRANSACTION -- Required Regulatory Approvals."
TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT. The Merger
Agreement may be terminated at any time prior to the effective time of the
Merger:
(a) by mutual written consent of CFC and RPGI;
(b) by RPGI, upon a material breach of the Merger Agreement
by CFC or Interim that has not been cured and that would cause either
CFC or Interim to be incapable, by September 30, 1998, of (i)
performing in all material respects the obligations under the Merger
Agreement that it is required to perform at or prior to the effective
time of the Merger, (ii) providing an officer's certificate to the
effect that it has performed all such obligations, (iii) ensuring
that its representations and warranties made in the Merger Agreement
are true as of the applicable date, or (iv) providing an officer's
certificate to the effect that such representations and warranties
are true as of the applicable date;
(c) by CFC, upon a material breach of the Merger Agreement by
RPGI that has not been cured and that would cause RPGI to be
incapable, by September 30, 1998, of (i) performing in all material
respects the obligations under the Merger Agreement that it is
required to perform at or prior to the effective time of the Merger,
(ii) providing an officer's certificate to the effect that it has
performed all such obligations, (iii) ensuring that the
representations and warranties made by RPGI in the Merger Agreement
are true as of the applicable date, or (iv) providing an officer's
certificate to the effect that such representations and warranties
are true as of the applicable date;
(d) subject to the parties' obligation to use their
reasonable best efforts to do or cause to be done all things
necessary or advisable to consummate the Merger, by either RPGI or
CFC if any court of proper jurisdiction issues or enforces any order
or ruling which restrains or prohibits the Merger and such order or
ruling is final and cannot be appealed;
(e) by either RPGI or CFC if the Merger has not been
consummated on or before September 30, 1998, provided the
terminating party is not otherwise in material breach of its
representations, warranties or obligations under the Merger
Agreement;
(f) by either RPGI or CFC if the RPGI Special Meeting
concludes without shareholder approval of the Merger Agreement and
the transactions contemplated therein having been made; or
(g) by RPGI if a third party commences a tender or exchange
offer to acquire any shares of RPGI common stock or makes a proposal
to acquire any equity interest in RPGI, to engage in any form of
business combination with RPGI or to purchase all or (except in the
ordinary course of business) any substantial portion of RPGI's
assets, provided that the RPGI Board, after consultation with RPGI's
financial advisor, determines that such offer or proposal may
reasonably be expected to result in a transaction or transactions
that will be more favorable to RPGI's shareholders than the Merger
and provided further that if RPGI terminates the Merger Agreement on
the basis of such offer or proposal, it pays CFC $500,000.
The Merger Agreement may be amended by mutual written consent of all
the parties, provided, however, that after the Merger Agreement has been
approved by the RPGI shareholders, no amendment may be made without the approval
of RPGI shareholders that (a) changes the form or decreases the amount
5
<PAGE>
of consideration to be received for shares of RPGI common stock, (b) materially
and adversely affects the rights of holders of RPGI common stock, or (c) under
applicable law would require the approval of RPGI shareholders.
EFFECTIVE TIME OF THE MERGER. The Merger will become effective at the
time at which the Articles of Merger are accepted for filing by the Secretary of
State of South Carolina (the "Effective Time"). The Effective Time will occur as
soon as practicable after the Closing Date, which shall be after all conditions
specified in the Merger Agreement have been satisfied or waived. The Effective
Time currently is anticipated to be approximately June 1, 1998, 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. First Annapolis Capital, Inc. ("First
Annapolis") has served as financial adviser to RPGI in connection with the
Merger Agreement and has delivered a written opinion, dated February 5, 1998 and
supplemented March 6, 1998, to the RPGI Board that the consideration to be
received by shareholders of RPGI was fair from a financial point of view to the
RPGI shareholders as of the date of such opinion. The full text of the written
opinion, as supplemented, of First Annapolis is attached as Exhibit B to this
Proxy Statement/Prospectus and should be read carefully in its entirety. For
additional information concerning First Annapolis and its opinion, see "THE
PROPOSED TRANSACTION -- Opinion of RPGI's Financial Adviser."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. RPGI will receive an opinion
of McNair Law Firm, P.A., stating that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), subject to certain conditions. However, this
opinion of counsel is not binding on the Internal Revenue Service ("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 the
shareholders of RPGI upon the exchange in the Merger of their shares of RPGI
common stock for CFC common stock, except that if additional shares of CFC
common stock are issued in the years 1999 or 2000 as additional compensation in
the Merger, a portion of such shares will be deemed to be interest income to the
recipient. To the extent that shareholders receive cash consideration for
fractional shares or cash upon the exercise of dissenter's rights, such
shareholders will be taxed to the extent that the cash exceeds such
shareholders' allocated bases in such RPGI 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 shareholder's individual circumstances or tax status, it
is recommended that each shareholder of RPGI consult his or her tax adviser
concerning the federal (and any applicable state, local or other) tax
consequences of the Merger. See "THE PROPOSED TRANSACTION -- Certain Federal
Income Tax Consequences."
INTERESTS OF CERTAIN PERSONS. RPGI has entered into severance
agreements with two of its executive officers, Angelo R. Palombi and Gary Bruce
Thomas, and an employment agreement with another of its executive officers, R.
Dean Dougherty. These agreements provide that, subject to certain limitations,
those individuals will be entitled to severance payments if their employment
with RPGI terminates following the Merger. The maximum severance payments
payable under the agreements range from approximately $190,000 to $502,000 per
person. The Merger Agreement provides that CFC will indemnify RPGI's directors
and officers against certain liabilities. The Merger Agreement further requires
CFC and RPGI to use their reasonable best efforts to maintain RPGI's existing
directors' and officers' liability insurance policy, or a similar policy, for a
period of six years after the Effective Time, provided that CFC and RPGI will
not make, individually or collectively, aggregate premium payments in excess of
$100,000 for such policy. Pursuant to the Merger Agreement, CFC has agreed that
RPGI employees who remain employed with RPGI following the Closing Date will be
provided with severance pay upon termination of employment with RPGI, will be
eligible to participate in CFC's benefit plans and will receive past service
credit for eligibility and vesting purposes under CFC's qualified retirement
plan. CFC will also provide service credit as required by the Health Insurance
Portability and Accountability Act of 1996. To the extent permitted by law, RPGI
will terminate
6
<PAGE>
its Employee Stock Ownership Plan and 401(k) Plan prior to the Effective Time,
and the assets will be distributed to the respective plan participants. See "THE
PROPOSED TRANSACTION -- Interests of Certain Persons in the Merger."
RESTRICTIONS ON RESALES BY AFFILIATES. Shares of CFC common stock to
be issued to the shareholders of RPGI in connection with the Merger will be
freely transferable under the Securities Act, except for shares issued to any
person or entity who, at the time of the Merger, may be deemed an "affiliate" of
RPGI within the meaning of Rule 145 under the Securities Act ("Rule 145"). In
general, affiliates of RPGI include its executive officers and directors and any
other person or entity who directly or indirectly controls, is controlled by or
is under common control with RPGI. In this context, control is sometimes
attributed to the holders of 10% or more of a corporation's 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). Rule 145, among other
things, imposes certain restrictions upon the resale of securities received by
affiliates in connection with certain reclassifications, mergers, consolidations
or asset transfers. These restrictions will consist of volume and manner-of-sale
restrictions on the resale of shares of CFC common stock issued to such persons
and entities. CFC may place legends on certificates representing shares of CFC
common stock that are issued to such shareholders of RPGI in the Merger to
restrict such transfers. See "THE PROPOSED TRANSACTION -- Restrictions on
Resales by Affiliates."
ACCOUNTING TREATMENT. The Merger will be accounted for as a
"purchase" of RPGI by CFC under generally accepted accounting principles. See
"THE PROPOSED TRANSACTION -- Accounting Treatment."
MARKET PRICES AND DIVIDENDS. CFC common stock is traded on the Nasdaq
National Market under the symbol "CAFC." CFC currently pays a regular quarterly
dividend of $0.08 per share. Although CFC currently expects to continue payment
of its regular cash dividend on the CFC common stock, there can be no assurance
that CFC's current dividend policy will continue unchanged after consummation of
the Merger. The declaration and payment of dividends on CFC common stock is
subject to legal restrictions and further depends upon business conditions,
operating results, capital and reserve requirements and the CFC Board of
Directors' consideration of other relevant factors. See "Risk Factors --
Limitations on Dividends."
There are no market makers for the RPGI common stock, and it is not
listed on any exchange or with the Nasdaq Stock Market. RPGI management is
unaware of any transfers of RPGI common stock (other than gifts and transfers by
operation of law). RPGI has never paid any cash dividend on its common stock.
The information presented in the following table reflects the last
reported sales prices for CFC common stock on March 6, 1998, the last trading
day prior to the public announcement of the proposed Merger. The table also
reflects the last reported sales price for CFC common stock on April 24, 1998:
Market Values Per Share
---------------------------------------------------
CFC RPGI
--- -----------------------------
Historical Historical Equivalent
---------- -----------------------------
March 6, 1998 $24.88 * $ 1.23(1)
April 24, 1998 $28.75 * $ 1.42(1)
- ------------------------
* Not available
(1) Determined using a conversion ratio of 0.0495 based on an assumed
value of $25.00 per share of CFC common stock and assuming receipt of the base
(non-contingent) consideration only.
7
<PAGE>
RPGI shareholders are advised to obtain current market quotations for the
CFC common stock. The market price of CFC common stock at the Effective Time may
be higher or lower than the market price at the time the Merger Agreement was
executed, at the date of mailing this Proxy Statement/Prospectus, or at the time
of the Special Meeting.
8
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected historical financial information
and selected unaudited combined pro forma financial information of CFC
(consolidated) and RPGI. The selected unaudited combined pro forma financial
information includes figures reflecting adjustments related to a Regulation S
offering by CFC of 2,000,000 shares of CFC common stock that was consummated in
February 1998. This information is derived from the historical financial
statements of CFC (consolidated) and RPGI and its predecessor companies, and
should be read in conjunction with such historical financial statements and the
notes thereto either contained elsewhere in this Proxy Statement/Prospectus, the
documents that are incorporated herein by reference, and, in the case of RPGI,
"INFORMATION ABOUT RPGI -- Management's Discussion and Analysis of Financial
Condition and Results of Operations." The following selected unaudited pro forma
combined financial data is presented using the purchase method of accounting.
The selected unaudited pro forma combined financial data showing the combined
results of CFC (consolidated) and RPGI is provided for informational purposes
only. It is not necessarily indicative of actual results that would have been
achieved had the Merger been consummated on the dates or at the beginning of the
periods presented, nor is it necessarily indicative of future results. For
additional pro forma information, see "UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
CAROLINA FIRST CORPORATION
Years Ended December 31,
----------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
STATEMENT OF INCOME DATA
<S> <C> <C> <C> <C> <C>
Net interest income $29,358 $43,260 $50,772 $57,070 $66,706
Provision for loan losses 1,106 1,197 6,846 10,263 11,646
Noninterest income, excluding securities transactions 6,085 8,151 16,557 20,368 16,604
Securities transactions 680 75 769 973 3,011
Noninterest income 6,765 8,226 17,326 21,341 19,615
Noninterest expenses (1) 27,294 51,839 46,882 51,675 52,243
Net income (loss) (1) 5,418 (1,740) 9,414 10,474 14,340
Dividends on preferred stock 1,930 2,433 2,752 63 -
Net income (loss) applicable
to common shareholders (1) 3,488 (4,173) 6,662 10,411 14,340
BALANCE SHEET DATA (Period End)
Total assets $904,474 $1,204,350 $1,414,922 $1,574,204 $2,156,346
Securities and temporary investments 190,683 137,091 187,029 271,396 333,236
Loans, net of unearned income 623,646 923,068 1,062,660 1,124,775 1,602,415
Allowance for loan losses 6,679 6,002 8,661 11,290 16,211
Nonperforming assets 5,366 4,722 4,868 5,880 3,767
Total earning assets 814,579 1,059,455 1,249,689 1,396,171 1,935,651
Total deposits 804,549 1,001,748 1,095,491 1,281,050 1,746,542
Borrowed funds 16,779 106,074 186,789 145,189 139,739
Long-term debt 1,274 1,162 26,347 26,442 39,119
Preferred stock 15,662 37,014 32,909 943 -
Shareholders' equity 70,415 86,482 94,967 104,964 201,659
PER SHARE DATA (2)
Net income (loss) per common share:
Basic (1) $0.63 ($0.59) $0.89 $0.97 $1.19
Diluted (1) 0.63 (0.59) 0.84 0.92 1.18
Cash dividends declared 0.04 0.17 0.21 0.25 0.29
Book value per common share (period end) 7.70 6.61 7.61 9.26 12.88
Common shares outstanding:
Weighted average - basic 5,505,461 7,004,214 7,516,620 10,705,107 11,989,517
Weighted average - diluted 8,208,935 10,114,812 11,183,726 11,368,035 12,175,561
Period end 6,969,484 7,079,866 7,820,839 11,225,568 15,659,338
FINANCIAL RATIOS
Return on average assets 0.69% (0.16)% 0.74% 0.71% 0.84%
Return on average equity 8.27 (1.99) 10.43 10.56 11.62
Net interest margin 4.16 4.65 4.54 4.35 4.36
</TABLE>
- -------------------------------------------
(1) Includes 1996 SAIF special assessment of $1,184 (pre-tax) and 1994
restructuring charges of $12,214 (pre-tax).
(2) Adjusted for stock dividends and stock split.
9
<PAGE>
RESOURCE PROCESSING GROUP, INC.
(All amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1993 1994 1995 1996 1997
---- ----- ----- ---- ----
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenues....................................................... $ 8,087 $ 24,485 $ 11,637 $ 18,424 $ 19,912
Operating expenses:
Acquired products and services.............................. 3,936 11,526 6,381 10,046 11,660
Contract impairment provision............................... 600 3,638
Selling, general and administrative......................... 3,422 4,476 3,798 6,741 8,268
-------- -------- -------- ------- -------
Income (loss) from operations.......................... 729 8,483 1,458 1,037 (3,654)
Interest income................................................ 51 22 462 200 196
Interest expense............................................... -- (151) (67) (509) (279)
------- -------- --------- -------- --------
Income (loss) before provision (benefit) for income taxes.. 780 8,354 1,853 728 (3,737)
Provision (benefit) for income taxes........................... 293 3,141 697 280 (1,441)
-------- -------- -------- -------- --------
Net income (loss).......................................... $ 487 $ 5,213 $ 1,156 $ 448 ($2,296)
======== ======= ======= ======== ========
Net income (loss) per share - basic and diluted................. $ .06 $ 0.61 $ 0.13 $ .05 $ (.25)
Year Ended December 31,
------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
OPERATING DATA (UNAUDITED):
Average outstanding balance of accounts serviced during
the period:
Third parties................................................ $276,409 $ 188,284 $ 267,298 $ 394,347 $ 450,242
Affiliates................................................... 15,802 - - - -
Number of accounts serviced at end of period.................... 331 226 369 506 471
Number of accounts originated during period..................... 13 284 192 267 45
At December 31,
--------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Total assets.................................................... $ 5,218 $ 7,388 $ 9,062 $ 23,897 $ 19,258
Affiliate advances, net......................................... (3,086) 1,407 570 - -
Note payable to Resource Bancshares Corporation................. - - - 2,267 2,267
Total liabilities............................................... 3,161 1,087 1,605 12,948 8,654
Total shareholders' equity/parent equity........................ 2,057 6,301 7,457 10,949 10,604
</TABLE>
(1) Financial data for periods ended prior to November 30, 1994 are presented on
a "carve-out" basis from the historical consolidated financial statements of
Resource Bancshares Corporation and its subsidiaries. For further
information, see "INFORMATION ABOUT RPGI -- Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General."
10
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
OF CAROLINA FIRST CORPORATION AND RESOURCE PROCESSING GROUP, INC.
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------
STATEMENT OF INCOME DATA
<S> <C>
Net interest income $66,623
Provision for loan losses 11,646
Noninterest income 39,527
Noninterest expenses 75,922
Net income 11,941
PER SHARE DATA
Net income per common share:
Basic $0.96
Diluted 0.95
Cash dividends declared 0.29
Book value per common share (period end) 13.22
Common shares outstanding:
Weighted average - basic 12,438,901
Weighted average - diluted 12,624,945
Period end 16,108,722
BALANCE SHEET DATA AT DECEMBER 31, 1997
Total assets $ 2,176,734
Securities and temporary investments 337,192
Loans, net of unearned income 1,602,415
Allowance for loan losses 16,211
Total earning assets 1,939,607
Total deposits 1,746,542
Borrowed funds 139,739
Long-term debt 41,386
Shareholders' equity 213,294
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents at the dates and for the periods indicated
(i) certain consolidated historical and pro forma combined per share data for
the CFC common stock after giving effect to the Merger and (ii) certain
historical and pro forma data for the RPGI common stock. The pro forma financial
data are presented using the purchase method of accounting, and an assumed
conversion ratio of 0.0495 shares of CFC common stock for each share of RPGI
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 Merger been consummated at the beginning of the periods presented and are
not necessarily indicative of future results.
<TABLE>
<CAPTION>
CFC RPGI
------- -----
Year Ended Year Ended Pro Forma RPGI
December 31, 1997 December 31, 1997 Combined Equivalent (1)
----------------- ------------------- ---------- --------------
Diluted earnings (losses) per
<S> <C> <C> <C> <C>
common share $ 1.18 $ (0.25) $ 0.95 $ 0.05
Cash dividends declared per
common share 0.29 - 0.29 0.01
Book value per common share
(period end) 12.88 1.17 13.22 0.65
</TABLE>
- --------------------
(1) Calculated by multiplying the Pro Forma Combined by a conversion ratio
of 0.0495, based on an assumed value of $25.00 per share of CFC common stock and
assuming receipt of the base (non-contingent) consideration only.
12
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY WHEN
EVALUATING CFC AND THE CFC COMMON STOCK.
ACQUISITION OF FIRST SOUTHEAST FINANCIAL CORPORATION
In November 1997, CFC acquired First Southeast Financial Corporation, a
$350 million thrift holding company headquartered in Anderson, South Carolina
("First Southeast"). This acquisition represents CFC's largest acquisition to
date. Any problems encountered by CFC in assimilating First Southeast and its
wholly-owned subsidiary, First Federal Savings and Loan Association of Anderson
("First Federal"), into CFC's banking operations could have a material adverse
effect on CFC, its operations and earnings. These could include, among others,
problems related to the inability to profitably deploy and redeploy First
Southeast's assets, the inability to retain deposits and depositor
relationships, the inability to retain loan customers, and the inability to
retain key First Southeast or First Federal employees. During the first quarter
of 1998, CFC sold into the secondary market approximately $153 million in
mortgage loans acquired through the First Southeast merger in an effort to
redeploy the proceeds into higher-yielding loans.
CREDIT CARD CHARGEOFFS
During 1997, net chargeoffs for credit cards were at a higher level
than those historically experienced and had a material adverse effect on CFC's
1997 earnings. CFC carefully monitors past due trends in its credit card
portfolio and is examining various options to decrease the level of chargeoffs.
CFC's credit card chargeoffs may continue to exceed industry averages and could
continue to have a material adverse effect on CFC's earnings.
LITIGATION
On November 4, 1996, a derivative shareholder action was filed in
Greenville County Court of Common Pleas against CFC, the majority of CFC's and
Carolina First Bank's directors and certain executive and other officers. The
named plaintiffs are CFC by and through certain minority shareholders. CFC filed
a motion to dismiss with respect to all claims in this complaint, which was
granted in December 1997. Plaintiffs have filed a motion for reconsideration and
have the right to appeal the grant of the motion to dismiss. 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 CFC officers and other individuals of a
bonus in stock held by CFC in Affinity Technology Group Inc. ("Affinity") (as a
reward for their efforts in connection with CFC's procurement of stock in
Affinity), statements to former Midlands National Bank ("Midlands") shareholders
in connection with CFC's acquisition of Midlands, alleged misstatements in CFC's
public filings, transactions between CFC and entities affiliated with Edward J.
Sebastian, the Chairman and a director of RPGI and a former director of CFC, and
alleged mismanagement by certain executive officers involving financial matters
and employee matters. The complaint seeks damages for the benefit of CFC
aggregating $41 million and recision of the Affinity bonus.
In an action instituted by the same attorneys bringing the
above-mentioned derivative action, on December 31, 1996, certain individuals
filed a class action lawsuit against CFC, Carolina First Bank and a number of
officers and directors of CFC and Carolina First Bank. In connection with the
judge's granting of the motion to dismiss in the above-referenced derivative
action, the plaintiff's attorney has agreed to withdraw this lawsuit, without
prejudice. In this class action lawsuit, plaintiffs allege that they are former
shareholders of 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 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
13
<PAGE>
complaint seeks compensatory damages of approximately $1.8 million, punitive
damages in an amount to be determined by a jury and attorneys' fees and other
costs.
GROWTH THROUGH ACQUISITIONS
CFC has experienced significant growth in assets as a result of
acquisitions. Moreover, CFC anticipates engaging in selected acquisitions of
financial institutions and branch locations in the future. Growth through future
acquisitions could be very significant. There are certain risks associated with
CFC'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 CFC and being unable to profitably deploy
funds acquired in an acquisition. Furthermore, there can be no assurance as to
the extent that CFC can continue to grow through acquisitions. In the past, CFC
has engaged in acquisitions accounted for by the purchase method of accounting.
Acquisitions accounted for by the purchase method of accounting typically
increase intangible assets and may lower the capital ratios of the entities
involved. Consequently, in the event that CFC engages in significant
acquisitions accounted for by the purchase method of accounting in the future,
CFC may be required to raise additional capital in order to maintain capital
levels required by the Federal Reserve. In the future, CFC 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.
DEPENDENCE ON SENIOR MANAGEMENT
CFC is dependent upon the services of certain of the senior executive
officers of CFC and its subsidiaries. The loss of the services of one or more of
such individuals could have a material adverse effect on CFC. No assurance can
be given that replacements for any of these officers could be employed if their
services were no longer available. CFC maintains key employee insurance on Mack
I. Whittle, Jr., CFC's Chief Executive Officer.
ANTITAKEOVER MEASURES
CFC has certain antitakeover measures in place. These include (i) a
Shareholders' Rights Agreement which, among other things, provides for the
dilution of the CFC common stock holdings of certain shareholders who acquire
20% or more of the CFC common stock and attempt to acquire CFC 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 CFC, 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
CFC. One or more of these measures may impede the takeover of CFC without the
approval of CFC'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 CFC common stock. See "CAROLINA FIRST CORPORATION CAPITAL
STOCK."
COMMERCIAL LENDING ACTIVITIES
Over the past several years, CFC has experienced significant growth in
commercial loans and commercial mortgage loans. These loans are generally more
risky than one-to-four family or consumer loans because they are unique in
character, generally larger in amount and dependent upon the borrower's ability
to generate cash to service the loan. There are certain risks inherent in making
all loans, including risks with respect to the period of time over which loans
may be repaid, risks resulting from uncertainties as to the future value of
collateral, risks resulting from changes in economic and industry conditions and
risks inherent in dealing with individual borrowers. Although CFC's
nonperforming loans as a percentage of total loans is below its peer group
average, there is a risk that the quality of CFC's loan portfolio could decline,
particularly in connection with the rapid loan growth that CFC has experienced
over the past several years.
14
<PAGE>
HOLDING COMPANY STRUCTURE
As a holding company, CFC is a legal entity separate and distinct from
its banking and non-banking subsidiaries. Accordingly, the right of CFC, and
thus the right of CFC'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 its operating subsidiaries, except to the
extent that claims of CFC in its capacity as a creditor may be recognized. The
principal source of CFC's revenues is dividends from its operating subsidiaries.
LIMITATIONS ON DIVIDENDS
CFC generates cash to pay dividends primarily through dividends paid to
it by its operating subsidiaries. South Carolina's banking regulations restrict
the amount of dividends that may be paid from Carolina First Bank. All dividends
paid from Carolina First Bank are subject to prior approval by the South
Carolina Commissioner of Banking and are payable only from the undivided profits
of Carolina First Bank. At December 31, 1997, Carolina First Bank's retained
earnings were $40.2 million. However, the payment of any such dividends would be
subject to receipt of appropriate regulatory approvals.
REGULATION
CFC and its operating subsidiaries are extensively regulated under
federal and state law. To the extent that information contained herein describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws may have a material adverse effect on the business and prospects of CFC.
The operations of CFC may be materially adversely affected by possible
legislative and regulatory changes and by the monetary policies of the United
States.
YEAR 2000
Many existing computer hardware and software systems were designed to
accept only two-digit date entries to indicate the year and to assume that the
first two digits of any year are "19." As we enter the year 2000, these systems
may misinterpret date entries, causing problems such as miscalculation of
interest on loans and deposits. A number of computer systems used by CFC in its
day-to-day operations will be affected by this problem. Management has
established a team which it believes has identified all affected systems and is
currently working to ensure that this event will not disrupt operations. CFC is
also working with outside computer vendors to ensure that all software
corrections and warranty commitments are obtained and to arrange mock conversion
testing. The estimated cost to CFC of these corrective actions is $250,000.
Incomplete or untimely corrective action, however, would have a material adverse
effect on CFC, the dollar amount of which cannot be accurately quantified at
this time because of the inherent uncertainties involved.
15
<PAGE>
INFORMATION CONCERNING THE RPGI SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to shareholders of
RPGI as of the Record Date in connection with the solicitation of proxies by the
RPGI Board for use at the RPGI Special Meeting and at any adjournments thereof.
The RPGI Special Meeting is to be held on June 1, 1998 at 9:00 A.M. local time,
at 101 Executive Center Drive, Columbia, South Carolina. Holders of RPGI common
stock are requested to complete, date and sign the accompanying Proxy and return
it promptly to RPGI in the enclosed postage-paid envelope.
PURPOSE OF THE RPGI SPECIAL MEETING
The purpose of the RPGI Special Meeting is to consider and take action
with respect to approval of the Merger Agreement. Approval of the Merger
Agreement will require the affirmative vote of the holders of a majority of the
outstanding shares of RPGI common stock entitled to vote on the Merger
Agreement. See "--RPGI Record Date and Voting Rights." This Proxy
Statement/Prospectus, Notice of Special Meeting and the Proxy are first being
mailed to shareholders of RPGI on or about May 1, 1998.
RPGI RECORD DATE AND VOTING RIGHTS
Only the holders of RPGI common stock on the Record Date are entitled
to receive notice of and to vote at the RPGI Special Meeting and at any
adjournments thereof. On the Record Date, there were 9,082,126 shares of RPGI
common stock outstanding, which were held by 183 holders of record. Each share
of RPGI common stock outstanding on the Record Date is entitled to one vote as
to each of the matters submitted at the RPGI Special Meeting.
A majority of the shares entitled to be voted at the RPGI Special
Meeting constitutes a quorum. If a share is represented for any purpose at the
RPGI 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 RPGI Special
Meeting.
THE MERGER MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF
AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF RPGI COMMON STOCK ELIGIBLE TO
VOTE AT THE RPGI 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 MERGER AGREEMENT.
On the Record Date, the directors and executive officers of RPGI and
their affiliates beneficially owned a total of 2,579,534 shares, or
approximately 28.4% of the outstanding RPGI common stock.
PROXIES
The accompanying Proxy is for use at the RPGI Special Meeting. A record
shareholder may use this Proxy if the shareholder is unable to attend the RPGI
Special Meeting in person or wishes to have his or her shares voted by proxy
even if the shareholder does attend the RPGI Special Meeting. All shares
represented by valid proxies received pursuant to this solicitation that are not
revoked before they are exercised will be voted in the manner specified therein.
If no specification is made, the proxies will be voted FOR approval of the
Merger Agreement. The RPGI Board is not aware of any other matters that may be
presented for action at the RPGI Special Meeting, but if other matters do
properly come before the RPGI 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 RPGI common stock
are voted in favor of approval of the Merger Agreement than the number required
for approval, it is expected that the RPGI Special Meeting will be postponed or
adjourned for the purpose of allowing additional time for obtaining
16
<PAGE>
additional proxies or votes, and, at any subsequent reconvening of the RPGI
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 RPGI 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 RPGI at
any time before it is voted, (ii) by submitting a proxy having a later date or
(iii) by appearing at the RPGI 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 RPGI, 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. RPGI will bear the costs
associated with the solicitation of proxies and other expenses associated with
the RPGI Special Meeting, except that RPGI and CFC will each bear 50% of the
printing and mailing costs incurred in connection with this Proxy
Statement/Prospectus.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by RPGI, CFC, Interim or any
other person. The delivery of this Proxy Statement/Prospectus will not, under
any circumstances, create any implication that there has been no change in the
affairs of RPGI, CFC or Interim since the date of this Proxy
Statement/Prospectus.
RECOMMENDATION OF THE RPGI BOARD
THE RPGI BOARD HAS APPROVED THE MERGER AGREEMENT AND BELIEVES THAT THE
PROPOSED TRANSACTION IS FAIR TO AND IN THE BEST INTERESTS OF RPGI AND ITS
SHAREHOLDERS. THE RPGI BOARD OF DIRECTORS RECOMMENDS THAT RPGI'S SHAREHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
17
<PAGE>
THE PROPOSED TRANSACTION
THE FOLLOWING DESCRIPTION OF THE TERMS AND PROVISIONS OF THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
WHICH IS SET FORTH IN FULL AS EXHIBIT A TO THIS PROXY STATEMENT/PROSPECTUS AND
INCORPORATED HEREIN BY REFERENCE.
GENERAL DESCRIPTION OF THE TERMS OF THE MERGER AGREEMENT
The Merger Agreement provides for the merger of Interim, a wholly-owned
subsidiary of CFC formed solely for the purpose of effecting the Merger, with
and into RPGI. As a result of the Merger, the separate corporate existence of
Interim will cease, leaving RPGI as the surviving entity and a wholly-owned
subsidiary of CFC. As of the Effective Time of the Merger, certificates of RPGI
common stock will represent only the right to receive the requisite number of
shares of CFC common stock and cash for any fractional shares. However, the
Merger Agreement also provides that CFC 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 the common stock of
RPGI as provided for in the Merger Agreement, (ii) reduce the value of such
consideration, (iii) adversely affect the intended tax-free treatment to RPGI's
shareholders as a result of receiving such consideration or prevent the parties
from obtaining the tax opinion of McNair Law Firm, P.A. referred to therein,
(iv) materially impair the ability of the parties to the Merger Agreement to
receive any consents required by the Merger Agreement in connection with the
acquisition of RPGI by CFC or to satisfy any other conditions to the
consummation of the transactions contemplated by the Merger Agreement, or (v)
materially delay the Closing Date.
Pursuant to the terms of the Merger Agreement, upon consummation of the
Merger, holders of RPGI's common stock will be entitled to receive $1.237 for
each outstanding share of RPGI common stock held by them. Such amount shall be
payable in the form of shares of CFC common stock, with cash being paid in lieu
of fractional shares. For purposes of determining the number of shares of CFC
common stock so payable, a share of such stock shall be valued at the average
closing price of a share of such stock as reported on the Nasdaq National Market
for the 20 trading days immediately preceding the Closing Date. The conversion
ratio is subject to equitable adjustment for stock splits, stock dividends,
reverse stock splits and similar items.
In addition, upon consummation of the Merger, holders of RPGI common
stock are eligible to receive additional consideration as follows:
(i) if "net chargeoffs" (as defined in the Merger Agreement) during the
year ending December 31, 1998 that are associated with all credit card
accounts originated in 1997 by RPGI on behalf of CFC are less than 4%
of the weighted average daily outstanding balance of such accounts
during 1998, CFC shall issue to holders of RPGI common stock shares of
CFC common stock having a fair market value of $500,000. For purposes
of determining the number of shares to be issued, the fair market value
of a share of CFC common stock shall be the average closing price of
CFC common stock for the 20 trading days immediately prior to January
31, 1999.
(ii) if "net chargeoffs" (as defined in the Merger Agreement") during
the year ending December 31, 1999 that are associated with all CFC
credit card accounts owned as of December 31, 1997 (regardless of the
originator or servicer of such credit card accounts) are less than 4.5%
of the weighted average daily outstanding balance of such accounts
during 1999, CFC shall issue to holders of RPGI common stock shares of
CFC common stock having a fair market value equal to 1.33% of the
weighted average daily outstanding balance of such accounts during
1999. For purposes of determining the number of shares to be issued,
fair market value shall mean the average closing price of CFC common
stock for the 20 trading days immediately prior to January 31, 2000.
Because the number of shares of CFC common stock to be received by RPGI
shareholders will depend on the market price of CFC common stock and on
subsequent performance of credit card accounts,
18
<PAGE>
the exact number of shares to be received by RPGI shareholders will not be known
until January 31, 2000. On April 24, 1998, the most recent date for which it was
practicable to obtain information prior to the printing of this Prospectus/Proxy
Statement, the closing price per share of CFC common stock, as reported on the
Nasdaq National Market, was $28.75. RPGI shareholders should note, however, that
the market price of the CFC common stock they receive will continue to be
subject to market fluctuations, as well as the future results of operations and
financial condition of CFC, among other factors, and therefore may be worth less
than, or more than, such amount as of the date they receive their CFC common
stock certificates.
No fractional shares of CFC common stock will be issued as a result of
the Merger. Cash will be paid to the holders of the RPGI common stock in lieu of
any fractional shares that would otherwise be issuable under the terms of the
Merger Agreement.
The Merger Agreement generally provides that CFC and RPGI will each
bear and pay their own costs and expenses incurred in connection with the
transactions contemplated by the Merger Agreement, including fees of attorneys
and accountants. The Merger Agreement specifically provides that CFC and RPGI
will each bear 50% of the printing and mailing costs incurred in connection with
the Proxy Statement/Prospectus and the Registration Statement.
The Merger will become effective at the Effective Time. At the
Effective Time, by operation of law, RPGI shareholders will no longer be owners
of RPGI common stock and (to the extent that they receive CFC common stock as
consideration) will automatically become owners of CFC common stock. After the
Effective Time, each outstanding certificate representing shares of RPGI common
stock prior to the Effective Time shall be deemed for all corporate purposes to
evidence only the right of the holder thereof to surrender such certificate and
receive the consideration as provided in the Merger Agreement.
BACKGROUND OF AND REASONS FOR THE MERGER AGREEMENT
During May 1997, RPGI contacted several major credit card servicers to
determine their interest in forming a strategic alliance with RPGI. Several of
those servicers expressed an interest in further discussions, and on May 6,
1997, the RPGI Board gave approval for management to continue to pursue
strategic alternatives with the interested parties, including working with them
or other parties who might have an interest in a transaction with RPGI,
including a possible merger, consolidation or purchase of RPGI. Throughout June,
July and August 1997 active discussions continued and several companies
performed due diligence reviews of RPGI. However, by the end of August 1997, all
such companies except one had terminated their discussions with RPGI.
On September 10, 1997, management briefed the RPGI Board on the status
of its initiatives. After this briefing the RPGI Board discussed RPGI's
financial condition and future prospects, including RPGI's receipt of notice
from a significant client that, because of a merger of the client with a larger
financial institution, the client would transfer its credit card servicing to
the acquirer's in-house system and terminate its servicing agreement with RPGI
effective February 1998. After the discussion, the RPGI Board requested
management to recommend an investment banker for the Board to employ to assist
it in evaluating strategic alternatives. The RPGI Board and management agreed
that RPGI should use a regional investment banker or a firm with credit card
industry experience.
On November 3, 1997, management advised the RPGI Board that it had
solicited proposals from five investment banking and consulting firms and, based
upon its review of the proposals and discussions with representatives of those
firms, recommended that the Board engage First Annapolis Capital, Inc. ("First
Annapolis") to represent RPGI in evaluating and implementing a strategic plan.
After discussing each proposal the RPGI Board selected First Annapolis. In
addition, the RPGI Board stated its objectives in the process as being to
provide near-term shareholder liquidity, maximize the value of shareholders'
investment in RPGI and, to the extent practical, minimize taxation on any
transaction.
19
<PAGE>
On December 2, 1997, RPGI executed an engagement letter with First
Annapolis, which immediately thereafter began a due diligence review of RPGI. By
late December 1997 a draft offering memorandum had been prepared and First
Annapolis was beginning to contact prospective investors. CFC immediately
expressed an interest in being involved in the process as a potential bidder and
possibly being a preemptive bidder. CFC also advised RPGI that it was reviewing
non-RPGI servicing options and that if RPGI were sold to another party it might
elect to terminate the servicing agreement between Carolina First Bank and RPGI
prior to the expiration of the term thereof. Because of the long-term
relationship between RPGI and CFC and the significance of the business
relationship to RPGI, a draft of the offering memorandum was provided to CFC
before the offering memorandum was provided to other interested parties. CFC
delivered a draft letter of interest to RPGI on December 10, 1997 and a final
letter of interest on December 20, 1997. On December 29 and 30, 1997, CFC
performed a due diligence review of RPGI. During this review, CFC was informed
that on December 29, 1997, RPGI was notified by one of its significant servicing
clients that the client would transfer its credit card servicing to an in-house
system and terminate its servicing agreement with RPGI in the third quarter of
1998.
Simultaneous with CFC's due diligence review, First Annapolis contacted
over 15 parties to determine their interest in pursuing a business combination
with RPGI. However, because at the time it was believed that Carolina First Bank
would account for a substantial portion of future RPGI revenues, a decision was
made to delay distribution of the offering memorandum to those parties until CFC
had enough time to complete its due diligence and finalize its offer. CFC's
offer stated that if its best and final offer were not accepted by RPGI,
Carolina First Bank would terminate its servicing agreements with RPGI. At that
time RPGI had only two other major clients, both of which had already given
notice of their intent to terminate their servicing agreements with RPGI.
During early January 1998, the management of RPGI had various telephone
conversations with RPGI Board members regarding the status of the process and in
particular the terms and conditions of the offer received from CFC compared with
other possible alternatives, including the liquidation of RPGI. RPGI retained
McNair Law Firm, P.A. to draft a merger agreement, and on January 20, 1998 the
RPGI Board met via teleconference to consider CFC's offer and the draft merger
agreement. After a discussion of CFC's offer and the draft merger agreement,
including a presentation by First Annapolis, the RPGI Board agreed to accept
CFC's offer with a base consideration of $11.3 million, subject to satisfactory
negotiation of several outstanding matters, approval by RPGI shareholders,
receipt of an acceptable fairness opinion from First Annapolis and receipt of
all required regulatory approvals. The RPGI Board instructed management to try
to structure the transaction as a tax-free transaction but stated that if a
tax-free transaction were not practical a taxable transaction which provided
near-term shareholder liquidity should not be ruled out.
Between January and March 9, 1998, there were various conversations
between the managements of RPGI and CFC, including discussions regarding the
amount of the base consideration to be received in the Merger. Also, during that
period the parties worked together in finalizing the merger agreement and
related disclosure schedules. As a result of those conversations and
negotiations, the base consideration was reduced to $11.235 million. RPGI
received a letter from First Annapolis dated March 6, 1998 stating that
assuming, with the permission of RPGI, that all other material facts in
connection with the Merger had not changed since First Annapolis completed its
review and analysis in support of its opinion dated February 5, 1998, the
reduction in amount of the base consideration did not affect its opinion as to
the fairness of the transaction. On March 9, 1998, the Merger Agreement was
executed.
RPGI REASONS. In approving and adopting the Merger Agreement and
formulating its recommendation that the shareholders of RPGI approve the Merger
Agreement, the RPGI Board considered a number of factors, including, without
limitation, the following:
(i) the business, financial results and prospects of CFC,
including, without limitation, its earnings history, balance sheet,
access to the capital markets and the expected performance of the CFC
common stock;
20
<PAGE>
(ii) the business, financial results and prospects of RPGI and
its businesses including, without limitation, the recent loss of
substantial amounts of business by RPGI, the importance of greater
financial resources and enhanced operational and administrative support
to expand and add value to its business;
(iii) the terms and conditions of the Merger Agreement,
including the amount and form of consideration to be received by the
shareholders of RPGI and the nature of the parties' representations,
warranties, covenants and agreements;
(iv) the written opinion of First Annapolis dated February 5,
1998, as supplemented March 6, 1998, as to the fairness, from a
financial point of view, of the consideration to be received by the
shareholders of RPGI in the Merger;
(v) the expectation that the Merger would be tax-free for
federal income tax purposes to the shareholders of RPGI; and
(vi) the absence of an active trading market for the RPGI
common stock and the expectation that the Merger would provide the
shareholders of RPGI with greater liquidity in their investment.
In view of the number of factors considered by the RPGI Board, the RPGI
Board did not deem it practicable to assign relative weights to the various
factors considered.
CFC REASONS. During 1997, CFC experienced higher than historical levels
of credit card losses. Management undertook a thorough review of the options
available to mitigate the problem. These options included changing servicers or
selling the portfolio of credit card loans, but neither was deemed to be an
attractive option. When RPGI became available for purchase, this gave CFC an
additional, more attractive alternative. The purchase of RPGI would allow CFC to
control the collection process and would permit CFC to reduce its servicing
expense by reducing overhead at RPGI. Furthermore, the purchase price payable by
CFC is thought to be roughly equivalent to the amount of RPGI's net cash and
other tangible assets plus all termination fees payable to RPGI (including the
termination fee which would be applicable if Carolina First Bank terminated its
existing servicing contract with RPGI).
MATERIAL CONTACTS WITH COMPANY BEING ACQUIRED
Carolina First Bank has been a customer of RPGI, including with respect
to the origination and servicing of credit card accounts. The contracts between
Carolina First Bank and RPGI are believed to be typical of similar contracts
between RPGI and its other customers and were entered into on an arm's length
basis. Pursuant to such contracts, Carolina First Bank made payments to RPGI
totaling $3,609,424 in 1995, $7,587,953 in 1996 and $5,714,691 in 1997. The
Credit Card Account Servicing Agreement in effect between RPGI and Carolina
First Bank provides that Carolina First Bank may terminate the Agreement prior
to its expiration regardless of any default, but only upon payment of (i) an
early termination fee equal to a fractional multiple of the aggregate balances
of the credit card accounts being serviced at the time by RPGI multiplied by the
number of months remaining until December 31, 2003, (ii) reimbursement to RPGI
for all payments to third parties for trailing transactions and RPGI's
reasonable internal costs associated with such trailing transactions and (iii) a
termination fee equal to a fixed percentage of the outstanding balance of the
credit card accounts being serviced at the time by RPGI. At December 31, 1997,
the aggregate total of such payments would have been approximately $7,100,000.
As of the date of this Proxy Statement/Prospectus, Mack I. Whittle,
Jr., President and CEO of CFC and Chairman and CEO of Carolina First Bank, owned
2,000 shares of RPGI common stock, and Keith C. Hinson, Walter J. Roberts, Jr.,
and Jasper Salmond, directors of Carolina First Bank, owned 7,000, 150, and 125
shares of RPGI common stock, respectively.
21
<PAGE>
RPGI has a $5.0 million line of credit with Carolina First Bank.
Carolina First Bank also provides RPGI with cash management services. As a part
of those services, RPGI invests excess cash overnight pursuant to reverse
repurchase agreements with Carolina First Bank.
OPINION OF RPGI'S FINANCIAL ADVISER
Pursuant to an engagement letter executed December 2, 1997 (the
"Engagement Letter"), RPGI engaged First Annapolis to evaluate a potential sale
of RPGI. As part of its engagement, First Annapolis agreed, if requested by
RPGI, to render to the RPGI Board a fairness opinion with respect to a potential
sale of RPGI. First Annapolis delivered such an opinion to the RPGI Board on
February 5, 1998 and supplemented its original opinion on March 6, 1998 (as
supplemented, the "Opinion"). First Annapolis is a nationally recognized
investment banking and advisory firm and, as part of its investment banking
business, is engaged in the valuation of businesses and assets in connection
with mergers and acquisitions, joint ventures, asset divestitures and other
similar transactions. First Annapolis was not retained nor did it advise RPGI
with respect to alternatives to the sale of RPGI.
In requesting the opinion of First Annapolis, the RPGI Board neither
gave any special instructions to First Annapolis nor imposed any limitations
upon the scope of the investigation that First Annapolis deemed necessary to
enable it to deliver the Opinion.
THE FULL TEXT OF FIRST ANNAPOLIS' WRITTEN OPINION TO THE RPGI BOARD
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS OF
THE REVIEW BY FIRST ANNAPOLIS, IS ATTACHED HERETO AS EXHIBIT B AND IS
INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF FIRST ANNAPOLIS'
OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION, WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING SUCH
OPINION, FIRST ANNAPOLIS DOES NOT ADMIT THAT IT IS AN EXPERT WITH RESPECT TO THE
REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS IS A PART
WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED IN THE SECURITIES ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER. FIRST ANNAPOLIS' OPINION IS
ADDRESSED TO THE RPGI BOARD, COVERS ONLY THE FAIRNESS OF THE CONSIDERATION TO BE
RECEIVED BY RPGI SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF
THE OPINION, FEBRUARY 5, 1998, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF RPGI COMMON STOCK AS TO HOW SUCH RPGI SHAREHOLDER SHOULD VOTE AT THE
RPGI SPECIAL MEETING.
In connection with rendering its opinion, First Annapolis, among other
things: (1) reviewed RPGI's audited financial statements and related financial
information for the fiscal years ended December 31, 1995 and 1996 and RPGI's
unaudited financial statements and related unaudited financial information for
the ten months ended October 31, 1997; (2) reviewed CFC's Annual Reports, Forms
10-K and related financial information for the two fiscal years ended December
31, 1996, CFC's Form 10-Q and the related unaudited financial information for
the nine months ended September 30, 1997 and the Proxy Statement dated March 21,
1997 for the 1997 Annual Meeting of Stockholders; (3) reviewed with management
of RPGI and CFC, respectively, certain information, including financial
forecasts, relating to the business, earnings, cash flow, assets and prospects
of RPGI and CFC, furnished to First Annapolis by RPGI and CFC; (4) conducted
discussions with members of senior management of RPGI and CFC concerning their
respective businesses and prospects; (5) reviewed the reported prices and
trading activity for shares of CFC common stock and compared them with those of
certain publicly traded companies which First Annapolis deemed to be reasonably
similar to CFC; (6) compared financial and operating data of RPGI and CFC to
financial and operating data of certain publicly traded companies which First
Annapolis deemed reasonably similar to RPGI and CFC; (7) compared the proposed
financial terms of the transactions contemplated by the Merger Agreement with
the financial terms of certain other mergers and acquisitions which First
Annapolis deemed to be relevant to its inquiry; (8) reviewed a draft dated
January 30, 1998 of the Merger Agreement; and, (9) reviewed such other financial
studies and analyses and performed such other
22
<PAGE>
investigations and took into account such other matters as it deemed necessary,
including assessments of general economic, market and monetary conditions.
First Annapolis assumed and relied upon the accuracy and completeness
of all of the financial and other information provided to it, conveyed to it in
discussions with senior management of RPGI and CFC, or publicly available, for
purposes of the Opinion. First Annapolis did not attempt to independently verify
any such information. First Annapolis did not conduct a physical inspection of
the properties or facilities of RPGI or CFC or make or obtain any independent
evaluations or appraisals of any such properties or facilities. First Annapolis
did not specifically evaluate the loan portfolio or the adequacy of reserves for
possible loan losses of CFC or any of its subsidiaries or affiliates.
In connection with the Opinion, First Annapolis performed certain
financial analyses, the results of which were provided to the RPGI Board on
February 5, 1998. The following is a summary of these analyses. For purposes of
the analyses, First Annapolis assumed that 9,082,141 shares of RPGI common stock
were issued and outstanding.
Valuation of CFC's Offer. First Annapolis independently valued the three
components of the consideration offered by CFC. The components valued by
First Annapolis were: (a) shares of CFC common stock to be issued to RPGI
shareholders at the Closing Date, (b) earnout scenario #1, which provides
for the issuance of additional shares of CFC common stock to RPGI
shareholders on January 31, 1999 if net chargeoffs during 1998 that are
associated with credit card accounts originated by RPGI for CFC during 1997
are less than 4% of the weighted average daily outstanding balance of such
accounts, and (c) earnout scenario #2, which provides for the issuance of
additional shares of CFC common stock to RPGI shareholders on January 31,
2000 if net chargeoffs during 1999 that are associated with CFC credit card
accounts owned as of December 31, 1997 are less than 4.5% of the weighted
average daily outstanding balance of such accounts.
First Annapolis valued the consideration offered at closing at $11.300
million, or $1.244 per share of RPGI common stock. Consideration offered
under earnout scenario #1 was valued from $0.00 to $0.42 million, or $0.000
to $0.046 per share of RPGI common stock. Consideration offered under
earnout scenario #2 was valued from $0.00 to $1.22 million, or $0.00 to
$0.134 per share of RPGI common stock. In the aggregate, First Annapolis
valued the consideration offered by CFC to range from $11.300 million to
$12.940 million, or from $1.244 to $1.424 per share of RPGI common stock.
Subsequent to First Annapolis' delivery of the opinion, RPGI and CFC agreed
that the fair market value of the fully registered CFC common stock to be
issued to RPGI shareholders at closing would be reduced from $11.300
million, or $1.244 per share, to $11.235 million, or $1.237 per share.
First Annapolis delivered a letter to the RPGI Board dated March 6, 1998,
stating that this change in consideration did not cause First Annapolis to
change its conclusion that the consideration to be received by RPGI
shareholders was fair from a financial point of view. With the permission
of RPGI, First Annapolis assumed that all other material facts in
connection with the Merger had not changed since First Annapolis completed
its review and analysis.
Discounted Cash Flow Valuation of RPGI. First Annapolis utilized a
discounted cash flow methodology as the primary financial approach to
valuing RPGI's business operations. Two separate scenarios were modeled:
(a) the liquidation case, which assumed that Carolina First Bank terminated
its contractual relationship with RPGI effective December 31, 1998, another
major customer of RPGI terminated its contractual relationship with RPGI
effective February 28, 1998, a third major customer of RPGI terminated its
contractual relationship with RPGI effective July 10, 1998, and no
additional accounts were originated by RPGI on behalf of its clients, and
(b) the base case, which assumed that Carolina First Bank remained a
customer through 2003 with no changes in current servicing or origination
pricing, the other two major customers of RPGI terminated their contractual
relationships with RPGI as assumed in the liquidation case and 10,000
additional accounts were originated annually by RPGI on behalf of CFC.
23
<PAGE>
Using a discount rate of 20 percent, First Annapolis valued RPGI's business
operations under the liquidation case at approximately $9.16 million, or
$1.008 per share of RPGI common stock, and under the base case at
approximately $9.11 million, or $1.003 per share of RPGI common stock.
First Annapolis' valuation of the total consideration offered by CFC for
RPGI's business operations was higher than the valuation of either of the
two scenarios modeled.
Selected Comparable Company Analysis. First Annapolis reviewed and analyzed
certain financial, operating and stock market information relating to nine
selected publicly traded transaction processing companies with business
operations similar in nature to RPGI. These companies were: NOVA
Corporation, PMT Services, Inc., First Data Corporation, National Data
Corporation, Deluxe Corporation, Electronic Data Systems Corporation,
Fiserv, Inc., National Processing, Inc., and Equifax, Inc. First Annapolis
evaluated these companies, individually and in the aggregate on the basis
of their market capitalizations as a multiple of various financial
benchmarks, and compared these ratios to the ratio of the consideration
offered by CFC to the appropriate RPGI financial benchmark.
The ratios analyzed were market capitalization as a multiple of net revenue
(1.19 for the CFC offer, 1.45 for the average of the comparable companies,
and 2.67 and 1.30 for the maximum and minimum, respectively), market
capitalization as a multiple of earnings before interest, taxes,
depreciation and amortization (1.98 for the CFC offer, 10.27 for the
average of the comparable companies, and 14.41 and 6.93 for the maximum and
minimum, respectively), market capitalization as a multiple of book value
(1.13 for the CFC offer, 4.90 for the average of the comparable companies,
and 13.45 and 1.51 for the maximum and minimum, respectively) and market
capitalization as a multiple of net income (49.50 for the CFC offer, 29.15
for the average of the comparable companies, and 45.30 and 19.43 for the
maximum and minimum, respectively).
Selected Comparable Transaction Analysis. First Annapolis reviewed and
analyzed certain financial, operating and stock market information relating
to 11 selected merger and acquisition transactions occurring between May
1993 and October 1997 involving transaction processing companies with
business operations similar in nature to those of RPGI. These transactions
were: Bancard Systems, Inc./PMT Services, Inc., FA Holdings/National
Processing, Inc., Comdata Holdings/Ceridian Corporation, First Financial
Management Corporation/First Data Corporation, Gensar Holdings, Inc./First
USA Paymentech, Card Establishment Services/First Data Corporation, Western
Union Financial Services/First Financial Management Corporation, Envoy
Corporation/First Data Corporation, Data-Link/Fiserv, Inc., CYBERTEK
Corporation/Policy Management Systems Corporation, and Datatronix Financial
Services/Fiserv, Inc. First Annapolis evaluated these transactions, both
individually and in the aggregate, on the basis of the ratio of
consideration offered by the acquirer to selected financial benchmarks of
the target company, and compared these ratios to the ratio of consideration
offered by CFC to the appropriate RPGI financial benchmark.
The ratios analyzed were the purchase consideration as a multiple of net
revenue (1.19 for the CFC offer, 2.23 for the average of the comparable
transactions and 5.36 and 0.64 for the maximum and minimum, respectively),
purchase consideration as a multiple of earnings before interest, taxes,
depreciation and amortization (1.98 for the CFC offer, 13.37 for the
average of the comparable transactions, and 18.27 and 10.01 for the maximum
and minimum, respectively), and purchase consideration as a multiple of net
income (49.50 for the CFC offer, 29.60 for the average of the comparable
transactions, and 41.82 and 19.20 for the maximum and minimum,
respectively).
CFC Evaluation. First Annapolis reviewed and compared certain financial,
operating and stock market information of CFC with that of a group of 12
publicly-traded bank holding companies: First Commonwealth Financial,
Hancock Holding Company, F&M National Corporation, 1st Source Corporation,
Mid Am, Inc., Trans Financial, Inc., Chittenden Corporation, First United
Bancshares, Chemical Financial, WesBanco Inc., Cathay Bancorp and First
Financial Corporation. Three primary criteria were used to select companies
to include in this group (the "Peer Group"): (a) the holding company had
between $1.5 and $3.0 billion in assets, (b) primary banking operations
were in one state
24
<PAGE>
and (c) a majority of the company's income was derived from consumer and/or
commercial banking operations.
The information used in the evaluation of CFC included 1995-1997 asset
growth (23.5% for CFC, 7.7% for the Peer Group average, and 21.3% and 0.0%
for the maximum and minimum, respectively), 1995-1997 average return on
assets (0.75% for CFC, 1.16% for the Peer Group average, and 1.34% and
0.78% for the maximum and minimum, respectively), 1995-1997 average return
on equity (12.27% for CFC, 12.19% for the Peer Group average, and 16.51%
and 9.52% for the maximum and minimum, respectively), efficiency ratio
(60.3% for CFC, 59.3% for the Peer Group average, and 66.7% and 45.6% for
the maximum and minimum, respectively; the efficiency ratio is equal to
non-interest expense divided by the sum of net interest income plus
non-interest income), non-performing assets as a percent of loans (0.24%
for CFC, 1.83% for the Peer Group average, and 3.70% and 0.28% for the
maximum and minimum, respectively), 1995-1997 share price annual growth
rate (21.4% for CFC, 21.4% for the Peer Group average, and 53.5% and 0.6%
for the maximum and minimum, respectively), market price to earnings per
share ratio (18.2 for CFC, 19.8 for the Peer Group average, and 22.1 and
16.0 for the maximum and minimum, respectively), and market price to book
value ratio (2.09 for CFC, 2.56 for the Peer Group average, and 3.68 and
1.98 for the maximum and minimum, respectively).
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. First
Annapolis believes that its analysis must be considered as a whole and that
selecting portions of its analysis, without considering the analysis taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in the Opinion. In addition, First Annapolis considered the results of
all such analyses and did not assign relative weights to any of the analyses, so
that the range of valuations should not be taken to be First Annapolis' view of
the actual value of RPGI, CFC, or the combined entity.
The analyses were prepared solely for the purpose of First Annapolis
providing its Opinion to the RPGI Board as to the fairness, from a financial
point of view, of the consideration offered by CFC to the holders of RPGI common
stock and do not purport to be appraisals or necessarily reflect the prices at
which businesses may actually be sold. Any estimates incorporated in the
analyses performed by First Annapolis are not necessarily indicative of actual,
past or future values or results. No public company utilized as a comparison is
identical to RPGI and none of the comparable business transactions utilized as a
comparison is identical to the transaction contemplated by RPGI and CFC.
Accordingly, an analysis of publicly traded comparable companies and comparable
business transactions is not solely mathematical; it also involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies to which RPGI is being
compared. In connection with the analyses, First Annapolis made, and was
provided by RPGI management with, estimates and forecasts based upon numerous
assumptions with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of RPGI.
Similarly, analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, none of RPGI, First Annapolis, or any other person
assumes responsibility if future results or actual values are materially
different from these forecasts or assumptions. The Opinion necessarily was based
on the economic, market and other conditions as in effect on, and the
information made available to it as of, the date of the Opinion dated February
5, 1998.
RPGI agreed to pay First Annapolis a $50,000 retainer fee and a
transaction fee which after reduction by the amount of the retainer fee as
provided for in the terms of the Engagement Letter will be approximately
$324,700 (calculated solely on the basis of the aggregate base consideration for
the Merger of $11,235,000). RPGI has also agreed to reimburse First Annapolis
for its reasonable out-of-pocket expenses incurred in connection with the
services provided by First Annapolis and indemnify and hold harmless First
Annapolis and certain related parties to the full extent lawful from and against
certain liabilities and expenses incurred in connection with its engagement,
including liabilities under the federal securities laws.
25
<PAGE>
EXCHANGE OF RPGI STOCK CERTIFICATES
As soon as practicable after the Effective Time, CFC or its transfer
agent (in such capacity, the "Exchange Agent") will mail, and otherwise make
available to each former record holder of shares of RPGI 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 RPGI common stock ("Certificates") for payment therefor.
RPGI 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, and a duly executed letter of transmittal to the Exchange Agent,
whereupon the shareholder shall promptly be sent the CFC common stock issuable
to the shareholder 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 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.
CFC is not obligated to deliver the CFC common stock to which any
former holder of RPGI common stock is entitled as a result of the Merger until
such holder surrenders his or her Certificates. 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 RPGI 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 CFC
common stock certificate, together with all such withheld dividends or other
distributions and any withheld cash payments in respect of any fractional share
interest, but without any obligation to pay interest on any sums withheld, 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) 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 the Merger Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligation of CFC to consummate the transactions contemplated in
the Merger Agreement are subject to the satisfaction of the following conditions
(among others) at or before the Effective Time: (i) the approval and adoption of
the Merger Agreement by the requisite vote of the holders of RPGI common stock;
(ii) receipt of all permits required by state securities or blue sky laws to
carry out the transactions contemplated by the Merger Agreement; (iii) the
performance by RPGI in all material respects of its obligations under the Merger
Agreement required to be performed at or prior to the Effective Time; (iv) the
material accuracy, at the Effective Time, of each of the representations and
warranties of RPGI set forth in the Merger Agreement (subject to certain limited
exceptions); (v) the receipt by CFC of an opinion of counsel to RPGI in form and
substance reasonably satisfactory to CFC and its counsel; (vi) the approval of
the shares of CFC common stock to be issued in the Merger for listing on the
Nasdaq National Market, subject to official notice of issuance and evidence of
satisfactory distribution; and (vii) the receipt or filing of any regulatory or
third party consents required prior to the Effective Time with respect to the
transactions contemplated by the Merger Agreement, except for such consents
whose absence would not have a material adverse effect on RPGI; and, (viii) the
termination of all existing contractual arrangements between RPGI and one of its
major customers without further liability to RPGI (except in connection with
trailing transactions) and the payment from the customer to RPGI of at least
$6.01 million.
26
<PAGE>
The obligation of RPGI to consummate the transactions contemplated in
the Merger Agreement is subject to the satisfaction of the following conditions
(among others) at or before the Effective Time: (i) the approval and adoption of
the Merger Agreement by the requisite vote of the holders of RPGI common stock;
(ii) the receipt of all permits required by state securities or blue sky laws to
carry out the transactions contemplated by the Merger Agreement; (iii) the
performance by CFC in all material respects of its obligations under the Merger
Agreement required to be performed at or prior to the Effective Time; (iv) the
material accuracy, at the Effective Time, of each of the representations and
warranties of CFC set forth in the Merger Agreement (subject to certain limited
exceptions); (v) the receipt by RPGI of an opinion of McNair Law Firm, P.A.
reasonably satisfactory to RPGI to the effect that, subject to reasonable
qualifications and conditions, the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code, and that the
shareholders of RPGI will recognize no gain or loss upon the receipt of shares
of CFC common stock in exchange for shares of RPGI common stock as a result of
the Merger; (vi) the receipt of an opinion of counsel of CFC in form and
substance reasonably satisfactory to RPGI and its counsel; (vii) the approval of
the shares of CFC common stock to be issued in the Merger for listing on the
Nasdaq National Market, subject to official notice of issuance and evidence of
satisfactory distribution; and (viii) the receipt or filing of any regulatory or
third party consents required prior to the Effective Time with respect to the
transactions contemplated by the Merger Agreement, except for such consents
whose absence would not have a material adverse effect on RPGI.
CFC and RPGI may waive certain of the conditions imposed with respect
to their respective obligations to consummate the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time: (a) by mutual written consent of CFC and RPGI; (b) by RPGI, upon
a material breach of the Merger Agreement by CFC or Interim that has not been
cured and that would cause either CFC or Interim to be incapable, by September
30, 1998, of (i) performing in all material respects the obligations under the
Merger Agreement that it is required to perform at or prior to the Effective
Time, (ii) providing an officer's certificate to the effect that it has
performed all such obligations, (iii) ensuring that its representations and
warranties made in the Merger Agreement are true as of the applicable date or
(iv) providing an officer's certificate to the effect that such representations
and warranties are true as of the applicable date; (c) by CFC, upon a material
breach of the Merger Agreement by RPGI that has not been cured and that would
cause RPGI to be incapable, by September 30, 1998, of (i) performing in all
material respects the obligations under the Merger Agreement that it is required
to perform at or prior to the Effective Time, (ii) providing an officer's
certificate to the effect that it has performed all such obligations, (iii)
ensuring that the representations and warranties made by RPGI in the Merger
Agreement are true as of the applicable date, or (iv) providing an officer's
certificate to the effect that such representations and warranties are true as
of the applicable date; (d) subject to the parties' obligation to use their
reasonable best efforts to do or cause to be done all things necessary or
advisable to consummate the Merger, by either RPGI or CFC if any court of proper
jurisdiction issues or enforces any order or ruling which restrains or prohibits
the Merger and such order or ruling is final and cannot be appealed; (e) by
either RPGI or CFC if the Merger has not been consummated on or before September
30, 1998, provided the terminating party is not otherwise in material breach of
its representations, warranties or obligations under the Merger Agreement; (f)
by either RPGI or CFC if the RPGI Special Meeting concludes without shareholder
approval of the Merger Agreement and the transactions contemplated therein; (g)
by RPGI if a third party commences a tender or exchange offer to acquire any
shares of RPGI common stock or makes a proposal to acquire any equity interest
in RPGI, to engage in any form of business combination with RPGI or to purchase
all or (except in the ordinary course of business) any substantial portion of
RPGI's assets, provided that RPGI's Board of Directors, after consultation with
RPGI's financial advisor, determines that such offer or proposal may reasonably
be expected to result in a transaction or transactions that will be more
favorable to RPGI's shareholders than the Merger and provided further that if
RPGI terminates the Merger Agreement on the basis of such offer or proposal, it
shall pay CFC $500,000.
27
<PAGE>
AMENDMENT
The Merger Agreement may be amended or supplemented in writing by
mutual agreement of CFC and RPGI at any time, but after the approval of the
Merger Agreement by the holders of shares of RPGI common stock, no amendment may
be made without further approval of such shareholders which (a) changes the form
or decreases the amount of the consideration to be received by such shareholders
pursuant to the Merger Agreement, (b) in any way materially adversely affects
the rights of holders of shares of RPGI common stock or (c) under applicable law
would require approval of RPGI shareholders. Subject to the foregoing sentence,
CFC may at any time alter the method of effecting the acquisition of RPGI if and
to the extent it deems such alteration to be desirable; provided, however, that
no such change shall (a) alter the type of consideration to be received by the
holders of RPGI common stock, (b) reduce the value of such consideration, (c)
adversely affect the intended tax-free treatment to RPGI's shareholders as a
result of receiving such consideration or preclude the issuance of the tax
opinion of McNair Law Firm, P.A., (d) materially impair the ability of CFC or
RPGI to satisfy any of the conditions to consummation of the Merger, or (e)
materially delay the Closing.
CONDUCT OF RPGI'S AND CFC'S BUSINESSES PRIOR TO THE EFFECTIVE TIME
Under the terms of the Merger Agreement, RPGI has agreed with respect
to the conduct of its business prior to the Effective Time, among other things:
(i) except for matters contemplated by the Merger Agreement, to carry on its
business in the usual and customary manner and to use reasonable efforts to
preserve intact its current business organization, keep available the services
of its employees and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
RPGI; (ii) not to declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock; (iii) not to split,
combine or reclassify any of its capital stock or, other than pursuant to
exercise of existing RPGI stock options, issue any other securities in respect
of, or in substitution for, its capital stock or any other equity security of
RPGI or any rights, warrants or options to acquire any such shares or other
securities; (iv) not to purchase, redeem or otherwise acquire any shares of
capital stock of RPGI or any other equity securities of RPGI or any rights,
warrants or options to acquire any such shares or other securities; (v) not to
issue, deliver, sell, pledge or otherwise encumber any shares of its capital
stock, or any securities convertible into, or any rights, warrants or options to
acquire, any such shares (other than the issuance of RPGI common stock upon the
exercise of existing RPGI stock options); (vi) not to amend its articles of
incorporation or bylaws; (vii) not to acquire or agree to acquire, by merger,
asset purchase or any other means, any other business organization or division
thereof; (viii) not to acquire or agree to acquire any assets that are material,
individually or in the aggregate, to RPGI, except in the ordinary course of
business; (ix) not to subject to a lien or sell, lease or otherwise dispose of
any of its material assets, except in the ordinary course of business; (x) not
to (a) incur any debt or guarantee any debt of another person or (b) issue or
sell any debt securities of RPGI, guarantee the debt securities of another
person or enter into any agreement to maintain the financial condition of
another person, except in the ordinary course of business under RPGI's existing
credit line with Carolina First Bank or not in excess of $100,000; (xi) not to
make any loans, advances or capital contributions to, or invest in, any other
person, except in the ordinary course of business; (xii) to advise CFC of any
change in RPGI's business that has or may reasonably be expected to have a
material adverse effect; (xiii) not to take any action that would represent a
material breach of the Merger Agreement or cause any of the representations or
warranties contained therein to become untrue in any material respect; (xiv)
except for expenses in connection with the Merger and existing contractual
obligations, not to incur any expenses in excess of $100,000; (xv) not to grant
any executive officers any increase in compensation (with certain exceptions) or
enter into any employment agreement with any executive officer, except as might
be required by any existing, effective employment or termination agreements
previously disclosed to CFC; (xvi) not to change its servicing, investment,
liability management or other material policies in any material respect and not
to implement or adopt any material change in accounting principles, practices or
methods (other than as required by generally accepted accounting principles),
except as directed by a governmental authority or required by law, in the
ordinary course of business in accord with past practices, as reasonably
appropriate in light of changes in economic circumstances, at the request of a
client or as contractually required by a third-party vendor or subcontractor.
28
<PAGE>
Under the terms of the Merger Agreement, CFC has agreed, with respect
to the conduct of its business prior to the Effective Time, among other things,
except as contemplated by the Merger Agreement or CFC's plans as made available
to RPGI, to carry on, and to cause its subsidiaries each to carry on, its
business in the usual and customary manner and to use, and to cause its
subsidiaries each to use, reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationship with customers, suppliers, licensors, licensees, distributors
and others having business dealings with it.
REQUIRED REGULATORY APPROVALS
The Merger is subject to regulatory approval as set forth below. To the
extent that the following information describes statutes and regulations, it is
qualified in its entirety by reference to the particular statutes and
regulations promulgated under such statutes.
The Merger is subject to the approval of the Federal Reserve under
Section 4 of the Bank Holding Company Act of 1954, as amended. CFC has filed a
notice application with the Federal Reserve with respect to this transaction and
has received clearance for its consummation.
CFC and RPGI 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
CFC anticipates that the employment of certain RPGI employees will be
terminated in connection with the Merger. It is generally expected that the
retained RPGI officers and employees will continue in similar positions in an
at-will employment capacity. In general, retained RPGI 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 CFC. After consummation of the Merger, it is anticipated that CFC
will cause RPGI to conduct its business in generally the same manner in which it
is now conducted, except that it will not engage in providing services to any
new third parties for the immediate future. See "--Interests of Certain Persons
in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
INDEMNIFICATION; ADVANCEMENT OF EXPENSES; DIRECTORS' AND OFFICERS'
INSURANCE. The Merger Agreement provides that CFC will indemnify RPGI's
directors and 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
South Carolina and will provide such persons with the maximum elimination of
liability provided for in Section 33-2-102(e) of the 1976 South Carolina Code of
Law as if RPGI were permitted to eliminate such liability under such section.
The Merger Agreement also provides that RPGI and CFC shall use their reasonable
best efforts to maintain RPGI's existing directors' and officers' liability
insurance policy for six years following the Effective Time covering persons
covered by such policy as of the Closing Date, except that CFC need not make
aggregate premium payments with respect to such policy in excess of $100,000. In
the event that such policy costs more than $100,000, CFC shall obtain the
maximum amount of coverage available for an aggregate premium of $100,000.
EMPLOYMENT AND SEVERANCE AGREEMENTS. RPGI has entered into severance
agreements with two of its executive officers, Angelo R. Palombi and Gary Bruce
Thomas. These severance agreements provide that, contingent upon the
consummation of the Merger, RPGI shall be obligated to pay to Mr. Palombi or Mr.
Thomas, as the case may be, a lump sum equal to 15 times (in the case of Mr.
Palombi) or 12 times (in the case of Mr. Thomas) his monthly base compensation
amount as of March 9, 1998 if (i) he voluntarily terminates his employment with
RPGI or CFC or any subsidiary thereof within one year following the Closing (for
any reason, in the case of Mr. Palombi, or, in the case of Mr. Thomas, because
29
<PAGE>
of (a) his determination in his sole discretion that as a result of a change in
circumstances occurring after the Closing significantly affecting his position,
he can no longer adequately exercise the authority, powers, functions or duties
of his position or (b) his determination in his sole discretion that he can no
longer perform his duties by reason of a substantial diminution in his
responsibilities, status or position or (c) he is required to relocate to an
area 125 miles or more outside of Columbia, South Carolina) or (ii) his
employment is terminated (a) for any reason within one month following the
Closing or (b) without cause (as defined in the severance agreements) within one
year after the Closing. RPGI has also entered into an employment contract with
R. Dean Dougherty. This contract provides that if Mr. Dougherty's employment is
terminated as the result of a sale or transfer of RPGI's common stock, he is
entitled to receive any incentive commissions payable under the contract with
respect to any calendar quarter ended on or before the date of termination plus
his salary for the lesser of (i) two years from the date of termination or (ii)
the period beginning on the date of termination and ending June 30, 2000, less
any sums owed to RPGI as of the date of termination. The maximum amounts payable
under these agreements range from approximately $190,000 to $502,000.
OTHER MATTERS RELATED TO EMPLOYEES AND EMPLOYEE BENEFIT PLANS. In the
Merger Agreement, CFC and RPGI agreed to cooperate to develop staffing plans for
the future operation of RPGI. CFC agreed that those former RPGI employees who
are employed by RPGI immediately following the Closing Date will be eligible to
participate in CFC's benefit plans and will receive past service credit for
eligibility and vesting purposes (but not benefit accrual) under CFC's qualified
retirement plans for years of service with RPGI and its predecessor companies.
RPGI has agreed that, to the extent permitted by law, it will terminate its
Employee Stock Ownership Plan and 401(k) plan effective prior to the closing of
the transactions contemplated by the Merger Agreement. The Merger Agreement also
provides that from and after the Effective Time, (i) employees of RPGI who
became covered under a medical plan sponsored by CFC would receive credit for
service as required by the Health Insurance Portability and Accountability Act
of 1996 for purposes of determining the applicability of any relevant
preexisting condition exclusion; (ii) each employee of RPGI whose employment
with RPGI was terminated following the Merger would receive severance pay in
accordance with the RPGI severance policies and agreements referenced in the
Merger Agreement; and, (iii) that the assets of the RPGI Employee Stock Option
Plan and 401(k) plan would be distributed to their respective participants, to
the extent permitted by law.
ACCOUNTING TREATMENT
CFC will account for the acquisition of RPGI as a "purchase" under
generally accepted accounting principles. Under the purchase method of
accounting, the assets and liabilities of RPGI will be adjusted to their
estimated market values and combined with the assets and liabilities of CFC.
Shareholders' 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 appropriate periods 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
RPGI 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 RPGI 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 RPGI shareholders who acquired their shares of RPGI 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. This summary is included for general
informational purposes only and does not address the state, local or foreign tax
consequences of the Merger, if any. This summary also is based on provisions of
the Code, the Treasury Regulations
30
<PAGE>
promulgated thereunder and rulings and court decisions as of the date hereof,
all of which are subject to change, possibly retroactively.
Upon consummation of the Merger, RPGI shareholders who do not dissent
from the Merger will be entitled to receive $1.237 for each share of RPGI common
stock held by them, such amount to be paid in the form of shares of CFC common
stock, which will be valued at the average closing price of CFC common stock for
the 20 trading days immediately preceding the Closing Date. Certain additional
consideration may also be payable in the years 1999 and 2000 in shares of CFC
common stock if certain performance-related criteria are met with respect to
CFC's credit card portfolio. Cash will be paid in lieu of fractional shares.
RPGI will receive an opinion (the "RPGI Tax Opinion") from McNair Law
Firm, P.A., that, based upon its review of the Registration Statement of which
this Proxy Statement/Prospectus is a part, certain other facts and documents
which it has considered relevant and certain representations made to it by RPGI
and CFC, the Merger will have the federal income tax consequences set forth
below:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by the shareholders of
RPGI upon the exchange in the Merger of their shares of RPGI common
stock for CFC common stock, except that if additional shares of CFC
common stock are issued in the years 1999 and 2000 as additional
compensation in the Merger, a portion of such shares will be deemed to
be interest income to the recipient as described in subparagraph (iii)
below;
(iii) if additional shares of CFC common stock are issued in
the years 1999 and 2000 as additional compensation in the Merger,
shareholders of RPGI that receive such shares shall be deemed to have
interest in the year of receipt of such shares equal to the excess of
the fair market value of such CFC common stock on the date of the
issuance of such shares over the present value of the fair market value
of such CFC common stock determined by discounting such amount using
the "applicable federal rate" of interest, compounded annually, from
the Effective Time to the date of issuance of such additional
consideration;
(iv) except to the extent that the CFC shares issued as
additional consideration are deemed to be interest income, the tax
basis of the CFC common stock received in the Merger by a shareholder
of RPGI will be the same as the tax basis of the RPGI common stock
exchanged for such CFC common stock, provided that such shareholder
disposes of his CFC common stock received pursuant to the Merger only
after the lapse of the right of such shareholder to receive any
additional consideration pursuant to the Merger;
(v) to the extent that the CFC shares issued as additional
consideration are deemed to be interest income, the tax basis of such
CFC shares will equal the amount recognized as interest income;
(vi) except to the extent that the CFC shares issued as
additional consideration are deemed to be interest income, the holding
period of the CFC common stock received in the Merger by a shareholder
of RPGI will include the holding period of such shareholder in the RPGI
common stock exchanged for such CFC common stock, provided that the
RPGI common stock is held as a capital asset at the Effective Time;
(vii) to the extent that the CFC shares issued as additional
consideration are deemed to be interest income, the holding period of
such CFC shares will commence on the date such CFC common stock is
received;
31
<PAGE>
(viii) a shareholder of RPGI who receives cash in the Merger
in lieu of a fractional share interest in CFC common stock will be
treated as having received such fractional share in the Merger and then
as having exchanged such fractional share for cash in a redemption
subject to Section 302 of the Code; and
(ix) if a shareholder of RPGI dissents to the Merger and
receives solely cash in exchange for such shareholder's RPGI common
stock, such cash will be treated as having been received in redemption
of the RPGI common stock (or possibly CFC common stock deemed to have
been received in the Merger), subject to the provisions and limitations
of Section 302 of the Code.
The RPGI Tax Opinion will not include an opinion as to the
determination of a shareholder's basis in his shares of CFC common stock if such
shareholder disposes of his CFC common stock prior to the lapse of any right of
such shareholder to receive any additional consideration pursuant to the Merger.
If an RPGI shareholder who receives CFC common stock through the Merger sells or
otherwise disposes of any of such shares prior to the lapse of any right of such
shareholder to receive any additional consideration, then such shareholder's
basis in his CFC common stock will vary depending upon the number of shares of
CFC common stock disposed of and the number of additional shares, if any, of CFC
common stock such shareholder was to receive as additional consideration. Each
shareholder is urged to consult with his own tax advisor regarding the
determination of his basis in the CFC common stock received in the Merger,
including any additional consideration issued as described above.
In rendering the RPGI Tax Opinion, counsel will rely upon certain
written representations as to factual matters made by appropriate officers of
CFC and RPGI. Such representations are customary for opinions of this type; the
RPGI Tax Opinion cannot be relied upon, however, if any such representation is,
or later becomes, inaccurate. No ruling from the Internal Revenue Service (the
"IRS") with respect to the tax consequences of the Merger has been, or will be,
requested, and the RPGI Tax Opinion is not binding upon the IRS or the courts.
If the Merger is consummated, and it is later determined that the Merger did not
qualify as a "reorganization" under the Code, then each former shareholder of
RPGI would recognize taxable gain or loss equal to the difference between the
fair market value of the CFC common stock received by the shareholder in the
Merger and the shareholder's tax basis in the RPGI common stock exchanged
therefor.
The foregoing discussion of the tax consequences of the Merger applies
only to a shareholder of RPGI who holds RPGI common stock as a capital asset,
and may not apply to special situations, such as shareholders of RPGI, if any,
who received their RPGI common stock upon the exercise of employee stock options
or otherwise as compensation and shareholders of RPGI that are insurance
companies, securities dealers, financial institutions or foreign persons.
Any cash received in the Merger by a shareholder of RPGI may be subject
to backup withholding at a rate of 31%. Backup withholding will not apply,
however, to a taxpayer who (i) furnishes a correct taxpayer identification
number ("TIN") and certifies that such taxpayer is not subject to backup
withholding on IRS Form W-9 (or an appropriate substitute form), (ii) provides a
certificate of foreign status on IRS Form W-8 (or an appropriate substitute
form) or (iii) is otherwise exempt from backup withholding. The IRS may impose a
$50 penalty upon any taxpayer who fails to provide the correct TIN, as required.
The Merger will not be a taxable event to CFC or its shareholders.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER A
SHAREHOLDER OF RPGI SHOULD VOTE IN FAVOR OF THE MERGER. BECAUSE CERTAIN TAX
CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES
OF EACH SHAREHOLDER OF RPGI, EACH SHAREHOLDER OF RPGI IS URGED TO CONSULT HIS
OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER
OF THE
32
<PAGE>
MERGER (INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN
TAX LAWS).
RESTRICTIONS ON RESALES BY AFFILIATES
The issuance of the CFC Shares has been registered under the Securities
Act. Accordingly, resales of the CFC Shares by non-affiliates of RPGI will not
require registration. However, under existing law, any person who is an
"affiliate" of RPGI (as defined in the Securities Act and the rules and
regulations issued thereunder) at the time the proposed exchange is submitted to
a vote of the RPGI shareholders and who wishes to sell CFC Shares will be
required either to (a) register the sale of the CFC Shares under the Securities
Act, (b) sell in compliance with Rule 145 promulgated under the Securities Act
(permitting limited sales under certain circumstances), or (c) utilize an
exemption (if any) from registration other than Rule 145. Rule 145(d) requires
that persons deemed to be RPGI affiliates resell their CFC Shares pursuant to
certain of the requirements of Rule 144 under the Securities Act if such CFC
Shares are sold within one year after receipt thereof. After one year, if such
person is not an affiliate of CFC and CFC is current in the filing of its
periodic securities law filings, a former RPGI affiliate may freely sell the CFC
Shares without limitation. After two years from the issuance of the CFC Shares,
if such person is not a CFC affiliate at the time of sale or for at least three
months prior to such sale, such person may freely sell such CFC Shares without
limitation, regardless of the status of CFC's periodic securities law filings.
Stop transfer instructions will be given by CFC to the Exchange Agent with
respect to the CFC common stock to be received by persons subject to the
restrictions described above, and the certificates for such stock may be
appropriately legended. An "affiliate" of RPGI, 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, RPGI at the time of consummation of the Merger. In
this context, affiliates generally include directors, executive officers, and
the holders of 10% or more of RPGI's 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).
DISSENTERS' RIGHTS
Pursuant to the South Carolina Dissenters' Rights Statute, the holders
of shares of RPGI common stock are entitled to dissent from approval of the
Merger Agreement and receive payment of the fair value of their shares in the
event the Merger is consummated, provided that such shareholders comply with the
provisions of the South Carolina Dissenters' Rights Statute.
Under the South Carolina Dissenters' Rights Statute, only shareholders
of RPGI who are entitled to vote on the Merger Agreement have the right to
dissent from the Merger and obtain payment of the fair value of such holder's
shares of RPGI common stock. The South Carolina Dissenters' Rights Statute
contains detailed information as to a dissenting shareholder's right to payment
and the procedural steps to be followed by a dissenting shareholder. The
following description is only a summary of these provisions and is qualified in
its entirety by reference to the South Carolina Dissenters' Rights Statute, a
copy of which is attached to this Proxy Statement/Prospectus as Exhibit D and is
incorporated herein by reference.
If the Merger Agreement is approved by the required vote of the
shareholders of RPGI and the Merger is consummated, each shareholder of RPGI who
votes against the Merger Agreement or who fails to vote and who follows the
procedures set forth in the South Carolina Dissenters' Rights Statute is
entitled to demand payment of the fair value of such holder's shares.
A shareholder electing to exercise such holder's dissenters' rights
must give notice to RPGI, before the vote on the Merger Agreement at the RPGI
Special Meeting, of such holder's intent to demand payment for such holder's
shares if the Merger is effectuated and must not vote his or her shares in favor
of the proposed action. A vote cast in favor of approval of the Merger Agreement
by the holder of a proxy solicited hereby, however, will not constitute a waiver
of a shareholder's right to dissent from approval of the Merger Agreement,
provided such shareholder complies with the other requirements of the South
33
<PAGE>
Carolina Dissenters' Rights Statute. All notices of intent to demand payment
should be addressed to: Secretary, Resource Processing Group, Inc., 101
Executive Center Drive, Columbia, South Carolina 29210. A beneficial shareholder
may assert dissenters' rights as to shares held on such holder's behalf by a
nominee only if such holder dissents with respect to all shares of which such
holder is the beneficial owner or over which such holder has the power to direct
the vote and such holder notifies RPGI in writing of the name and address of the
record holder of the shares, if known. A record shareholder may assert
dissenters' rights as to fewer than all the shares registered in such holder's
name only if such holder dissents with respect to all shares beneficially owned
by any one person and notifies RPGI in writing of the name and address of each
person on whose behalf such holder asserts dissenters' rights. A dissenting
shareholder need not vote against the Merger Agreement in order to preserve such
holder's dissenters' rights after filing such holder's notice of dissent.
If the Merger is authorized at the RPGI Special Meeting, within ten
days thereafter, RPGI will deliver a written notice to all former shareholders
of RPGI who notified RPGI in compliance with the South Carolina Dissenters'
Rights Statute that they intend to demand payment for their shares. Such notice
will: (i) state where the payment demand must be sent and where certificates for
shares of RPGI common stock must be deposited; (ii) supply a form for demanding
payment that includes the date of the first announcement to news media or to
shareholders of the terms of the Merger and requires that the person asserting
dissenters' rights certify whether or not such holder (or the beneficial
shareholder on whose behalf he or she is asserting dissenters' rights) acquired
beneficial ownership of the shares before that date; (iii) set a date by which
RPGI must receive payment demand; and (iv) be accompanied by a copy of the South
Carolina Dissenters' Rights Statute.
A shareholder sent the notice described above must demand payment,
certify whether such holder (or the beneficial shareholder on whose behalf he or
she is asserting dissenters' rights) acquired beneficial ownership of the shares
before the date set forth in the notice, and deposit his or her shares in
accordance with the terms of the notice. A shareholder who does not comply
substantially with the requirements that such holder demand payment and deposit
such holder's shares where certificates are required to be deposited by the
appropriate date is not entitled to payment for such holder's shares under the
South Carolina Dissenters' Rights Statute.
After consummation of the Merger, or upon receipt of a payment demand,
RPGI will pay each such dissenter who substantially complied with the payment
demand requirements the amount that RPGI estimates to be the fair value of such
holder's shares, plus accrued interest. Such payment will be accompanied by
certain financial information regarding RPGI, a statement of the estimate of the
fair value, an explanation of how the fair value and interest were calculated, a
statement of the dissenter's right to demand additional payment under the South
Carolina Dissenters' Rights Statute and a copy of the South Carolina Dissenters'
Rights Statute.
If a dissenting shareholder believes that the amount paid for such
holder's shares is less than the fair value of such holder's shares or that the
interest due is calculated incorrectly, if RPGI fails to make or offer payment
within 60 days after the date set for demanding payment or if RPGI, having
failed to take the proposed action, does not return the deposited certificates
within 60 days after the date set for demanding payment, the dissenter may
notify RPGI in writing of such holder's own estimate of the fair value of such
holder's shares and amount of interest due and demand payment of such holder's
estimate (less any payment already received). A dissenter waives the right to
demand additional payment unless such demand is made in writing within 30 days
after RPGI has made or offered payment for such holder's shares. If RPGI and the
dissenter do not settle a demand for additional payment within 60 days after
RPGI receives the demand, RPGI must commence a proceeding for judicial appraisal
of the shares or pay the amount demanded. The costs of a court-appointed
appraiser will be borne by RPGI, unless the court finds that the dissenter acted
arbitrarily, vexatiously or not in good faith in demanding additional payment
for the dissenter's shares. The court also may assess the fees and expenses of
counsel and experts for one party against another under certain circumstances.
34
<PAGE>
Because of the detailed provisions and requirements of the South
Carolina Dissenters' Rights Statute, each dissenting shareholder should consult
with such holder's own legal counsel concerning the procedures and remedies
available to such holder. Any failure to follow the detailed procedures set
forth in the South Carolina Dissenters' Rights Statute may result in the loss of
a shareholder's right to claim fair value as described herein.
RECOMMENDATION OF THE RPGI BOARD.
THE RPGI BOARD HAS CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS
OF RPGI AND HAS AUTHORIZED CONSUMMATION THEREOF, SUBJECT TO APPROVAL OF THE RPGI
SHAREHOLDERS, RECEIPT OF ALL REQUISITE REGULATORY APPROVALS, AND SATISFACTION OF
CERTAIN OTHER CONDITIONS. THE RPGI BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
35
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Capitalization is based on combining
the historical capitalization of CFC at December 31, 1997 with the historical
consolidated capitalization of RPGI at December 31, 1997, adjusting for the
issuance of additional shares expected to be issued in the Merger. The unaudited
Pro Forma Combined Capitalization also includes figures reflecting adjustments
to account for a Regulation S offering by CFC of 2,000,000 shares of CFC common
stock that was consummated in February 1998.
The unaudited Pro Forma Combined Condensed Balance Sheet is based on
combining the historical consolidated balance sheet for CFC at December 31, 1997
with the historical balance sheet of RPGI at December 31, 1997, adjusting for
the issuance of additional shares expected to be issued in the Merger. The
unaudited Pro Forma Combined Condensed Balance Sheet also provides figures
reflecting adjustments for the CFC Regulation S offering.
The unaudited Pro Forma Combined Condensed Statement of Earnings is
based on the combination of the historical consolidated statement of income of
CFC for the year ended December 31, 1997 with the historical statement of income
of RPGI for the year ended December 31, 1997 and adjusting the combined results
to reflect the application of purchase accounting as if the acquisition of RPGI
had occurred on January 1, 1997. The unaudited Pro Forma Combined Condensed
Statement of Earnings does not reflect the CFC Regulation S offering.
The Merger will be accounted for under the purchase method of
accounting, and the unaudited pro forma data are derived in accordance with such
method.
The unaudited pro forma data do not reflect any potential benefits from
potential cost savings or synergies expected to be achieved following the
Merger.
Information set forth below should be read in conjunction with such
historical and unaudited 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.
36
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CAPITALIZATION
December 31, 1997 Purchase Pro Forma Combined
---------------------- Accounting Pro Forma Adjusted for 2/98
CFC RPGI Adjustments Combined Regulation S Offering
---- ------ ----------- -------- ---------------------
(Dollars in thousands, except footnote)
<S> <C> <C> <C> <C> <C>
Long-term debt:
Subordinated notes $25,489 $ - $ - $25,489 $25,489
FHLB advances 10,000 - - 10,000 10,000
ESOP debt 2,575 - - 2,575 2,575
Mortgage debt 1,055 - - 1,055 1,055
Note payable - 2,267 - 2,267 2,267
--------- ----- ------ ----- -----
Total long-term debt 39,119 2,267 - 41,386 41,386
------ ----- ------ ------ ------
Shareholders' equity:
Common stock 15,659 91 358 (a) 16,108 18,108
Surplus 164,517 7,725 3,061 (a) 175,303 211,723
Retained earnings 20,059 2,788 (2,788) (a) 20,059 20,059
Nonvested restricted stock and
guarantee of ESOP debt (3,129) - - (3,129) (3,129)
Unrealized gain on securities
available for sale 4,553 - - 4,553 4,553
----- ------ ------ ----- -----
Total shareholders' equity 201,659 10,604 631 212,894 251,314
------- ------ ----- ------- -------
Total capitalization $240,778 $12,871 $ 631 $254,280 $292,700
======== ======= ====== ======== ========
</TABLE>
- ----------------------------------
(a) To reflect the effect of issuing 449,384 shares of CFC common stock based
on an assumed value of $25.00 per share of CFC common stock and assuming
receipt of the base (non-contingent) consideration only.
37
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
Purchase Pro Forma Combined
December 31, 1997 Accounting Pro Forma Adjusted for 2/98
CFC RPGI Adjustments Combined Regulation S Offering
---- ----- ----------- --------- ---------------------
(Dollars in thousands, except share data and footnotes)
Assets:
<S> <C> <C> <C> <C> <C>
Cash and due from banks $73,326 $346 $ - $73,672 $112,092
Interest-bearing bank balances 34,703 - - 34,703 34,703
Investment securities 298,533 3,956 - 302,489 302,489
Loans 1,614,190 - - 1,614,190 1,614,190
Less unearned income (11,775) - - (11,775) (11,775)
Less allowance for loan losses (16,211) - - (16,211) (16,211)
-------- ------ ----- -------- --------
Net loans 1,586,204 - - 1,586,204 1,586,204
Premises and equipment 39,682 2,508 251 (a) 42,441 42,441
Intangible assets 58,228 - 879 (b) 59,107 59,107
Deferred contract costs - 10,334 - 10,334 10,334
Other assets 65,670 2,114 - 67,784 67,784
------- ----- ------- ------- ------
Total assets $2,156,346 $19,258 $1,130 $2,176,734 $2,215,154
=========== ======= ====== =========== ==========
Liabilities and Shareholders' equity:
Liabilities
Deposits
Noninterest-bearing $206,938 $ - $ - $206,938 $206,938
Interest-bearing 1,539,604 - - 1,539,604 1,539,604
---------- ------- ------- ---------- ---------
Total deposits 1,746,542 - - 1,746,542 1,746,542
Borrowed funds 139,739 - - 139,739 139,739
Long-term debt 39,119 2,267 - 41,386 41,386
Other liabilities 29,287 6,387 99 (c) 36,173 36,173
------- ----- ------ ------
400 (d)
Total liabilities 1,954,687 8,654 499 1,963,840 1,963,840
---------- ----- --- ---------- ---------
Total shareholders' equity 201,659 10,604 631 (e) 212,894 251,314
-------- ------ --- -------- -------
Total liabilities and shareholders' equity $2,156,346 $19,258 $1,130 $2,176,734 $2,215,154
=========== ======= ====== =========== ==========
</TABLE>
- -----------------------------------
(a) To adjust the premises and equipment of RPGI to estimated market value.
(b) To record the excess cost of acquisition over the estimated market value of
the net assets acquired (goodwill of $879,000).
(c) To adjust the deferred tax liabilities as a result of the purchase
accounting adjustments using CFC's statutory tax rate of 38%.
(d) To record liability for estimated costs related to the Merger.
(e) To give effect to the acquisition of RPGI, assuming the issuance of 449,384
shares of CFC common stock, $1.00 par value per share, based on an assumed
value of $25.00 per share of CFC common stock and receipt of the base
(non-contingent) consideration only. The exchange ratio would be 0.0495 and
the total value of CFC common stock exchanged would be $11,234,600.
38
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
Purchase
Year Ended December 31, 1997 Accounting Pro Forma
CFC RPGI Adjustments Combined (a)
--- ---- ------------ --------
(Dollars in thousands, except share data)
<S> <C> <C> <C> <C>
Interest income $135,706 $196 $ - $135,902
Interest expense 69,000 279 - 69,279
------ --- ------- ------
Net interest income (loss) 66,706 (83) - 66,623
Provision for loan losses 11,646 - - 11,646
------ --------- --------- ------
Net interest income (loss) after provision
for loan losses 55,060 (83) - 54,977
Noninterest income 19,615 19,912 - 39,527
Noninterest expenses 52,243 23,566 88 (b) 75,922
------ ------ ------
25 (c)
----
Income (loss) before income taxes 22,432 (3,737) (113) 18,582
Income taxes (benefit) 8,092 (1,441) (10)(d) 6,641
----- ------- ---- -----
Net income (loss) $ 14,340 $ (2,296) $ (103) $ 11,941
======== ========= ======= ========
Net income (loss) per common share
Basic $1.19 $ (0.25) - $0.96
Diluted 1.18 (0.25) - 0.95
Average shares outstanding
Basic 11,989,517 9,082,126 - 12,438,901
Diluted 12,175,561 9,082,126 - 12,624,945
</TABLE>
- ------------------------------------
(a) Pro forma combined results do not reflect any adjustments to account for
CFC's Regulation S offering consummated in February 1998.
(b) To amortize goodwill over a 10-year period using the straight-line method.
(c) To increase depreciation expense from mark-up of RPGI premises and equipment
to an estimated market value.
(d) To show impact of taxes at 38% tax rate.
39
<PAGE>
INFORMATION ABOUT CAROLINA FIRST CORPORATION
GENERAL
CAROLINA FIRST CORPORATION. CFC is a bank holding company headquartered
in Greenville, South Carolina which engages in a general banking business
through its four operating subsidiaries: (1) Carolina First Bank, a South
Carolina-chartered bank headquartered in Greenville, South Carolina, (2)
Carolina First Mortgage Company ("CF Mortgage"), a mortgage loan origination and
servicing company headquartered in Columbia, South Carolina, (3) Blue Ridge
Finance Company, Inc. ("Blue Ridge"), an automobile finance company
headquartered in Greenville, South Carolina, and (4) CF Investment Company ("CF
Investment"), a small business investment company headquartered in Greenville,
South Carolina (collectively, the "Operating Subsidiaries"). Through the
Operating Subsidiaries, CFC 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. CFC, which commenced operations in
December 1986, currently conducts business in 65 locations in South Carolina and
is the largest independent South Carolina- headquartered financial institution.
At December 31, 1997, it had total assets of approximately $2.2 billion, total
loans of approximately $1.6 billion, total deposits of approximately $1.7
billion and approximately $202 million in shareholders' equity.
CFC 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 CFC'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 CFC's loan and deposit growth. CFC 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.
CFC's objective is to be 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. CFC currently serves five principal market areas: the Anderson
metropolitan area and surrounding counties (located in the upstate region of
South Carolina); 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). CFC's market areas are located in the four
largest Metropolitan Statistical Areas of the state. Following the acquisition
in November 1997 of First Southeast Financial Corporation ("First Southeast")
and its wholly-owned subsidiary, First Federal Savings and Loan Association of
Anderson ("First Federal"), CFC ranked first in market share in Anderson County,
a strategic market located along the desirable Interstate 85 corridor between
Atlanta and Charlotte and the fourth largest Metropolitan Statistical Area in
South Carolina. CFC also has branch locations in other counties in South
Carolina.
CFC 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, the acquisition in March 1993 of 12 branch locations of Republic
National Bank, the acquisition in July 1997 of Lowcountry Savings Bank, Inc. and
the acquisition in November 1997 of First Southeast and its wholly-owned
subsidiary, First Federal, in which deposits of approximately $285 million were
assumed. Approximately half of CFC's total deposits have been generated through
acquisitions. CFC anticipates that it will continue to expand in the future and
is frequently in discussions regarding possible acquisitions. See "--Recent
Developments."
40
<PAGE>
CFC is a legal entity separate and distinct from its banking and
non-banking subsidiaries. Accordingly, the right of CFC, and thus the right of
CFC'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 CFC in its
capacity as a creditor may be recognized. The principal source of CFC's revenues
is dividends from its subsidiaries.
CAROLINA FIRST BANK. Carolina First Bank is a South Carolina-chartered,
non-member bank, which is headquartered in Greenville, South Carolina. It
currently engages in a general banking business through 62 locations, which are
located throughout South Carolina. It began its operations in December 1986 and
at December 31, 1997 had total assets of approximately $2.1 billion, total loans
of approximately $1.6 billion and total deposits of approximately $1.8 billion.
Its deposits are insured by the Federal Deposit Insurance Corporation (the
"FDIC"). Carolina First Bank provides a full range of commercial and consumer
banking services, including short- and medium-term loans, mortgage loans,
revolving credit arrangements, international banking services, inventory and
accounts receivable financing, equipment financing, real estate lending, credit
card loans, safe deposit services, savings accounts, interest- and
noninterest-bearing checking accounts, home banking and installment and other
personal loans. Carolina First Bank also provides trust services, investment
products and various cash management programs.
CF MORTGAGE. CF 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 December 31, 1997, CF Mortgage was servicing or subservicing
approximately 20,187 loans having an aggregate principal balance of
approximately $1.7 billion.
BLUE RIDGE. On December 29, 1995, CFC acquired Blue Ridge, an
automobile finance company headquartered in Greenville, South Carolina. Blue
Ridge operates from one location and, at December 31, 1997, had approximately
$19.5 million in total assets. Blue Ridge is engaged primarily in indirect
automobile lending.
CF INVESTMENT. CF Investment is licensed through the U.S. Small
Business Administration to operate as a Small Business Investment Company. CF
Investment is engaged in making investments in small or start-up companies
developing or employing technologies relevant to the banking industry. In 1997,
CFC capitalized CF Investment with a contribution of $3.0 million. On December
19, 1997, CF Investment Company agreed to lend up to $1.2 million to ITS, Inc.,
a South Carolina corporation specializing in electronic document storage and
retrieval, in return for a 49% equity ownership position.
CAPITAL ADEQUACY
CFC. 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
shareholders' equity, noncumulative perpetual preferred stock, a limited amount
of cumulative perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries, less certain goodwill items and other
intangible assets. 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 December 31, 1997, CFC was in compliance with the risk-based
capital guidelines and was well capitalized under prompt corrective action
provisions.
41
<PAGE>
CAROLINA FIRST BANK. As a state-chartered, FDIC-insured institution
which is not a member of the Federal Reserve, Carolina First Bank is subject to
capital requirements imposed by the Federal Deposit Insurance Corporation (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 December 31, 1997, CFC and Carolina First Bank were both
in compliance with each of the applicable regulatory capital requirements and
were well capitalized under prompt corrective action provisions.
PRO FORMA REGULATORY CAPITAL. The following tables set forth Carolina
First Bank's and CFC's regulatory capital position at December 31, 1997, on a
historical basis as well as an unaudited pro forma basis, in the case of CFC,
assuming consummation of the Merger. The unaudited pro forma information
includes figures reflecting adjustments for a Regulation S offering by CFC of
2,000,000 shares of CFC common stock that was consummated in February 1998. See
"UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
CAROLINA FIRST BANK
At December 31, 1997
--------------------
(Dollars in thousands)
Shareholders' Equity $212,273 9.98%
======== =====
Regulatory Capital
Tier I risk-based:
<S> <C> <C>
Actual................................................ $ 155,673 9.40%
Required*............................................. 66,241 4.00
------ ----
Excess................................................ $ 89,432 5.40%
====== =====
Total risk-based:
Actual................................................ $ 170,736 10.31%
Required*............................................. 132,483 8.00
------- ----
Excess................................................ $ 38,253 2.31%
=========== =====
Leverage:
Actual................................................ $ 155,673 7.51%
Required*............................................. 82,878 4.00
------ ----
Excess................................................ $ 72,795 3.51%
============ =====
Total risk-based assets................................. $ 1,656,035
===========
Total assets.......................................... $ 2,127,797
===========
</TABLE>
- ---------------------------
* For capital adequacy purposes.
42
<PAGE>
<TABLE>
<CAPTION>
CAROLINA FIRST CORPORATION
At December 31, 1997
---------------------
Unaudited Pro Forma Adjusted
Historical Unaudited Pro Forma for 2/98 Reg. S Offering
------------------ ------------------------ -------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Shareholders' Equity $ 201,659 9.35% $ 212,894 9.78% $ 251,314 11.35%
========== ===== ========== ===== ========== ======
Regulatory Capital
Tier I risk-based:
Actual.............................. $ 138,405 8.57% $ 148,761 9.12% $ 187,181 11.48%
Required*........................... 64,595 4.00 65,225 4.00 65,225 4.00
------ ---- ------ ---- ------ ----
Excess.............................. $ 73,810 4.57% $ 83,536 5.12% $ 121,956 7.48%
=========== ===== ========== ===== ========= ====
Total risk-based:
Actual.............................. $ 180,095 11.15% $ 190,451 11.68% 228,871 14.04%
Required*........................... 129,190 8.00 130,450 8.00 130,450 8.00
------- ---- ------- ---- ------- ----
Excess.............................. $ 50,905 3.15% $ 60,001 3.68% $ 98,421 6.04%
=========== ===== =========== ===== ========= ====
Leverage:
Actual.............................. $ 138,405 6.60% $ 148,761 7.02% $ 187,181 8.68%
Required*........................... 83,930 4.00 84,711 4.00 86,247 4.00
------ ---- ------ ---- ------ ----
Excess.............................. $ 54,475 2.60% $ 64,050 3.02% 100,934 4.68%
=========== ===== =========== ===== ======= ====
Total risk-based assets............... $ 1,614,872 $1,630,620 $1,630,620
========== ========== ==========
Total assets........................ $ 2,156,346 $2,176,734 $2,215,154
========== ========== ==========
</TABLE>
- ---------------------------
* For capital adequacy purposes.
43
<PAGE>
RECENT DEVELOPMENTS
REGULATION S OFFERING. On February 13, 1998, CFC completed the sale of 2,000,000
shares of CFC common stock at an offering price of $20.50 per share (the
"Regulation S Offering"), excluding underwriting discounts and offering
expenses. The Regulation S Offering was not registered under the Securities Act.
Rather, the shares offered thereby were sold in a manner so as to meet the
conditions set out in Regulation S promulgated under the Securities Act. The
purchasers in the Regulation S Offering were "non-U.S. persons" within the
contemplation of Regulation S. In connection with the Regulation S Offering, CFC
undertook to register the shares issued in the Regulation S Offering and to keep
the registration statement for the Offering effective for a period of at least
90 days, subject to extension in certain instances. This registration statement
was filed and became effective on March 11, 1998. The proceeds from the sale of
the shares in the Regulation S Offering will be utilized to provide additional
capital to support internal growth, acquisitions, the expansion of Blue Ridge
and for general corporate purposes. The proceeds from the Regulation S Offering
will also permit CFC to continue to pursue attractive acquisition possibilities
while proceeding with internal growth strategies.
FIRST QUARTER 1998 EARNINGS AND FINANCIAL DATA. On April 16, 1998, CFC
announced its earnings and other financial data at and for the quarter ended
March 31, 1998. For the quarter, CFC's net income totaled $4.7 million, or $0.28
per diluted share. This represented a substantial increase over the first
quarter of 1997 net income of $1.7 million, or $0.15 per diluted share. Per
share cash earnings (which exclude intangible amortization) for the first
quarter of 1998 were $0.32, compared with $0.15 for the first quarter of 1997.
At March 31, 1998, CFC's total assets, loans, deposits and shareholders' equity
were $2.3 billion, $1.5 billion, $1.8 billion and $245 million, respectively. At
March 31, 1998, CFC's ratio of nonperforming assets to loans and other real
estate owned was 0.21%.
OTHER ACQUISITIONS. CFC continues to explore opportunities to acquire banks and
other companies engaging in financial institution-related activities. It is not
presently known whether, or on what terms, such discussions will result in
further acquisitions. CFC's acquisition strategy is flexible in that it does not
require CFC to effect specific acquisitions so as to enter certain markets or to
attain specified growth levels. Rather than being market driven or size
motivated, CFC'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. CFC's acquisitions
may be made by the exchange of stock, through cash purchases or with other
consideration. CFC anticipates that it will continue to expand by acquisition in
the future.
44
<PAGE>
INFORMATION ABOUT RPGI
GENERAL
RPGI provides credit card servicing, marketing and program management
to financial institutions. Servicing and marketing programs like those provided
by RPGI have historically been performed in-house by most institutions. In
recent years, however, some institutions have outsourced these activities due to
the cost savings and expertise offered by third-party providers such as RPGI. In
other instances, institutions have withdrawn from or refrained from issuing
credit cards due to their lack of specialized program management expertise or
inability to achieve economies of scale. By focusing exclusively on account
servicing and related value-added services, RPGI offers clients the ability to
implement credit card programs or improve the profitability of their existing
programs through improved data analysis capabilities, specialized program
management skills and back-office cost savings.
RPGI provides data processing services, including transaction
processing, plastic production, statementing and fraud monitoring through Total
System Services, Inc. ("TSYS"). Typically, TSYS charges are paid by RPGI;
however, certain optional services provided by TSYS are billed by RPGI on a
pass-through basis. Alternatively, servicing contracts may provide for a lower
servicing fee to be paid to RPGI and a pass-through of all TSYS costs to the
client. In addition, should a client request, RPGI has the ability and the staff
to service accounts through First Data Corporation, Equifax or the client's
in-house system.
Back-office services include credit processing, customer service and
collections.
Credit Processing: RPGI monitors cardholder credit on behalf of card
issuers. RPGI reviews cardholder accounts for unusual activity, responds to
requests for credit limit increases and, through TSYS, maintains cardholder
transaction accounting. RPGI also approves or denies new account applications
and determines credit limit increases. RPGI's credit underwriting system is
highly automated and capable of taking into account both scoring algorithms and
judgmental criteria.
Customer Service: RPGI responds to cardholder communications using
state-of-the-art systems, including a Syntellect Voice Response Unit. These and
other systems allow RPGI to provide cardholders with timely and responsive
service whereby a majority of inquiries are handled while the customer is on the
phone.
Collections: RPGI's collections department monitors daily activity on
past-due and over-limit cardholder accounts, contacts cardholders concerning
such accounts and attempts to obtain agreements with respect to payment. RPGI's
collection services also include performing cardholder "skip tracing," and,
where contracted for, coordination of chargeoff and recovery efforts.
RPGI conducts origination programs for its clients to increase the
number of cardholder accounts. In addition, RPGI assists its clients in the
development of strategic plans designed to increase portfolio profitability,
cardholder account utilization and account retention and to reduce portfolio
risk.
RISK FACTORS RELATING TO THE BUSINESS OF RPGI
DEPENDENCE ON SINGLE CUSTOMER. During 1997, RPGI had four major clients, one of
which converted to an in-house system during 1997 and another which was acquired
and converted to the acquirer's in-house system in February 1998. Currently,
RPGI has two major clients and one of those clients has given notice of its
intent to terminate its servicing agreement in July 1998 and convert to an
in-house system. The servicing agreement for the remaining client, Carolina
First Bank, expires in 2003. In 1997, Carolina First Bank accounted for 31% of
RPGI's total revenue and is expected, in 1998, to account for approximately 45%
of total revenues and 70% of such revenues excluding amounts collected in
February 1998 in conjunction with the early termination of a servicing
agreement. The Carolina First Bank servicing agreement allows Carolina First
Bank to terminate that agreement early; however, such action would result in a
significant payment to RPGI for early termination. There can be no assurances
that Carolina First
45
<PAGE>
Bank will not terminate its agreement early or that RPGI will be able either to
replace the lost business or reduce its processing costs sufficiently to off-set
the lost revenues. See " -- Management's Discussion and Analysis of Financial
Condition and Results of Operations".
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION. Although the business of
RPGI has been conducted since 1989, it has only been operated as a separate
stand-alone entity since January 1, 1997. As a result of its separation from its
parent on December 31, 1996, RPGI experienced changes in its funding and
operations. Due to such factors, the historical financial information included
in this Proxy Statement/Prospectus may not reflect the financial position and
results of operations of RPGI in the future, and the financial position and
results of operations of RPGI had it been operated as a separate stand-alone
entity during the periods presented might have been materially different. See "
- -- Management's Discussion and Analysis of Financial Condition and Results of
Operations."
FINANCIAL SERVICES INDUSTRY DEVELOPMENTS. Continuing changes in the financial
services industry, including mergers, restructurings and sales of credit card
and other credit product portfolios, may have an impact on RPGI, its clients and
its potential clients. For example, RPGI will lose business if a surviving or
acquiring company of one of RPGI's clients chooses to perform credit card
transaction processing in-house or transfers processing of acquired portfolios
to a competitor of RPGI. Such changes in the financial services industry have
already significantly affected RPGI's business and there can be no assurance
that future developments in the industry will not negatively impact RPGI.
COMPETITION. The credit card processing industry is highly competitive, on the
bases of price, quality, availability of value-added services, reputation of the
servicer and, in some instances, convenience to the client. As a result, account
attrition (both losing accounts to competing card issuers) and balance attrition
(losing account balances to competing card issuers) is a significant factor in
the credit card industry. Such attrition can result in lower profitability
because of lower transaction processing volume and outstanding portfolio
balances. See " -- Competition."
CERTAIN ECONOMIC AND LEGAL RISKS. A primary risk associated with the credit card
transaction processing and marketing business involves the possibility of future
economic downturns causing an increase in credit losses. In addition, the risks
faced by RPGI's clients include (i) the risk of fraud by third parties and (ii)
the risk of unfavorable changes in cardholder payment behavior, such as
increases in discretionary repayment of account balances, resulting in
diminished income. Such negative impact on RPGI's clients may result in lower
average outstanding balances of credit card accounts serviced by RPGI and thus
less revenue. In addition, future origination programs may not occur or they may
be curtailed.
ATTRITION AND BOOKING RATES; MARKETING EXPENSES. Growth in the number and
outstanding balances of credit card accounts serviced by RPGI depends, in part,
on the levels of account and balance attrition (losing accounts and account
balances to competing card issuers) experienced by RPGI's clients. The growth in
such accounts and account balances may also be dependent on the level of success
of RPGI's marketing efforts for its clients which may be negatively impacted by
the cost to originate accounts and the response rate of account acceptance to
mailed solicitations. Competition among credit card issuers for new accounts has
intensified significantly within the past two years, resulting in lower booking
rates and lower profit margins. In the past, RPGI has assumed the risk of its
marketing programs. Therefore, clients have only paid for accounts originated
which meet the client's underwriting standards. In addition, income from most
origination programs have been collected over several years based on the average
balance of loans outstanding. Accordingly, attrition of account balances in
excess of the level considered in pricing the program may result in contract
impairment provisions, and the amounts may be material. During 1996 and 1997,
RPGI recorded contract impairment provisions of $600,000 and $3,638,000,
respectively, related to unprofitable origination programs. There can be no
assurance that future origination programs will be profitable.
REGULATION. Various aspects of RPGI's business are subject to federal and state
regulations and, although RPGI's servicing and marketing agreements make the
client responsible for all cardholder compliance matters, failure by the client
or RPGI to comply with regulatory requirements could result in actions by
46
<PAGE>
the regulators possibly culminating in penalties, enforcement actions or
termination of a contract. See " -- Regulation."
IMPACT OF LEGISLATION ON CREDIT CARDHOLDERS. Certain consumer groups have
attempted to raise congressional awareness regarding the interest rates charged
on credit card balances, and from time to time, federal and state legislation
has been introduced which would limit the interest rate payable on such credit
card balances. To the extent that any such legislation is enacted, its effect
may be to reduce the number of credit card transactions or the number of credit
cards in circulation due to the tightening of credit standards by card issuers,
which can in turn have an adverse effect on RPGI.
TECHNOLOGY -- YEAR 2000. A number of services that RPGI provides are
date-sensitive. RPGI currently uses the TS1 platform from TSYS to perform its
data processing functions. Currently, that system is not Year 2000 compliant.
TSYS has advised RPGI that this system will soon be upgraded to eliminate any
potential Year 2000 problems. However, a failure by TSYS to upgrade the TS1
system to correctly deal with Year 2000 issues could render RPGI unable to
provide service to its customers, possibly resulting in large liabilities to
those customers.
LACK OF FUTURE DIVIDENDS. RPGI does not anticipate paying cash dividends in the
foreseeable future.
LACK OF MARKET FOR RPGI STOCK; RESTRICTIONS ON TRANSFER. There is no public
trading market for RPGI common stock, and it should not be anticipated that such
a market will develop. None of the RPGI common stock has been registered under
the Securities Act or under the securities laws of any state, and consequently
the RPGI common stock may not be sold unless subsequently registered under the
Act and applicable state securities laws or unless an exemption from such
registration is available. Furthermore, the transfer of RPGI Common Stock is
restricted under the separation agreement relating to the spinoff of RPGI from
its parent.
CERTAIN PROVISIONS IN GOVERNING DOCUMENTS. Several provisions of the RPGI
Articles may have the effect of discouraging or preventing hostile takeover
attempts. These provisions include requirements for super-majority votes to
approve certain business combination transactions unless such transactions are
approved by a majority of disinterested directors or unless such transactions
meet certain minimum price, form of consideration and procedural requirements.
To the extent these provisions are effective they may tend to reduce the value
of shares of RPGI common stock. See "COMPARATIVE RIGHTS OF SHAREHOLDERS."
COMPETITION
RPGI operates in a highly competitive environment. Most, if not all, of
RPGI's competitors have access to significantly greater capital and other
resources than does RPGI. RPGI competes with financial institutions that
internally perform services offered by RPGI and with software vendors that offer
their products to such financial institutions.
RPGI encounters vigorous competition in providing credit card services
from several different sources. The third-party credit card transaction
processing and marketing industry currently consists of numerous vendors that
offer some, if not all, of the services provided by RPGI. The industry has a
number of such vendors who because of their size and capital structure have
achieved economies of scale far greater than those of RPGI, especially after
RPGI's recent loss of several major clients. In addition, the larger and
better-capitalized competitors have more automated and sophisticated systems
with which to improve efficiencies and offer products. Cardholders are attracted
to credit card issuers largely on the basis of price, credit limit and other
product features, and once an account is originated, customer loyalty may
change.
The most significant competitive factors in the sale of RPGI's credit
card services are price, quality, technological advancement, reliability of
service, efficiency and effectiveness in handling large volumes of data and
value-added services.
47
<PAGE>
REGULATION
RPGI is subject to examination and is indirectly regulated by various
federal and state financial regulatory agencies including the Office of the
Comptroller of the Currency, the FDIC, the Federal Reserve and the Office of
Thrift Supervision, which supervise and regulate financial institutions for
which RPGI may provide services. Matters reviewed and examined by these
regulatory agencies may include RPGI's internal controls in connection with its
performance of credit card management services and the agreements pursuant to
which it provides such services.
EMPLOYEES
As of March 31, 1998, RPGI had approximately 93 full-time equivalent
employees. None of RPGI's employees are represented by unions and management
considers RPGI's relations with its employees to be good.
PROPERTIES
RPGI's operations are located at its headquarters at 101 Executive
Center Drive, Columbia, South Carolina 29210, which is a 44,036 square foot
facility leased for $50,458 per month through April 2002. The building is a
two-story structure in an office park setting in suburban Columbia which is near
the airport and accessible to three interstate highways.
As a result of the recent and pending loss of business, RPGI is
evaluating its options with respect to this facility, including the possible
sublet of a substantial portion of the space or renegotiation of the lease to
reduce the amount of space leased.
LEGAL PROCEEDINGS
RPGI is not a party to any material legal proceeding. However, in the
ordinary course of its business, RPGI is from time to time subject to
litigation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
RPGI is the successor to a credit card business which was begun by
Resource Bancshares Corporation ("RBC") in January 1989. Initially, RBC through
one of its banking subsidiaries (the "RBC Sub") originated and serviced credit
card accounts which were owned by RBC's banking subsidiaries. In 1990, the RBC
Sub began selling credit card portfolios to third parties and in most instances,
it continued to service the sold accounts until they were converted to the
buyer's in-house system, usually within three to 18 months of the sale. In 1992,
the RBC Sub began servicing a credit card portfolio for a third party that had
not acquired the accounts from the RBC Sub. Later that year, RBC made a
strategic decision to have its banking subsidiaries divest themselves of
ownership of their remaining credit card accounts and to have the RBC Sub
concentrate its credit card efforts on servicing and marketing for third
parties. Accordingly, the RBC banking subsidiaries sold their remaining credit
card portfolios and the RBC Sub began servicing and originating credit card
accounts only for third parties. In early 1994, RBC consummated the sale of the
retail banking assets of the RBC Sub, effected a dividend of the remaining
assets of the RBC Sub to RBC and contributed the credit card servicing and
marketing business operations and the related assets and liabilities to a newly
formed wholly-owned subsidiary of RBC ("Former RPGI"). Later that year, Former
RPGI organized RPGI (then known as Republic Services Company, Inc.) as its
wholly-owned subsidiary and transferred the credit card business, assets and
liabilities to RPGI. Both transfers were at the transferor's book value.
48
<PAGE>
On December 16, 1996, Former RPGI merged into RBC effective as of the
close of business on November 30, 1996 which resulted in RPGI becoming a
wholly-owned subsidiary of RBC. Subsequent to that merger, RPGI changed its name
from Republic Services Company, Inc. to Resource Processing Group, Inc.
As of the close of business on December 31, 1996, RBC effected a
separation or spin-off of RPGI through a distribution of RPGI stock to RBC
shareholders (the "Separation"). In conjunction with the Separation, RPGI
declared and distributed to RBC a 99,000-for-one stock dividend effective
December 16, 1996, and on December 31, 1996 each RBC shareholder received one
share of RPGI's common stock for each share of RBC stock owned as of the
December 30, 1996 record date. In addition, RBC was obligated to distribute to
each holder of certain of its phantom stock units a dividend equivalent payment
of 0.54 shares of RPGI common stock for each phantom unit held on the record
date, for a total of 471,528 shares of RPGI common stock. In conjunction with
the Separation, as more fully explained in Note 1 to the RPGI financial
statements included herein, a portion of RPGI's affiliate advances were reduced
and the balance converted to a note payable and RBC agreed to indemnify RPGI
against certain taxes and to guarantee certain obligations of RPGI.
RPGI provides credit card servicing, marketing and program management
to financial institutions. RPGI does not own any credit card accounts or loans
other than accounts which were charged-off by its former parent and contributed
to it at a zero book value. Data processing services offered by RPGI to its
clients includes cardholder transaction processing, plastic production,
statement production and mailing and fraud monitoring. These services are made
available through TSYS. Back-office services provided by RPGI include credit
processing, customer service and collections. Program management services
include the origination of new accounts and the development of strategic plans
designed to increase portfolio profitability, cardholder account utilization,
account retention and reduction of portfolio risk.
SOURCES AND RECOGNITION OF REVENUE
Currently, RPGI derives the majority of its recurring revenues under
long-term servicing agreements with third parties (RPGI's "clients"). Prior to
1995, revenues for new account originations were collected during the marketing
program. However, beginning in 1995, RPGI began to "bundle-price," or charge a
combined fee for separate services, marketing programs in conjunction with
long-term servicing and program management agreements. The revenues from most of
those contracts are based upon the average outstanding balance of accounts being
serviced. Therefore, RPGI offers marketing and program management services to
its clients which focus on increasing the profitability of the client's credit
card portfolio, including new account origination, account activation and
increased account utilization. In so doing the balances of the accounts being
serviced may increase with RPGI benefitting from increased revenues. In
addition, some of RPGI's revenues are based either on the number of accounts
being serviced or the number of transactions processed, for example, the number
of credit applications processed. In most instances, client contracts are for a
term of at least five years. However, the client is permitted to terminate the
agreement early upon at least 180-day notice and, in most instances, the payment
of a significant penalty.
Credit card accounts originated for clients are originated in the name
of the client and accordingly such accounts do not appear on RPGI's balance
sheet. RPGI is located in Columbia, South Carolina but originates credit card
accounts and provides servicing for clients in other areas of the United States.
As of December 31, 1996, RPGI was servicing approximately 506,000
credit card accounts with an aggregate balance of approximately $498,000,000 for
five clients. As of December 31, 1997, RPGI was servicing approximately 471,000
credit card accounts with an aggregate balance of approximately $394,000,000 for
three clients.
A significant portion of RPGI's revenue is derived under agreements
which provide for more than one service. Whenever RPGI cross-sells services, the
price of the services specified in the agreement may
49
<PAGE>
be bundled or expressed as a separate price for each service. RPGI recognizes
revenue in accordance with the provisions of the underlying agreements.
Incremental direct costs of acquiring long-term servicing, program
management and marketing agreements are recorded as deferred contract costs and
are amortized to expense as revenues are recognized based on the ratio of
estimated total costs to total revenues under the related contract. The portion
of the amortized cost related to salaries and wages is expensed as selling,
general and administrative expenses. The remaining amortized costs are recorded
as acquired products and services and consist primarily of postage, printing,
credit bureau and systems expense provided to RPGI by third-party vendors.
Deferred contract costs are periodically assessed for recoverability on an
individual contract basis and, when necessary, a contract impairment provision
is recorded.
The following management's discussion and analysis of financial
condition and results of operations should be read in conjunction with the
financial statements of RPGI included elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth certain financial data of RPGI expressed as a
percentage of total revenues:
<TABLE>
<CAPTION>
Percentage of Total Revenues
----------------------------
Year Ended December 31,
-----------------------
1995 1996 1997
---- ----- ----
<S> <C> <C> <C>
Operating expenses
Acquired products and services ......................... 54.8% 54.5% 58.6%
Contract impairment provision........................... 0.0 3.3 18.3
Selling, general and administrative..................... 32.6 36.6 41.5
Income (loss) from operations................................ 12.5 5.6 (18.4)
Interest income.............................................. 4.0 1.1 1.0
Interest expense............................................. (0.6) (2.8) (1.4)
Income (loss) before provision (benefit) for income taxes.... 15.9 4.0 (18.8)
Provision (benefit) for income taxes......................... 6.0 1.5 (7.2)
Net income (loss)............................................ 9.9 2.4 (11.5)
</TABLE>
The following table sets forth the number and outstanding balances of
credit card accounts serviced and the number of credit card accounts originated:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
(dollars in thousands)
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Servicing:
Number of accounts serviced at end of
period....................................... 369,000 506,000 471,000
Average outstanding balance of accounts
serviced during period....................... $267,298 $394,347 $450,242
Period-end outstanding balance of accounts
serviced..................................... $369,636 $498,306 $393,545
Number of accounts originated during period........... 192,000 267,000 45,000
</TABLE>
50
<PAGE>
REVENUES
Revenues were $11,637,000, $18,424,000 and $19,912,000 for years 1995,
1996 and 1997, respectively.
During the year 1996, revenues increased $6,787,000, or 58.3%. This
increase was primarily attributable to an increase in both the number and
average outstanding balance of accounts serviced. The number of accounts
serviced at December 31, 1996 increased by 137,000, or 37.1%, over the number
being serviced at the end of the prior year and the average outstanding balance
of accounts serviced during the year 1996 increased $127,049,000, or 47.5%, to
$394,347,000. This increase also included $2,500,000 of penalties or commissions
which were paid to RPGI in conjunction with portfolios which were sold by
several of RPGI's clients.
Revenues for the year 1997 increased $1,488,000, or 8.1%, over the year
1996. This increase included $2,181,000 collected from a client that early
terminated its servicing and program management agreements during the year.
While accounts originated during the year decreased by 222,000, or 83.1%, the
number of accounts serviced at the end of the year decreased by only 35,000, or
6.9%, and the average balance of accounts serviced during the year increased
$55,895,000, or 14.2%.
OPERATING EXPENSES
Total operating expenses were $10,179,000, $17,387,000 and $23,566,000
for the years 1995, 1996 and 1997, respectively.
During the year 1996, total operating expenses increased $7,208,000, or
70.8%, from the prior year while during the same period the average outstanding
balance of accounts being serviced increased $127,049,000, or 47.5%, and the
number of accounts originated increased by 75,000, or 39.1%. During the year
1996, RPGI deferred $18,012,000 of costs related to accounts originated and
recorded deferred contract costs amortization of $4,477,000, an increase in
deferred contract amortization cost of $2,599,000 over the prior year. In 1996,
personnel costs not related to marketing programs increased $1,968,000 over the
prior year. This 70.9% increase was primarily attributable to increased staffing
to absorb the 47.5% increase in average account balances serviced. However, it
also reflected significantly higher overhead associated with increased
administrative personnel and telecommunication equipment to expand the business.
Operating expenses in 1996 also included a $600,000 contract impairment
provision expense to adjust a long-term contract to the amount estimated to be
received in the future. In addition, during the year 1996 RPGI recorded
accelerated deferred contract cost amortization of $1,710,000 in conjunction
with portfolio sales by several clients which required the client to pay RPGI
certain penalties and commissions.
During the year 1997, total operating expenses increased $6,179,000, or
35.5%, from the prior year while during the same period the average outstanding
balance of accounts being serviced increased $55,895,000, or 14.2%, and the
number of accounts originated declined 83.1%. Amortization of deferred contract
costs accounted for $5,109,000 of the increase in costs. During 1996 and
continuing through 1997, the credit card industry experienced record high levels
of delinquencies and charge-offs. To combat that trend, RPGI greatly increased
its collection efforts, including the number of collectors employed. Also,
contributing to the increased costs were further increases in administrative and
marketing personnel and expansion of office facilities to grow the business.
However, the largest contributing factors to the increased costs were (i) a
contract impairment provision of $3,008,000 and (ii) the acceleration of
$1,850,000 of deferred contract costs amortization recorded in conjunction with
the early termination of a long-term program management agreement. In addition,
an additional $630,000 contract impairment provision was recorded in 1997
related to two long-term contracts for which the estimated future revenues were
lowered to give effect to higher than expected account and account balance
attrition rates and charge-offs.
51
<PAGE>
INCOME FROM OPERATIONS
Income from operations during the year 1996 decreased by $421,000 to
$1,037,000, or 28.9%, from the prior year. This decrease was primarily due to a
$600,000 contract impairment provision and increased overhead which were
partially off-set by increased revenues from servicing higher account balances
during the year. In addition, during 1996 RPGI collected $705,000 from
previously charged-off credit card accounts which were contributed during the
year by RBC to RPGI at the transferee's zero book value.
During the year 1997, RPGI incurred a loss of $3,654,000, compared to
income of $1,037,000 in the year 1996. Contributing to this $4,691,000 decrease
were (i) contract impairment provisions of $3,638,000, (ii) significantly higher
overhead costs, (iii) higher collection costs and (iv) higher staffing levels
and higher facilities and equipment costs in anticipation of expansion of the
business. Partially offsetting these higher costs were higher revenues related
to servicing a higher level of average account balances and $453,000 collected
from the charged-off credit card accounts received in 1996 from its former
parent.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) was $395,000, ($309,000) and ($83,000)
for the years 1995, 1996 and 1997, respectively.
RPGI earns interest income from two sources. One source is the
short-term investment of its excess cash in overnight investments and, prior to
the Separation, the overnight advances of its excess cash to its parent at the
Wall Street Journal Prime rate of interest. The second source of interest income
is interest charged its clients when RPGI advances funds overnight on behalf of
the client to settle its cardholders' transactions which are cleared through
VISA and MasterCard and their convenience checks. Interest expense is incurred
on short-term bank notes payables and, prior to the Separation, overnight
advances from RPGI's former parent and, since the Separation, interest payable
on the note to RBC. See Notes 1 and 5 of the RPGI financial statements included
elsewhere herein.
During the year 1996, RPGI earned $200,000 from advances made on behalf
of its clients. However, it incurred $509,000 of interest expense from affiliate
borrowing and overnight bank loans. There is a correlation between the amounts
advanced for clients and the outstanding balances of accounts serviced.
Therefore, the increased size of portfolios serviced in 1996 was primarily
responsible for the increased interest income. The significant increase in
interest expense resulted from several large marketing programs that were
conducted during 1996 which were bundle-priced. The cost of such programs in the
year 1996 was $18,012,000, which was partially funded from operating income.
However, during the year 1996, short-term notes payable to banks and affiliate
advances averaged $5,181,000.
During the year 1997, interest income remained approximately the same
as in the prior year however interest expense decreased $230,000, or 45.2%, to
$279,000. Contributing to this decrease were the following: (i) cash paid out
during the year for new marketing programs declined $15,228,000 and (ii) cash
receipts from operations increased. In addition, RPGI improved its client cash
settlement procedures and reduced the amount it needed to borrow to fund
overnight advances on behalf of clients.
52
<PAGE>
PROVISION FOR INCOME TAXES
The effective income tax rate for the years 1995, 1996 and 1997 was
37.6%, 37.6% and 38.6%, respectively.
NET INCOME
Net income for the year 1996 was $448,000, a $708,000, or 61.2%,
decrease from the year 1995. Contributing to this decrease were lower margins on
new marketing programs resulting from bundled pricing and lower booking rates,
increased corporate overhead and a $600,000 contract impairment provision.
For the year 1997, RPGI had a net loss of $2,296,000. This net
operating loss was primarily the result of a $3,638,000 contract impairment
provision, $3,008,000 of which related to the early termination of a long-term
program management agreement, higher corporate overhead related to increased
staffing, facilities and equipment expenses incurred in anticipation of
expansion of the business and higher collection costs related to increased past
due accounts serviced for clients. These negative factors were partially off-set
by increased revenues primarily related to higher outstanding balances of
accounts serviced. See Note 12 to RPGI's financial statements regarding
subsequent events.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, RPGI had cash and overnight investments of
$4,302,000. However, at March 31, 1998 RPGI had cash and overnight investments
of $8,891,000 which included the collection of $6,052,000 of cash in February
1998 in conjunction with the early termination of a long-term contract. For
income tax purposes, RPGI deducted the cost of the terminated marketing programs
in the year the costs were paid. However, for financial accounting purposes such
costs were deferred and were being amortized over the periods during which
revenues were earned. Because the costs associated with the terminated contract
were deducted on an income tax return in a prior year, RPGI will pay income tax
on such amounts in 1998. Management believes that between its current cash
reserves and bank line of credit, RPGI has sufficient liquidity to meet its
future cash requirements.
The operating loss incurred in 1997 and, as further described in Notes
9 and 12 to RPGI's financial statements, the potential loss of RPGI's remaining
major client could make it difficult for RPGI to borrow funds at reasonable
rates or to raise future capital without dilution to current shareholders. In
addition, if RPGI loses its remaining major client without replacing it with new
profitable business or if RPGI incurs another significant operating loss, RPGI
could lose its bank line of credit and, in the future, encounter difficulty if
its current cash reserves and internally generated cash is insufficient to meet
company requirements. Although RPGI's management believes that RPGI will have
sufficient cash to meet its requirements, there can be no assurance that it
will.
53
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF RPGI
BENEFICIAL OWNERS OF FIVE PERCENT OR MORE OF RPGI COMMON STOCK
The following table sets forth information relating to the beneficial
ownership of RPGI common stock by those persons known to RPGI to beneficially
own more than 5% of the RPGI common stock as of April 29, 1998.
<TABLE>
<CAPTION>
Percent of
Shares of Shares of Carolina Carolina First
RPGI Common Percent of First Corporation Corporation
Stock Owned RPGI Common Common Stock Common Stock
Prior to Stock Owned Prior Owned After Owned after
Name of Beneficial Owner the Merger to the Merger the Merger(1) the Merger
- ------------------------ ---------------- ----------------- ------------------ ----------
<S> <C> <C> <C>
APA Excelsior II L.P. and 1,199,147 13.20% 59,357 *
APA Excelsior Venture Capital
Holdings (Jersey) Ltd.(2)
445 Park Ave., 11th Floor
New York, NY 10022
Benefit Capital Management 1,199,147 13.20% 59,357 *
Corporation as Investment
Manager for the Union Carbide
Corporation Pension Plan
39 Old Ridgebury Rd.
Danbury, CT 06817
Amelia Holdings Partners 1,199,147 13.20% 59,357 *
Saugatuck Capital Company 726,667 8.00% 35,970 *
Limited Partnership II
One Canterbury Green
Stamford, CT 06901
SBSF First Sun Capital Group, 700,515 7.71% 34,675 *
a Connecticut Limited
Partnership, and SBSF First
Sun Capital Group II, L.P.(3)
45 Rockefeller Plaza
New York, NY 10111
Centennial Business 506,668 5.58% 25,080 *
Development Fund, Ltd.
1428 Fifteenth Street
Denver, CO 80202
Edward J. Sebastian(4) 457,732 5.04% 45,736(5) *
6000 Hampton Ridge Road
Columbia, SC 29209
</TABLE>
- ------------------------
* Less than one percent.
(1) Assuming receipt of the base (non-contingent) consideration only, an average
CFC common stock price of $25.00 per share and a conversion ratio of .0495
shares of CFC common stock received for each share of RPGI common stock, with
cash paid for fractional shares.
(2) APA Excelsior II L.P. owns 959,318 shares (10.56%) and APA Excelsior Venture
Capital Holdings (Jersey) Ltd. owns 239,829 shares (2.64%).
(3) SBSF First Sun Capital Group, a Connecticut Limited Partnership, owns
460,000 shares (5.06%) and SBSF First Sun Capital Group II, L.P. owns 240,515
shares (2.65%).
(4) Includes 8,000 shares owned by members of Mr. Sebastian's immediate family
and 7,732 shares held in RBC's ESOP which have been allocated to Mr. Sebastian.
(5) Includes 17,082 shares owned prior to the Merger by Mr. Sebastian and 5,997
shares owned prior to the Merger by members of Mr. Sebastian's immediate family.
54
<PAGE>
STOCK OWNERSHIP OF RPGI'S DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information relating to the ownership of
RPGI common stock as of April 29, 1998 by (i) each of RPGI's directors and
executive officers and (ii) all of RPGI's directors and executive officers as a
group.
<TABLE>
<CAPTION>
Shares of Percent of RPGI Shares of Percent of
RPGI Common Common Stock CFC Common CFC Common
Stock Owned Prior Owned Prior Stock Owned Stock Owned
Name of Beneficial Owner to the Merger to the Merger after the Merger(1) after the Merger
- ----------------------------- ------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Edward J. Sebastian 457,732(2) 5.04% 45,736(3) *
Angelo R. Palombi 56,719(4) * 2,807 *
Owen S. Crihfield(5) -0- N/A -0- N/A
John W. Currie 50,000 * 2,475 *
Susan L. DeCarlo(6) -0- N/A -0- N/A
Michael T. Smith 10,000 * 14,346(7) *
R. Dean Dougherty 33,888 * 1,677 *
Gary Bruce Thomas 40,436 * 2,001 *
L. Dale Savage 4,945 * 244 *
All directors and executive 653,720 7.20% 69,286 *
officers as a group (9 persons)
</TABLE>
- ----------------
*Less than one percent
(1) Assuming receipt of the base (non-contingent) consideration only, an average
CFC common stock price of $25.00 per share and a conversion ratio of .0495
shares of CFC common stock received for each share of RPGI common stock, with
cash paid for fractional shares.
(2) Includes 8,000 shares owned by members of Mr. Sebastian's immediate family
and 7,732 shares held in RBC's ESOP which have been allocated to Mr. Sebastian.
(3) Includes 17,082 shares owned prior to the Merger by Mr. Sebastian and 5,997
shares owned prior to the Merger by members of Mr. Sebastian's immediate family.
(4) Includes 6,000 shares owned by members of Mr. Palombi's immediate family.
(5) Mr. Crihfield is serving on the RPGI Board as a nominee of Saugatuck Capital
Company Limited Partnership II ("Saugatuck"). For information concerning the
RPGI common stock ownership of Saugatuck, see "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF RPGI -- Beneficial Owners of Five Percent or
More of RPGI Common Stock."
(6) Ms. DeCarlo is serving on the RPGI Board as a nominee of Benefit Capital
Management Corporation ("BCMC"). For information concerning the RPGI common
stock ownership of BCMC, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF RPGI -- Beneficial Owners of Five Percent or More of RPGI
Common Stock."
(7) Includes 13,851 shares owned by Mr. Smith before the Merger.
55
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time, the shares of RPGI common stock will be
converted into shares of CFC common stock, except that cash will be paid in lieu
of fractional shares of CFC common stock. Accordingly, shareholders of RPGI who
do not dissent from the Merger will become shareholders of CFC, and their rights
as CFC shareholders will be determined by CFC's Articles of Incorporation and
Bylaws. The rights of CFC shareholders differ from the rights of RPGI's
shareholders with respect to certain matters, including the amendment of the
articles of incorporation, shareholder approval of certain business
combinations, the removal of directors and standards for director liability.
A comparison of the respective rights of RPGI's shareholders and CFC's
shareholders with respect to these matters is set forth immediately below. A
description of the CFC common stock is set forth below under "CAROLINA FIRST
CORPORATION CAPITAL STOCK."
GENERAL
CFC and RPGI are both South Carolina corporations subject to the
provisions of the South Carolina Business Corporation Act of 1988, as amended
(the "SCBCA"). Shareholders of RPGI who do not dissent from the Merger will,
upon consummation of the Merger become shareholders of CFC. The rights of such
shareholders will thus be governed by the SCBCA and the Articles of
Incorporation and Bylaws of CFC.
Set forth below are the material differences between the rights of an
RPGI shareholder under the RPGI Articles of Incorporation and Bylaws, on the one
hand, and the rights of a CFC shareholder under the CFC Articles of
Incorporation and Bylaws, on the other hand.
CFC is also subject to certain additional rules by virtue of its being
traded on the Nasdaq Stock Market. The following summary does not reflect any
rules of Nasdaq that may apply to CFC 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 and the constituent documents of each
corporation.
AUTHORIZED CAPITAL
RPGI. The authorized capital stock of RPGI consists of 25,000,000
shares of RPGI common stock (par value $0.01 per share) and 5,000,000 shares of
RPGI preferred stock. As of March 10, 1998, RPGI had 9,082,126 shares of common
stock outstanding and no shares of preferred stock outstanding.
CFC. The authorized capital stock of CFC consists of 100,000,000 shares
of CFC common stock (par value $1.00 per share) and 10,000,000 shares of "blank
check" preferred stock. As of March 10, 1998, CFC had 17,709,741 shares of
common stock outstanding and no shares of preferred stock outstanding.
AMENDMENT OF ARTICLES OF INCORPORATION OR BYLAWS
RPGI. Unless the SCBCA specifically requires a different vote or the
RPGI Board, in recommending an amendment, requires a greater vote, the RPGI
Articles of Incorporation provide that amendments to the Articles may be
approved by a majority of the shares entitled to vote. The RPGI Articles also
require, in addition to any other shareholder approval required by law or
otherwise, an affirmative vote of the holders of 80% or more of the voting power
of the outstanding shares of capital stock of RPGI entitled to vote generally in
the election of directors to amend or repeal, or to adopt any provision
inconsistent with, the provision of the RPGI Articles imposing an 80%
shareholder voting requirement for the approval of certain mergers, share
exchanges, liquidations, reclassifications of securities, recapitalizations and
transactions with certain shareholders or their affiliates. (See "-- Shareholder
Voting in Certain Business Combinations.")
56
<PAGE>
CFC. CFC'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
CFC.
If 80% of the directors approve amendments pertaining to the Articles of
Incorporation listed above, then only a two-thirds affirmative vote of
shareholders is needed to approve the amendments. With respect to other
amendments, the SCBCA provides that unless a specific provision of the SCBCA
requires a different vote or the Board of Directors, in recommending an
amendment, requires a greater vote, amendments to the CFC Articles of
Incorporation must be approved by a two-thirds affirmative vote.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
The SCBCA permits the number of directors to be set in the articles of
incorporation or bylaws. If there are six 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% from the
number last approved by the shareholders. 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 from the number last approved by the shareholders.
Under the SCBCA, the articles or bylaws may establish a variable range for the
size of the board. Either the shareholders or the board of directors may change
the number of directors within the variable range, but only the shareholders can
alter the range or change from a variable board size to a fixed one. The SCBCA
permits cumulative voting for directors unless a corporation's articles of
incorporation provide otherwise.
RPGI. The RPGI Bylaws state that the number of directors shall be not
less than three and not more than 15, as determined from time to time by the
Board of Directors. RPGI's Articles of Incorporation provide that when the size
of the RPGI Board is fixed at six or greater, the directors shall be divided
into three classes, as equal in number as possible, and elected for staggered
terms. The RPGI Board is currently comprised of six persons.
CFC. CFC's Bylaws permit the Board of Directors to increase or reduce
the number of directors. If the number of directors is nine or greater, CFC's
Articles of Incorporation divide the Board into three classes, as equal in size
as possible, to be elected for staggered terms. The Bylaws provide that either
the Board of Directors or the shareholders may change the number of directors on
the Board. The CFC Board of Directors is currently comprised of 13 directors.
SHAREHOLDER NOMINATION OF DIRECTORS
RPGI. Under RPGI's Bylaws, shareholders entitled to vote to elect
directors may nominate directors for election. Nominations must be received at
the principal executive offices of RPGI no later than 60 days and no earlier
than 90 days before the meeting at which directors are to be elected. If
shareholders are given less than 70 days notice of a special meeting, they must
submit nominations within 10 days of the day on which notice of the meeting was
made public or mailed to shareholders. Nominations must conform to informational
requirements stated in the Bylaws.
57
<PAGE>
CFC. Under CFC's Bylaws, shareholders entitled to vote to elect
directors may nominate directors for election. Nominations must be received at
the principal executive offices of CFC 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 CFC
preferred stock may elect directors under specified circumstances.
REMOVAL OF DIRECTORS BY SHAREHOLDERS
RPGI. RPGI's shareholders may remove one or more directors with or
without cause as provided by the SCBCA.
CFC. In accordance with the SCBCA and the CFC Articles of
Incorporation, except for directors elected under specified circumstances by
holders of CFC preferred stock, any director or the entire Board of Directors of
CFC may be removed without cause only upon the affirmative vote of at least 80%
of the outstanding shares of capital stock.
STANDARDS FOR DIRECTOR LIABILITY
RPGI. The SCBCA permits corporations that have a class of voting
shares registered under Section 12 of the Securities Exchange Act of 1934,
gross assets at the end of their most recent fiscal year of $25 million or more
or 500 or more shareholders of any class of stock to adopt provisions in
their articles of incorporation that eliminate or limit the personal liability
of directors to the corporation or its shareholders for breach of fiduciary duty
except with respect to liability (a) for breach of a director's duty of loyalty
to the corporation or shareholders; (b) for acts or omissions not in good faith
or which involve gross negligence, intentional misconduct or a knowing
violation of law; (c) imposed under Section 33-8-330 of the SCBCA (unlawful
distributions); or, (d) for any transaction from which the director derived an
improper personal benefit. The RPGI Articles provide for the elimination of
directors' liability to the extent permitted by the SCBCA beginning on the date
that the corporation first meets one of the aforementioned prerequisites. RPGI
currently does not meet any of the SCBCA prerequisites.
CFC. The CFC Articles of Incorporation eliminate personal liability for
directors to the extent permitted by the SCBCA.
DIRECTOR AND OFFICER INDEMNIFICATION
RPGI. RPGI's Bylaws state that the corporation shall indemnify all
persons whom it is permitted to indemnify (i.e., directors, officers, employees
and agents) to the fullest extent allowed by the SCBCA, so long as such persons
have conducted themselves in good faith and reasonably believed that their
conduct was not opposed to RPGI's best interests.
CFC. CFC's Bylaws provide for indemnification of directors for expenses
and for the advancement of expenses to the maximum extent permitted by
applicable law. The Bylaws authorize the Board of Directors to grant
indemnification rights to other employees and agents of the corporation to the
fullest extent permitted by law.
SHAREHOLDER MEETINGS
RPGI. Pursuant to RPGI's Bylaws, RPGI may have special meetings called
by (i) the Chief Executive Officer, (ii) the Chairman of the Board of Directors,
(iii) a majority of the Board of Directors or (iv) the Chief Executive Officer
upon the request of the holders of at least 10% of all the votes entitled to be
cast on the issue(s) proposed to be considered at the special meeting.
Shareholders may propose business for consideration at shareholder
meetings. Shareholders must give notice of proposals to the Secretary of RPGI,
which must be received at the principal executive offices of RPGI no more than
90 days and no less than 60 days prior to the meeting. In the event that
shareholders
58
<PAGE>
receive less than 70 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 or made public.
CFC. Pursuant to CFC's Bylaws, the corporation may have special
meetings called by the President, the Board of Directors, or by request of
holders of 10% of all outstanding votes of the corporation entitled to be cast
on any issue at 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. CFC 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 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 CFC no more than 90 days and no less than 60 days prior to the first
anniversary of the preceding year's 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
RPGI. In general, RPGI's Articles of Incorporation provide that the
vote required for any corporate action for which the SCBCA establishes a
supermajority vote unless a corporation's articles of incorporation provide
otherwise shall be a majority of the votes entitled to be cast on the issue in
question.
CFC. Neither the CFC Articles of Incorporation nor its Bylaws include a
similar provision.
SHAREHOLDER VOTING IN CERTAIN BUSINESS COMBINATIONS
RPGI. With the exceptions set forth below, the RPGI Articles prohibit
the following transactions (defined in the Articles as "Business Combinations")
unless they are approved by the affirmative vote of the holders of at least 80%
of the voting power of the then-outstanding shares of capital stock of RPGI
entitled to vote generally in the election of directors:
(i) any merger or consolidation of RPGI or any of its subsidiaries
with (a) any Interested Stockholder (as defined below) or (b)
any other person which is, or after such merger or
consolidation would be, an affiliate of an Interested
Stockholder;
(ii) any plan of exchange for all outstanding shares of RPGI or any
of its subsidiaries or for any class of shares of RPGI or any
of its subsidiaries with (a) any Interested Stockholder or (b)
any other person which is, or after such plan of exchange
would be, an affiliate of an Interested Stockholder;
(iii) any disposition to or with any Interested Stockholder or an
affiliate thereof of any assets of RPGI or any of its
subsidiaries having an aggregate fair market value of 10% or
more of the total assets of RPGI and its subsidiaries;
(iv) the issue or transfer by RPGI or any of its subsidiaries of
any securities of RPGI or any of its subsidiaries to any
Interested Stockholder or any affiliate thereof in exchange
for cash, securities or other property having a fair market
value of 10% or more of the total assets of RPGI and its
subsidiaries;
59
<PAGE>
(v) the adoption of any plan or proposal for the liquidation or
dissolution of RPGI proposed by or on behalf of an Interested
Stockholder or any affiliate thereof; or
(vi) any reclassification of securities, recapitalization of RPGI
or any merger or consolidation of RPGI with any of its
subsidiaries or any other transaction which has the effect of
increasing the proportionate share of the outstanding class of
equity or convertible securities of RPGI or any of its
subsidiaries which is directly or indirectly owned by any
Interested Stockholder or any affiliate thereof.
An "Interested Stockholder" is defined, with certain exceptions, as any person
who or which: (i) is the beneficial owner, directly or indirectly, of more than
10% of the voting power of the outstanding shares of the capital stock of the
corporation entitled to vote generally in the election of directors ("Voting
Stock"); (ii) is an affiliate of RPGI and at any time within the two-year period
immediately prior to the date in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then-outstanding Voting
Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately prior
to the date in question beneficially owned by any Interested Stockholder, if
such assignment or succession has occurred in the course of one or more
transactions not involving a public offering (within the meaning of the
Securities Act, as amended).
This 80% voting requirement does not apply if the Business Combination
is approved by a majority of the Continuing Directors (as defined in the RPGI
Articles) or meets certain criteria regarding the amount and form of the
consideration offered as well as certain procedural requirements as specified in
the Articles.
CFC. The CFC Articles of Incorporation require the affirmative vote of
80% of the outstanding stock of CFC entitled to vote for approval of the
following actions unless 80% of the directors of CFC have approved the action
and recommended it without condition:
(i) a merger of CFC or any of its subsidiaries with any other
corporation;
(ii) the sale or exchange of all or a substantial part of CFC's
assets to or with any other corporation; or
(iii) the issue or delivery of CFC stock or other CFC securities in
exchange or payment for properties or assets of or securities
issued by any other corporation.
Transactions solely between CFC and another corporation are excluded from this
80% approval requirement if CFC owns 50% or more of the other corporation's
voting stock.
CHANGE IN CONTROL, BUSINESS COMBINATIONS AND ANTI-TAKEOVER PROVISIONS
RPGI. In 1988, South Carolina enacted statutes governing corporate
"control share acquisitions" (the "South Carolina Control Share Acquisition
Law") and "business combinations" (the "South Carolina Business Combination
Law"). Neither the South Carolina Control Share Acquisition Law nor the South
Carolina Business Combination Law apply to RPGI.
CFC. Both the South Carolina Control Share Acquisition Law and the
South Carolina Business Combination Law apply to CFC. In addition, CFC has
adopted a Shareholders' Rights Agreement that may have certain anti-takeover
effects.
South Carolina Control Share Acquisition Law. Unless a corporation has
opted out of the provisions of the South Carolina Control Share Acquisition Law
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
60
<PAGE>
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 South Carolina 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, or direct the exercise of,
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 Merger 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 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.
Shareholders' Rights Agreement. CFC has adopted a Shareholders' Rights
Agreement, discussed below, which may serve to impede certain takeovers not
favored by the CFC board of directors. See "CAROLINA FIRST CORPORATION CAPITAL
STOCK -- Certain Matters -- Shareholders' Rights Agreement."
61
<PAGE>
ACTION BY SHAREHOLDERS WITHOUT A MEETING
RPGI. RPGI's shareholders may act without a meeting as provided in the
SCBCA. RPGI has no restriction similar to CFC's 60-day limit described below for
the receipt of consents to shareholder action without a meeting.
CFC. All consents required for action by shareholders without a meeting
must be received within 60 days of the receipt by the corporation of the first
consent.
DISSOLUTION
RPGI. As described above (see "-- Shareholder Voting in Certain
Business Combinations"), the RPGI Articles require an affirmative vote by 80% of
the holders of shares of capital stock generally entitled to vote in the
election of directors to approve a plan of dissolution or liquidation proposed
by or on behalf of any Interested Stockholder, unless the plan is approved by a
majority of the Continuing Directors (as defined in the RPGI Articles) or unless
certain conditions are met regarding the amount and form of the consideration to
be received by the shareholders.
CFC. Any plan of dissolution proposed by or under an arrangement with
an interested shareholder or an associate is subject to the South Carolina
Business Combination Law as set forth above (See "-- Change in Control, Business
Combinations and Anti-Takeover Provisions").
CAROLINA FIRST CORPORATION CAPITAL STOCK
COMMON STOCK
CFC has 100,000,000 shares of common stock authorized, of which
17,709,741 shares were outstanding as of April 15, 1998. The holders of the CFC
common stock are entitled to dividends when, as and if declared by the Board of
Directors in their discretion out of funds legally available therefor. The
principal source of funds for CFC is dividends from its subsidiaries. CFC'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 CFC common stock are fully paid and
nonassessable. No holder of CFC common stock has any redemption or sinking fund
privileges, any preemptive or other rights to subscribe for any other shares or
securities, or any conversion rights. In the event of liquidation, the holders
of CFC common stock are entitled to receive pro rata any assets distributable to
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 CFC common stock
are entitled to one vote per share.
PREFERRED STOCK
CFC has 10,000,000 shares of "blank check" preferred stock authorized
("Preferred Stock"), none of which is outstanding. CFC'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 CFC'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 CFC, the dividend
rate and whether dividends shall be cumulative or participating or possess other
special rights, the voting rights, CFC'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 CFC to impede the ability of
third parties who attempt to acquire control of CFC without the cooperation of
CFC's Board of Directors.
62
<PAGE>
CERTAIN MATTERS
SHAREHOLDERS' RIGHTS AGREEMENT. In 1993, the CFC 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 CFC common stock outstanding on November
23, 1993 and each share to be issued by CFC thereafter. Each Right entitles the
registered holder to purchase from CFC one-half share of CFC 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 CFC
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 CFC 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 CFC common stock certificates and will be transferred with and
only with such certificates, and (ii) the surrender for transfer of any
certificates for CFC common stock will also constitute the transfer of the
Rights associated with the CFC common stock represented by such certificate. The
Rights are not exercisable until the Distribution Date and will expire at the
close of business on December 18, 2006, unless previously redeemed by CFC as
described below. As soon as practicable after the Distribution Date, rights
certificates will be mailed to holders of record of CFC common stock as of the
close of business on the Distribution Date and, thereafter, the separate rights
certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of CFC common stock issued prior to the
Distribution Date will be issued with Rights.
ln the event that (i) a person acquires beneficial ownership of 20% or
more of the CFC common stock, (ii) CFC is the surviving corporation in a merger
with an Acquiring Person or any Affiliate or Associate (as defined in the Rights
Agreement) and the CFC common stock is not changed or exchanged, (iii) an
Acquiring Person engages in one of a number of self-dealing transactions
specified in the Rights Agreement, or (iv) an event occurs which results in an
Acquiring Person's ownership interest being increased by more than 1% (e.g., a
reverse stock split), proper provision will be made so that each holder of a
Right will thereafter have the right to receive upon exercise thereof at the
then current exercise price, that number of shares of CFC common stock (or in
certain circumstances, cash, property, or other securities of CFC) 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) CFC is acquired in a merger or other business
combination transaction, or (ii) 50% or more of CFC'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 CFC common stock, the Board of Directors may exchange the Rights
(other than Rights which have become void), in whole or in part, at the exchange
rate of one share of CFC common stock per Right, subject to adjustment as
provided in the Rights Agreement.
The exercise price payable, and the number of shares of CFC common
stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
CFC common stock, (ii) if holders of the CFC common stock are granted certain
rights or warrants to subscribe for CFC common stock or securities convertible
into CFC common stock at less than the current market price of the CFC common
stock, or (iii) upon the distribution to holders of the CFC common stock
63
<PAGE>
of evidence of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The Rights may be redeemed in whole, but not in part, at a price of
$.001 per Right (payable in cash, CFC common stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors at any time
prior to 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, CFC'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 then-outstanding shares of CFC common stock in a transaction or series of
transactions not involving CFC 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 CFC 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 CFC's public filings with the
Securities and Exchange Commission.
BOARD OF DIRECTORS.
Classification of Board of Directors. CFC's Board of Directors
currently consists of 13 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 of directors as possible). The members of each class
are elected for staggered three-year terms. The staggering of Board terms has
the effect of making it more difficult to 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. CFC'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 CFC 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. CFC's Articles of Incorporation require the
affirmative vote of the holders of not less than 80% of the outstanding voting
securities of CFC 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 CFC are exempt under CFC'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.
64
<PAGE>
Evaluation of Proposed Business Combinations. CFC's Articles of
Incorporation provide that the Board of Directors, when evaluating any proposed
business combination with CFC, 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 CFC, and on its subsidiaries, the communities and geographical areas in which
CFC and its subsidiaries operate or are located, and on any of the businesses
and properties of CFC 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 CFC's outstanding
shares, but also in relation to the then current value of CFC in a
freely-negotiated transaction and in relation to the Board of Directors'
estimate of the future value of CFC (including the unrealized value of its
properties and assets) as an independent going concern.
VOTING.
Voting For Directors. CFC'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. CFC's Articles of Incorporation
require the affirmative vote of holders of at least 80% of the outstanding stock
of CFC entitled to vote for approval before CFC 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 CFC with or into any other corporation (the
foregoing being hereinafter referred to as a "business combination"). This 80%
supermajority is reduced to the percentage required by applicable law if such
business combination was approved (or adopted) and recommended without condition
by the affirmative vote of at least 80% of the directors. The Articles of
Incorporation expressly permit the Board of Directors to condition its approval
(or adoption) of any business combination upon the approval of holders of at
least 80% of the outstanding stock of CFC entitled to vote on such business
combination. The 80% supermajority provision is not applicable to any
transaction solely between CFC and another corporation, 50% or more of the
voting stock of which is owned by CFC. Under present South Carolina law, a
merger or the sale of substantially all the assets requires the approval of
holders of at least two-thirds of the outstanding shares entitled to vote. The
amendment of the foregoing business combination provisions requires the approval
of holders of at least 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 CFC without the cooperation of CFC's
Board of Directors.
TRANSFER AGENT. The transfer agent for the CFC common stock is Reliance
Trust Company, Atlanta, Georgia.
DIVIDEND REINVESTMENT PLAN. CFC has in place a dividend reinvestment
plan with respect to the CFC common stock. As set forth in the plan, holders of
such shares may elect to receive CFC common stock in lieu of receiving the cash
dividends to which such holder may otherwise be entitled. The plan also provides
for purchases of CFC common stock through optional cash payments.
LEGAL MATTERS
Certain legal matters in connection with the Merger Agreement,
including the validity of the CFC Shares offered hereby, will be passed upon for
CFC by Wyche, Burgess, Freeman & Parham, P.A., Greenville, South Carolina. As of
March 25, 1998, members and attorneys of Wyche, Burgess, Freeman & Parham, P.A.
beneficially owned a total of approximately 20,751 shares of CFC common stock.
65
<PAGE>
Certain legal matters in connection with the Merger Agreement will be
passed upon for RPGI by McNair Law Firm, P.A. John W. Currie, a member of McNair
Law Firm, P.A., is a director of RPGI. As of March 25, 1998, members and
attorneys of McNair Law Firm, P.A. beneficially owned a total of approximately
56,808 shares of RPGI common stock.
EXPERTS
The financial statements of RPGI as of December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997 included in
this Proxy Statement/Prospectus have been so included in reliance upon the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of CFC as of December 31, 1996
and 1997, and for each of the years in the three-year period ended December 31,
1997 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 herein, and upon the
authority of said firm as experts in accounting and auditing.
OTHER MATTERS
The RPGI Board is not aware of any other matters which may be presented
for action at the RPGI Special Meeting, but if other matters do properly come
before the meeting, it is intended that the shares of RPGI 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.
66
<PAGE>
RESOURCE PROCESSING GROUP, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS
RESOURCE PROCESSING GROUP, INC.
<TABLE>
<CAPTION>
<S> <C>
PAGE
Report of Independent Accountants........................................................................F-2
Balance Sheet as of December 31, 1996 and 1997...........................................................F-3
Statement of Income for the years ended December 31, 1995,
1996 and 1997..........................................................................................F-4
Statement of Changes in Shareholders' Equity
for the years ended December 31, 1995, 1996 and 1997....................................................F-5
Statement of Cash Flows for the years ended December 31, 1995,
1996 and 1997..........................................................................................F-6
Notes to Financial Statements............................................................................F-7
</TABLE>
<PAGE>
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Resource Processing Group, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of changes in shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of Resource Processing Group, Inc.
at December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of Resource Processing
Group, Inc.; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Columbia, South Carolina
March 23, 1998
F-2
<PAGE>
RESOURCE PROCESSING GROUP, INC.
BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 70 $ 346
Securities purchased under agreement
to resell - 3,956
Accounts receivable, net 4,526 1,241
Other current assets 292 862
------------ ---------------
Total current assets 4,888 6,405
Property and equipment, net 2,722 2,508
Deferred contract costs 16,275 10,334
Other assets 12 11
------------ ---------------
Total assets $ 23,897 $ 19,258
------------ ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 1,800 $ -
Accounts payable and accrued expenses 1,085 2,630
------------ ---------------
Current liabilities 2,885 2,630
Note payable to Resource Bancshares Corporation 2,267 2,267
Obligation to issue common stock 1,951 -
Deferred income taxes payable 5,845 3,757
------------ ---------------
Total liabilities 12,948 8,654
------------ ---------------
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding
Common stock, $.01 par value, 25,000,000 shares authorized; 8,610,598 and
9,082,126 shares issued and outstanding at December 31, 1996
and 1997, respectively 86 91
Additional paid in capital 5,779 7,725
Retained earnings 5,084 2,788
------------ ---------------
Total shareholders' equity 10,949 10,604
------------ ---------------
Contingencies (Note 9)
Total liabilities and shareholders' equity $ 23,897 $ 19,258
------------ ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
RESOURCE PROCESSING GROUP, INC.
STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenues $ 11,637 $ 18,424 $ 19,912
Operating expenses:
Acquired products and services 6,381 10,046 11,660
Contract impairment provision - 600 3,638
Selling, general and administrative expenses 3,798 6,741 8,268
-------------- ---------------- -----------------
Income (loss) from operations 1,458 1,037 (3,654)
Interest income 462 200 196
Interest expense (67) (509) (279)
-------------- ---------------- -----------------
Income (loss) before provision (benefit)
for income taxes 1,853 728 (3,737)
Provision (benefit) for income taxes 697 280 (1,441)
-------------- ---------------- -----------------
Net income (loss) $ 1,156 $ 448 $ (2,296)
-------------- ---------------- -----------------
Net income (loss) per share - basic and diluted $ .13 $ .05 $ (.25)
-------------- ---------------- -----------------
Weighted average shares outstanding - basic and diluted 8,610,598 8,610,598 9,082,126
-------------- ---------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RESOURCE PROCESSING GROUP, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
SHARES COMMON PAID IN RETAINED SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL EARNINGS EQUITY
----------- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 8,610,598 1 2,820 3,480 6,301
Net income 1,156 1,156
------------- ------------ -------------- ------------- ----------------
Balance at December 31, 1995 8,610,598 1 2,820 4,636 7,457
Net income 448 448
Recapitalization of Resource
Processing Group, Inc. 85 2,959 3,044
------------- ------------ -------------- ------------- ----------------
Balance at December 31, 1996 8,610,598 86 5,779 5,084 10,949
Shares issued in satisfaction of
obligation assumed in Separation 471,528 5 1,946 1,951
Net loss (2,296) (2,296)
------------- ------------ -------------- ------------- ----------------
Balance at December 31, 1997 9,082,126 $ 91 $ 7,725 $ 2,788 $ 10,604
------------- ------------ -------------- ------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RESOURCE PROCESSING GROUP, INC.
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,156 $ 448 $ (2,296)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and other amortization 179 317 444
(Increase) decrease in accounts receivable (1,065) (510) 3,286
Increase in other current assets (37) (212) (570)
(Increase) decrease in deferred contract costs (3,125) (12,857) 5,942
Decrease in other assets (2) (27) (1)
(Decrease) increase in accounts payable and accrued
expenses (725) 771 1,545
Deferred tax expense (benefit) 1,243 4,554 (2,088)
--------------- --------------- ---------------
Net cash provided by (used in) operating
activities (2,376) (7,516) 6,262
--------------- --------------- ---------------
Cash flows from investing activities:
Reimbursement for leasehold improvements by
landlord - - 75
Purchases of property and equipment (515) (2,273) (306)
Disposal of property and equipment - 58 1
--------------- --------------- ---------------
Net cash used in investing activities (515) (2,215) (230)
--------------- --------------- ---------------
Cash flows from financing activities:
Proceeds and repayments of notes payable to banks - 1,800 (1,800)
Net change in affiliate advances 837 7,832 -
--------------- --------------- ---------------
Net cash provided by (used in) financing activities 837 9,632 (1,800)
Net (decrease) increase in cash (2,054) (99) 4,232
Cash at beginning of year 2,223 169 70
--------------- --------------- ---------------
Cash at end of year $ 169 $ 70 $ 4,302
--------------- --------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 67 $ 485 $ 82
Income taxes paid 697 280 1,379
NON-CASH FINANCING ACTIVITIES:
Recapitalization of Resource Processing Group, Inc.
through forgiveness of affiliate advance 3,044
Conversion of affiliate advance to note payable 2,267
Obligation to issue common stock 1,951 (1,951)
Common stock issued 1,951
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BUSINESS:
Resource Processing Group, Inc. ("RPGI" or the "Company") is a South Carolina
corporation which is engaged in the business of providing credit card servicing
and marketing for financial institutions (its "clients"). All credit card
accounts which are serviced by RPGI are owned by RPGI's clients and all accounts
which are originated by RPGI are originated in the name of the client. In most
instances, RPGI retains the right to service originated accounts under a
long-term servicing agreement.
Prior to May 1994, Resource Bancshares Corporation ("RBC") the former parent of
RPGI, conducted its credit card operations as a division of one of its retail
banks. However, during 1994, RBC sold its retail banking assets, liquidated its
banks, including its credit card servicing and marketing operations and related
assets and liabilities (the "Credit Card Business"), and contributed its Credit
Card Business to a newly formed subsidiary, RPGI. The transfer of the assets and
liabilities to RPGI were at RBC's book value.
Between November 30, 1994 and December 31, 1996, RPGI operated as a wholly-owned
subsidiary of RBC. As of the close of business on December 31, 1996, RBC
effected a spin-off of RPGI (the "Separation").
In conjunction with the Separation, RPGI declared and distributed to RBC a
99,000-for-one stock split effective December 16, 1996 (the "Recapitalization"),
and on December 31, 1996 each RBC stockholder received one share of RPGI's stock
for each share of RBC voting and non-voting common stock owned as of the record
date, December 30, 1996. In addition, RBC was obligated to distribute to each
holder of certain of its phantom stock units a dividend equivalent payment of
.54 shares of RPGI stock for each phantom unit held on the record date, for a
total of 471,528 shares of RPGI stock. In conjunction with the Separation, RPGI
assumed that liability in exchange for a forgiveness of $1,951 of its affiliate
advance. After those shares were issued, RPGI had 9,082,126 shares of its common
stock outstanding.
AFFILIATE ADVANCES
Subsequent to the formation of RPGI and until the Separation any excess funds of
the Company were advanced to RBC and any needed funds were advanced from RBC.
Affiliate advances were due on demand and interest was at the average monthly
Wall Street Journal Prime Interest Rate.
As of the date of Separation, RBC forgave that portion of RPGI's advance from
RBC, which resulted in RPGI having $12,900 of capital as of the Separation date
after issuance of RPGI shares to the phantom stock unit holders. As of the
Separation, the remaining advances from RBC were either settled or converted
into a note payable which is more fully described in Note 5.
Also, in conjunction with the Separation, RBC agreed to continue to guarantee
performance under a transaction processing agreement, which began in 1992 and
continues through 1999 and RBC agreed to indemnify RPGI for any income taxes
associated with the Separation or any income taxes for periods prior to 1996
which have not been provided for in RPGI's financial statements.
Income and expense and associated average balances outstanding and applicable
rates of the affiliate advances are summarized below:
F-7
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
AVERAGE WEIGHTED
ALLOCATED AVERAGE
FUNDING INTEREST INTEREST
PROVIDED RATE INCOME
-------- ---- ------
PERIOD
- ------
1995 $ 2,605 8.83% $ 230
1996 5,278 8.25% 435
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of the Company reflect industry practices
and conform in all material respects with generally accepted accounting
principles. For comparative purposes, certain amounts from prior years have been
reclassified to conform to current period presentation.
SIGNIFICANT ESTIMATES
In preparing the financial statements, management is required to make estimates
based on available information that can affect the reported amounts of assets
and liabilities and disclosures as of the balance sheet date and revenues and
expenses for the related periods. Such estimates relate principally to the
deferral and amortization of, and the assessment of potential impairments of
deferred contract costs. Because of the inherent uncertainties associated with
any estimation process and due to possible future changes in market and economic
conditions, it is possible that actual future results in realization of the
underlying assets and liabilities could differ significantly from the amounts
reflected as of the balance sheet date.
SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
The Company has an agreement with one of its clients, Carolina First Bank
("CFB"), whereby excess Company cash at the end of each day is automatically
invested overnight in either U.S. Government or Agency securities. Under the
agreement, the purchased securities are held by the Federal Reserve Bank in book
entry form and are earmarked for the account of RPGI. At December 31, 1997, the
Company had purchased from CFB $3,956 of Federal Home Loan Mortgage Certificates
due January 20, 1998 under an agreement to resell the securities back to the CFB
on January 2, 1998. The market value of the underlying collateral at that date
was $3,943. Under the agreement, the underlying collateral is to be at least
100% of the purchase price but not more than 102%. In the event the collateral
value is less by the lesser of $25,000 or .5% of the purchase price, either cash
or additional acceptable collateral must be provided to the Company and if the
value is in excess of 102%, the excess collateral or an equivalent amount of
cash must be provided to CFB.
ACCOUNTS RECEIVABLE
Accounts receivable represent the amount advanced by the Company on behalf of
certain transaction processing clients for cardholder transactions, including
convenience checks and VISA and MasterCard credit charges, net of amounts due to
those clients for cardholder payments which have been received but for which the
funds cannot yet be withdrawn and remitted to the client. These amounts are
settled within two business days following the date of the transaction.
Management has provided no allowance for doubtful accounts as the Company has a
right of offset against payments collected on behalf of its clients.
PROPERTY AND EQUIPMENT
Property and equipment which includes leasehold improvements are stated at cost
less accumulated depreciation and amortization. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets varying from five to ten years. Gains or losses on routine
dispositions are reflected in
F-8
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
current operations. Maintenance and repairs are expensed and major replacements
and improvements are capitalized.
DEFERRED CONTRACT COSTS
Generally, marketing campaigns are conducted over a two-to-twelve-month period
and may be priced in conjunction with a transaction processing agreement or
program management agreement. In such case, the related agreements contain
provisions for payment to the Company for the portion of such fees associated
with the marketing services upon early termination, for any reason, of the
contracts. Incremental costs of acquiring transaction processing and program
management contracts and of marketing campaigns, consisting of acquired products
and services (such as data processing, postage and credit bureau reports) as
well as payroll and similar direct costs, are initially deferred as deferred
contract costs. Included in acquired products and services are amortized
deferred contract costs of $1,639, $4,052 and $4,550 for the years 1995, 1996
and 1997, respectively. Additionally, included in selling, general and
administrative expenses are amortized deferred contract costs of $262, $754 and
$558 for the years 1995, 1996 and 1997, respectively. Such deferred costs are
amortized to acquired products and services expense and selling, general and
administrative expenses as revenues are recognized based upon the ratio of
estimated total costs to total revenues under the related contracts.
Management reviews the amortization and recoverability of deferred contract
costs periodically on an individual contract basis through estimation of future
revenues. Revenues for most of the agreements in effect at December 31, 1996 and
1997 are based on portfolio balances and consequently recoverability of deferred
contract costs is dependent on the future balances of the accounts. In addition,
in certain instances, clients may terminate contracts under terms which may not
permit full recovery of associated costs. While management believes that
deferred contract costs at December 31, 1996 and 1997, after impairment
provisions of $600 recorded in 1996 and $3,638 in 1997 (see Note 9), are
recoverable through future contract revenues, it is reasonably possible that
estimated future revenues could be reduced based on the actions of clients.
REVENUES
Revenues for servicing and marketing credit card portfolios for clients are
recognized monthly on an accrual basis based upon the terms of the underlying
agreement. Generally, such agreements provide for fees based upon a percentage
of the outstanding portfolio balance or the number and types of transactions
processed. Certain servicing agreements provide for retention of all or a
portion of certain ancillary revenues (such as interchange volume, application
processing fees, credit insurance commissions and collection fees). Ancillary
revenues which are retained are recorded as collected except for credit
insurance experience rebates which are accrued monthly and adjusted to actual at
year end. Revenues for advising clients on portfolios' performance and
profitability are included in revenues as earned under the program management
agreement, generally on a monthly basis.
STOCK OPTIONS
RPGI accounts for compensation expense related to stock options under Accounting
Principles Board Opinion No. 25. Accordingly, compensation is determined on the
award date by the difference between the exercise price and the fair market
value of the stock and is recognized over the vesting period. In accordance with
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" disclosure
is made of pro forma net income as if stock options were accounted for at fair
value.
INCOME TAXES
The Company's operations prior to the Separation were included in the
consolidated federal and state income tax returns of RBC. Accordingly, the
income taxes prior to the Separation were payable to or due from RBC. Under an
intercompany income tax sharing agreement, the Company was paid for the benefit
of tax deductions attributed to the Company when the benefit was realized on the
consolidated return. The Company recognizes deferred tax assets and liabilities
in amounts representative of the estimated future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities.
F-9
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
Deferred tax assets and liabilities are measured using the enacted tax rate
expected to apply to taxable income in the period in which the difference is
expected to be realized or settled. Subsequent to the Separation, RPGI does not
file a consolidated income tax return with RBC but is obligated for its own
taxes and tax returns. However, under the terms of an income tax sharing
agreement which was entered into in conjunction with the Separation and which
replaced the prior income tax sharing agreement, under certain conditions, RPGI
may request RBC to carry back certain items to a prior year and file amended
consolidated income tax returns including the RPGI carryback amount.
F-10
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
CORPORATE OVERHEAD ALLOCATIONS
The historical operations of the Company prior to the Separation have been
adjusted to allocate certain corporate expenses incurred by RBC on the Company's
behalf. Such allocations, consisting primarily of salary and employee benefit
costs directly relating to the Company for executive and financial management,
human resources and internal audit, in the aggregate were $386, $660 and $0
during the three years ended December 31, 1997, respectively, and are included
as selling, general and administrative expenses in the accompanying statement of
income. The allocations were based on methodologies which management believes
resulted in a reasonable approximation of the costs that would have been
incurred had the Company been operating on a stand-alone basis.
CREDIT CARD ACCOUNTS
During 1995, the Company was paid $464 for collecting previously charged-off
credit card accounts owned by RBC. Effective January 1, 1996, RBC transferred
ownership of the remaining uncollected accounts at book value to RPGI. Because
the accounts had been previously charged-off and due to the uncertainty of
future collection, the accounts are not reflected in RPGI's balance sheet.
During 1996 and 1997, RPGI collected $705 and $453, respectively, from such
accounts; however, such amounts are no indication of amounts which may be
collected in the future.
INCOME TAX EXPENSE ALLOCATIONS
Income tax expense or benefit for periods prior to 1997 has been allocated to
the Company in consideration of intercompany tax sharing agreements. Such
allocations approximate those which would have been incurred had the Company
operated independently and filed separate tax returns. Income taxes currently
payable and/or receivable were settled at the end of each year through affiliate
advances. Subsequent to the Separation, the Company files separate tax returns.
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
DECEMBER 31,
------------
1996 1997
---- ----
Furniture and equipment $ 3,655 $ 3,878
Leasehold improvements 87 74
---------------- ----------------
3,742 3,952
Less: Accumulated depreciation
and amortization (1,020) (1,444)
---------------- ----------------
$ 2,722 $ 2,508
---------------- ----------------
Depreciation and amortization expense for the years 1995, 1996 and 1997 was
$179, $317 and $444, respectively.
NOTE 4 - LEASE COMMITMENT:
In 1997, the Company entered into a new noncancelable operating lease agreement
for its office facilities. The lease contains renewal options and escalation
clauses. At December 31, 1997, the minimum operating lease commitments were as
follows:
F-11
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
DECEMBER 31,
1997
-------------
1998 $ 596
1999 605
2000 605
2001 605
Thereafter 203
--------------
$ 2,614
--------------
Rent expense for operating leases was $153, $303 and $461 for the years 1995,
1996 and 1997, respectively.
F-12
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 5 - NOTES PAYABLE:
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
$300 line of credit at Wall Street Journal Prime ("WSJ Prime") plus 100 basis
points with interest and principal due on February 12, 1997 and $5,000 revolving
line of credit due on September 15, 1998 with interest at WSJ Prime and payable
monthly. Pursuant to the Separation, the $5,000 credit line is guaranteed by
Resource and RPG pays Resource 62.5 basis points per annum for the guarantee. $ 1,800 $ -
Note payable to Resource at WSJ Prime, with an interest rate floor of 6% and a
cap of 10% per annum. Interest payable in arrears on January 1, 1998 and January
1, 1999 and monthly thereafter. Principal is payable beginning January 1, 1999
based on a ten-year amortization with the balance due on November 30, 2001,
except that within 30 days after the closing of each public or private offering
of equity or debt of RPG, the note shall be reduced by the lesser of (i) 20% of
the net proceeds to RPG or (ii) the remaining principal and accrued interest. 2,267 2,267
--------------- --------------
$ 4,067 $ 2,267
--------------- --------------
</TABLE>
The aggregate amounts of payments required under notes payable at December 31,
1997 are as follows:
1998 $ -
1999 227
2000 227
2001 1,813
-------------
$ 2,267
-------------
As of December 31, 1997, the Company was in compliance with all covenants
related to the above notes payable.
F-13
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are summarized as follows:
DECEMBER 31,
------------
1996 1997
---- ----
Net liability for cardholder payments collected $ - $ 1,522
Accrued information system expenses 316 281
Accrued personnel expenses 243 185
Accrued interest expense 24 191
Credit insurance premiums payable 187 121
Other 315 330
--------- --------------
$ 1,085 $ 2,630
--------- --------------
NOTE 7 - INCOME TAXES:
The components of the provision (benefit) for income taxes for each of the three
years ended December 31, 1997 are as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
---- ---- ----
Current:
Federal $ (546) $ (4,274) $ 647
State - - -
----------- ----------- -----------
(546) (4,274) 647
Deferred:
Federal 1,182 4,500 (1,965)
State 61 54 (123)
----------- ----------- -----------
$ 697 $ 280 $ (1,441)
----------- ----------- -----------
The Company's effective tax rate varied from the statutory federal tax rate due
to the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
1995 INCOME 1996 INCOME 1997 INCOME
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate $ 630 34.0% $ 248 34.0% $ (1,271) 34.0%
State tax, net of federal benefit 61 3.3% 24 3.3% (123) 3.3%
Other, net 6 3% 8 3% (47) 1.3%
--------- --------- --------- -------- ----------- --------
$ 697 37.6% $ 280 37.6% $ (1,441) 38.6%
--------- --------- --------- -------- ----------- --------
</TABLE>
Deferred tax (assets) liabilities arising in accordance with SFAS No. 109 are as
follows:
F-14
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997
---- ----
Contract impairment provision $ - $ (234)
State taxes, net operating loss carryforwards (541) (375)
---------- ------------
Gross deferred tax assets (541) (609)
---------- ------------
Property and equipment depreciation 161 277
Deferred contract costs 6,225 4,089
---------- ------------
Gross deferred tax liabilities 6,386 4,366
---------- ------------
Total $ 5,845 $ 3,757
---------- ------------
NOTE 8 - EMPLOYEE BENEFIT PLANS:
STOCK OPTION PLAN
On December 17, 1996, RPGI's Board and shareholder approved a Stock Option Plan.
This plan is authorized to issue up to 500,000 shares of common stock. On
February 3, 1997, 245,600 options were awarded at an option price of $4.09 which
exceeded the estimated market value of RPGI's common stock on the date of award.
All of the awarded options have a five year vesting period. During the year
ended December 31, 1997, 29,575 of the awarded units were forfeited and are
available for reissue. At December 31, 1997 there were 216,025 options
outstanding. The Company has applied APB Opinion No. 25 and related
Interpretations in accounting for its plan. Accordingly, no compensation cost
was recognized in 1997. The amount of compensation cost that would have been
recorded under SFAS No. 123, "Accounting for Stock Based Compensation", would
not have been material.
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
Prior to the Separation, employees of RPGI participated in RBC's leveraged ESOP.
Under that ESOP plan, contribution by RBC could be made in the form of cash or
RBC common stock at the discretion of the Board of Directors of RBC, except that
cash contributions were required to be made in sufficient amounts to pay any
maturing debt obligations of the ESOP.
F-15
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
Through the date of the Separation, RBC allocated ESOP costs to the Company,
based upon a fraction where the numerator was the number of shares released to
participants who were employees of the Company and the denominator was the total
number of shares released to all RBC ESOP participants.
The Board of Directors of RPGI approved a similar ESOP plan and, in conjunction
with the Separation, the December 31, 1996 account balances of RPGI employees in
the RBC ESOP plan were, as of January 1, 1997, transferred to the RPGI ESOP
plan. During the year ended December 31, 1997, RPGI did not make any
contributions to the RPGI ESOP and at December 31, 1997, RPGI's ESOP plan had no
outstanding acquisition loans.
Compensation expense recorded by the Company related to the ESOP plans was $50,
$102 and $0 in 1995, 1996 and 1997, respectively.
OTHER EMPLOYEE BENEFIT PLANS
Prior to the Separation, employees of RPGI participated in RBC's 401(k) savings
plan and certain health, disability and life insurance programs offered to
employees of RBC and its subsidiaries. The portion of the cost of those benefits
related to the Company's employees were allocated to the Company. Under RBC's
401(k) savings plan, the Company matched 50% of its employees' contributions up
to a maximum of 3% of the employee's compensation. That plan provided for
immediate vesting of the employee's contributions and vesting of the employer
match at 25% per year.
Effective January 1, 1997, the Board of Directors of RPGI adopted a similar
401(k) savings plan and other employee benefit plans similar to those previously
available through RBC. Company matching contributions to the 401(k) plans were
$20, $45 and $91 for the years 1995, 1996 and 1997, respectively.
NOTE 9 - CONTINGENCIES:
SIGNIFICANT CUSTOMERS AND VENDOR
During 1997, four clients accounted for 97.7% of the Company's total revenues.
During that year, one of those clients, which accounted for 22.5% of total
revenue, elected to convert its servicing portfolio to an in-house system and to
terminate its program management agreement. In conjunction with the settlement
of that program management agreement, the Company recorded a contract impairment
provision of $3,008. Also, during 1997, a client, which accounted for 28.9% of
revenues and 26.6% of the outstanding loans being serviced at December 31, 1997,
was acquired by another financial institution. In February 1998, the acquirer
terminated that servicing agreement with RPGI. See Note 12 for further comment.
In conjunction with the settlement of that servicing agreement, the Company
collected $6,052 of deferred contract cost and recorded an impairment provision
of $630. A third client, which accounted for 15.0% of revenues and 35.4% of the
outstanding loans being serviced at December 31, 1997, has advised the Company
that it intends to form an in-house credit card servicing center and terminate
its servicing agreement with the Company during the third quarter of 1998.
Unless the Company is successful in either replacing the lost business or
reducing its operating expenses proportionate to the lost revenue, the lost
business will have a significant adverse effect on the future operations of
RPGI.
Acquired products and services expense included $4,688 for data processing
services received from Total System Services.
OTHER CONTINGENCIES
At December 31, 1996 and 1997, the Company was servicing approximately 506,000
and 471,000 credit card accounts owned by others with outstanding balances of
$498,000 and $394,000, respectively. Credit card receivables serviced for others
are not included in the accompanying balance sheet. In the ordinary course of
business, the Company is responsible for servicing these accounts in conformity
with the terms of the related transaction processing agreement. In addition, the
Company may be required to purchase accounts originated for
F-16
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
others if there is a breach of representations or warranties. RPGI does not
expect to incur any material liabilities or losses pursuant to these provisions.
Accordingly, no provision for loss has been recorded in the accompanying
financial statements.
From time to time, RPGI has various lawsuits and claims arising in the conduct
of its business; however, they are not expected to have any material adverse
effect on the financial position or results of operations of RPGI.
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
RPGI is not a party to any financial instruments with off-balance sheet risk or
a party to any derivatives.
NOTE 11 - NET INCOME (LOSS) PER SHARE:
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share ("EPS") by
replacing the presentation of primary EPS with a presentation of basic EPS. In
addition, SFAS No. 128 requires dual presentation of basic and diluted EPS on
the face of the income statement and requires a reconciliation of the numerator
and denominator of the diluted EPS calculation. The Company has adopted SFAS No.
128 as of December 31, 1997 and has restated EPS for all prior periods
presented.
Net income (loss) per share - basic is computed by dividing net income by the
weighted average number of common shares outstanding (after given retroactive
treatment to the stock split described in Note 1). Net income (loss) per share -
diluted is computed by dividing net income by the weighted average number of
common shares outstanding (after given retroactive treatment to the stock split
described in Note 1) and dilutive common share equivalents using the treasury
stock method. Dilutive common share equivalents include common shares issuable
upon exercise of outstanding stock options. However, options to purchase 216,025
shares of common stock at $4.09 per share were outstanding during 1997, but were
not included in the computation of net income (loss) per share - diluted because
the options' exercise price was greater than the average market price of the
common shares. The options, which expire in February 2007 were still outstanding
at December 31, 1997. As a result, there is no difference between net income
(loss) per share - basic and net income (loss) per share - diluted.
NOTE 12 - SUBSEQUENT EVENTS (UNAUDITED):
On March 9, 1998, RPGI entered into a definitive merger agreement with Carolina
First Corporation ("CFC"), parent of CFB, one of RPGI's significant clients. The
agreement which is subject to the approvals of the shareholders of RPGI and
CFC's regulators, provides that RPGI shareholders will receive $11,235 of
compensation plus additional compensation. The compensation will be paid in the
form of CFC common stock, $1 par value, with cash paid in lieu of fractional
shares. The compensation of $11,235 is payable upon consummation of the merger.
Based on the number of shares of RPGI outstanding as of December 31, 1997
(9,082,126) and assuming a closing price of $25.00 per share for CFC common
stock, shareholders of RPGI would receive .0495 shares of CFC common stock for
each share of RPGI common stock. The additional compensation is payable in two
installments, on January 31, 1999 and January 31, 2000. The first installment of
$500 is contingent on net charge-offs during 1998 being less than 4% of the
credit card loans originated in 1997 by the Company for a subsidiary of CFC. The
second installment is contingent on the net charge-offs during 1999 being less
than 4.5% of all credit card accounts owned as of December 31, 1997 by CFC, its
subsidiaries and a credit card securitized trust, which is subserviced by RPGI
(the "December 31, 1997 Accounts"). The second installment, if any, will be
equal to 1.33% of the weighted average daily outstanding balance of the December
31, 1997 Accounts during 1999.
During 1998, the Company expects to record a restructuring charge related to an
anticipated staffing reduction and disposal of office facilities and equipment.
This restructuring charge is related to clients that have provided notice of
termination of their servicing agreements with the Company.
F-17
<PAGE>
RESOURCE PROCESSING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
Also, as indicated in Note 9, in February 1998, the Company collected $6,052 of
cash in conjunction with the early termination of a servicing agreement. As
stated in Note 2, the Company invests its excess cash in overnight reverse
repurchase agreements with CFB. The amount invested overnight on March 15, 1998
was $8,704. Pending consummation of the merger discussed above, the Company
intends to continue its policy of overnight investing its excess cash with CFB.
F-18
<PAGE>
EXHIBIT A
[Merger Agreement]
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 9, 1998
AMONG
CAROLINA FIRST CORPORATION,
CFC MERGER SUB, INC.
AND
RESOURCE PROCESSING GROUP, INC.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), dated
as of March 9, 1998, among Carolina First Corporation, a South Carolina
corporation ("Parent"), CFC Merger Sub, Inc., a South Carolina corporation and a
wholly owned subsidiary of Parent ("Sub"), and Resource Processing Group, Inc.,
a South Carolina corporation ("RPG").
WHEREAS, the respective Boards of Directors of Parent, Sub and
RPG have approved the merger of Sub with and into RPG (the "Merger"), upon the
terms and subject to the conditions set forth herein; and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger qualify as a reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code"), and the Treasury regulations thereunder.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein the parties
hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER.
(a) Parent has formed Sub as a wholly owned subsidiary of
Parent. Sub has been formed solely to facilitate the Merger and shall conduct no
business or activity other than in connection with the Merger.
(b) Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3), Sub shall be merged with and
into RPG and the separate existence of Sub shall thereupon cease, and RPG shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation") under the laws of the State of South Carolina as a wholly owned
subsidiary of Parent and shall retain the name "Resource Processing Group, Inc."
Section 1.2 CLOSING. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1, and subject to the satisfaction or waiver of the
conditions set forth in Article VIII, the closing of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within five
business days) after satisfaction or waiver of the conditions set forth in
Sections 8.1, 8.2 and 8.3, at the offices of McNair Law Firm, P.A., 1301 Gervais
Street, Columbia, South Carolina 29201, unless another date, time or place is
agreed to by Parent and RPG (the "Closing Date").
Section 1.3 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective upon the filing of articles of merger with the Secretary of State of
the State of South Carolina in accordance with the provisions of the South
Carolina Business Corporation Act of 1988, as amended (the "South Carolina
Act"), which filing shall be made as soon as practicable on the Closing Date.
When used in this Merger Agreement, the term "Effective Time" shall mean the
time at which such articles are accepted for filing by the Secretary of State of
South Carolina.
<PAGE>
Section 1.4 EFFECT OF THE MERGER. The Merger shall, from and after the
Effective Time, have all the effects provided by applicable South Carolina law.
If at any time after the Effective Time the Surviving Corporation shall consider
or be advised that any further deeds, conveyances, assignments or assurances in
law or any other acts are necessary, desirable or proper to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, the title to any
property or rights of Sub or RPG (the "Constituent Corporations") to be vested
in the Surviving Corporation, by reason of, or as a result of, the Merger, or
otherwise to carry out the purposes of this Merger Agreement, the Constituent
Corporations agree that the Surviving Corporation and its proper officers and
directors shall execute and deliver all such deeds, conveyances, assignments and
assurances in law and do all things necessary, desirable or proper to vest,
perfect or confirm title to such property or rights in the Surviving Corporation
and otherwise to carry out the purposes of this Merger Agreement, and that the
proper officers and directors of the Surviving Corporation are fully authorized
in the name of each of the Constituent Corporations or otherwise to take any and
all such action.
Section 1.5 RESERVATION OF RIGHT TO REVISE TRANSACTION. Subject to
Section 9.4, Parent may at any time change the method of effecting the
acquisition of RPG if and to the extent it deems such change to be desirable;
provided, however, that no such change shall (a) alter the type of consideration
to be issued to the holders of the common stock, $.01 par value, of RPG ("RPG
Common Stock") as provided for in this Merger Agreement, (b) reduce the value of
such consideration, (c) adversely affect the intended tax-free treatment to
RPG's shareholders as a result of receiving such consideration or prevent the
parties from obtaining the tax opinion of McNair Law Firm, P.A. referred to
herein, (d) materially impair the ability of the parties hereto to receive any
Consents (as defined in Section 4.6(b)) required in connection with the
acquisition of RPG by Parent or to satisfy any other conditions to the
consummation of the transactions contemplated hereby or (e) materially delay the
Closing.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
RPG, as in effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation after the Effective Time, until
thereafter changed or amended as provided therein or by applicable law.
Section 2.2 BYLAWS. The Bylaws of RPG as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
Section 2.3 BOARD OF DIRECTORS; OFFICERS. The directors of Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and the officers of RPG immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, in each case, until the
earlier of their respective resignations or the time that their respective
successors are duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 MERGER CONSIDERATION.
2
<PAGE>
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of any shareholder of RPG or Sub:
(i) In connection with the Merger, each share of RPG
Common Stock issued and outstanding immediately prior to the Effective Time
(other than those to which Section 3.1(a)(ii) applies and other than any
Dissenting Shares (as defined in Section 3.2), shall by virtue of the Merger and
without any action on the part of the holder thereof, be converted into merger
consideration equal to $1.2370 per share (the "Base Consideration"), plus the
right to receive the Additional Consideration (as defined in Section 3.1(b).
Except for cash payable in lieu of fractional shares as provided below, 100% of
the Base Consideration shall be paid in the form of shares of common stock,
$1.00 par value per share, of Parent ("Parent Common Stock"), which shall be
valued at the Closing Price (as defined in Section 3.3(b)). The ratio of shares
of Parent Common Stock issuable for each share of RPG Common Stock under this
Section 3.1(a) as Base Consideration is hereinafter referred to as the
"Conversion Ratio," which Conversion Ratio shall be calculated and rounded to
four decimals. Notwithstanding the foregoing, no fractional shares of Parent
Common Stock will be issued as a result of the Merger, and in lieu of the
issuance of fractional shares, cash will be paid to the holders of the RPG
Common Stock in respect of any fractional share that would otherwise be issuable
based on the Closing Price or, with respect to the Additional Consideration,
Fair Market Value. Assuming a Closing Price of $24.00 per share for Parent
Common Stock, the Conversion Ratio would be 0.0515 shares of Parent Common Stock
for each share of RPG Common Stock.
(ii) All shares of RPG Common Stock which are held by
Parent or any wholly owned subsidiary of Parent (including Sub), other than in a
fiduciary capacity, shall be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(iii) Each issued and outstanding share of common
stock, $.01 par value, of Sub shall be converted into and become one fully paid
and nonassessable share of common stock, $.01 par value, of the Surviving
Corporation.
(b) In addition to the Base Consideration, additional shares
(the "Additional Consideration") of Parent Common Stock shall be issuable (pro
rata) to the record holders of RPG Common Stock issued and outstanding
immediately prior to the Effective Time or their successors by operation of law,
other than holders of those shares to which Section 3.1(a)(ii) applies and
holders of Dissenting Shares (the "RPG Stockholders") as follows:
(i) If Net Chargeoffs (as defined below) during the
year ended December 31, 1998 that are associated with 1997 Originations (as
defined below) are less than 4% of the weighted average daily outstanding
balance of such accounts during 1998, Parent shall issue to the RPG Stockholders
shares of Parent Common Stock having a Fair Market Value (as defined below)
equal to $500,000. Such shares, if issuable, shall be issued on January 31,
1999.
(ii) If Net Chargeoffs during the year ended December
31, 1999 that are associated with Parent Credit Card Accounts (as defined below)
are less than 4.5% of the weighted average daily outstanding balance of such
accounts during 1999, Parent shall issue to the RPG Stockholders shares of
Parent Common Stock having a Fair Market Value equal to 1.33% of the weighted
average daily outstanding balance of such accounts during 1999. Such shares, if
issuable, shall be issued on January 31, 2000.
3
<PAGE>
(iii) If a Change in Control (as defined below) of
Parent occurs during 1998 or 1999, then proper provision shall be made so that
Parent's successor in interest shall be able to properly calculate the Fair
Market Value of the Parent Common Stock that would be issuable under Sections
3.1(b)(i) and (ii), including, without limitation, maintain the ability to
calculate Net Chargeoffs as defined herein, and the Additional Consideration
shall be paid by Parent or such successor on January 31, 1999 and January 31,
2000, as the case may be, to the RPG Stockholders in Parent Common Stock or the
securities of such successor (or cash or other property) into which the shares
of Parent Common Stock (which otherwise would have been issuable as Additional
Consideration (and which have been valued at the Fair Market Value)) were
converted (or if the Parent Common Stock was not converted, the securities, cash
and/or other property exchange for, or received on account of, such shares of
Parent Common Stock which otherwise would have been issuable as Additional
Consideration). In the event that a Change in Control of Parent occurs during
1998 or 1999, the Fair Market Value of the Parent Common Stock, if issuable,
shall be calculated as of the following dates: (A) in the case of a tender
offer, the date immediately preceding the date of the first public announcement
of the tender offer; (B) in the case of an election contest, the date
immediately preceding the date of first public announcement of the election
contest; (C) in the case of Parent executing an agreement concerning the sale of
assets, the date immediately preceding the date of the first public announcement
of the potential sale; (D) in the case of Parent adopting a plan of dissolution
or liquidation the date immediately preceding the date of the first public
announcement of the adoption of the plan; or (E) in the case of Parent executing
an agreement concerning a merger or consolidation as contemplated in Section
3.1(b)(v)(E) below, the date immediately preceding the date of the first public
announcement of the executing of such an agreement.
(iv) Notwithstanding the foregoing, if any 1997
Originations are sold during 1998 or if any Parent Credit Card Accounts are sold
during 1998 or 1999, then the calculation of the amounts to be paid under
subparagraphs (i) and (ii) above with respect to 1997 Originations and Parent
Credit Card Accounts shall be made by assuming that (A) such accounts continued
to be held by Parent until December 31, 1998 or December 31, 1999, as the case
may be, and (B) such accounts had an average daily balance equal to the balance
on the date of sale from the date of sale until the applicable December 31.
(v) The following terms shall have the following
meanings, when used in this paragraph (b):
"Change in Control" shall mean (A) the obtaining by any party pursuant
to a tender offer of 50% or more of Parent's voting stock, (B)
individuals serving as directors immediately prior to a shareholder
meeting involving a director election contest failing to constitute a
majority of Parent's directors following such election contest, (C)
Parent's executing an agreement concerning the sale of all or
substantially all of its assets to a purchaser that is not a
subsidiary, (D) Parent's adopting of a plan of dissolution or
liquidation or (E) Parent's executing an agreement concerning a merger
or consolidation involving Parent in which Parent is not the surviving
corporation, unless at least 50% of the surviving corporation's voting
stock is held by (y) persons who were shareholders of Parent prior to
such merger or consolidation or (z) a direct or indirect parent
corporation, 50% of the voting stock of which is held by persons who
were shareholders of Parent prior to such merger or consolidation.
"Fair Market Value" of Parent Common Stock, as of a particular date,
shall be the average of the closing prices of Parent Common Stock for
the 20 trading days immediately prior to the date in question. Unless
specifically provided otherwise (as in Section 3.1(b)(iii)), Fair
Market Value
4
<PAGE>
for a specific provision hereof shall be calculated as of the date that
the shares of Parent Common Stock first become issuable under such
provision and the number of shares determined to have such value shall
be subject to adjustment for any stock divided, split up,
reclassification, recapitalization, combination or exchange of shares
of Parent Common Stock occurring between such date and the date of the
actual issuance thereof.
"Net Chargeoffs" shall mean the principal amount of 1997 Originations
or Parent Credit Card Accounts, as the case may be, written off during
the applicable year as a result of the consistent application of
Parent's and its subsidiaries' and the Carolina First Credit Card
Master Trust's (the "Trust") current policy of charging off accounts
more than 180 days past due, net of (i) all interest and fees earned on
charged off 1997 Originations or Parent Credit Card Accounts (as the
case may be) during the applicable year and (ii) all recoveries on
charged off 1997 Originations or Parent Credit Card Accounts (as the
case may be) during the applicable year actually recovered prior to
January 31, 1999 (in the case of 1997 Originations) and January 31,
2000 (in the case of Parent Credit Card Accounts). For purposes of
calculating Net Chargeoffs with respect to 1997 Originations or Parent
Credit Card Accounts that are sold as contemplated above in Section
3.1(b)(iv), (i) Net Chargeoffs for any particular year (and any
relevant subsequent year) shall be annualized and (ii) Net Chargeoffs
shall be increased (basis point for basis point) (but not annualized)
for each basis point below 100% at which any 1997 Originations or
Parent Credit Card Accounts are sold and (iii) in the event that a sale
occurs in 1998, Net Chargeoffs in 1999 for such transferred Parent
Credit Card Accounts, shall be deemed to be equal to the 1998 Net
Chargeoffs for such Parent Credit Card Accounts.
"1997 Originations" shall mean the credit card accounts originated by
RPG during 1997 on behalf of Parent or any of its subsidiaries which
are now held by Parent, any of its Subsidiaries or the Trust.
"Parent Credit Card Accounts" shall mean all credit card accounts owned
as of December 31, 1997 by Parent or its subsidiaries (including the
Surviving Corporation and the Trust) regardless of the originator or
servicer of such credit card accounts.
(vi) On or before January 31, 1999 and January 31,
2000, Parent shall deliver to each RPG Stockholder a schedule setting forth the
computation of the Additional Consideration to be paid or showing it is not due,
as the case may be, along with a certificate of the chief financial officer of
Parent as to the accuracy thereof.
(c) OPTIONS. At the Effective Time, all of the RPG Stock
Options (as defined in Section 5.2) shall, after the Effective Time, represent
only the right to receive shares of Parent Common Stock based on the Conversion
Ratio.
Section 3.2 DISSENTING SHARES. Each share of RPG Common Stock (a) as to
which a written notice of an intent to demand payment is given to RPG (in
accordance with Section 33-13-210 of the South Carolina Act) prior to the votes
of the holders of shares of RPG Common Stock on the Merger taken at the meeting
of such shareholders duly held for such purpose (the "RPG Special Meeting") and
not withdrawn at or prior to the time of such votes, (b) which is not voted by
the holder thereof in favor of the Merger at the RPG Special Meeting and (c) as
to which a written demand for payment of fair value, accompanied by the
certificate evidencing such share of RPG Common Stock, shall have been timely
made (in accordance with Section 33-13-230 of the South Carolina Act) with RPG
or the Surviving
5
<PAGE>
Corporation, as the case may be (a "Dissenting Share"), shall not be converted
into and represent the right to receive the Base Consideration and the
Additional Consideration, and such share of RPG Common Stock shall be subject to
the provisions of Chapter 13 of the South Carolina Act; provided, however, that
if any such shareholder shall withdraw his or her demand for payment or shall
fail to perfect his or her rights to such payment in accordance with the South
Carolina Act, then such holder's Dissenting Shares shall cease to be Dissenting
Shares and each such share of RPG Common Stock shall, subject to the terms of
this Merger Agreement and the South Carolina Act, be converted into and
represent the right to receive the Base Consideration and the Additional
Consideration. Each holder of a Dissenting Share who becomes entitled, pursuant
to the South Carolina Act, to receive payment of the fair value of his or her
Dissenting Share shall receive such payment from the Surviving Corporation (as
required by Chapter 13 of the South Carolina Act). RPG shall give Parent notice
of its receipt of any written notice of an intent to demand payment.
Section 3.3 EXCHANGE OF SHARES FOR BASE CONSIDERATION.
(a) At the Effective Time, Parent or Sub shall make available
or cause to be made available to a disbursing agent (the "Disbursing Agent")
(which may be Parent's transfer agent) the shares of Parent Common Stock
contemplated by Section 3.1(a) and sufficient funds to enable the Disbursing
Agent to make the cash payments in lieu of fractional shares contemplated by
Section 3.3(b).
(b) As soon as practicable after the Effective Time, Parent
shall cause the Disbursing Agent to send a notice and a letter of transmittal to
each holder of certificates formerly evidencing shares of RPG Common Stock
(other than certificates formerly representing shares of RPG Common Stock to be
canceled pursuant to Section 3.1(a)(ii) and certificates representing Dissenting
Shares) advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Disbursing Agent such certificates for
exchange into the Base Consideration for each share of RPG Common Stock so
represented, and that delivery shall be effected, and risk of loss and title to
the shares of RPG Common Stock shall pass, only upon proper delivery to the
Disbursing Agent of the certificates for the shares of RPG Common Stock and a
duly executed letter of transmittal and any other required documents of
transfer. Each holder of certificates theretofore evidencing shares of RPG
Common Stock, upon surrender thereof to the Disbursing Agent together with such
letter of transmittal (duly executed) and any other required documents of
transfer, shall be entitled to receive in exchange therefor the Base
Consideration with respect to each such share. Upon such surrender, the
Disbursing Agent shall promptly deliver the Base Consideration (less any amount
required to be withheld under applicable law) in accordance with the
instructions set forth in the related letter of transmittal, and the
certificates so surrendered shall promptly be canceled. Until surrendered,
certificates formerly evidencing shares of RPG Common Stock (other than
certificates formerly representing shares of RPG Common Stock to be canceled
pursuant to Section 3.1(a)(ii) and certificates representing Dissenting Shares)
shall be deemed for all purposes to evidence only the right to receive the Base
Consideration per share (and if payable, the Additional Consideration) or, in
the case of Dissenting Shares, the fair value of such Dissenting Shares. All the
former shareholders of RPG who are entitled to receive shares of Parent Common
Stock shall be deemed to be shareholders of record of Parent as of the Effective
Time and shall have the right to vote, and receive dividends thereafter declared
upon, the shares of Parent Common Stock into which their shares of RPG Common
Stock shall have been converted into the right to receive; provided, however,
that (i) all dividends payable with respect to shares of Parent Common Stock
which have not been issued as a result of the failure of shareholders of RPG to
surrender their certificates evidencing shares of RPG Common Stock shall be
withheld by Parent until such holders have surrendered such certificates for
exchange, and shall be paid to such holders without interest upon such surrender
for
6
<PAGE>
exchange, and (ii) no right to vote or receive any dividend or other
distribution shall attach to any fraction of a share resulting from the
above-described conversion, and no stock certificate for a fraction of a share
of Parent Common Stock shall be issued, but instead the Disbursing Agent, as
agent for the holders of shares of RPG Common Stock, shall pay to such holders
who otherwise become entitled to a fraction of a share of Parent Common Stock as
a result of the aforesaid conversion, an amount equal to such fraction
multiplied by the Closing Price of Parent Common Stock. "Closing Price" of
Parent Common Stock shall mean the average closing prices of a share of Parent
Common Stock as reported on the Nasdaq National Market (the "NMS") for the 20
trading days immediately preceding the Closing Date.
(c) In the event of any change in Parent Common Stock between
the date of this Merger Agreement and the Effective Time by reason of any stock
dividend, split up, reclassification, recapitalization, combination, exchange of
shares or the like, the Conversion Ratio shall be appropriately adjusted.
(d) If the Base Consideration is to be delivered to a person
other than the person in whose name the certificates surrendered in exchange
therefor are registered, it shall be a condition to the payment of such Base
Consideration that the certificates so surrendered shall be properly endorsed or
accompanied by appropriate stock powers and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Disbursing Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Disbursing Agent
that such taxes have been paid or are not required to be paid.
(e) All dividends or other distributions declared after the
Effective Time with respect to Parent Common Stock and payable to the holders of
record thereof on or after the Effective Time, which are payable to holders of
certificates representing shares of RPG Common Stock not theretofore surrendered
and exchanged for certificates representing shares of Parent Common Stock, shall
be paid or delivered by Parent to the Disbursing Agent in trust for the benefit
of such holders. Unless otherwise required by law, all such dividends or other
distributions held by the Disbursing Agent for payment or delivery to the
holders of unsurrendered certificates representing shares of RPG Common Stock
and unclaimed at the end of two years from the Effective Time shall be repaid or
redelivered by the Disbursing Agent to Parent, after which time any holder of
certificates representing shares of RPG Common Stock who has not theretofore
surrendered such certificates to the Disbursing Agent shall, subject to
applicable law, look as a general creditor only to Parent for payment or
delivery of such dividends or distributions. Any certificates for shares of
Parent Common Stock and any cash payable in lieu of fractional share interests
delivered or made available to the Disbursing Agent pursuant to this Merger
Agreement and not exchanged for certificates representing shares of RPG Common
Stock within two years after the Effective Time, unless otherwise required by
law, also shall be returned by the Disbursing Agent to Parent subject to the
rights of holders of unsurrendered certificates for shares of RPG Common Stock
under this Section 3.3. Notwithstanding the foregoing, neither Parent, the
Disbursing Agent nor any other party hereto shall be liable to any holder of
shares of RPG Common Stock for any Parent Common Stock or dividends or
distributions thereon or for any cash payable in lieu of fractional share
interests, delivered to a public official pursuant to applicable escheat or
similar laws.
Section 3.4 NO FURTHER RIGHTS. From and after the Effective Time,
holders of certificates theretofore evidencing shares of RPG Common Stock shall
cease to have any rights as shareholders of RPG, except as provided herein or by
law.
7
<PAGE>
Section 3.5 CLOSING OF RPG'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of RPG shall be closed and no transfer of shares of RPG
Common Stock shall be made thereafter. In the event that, after the Effective
Time, certificates for shares of RPG Common Stock are presented to Parent or the
Surviving Corporation, they shall be canceled and exchanged for Base
Consideration and, if applicable, the Additional Consideration for each share of
RPG Common Stock presented as provided in Section 3.3, subject to applicable law
in the case of Dissenting Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant the
following matters to RPG, subject to the exceptions disclosed in the Parent
Disclosure Schedule which has been delivered to RPG prior to the execution of
this Merger Agreement (the "Parent Disclosure Schedule"); provided, however,
that before any breach of or inaccuracy in any of the representations or
warranties given in this Article IV shall be actionable or shall constitute
grounds for termination of or failure to perform under the terms of this Merger
Agreement by Parent or Sub, such breach or inaccuracy must have a Material
Adverse Effect on Parent. As used herein, with respect to any party, "Material
Adverse Effect" shall mean the effect of an event, occurrence or circumstance
which, alone or when taken with other breaches, events, occurrences or
circumstances existing concurrently therewith (including without limitation, any
breach of a representation or warranty contained herein by such party) will have
a material adverse effect on the business, operations or financial condition of
that party and its affiliated corporations, taken as a whole:
Section 4.1 ORGANIZATION AND QUALIFICATION. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of South Carolina. Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina and is a
newly formed, wholly owned subsidiary of Parent. Each of Parent and each of its
subsidiaries, including Sub, has the requisite corporate power and authority to
carry on its business as it is now being conducted and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. Each of Parent and Sub has
heretofore made available to RPG a complete and correct copy of the Articles of
Incorporation and Bylaws, each as amended to the date hereof, of Parent and Sub.
Section 4.2 CAPITALIZATION. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock ("Parent Preferred Stock"). At February 1, 1998, 15,673,897
shares of Parent Common Stock and no shares of Parent Preferred Stock were
issued and outstanding. No shares have been issued subsequent to February 1,
1998 except as set forth in the Parent Disclosure Schedule. As of the date of
this Merger Agreement, except for items set forth on the Parent Disclosure
Schedule and except as contemplated by this Merger Agreement, there were no
options, warrants, calls or other rights, agreements or commitments outstanding
obligating Parent to issue, deliver or sell shares of its capital stock or
obligating Parent to grant, extend or enter into any such option, warrant, call
or other such right, agreement or commitment. All outstanding shares of Parent
Common Stock are, and all shares of Parent Common Stock issuable in exchange for
shares of RPG Common Stock at the Effective Time or thereafter pursuant to this
Merger Agreement will be, when so issued, duly authorized, validly issued, fully
paid and nonassessable, and none of such shares were or will be issued in
violation of any preemptive rights.
8
<PAGE>
Section 4.3 AUTHORITY RELATIVE TO THIS MERGER AGREEMENT. Each of Parent
and Sub has the necessary corporate power and authority to execute and deliver
this Merger Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Merger Agreement and the consummation of the
transactions contemplated hereby by Parent and Sub have been duly and validly
authorized and approved by the respective Boards of Directors of Parent and Sub
and by Parent as the sole shareholder of Sub, and no other corporate proceedings
on the part of Parent or Sub are necessary to authorize and approve this Merger
Agreement or to consummate the transactions contemplated hereby. This Merger
Agreement has been duly executed and delivered by each of Parent and Sub, and
assuming the due authorization, execution and delivery hereof by RPG,
constitutes the valid and binding obligation of Parent and Sub enforceable
against each of them in accordance with its terms.
Section 4.4 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has previously
delivered to RPG true and complete copies of its (a) consolidated financial
statements for the year ended December 31, 1996, certified by KPMG Peat Marwick
LLP, independent accountants for Parent, whose reports thereon are included
therewith, (b) Annual Report on Form 10-K for the year ended December 31, 1996,
as filed with the Securities and Exchange Commission (the "SEC"), (c) Quarterly
Reports on Form 10-Q for the three months ended March 31, 1997, the six months
ended June 30, 1997 and the nine months ended September 30, 1997, as filed with
the SEC, (d) proxy statements relating to all meetings of its shareholders
(whether annual or special) held or scheduled to be held since January 1, 1997
and (e) all other reports, statements and registration statements (including
current reports on Form 8-K) filed by it with the SEC since January 1, 1997
(collectively, the "Parent SEC Filings"). Parent shall deliver to RPG all Parent
SEC Filings filed after the date hereof through the Effective Date on the date
of submission of such documents for filing with the SEC. As of their respective
dates, the Parent SEC Filings did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Parent furnished to RPG, including those included in the
Parent SEC Filings, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as otherwise
indicated in such financial statements or the notes thereto) and present fairly
the financial condition, results of operations and cash flows of Parent and its
subsidiaries as at the dates or for the periods indicated therein, subject, in
the case of unaudited interim consolidated financial statements, to year-end
adjustments consisting only of normal recurring accruals.
Section 4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Parent SEC Filings, since September 30, 1997, Parent has conducted its
business only in the ordinary and usual course, and there has not been any
event, change or development which has affected or will affect materially and
adversely the business, financial condition or results of operations of Parent
and its subsidiaries taken as a whole, other than changes relating to or arising
from general economic, market or financial conditions or generally affecting the
industries in which Parent and its subsidiaries operate.
Section 4.6 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) None of the execution and delivery of this Merger
Agreement by Parent or Sub, the consummation by Parent or Sub of the
transactions contemplated hereby or compliance by Parent or Sub with any of the
provisions hereof will (i) conflict with or violate the charter or Bylaws of
Parent or Sub or the comparable organizational documents of any of Parent's
other subsidiaries, (ii) subject to receipt or filing of the required Consents
referred to in Section 4.6(b), conflict with or violate any statute, ordinance,
rule, regulation, order, judgment or decree applicable to Parent or Sub or any
of Parent's
9
<PAGE>
other subsidiaries, or by which any of them or any of their respective
properties or assets may be bound or affected, (iii) result in a violation or
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien, charge, security interest, pledge or encumbrance of any
kind or nature (any of the foregoing being a "Lien") on any of the property or
assets of Parent or Sub or any of Parent's other subsidiaries (any of the
foregoing referred to in clause (ii) or this clause (iii) being a "Violation")
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Sub or any of Parent's other subsidiaries or any of their respective properties
may be bound or affected, except in the case of the foregoing clause (ii) or
(iii) for any such Violations which would not have a Parent Material Adverse
Effect.
(b) None of the execution and delivery of this Merger
Agreement by Parent or Sub, the consummation by Parent or Sub of the
transactions contemplated hereby or compliance by Parent or Sub with any of the
provisions hereof will require any consent, waiver, license, approval,
authorization, order or permit of or registration or filing with or notification
to (any of the foregoing being a "Consent"), any government or subdivision
thereof, domestic, foreign or multinational or any administrative, governmental
or regulatory authority, agency, commission, court, tribunal or body, domestic,
foreign or multinational (a "Governmental Entity"), or any other person, except
for (i) filings with the SEC pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) the filing of articles of merger pursuant to the South
Carolina Act, (iii) compliance with certain state securities statutes, (iv) such
filings as may be required in connection with the taxes described in Section
7.7, (v) the approval of the South Carolina banking authorities and certain
federal banking authorities and (vi) Consents the failure of which to obtain or
make would not have a Parent Material Adverse Effect.
Section 4.7 LITIGATION. Except as set forth in Parent's SEC Filings,
there is no suit, action or proceeding pending or, to the knowledge of Parent or
Sub, threatened against or affecting Parent, Sub or any of Parent's other
subsidiaries that, individually or in the aggregate, is reasonably expected to
have a Parent Material Adverse Effect, nor is there any judgment, decree,
injunction or order of any Governmental Entity or arbitrator outstanding against
Parent, Sub or any of Parent's other subsidiaries having, or which is reasonably
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
Section 4.8 VOTING REQUIREMENTS. No vote of the holders of any class or
series of the capital stock of either Parent or Sub (except for the vote of
Parent as sole shareholder of Sub which previously has been obtained) is
necessary to approve this Merger Agreement or the transactions contemplated
hereby.
Section 4.9 BROKERS. No broker or finder is entitled to any broker's or
finder's fee in connection with the transactions contemplated by this Merger
Agreement based upon arrangements made by or on behalf of Parent or Sub.
Section 4.10 MERGER CONSIDERATION. Parent has reserved for issuance a
sufficient number of shares of Parent Common Stock to effect the conversion of
the shares of RPG Common Stock pursuant to Section 3.1(a) and a good faith
estimate of the number of shares of Parent Common Stock issuable pursuant to
Section 3.1(b) on the basis contemplated hereby, and Parent and Sub have
available on hand sufficient funds to provide the cash payable in lieu of
fractional shares and to pay fees and expenses
10
<PAGE>
related to the Merger, and, at the Effective Time of the Merger and on the dates
when any shares of Parent Common Stock are to be issued pursuant to Section
3.1(b), Parent and Sub will have available all of the shares of Parent Common
Stock and funds necessary (a) to satisfy their respective obligations under this
Merger Agreement and (b) to pay all the related fees and expenses in connection
with the foregoing.
Section 4.11 COMPLIANCE WITH APPLICABLE LAWS. Parent and each of its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for Parent or its subsidiaries
to own, lease or operate their respective properties and assets and to carry on
their businesses substantially as now conducted (the "Parent Permits"), except
for such permits, licenses, variances, exemptions, orders and approvals the
failure of which to hold would not have a Parent Material Adverse Effect. Parent
and each of its subsidiaries are in substantial compliance with applicable laws
and the terms of the Parent Permits, except for such failures so to comply which
would not have a Parent Material Adverse Effect. The business operations of
Parent and each of its subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity, except for possible
violations which, individually or in the aggregate, would not have a Parent
Material Adverse Effect.
Section 4.12 TAX MATTERS. Neither Parent, Sub nor any other subsidiary
of Parent has taken or agreed to take any action that would prevent the Merger
from constituting a transaction qualifying under Section 368(a) of the Code.
Neither Parent nor Sub is aware of any agreement, plan or other circumstance
that would prevent the Merger from so qualifying under Section 368(a) of the
Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RPG
RPG represents and warrants the following matters to Parent
and Sub, subject to the exceptions disclosed in the RPG Disclosure Schedule
which has been delivered to Parent prior to the execution of this Merger
Agreement (the "RPG Disclosure Schedule"); provided, however, that before any
breach of or inaccuracy in any of the representations or warranties given in
this Article V shall be actionable or shall constitute grounds for termination
of or failure to perform under the terms of this Merger Agreement by RPG, such
breach or inaccuracy must have a Material Adverse Effect on RPG:
Section 5.1 ORGANIZATION AND QUALIFICATION. RPG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina. RPG has the requisite corporate power and authority to carry on
its business as it is now being conducted and is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary. RPG does not own equity securities in any
entity. RPG has heretofore made available to Parent and Sub a complete and
correct copy of the Articles of Incorporation and Bylaws, each as amended to the
date hereof, of RPG.
Section 5.2 CAPITALIZATION. The authorized capital stock of RPG
consists of 25,000,000 shares of RPG Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share (the "RPG Preferred Stock"). As of the
date of this Merger Agreement, 9,082,126 shares of RPG Common Stock and no
shares of RPG Preferred Stock were issued and outstanding. As of the date of
this Merger Agreement, except for stock options to acquire an aggregate of
216,025 shares of RPG Common Stock (the "RPG Stock Options") and except as
contemplated by this Merger Agreement, there were no options, warrants, calls or
other rights, agreements or commitments outstanding obligating RPG to issue,
deliver
11
<PAGE>
or sell shares of its capital stock or obligating RPG to grant, extend or enter
into any such option, warrant, call or other such right, agreement or
commitment. Section 5.9(j) of the RPG Disclosure Schedule sets forth, with
respect to the RPG Stock Options, the names of the optionees, the term and the
exercise price. All outstanding shares of RPG Common Stock are duly authorized,
validly issued, fully paid and nonassessable, and none of such shares were
issued in violation of any preemptive rights.
Section 5.3 AUTHORITY RELATIVE TO THIS MERGER AGREEMENT. RPG has the
necessary corporate power and authority to execute and deliver this Merger
Agreement and, subject to approval of this Merger Agreement and the transactions
contemplated hereby by the holders of shares of RPG Common Stock, to consummate
the transactions contemplated hereby. The execution and delivery of this Merger
Agreement and the consummation of the transactions contemplated hereby by RPG
have been duly and validly authorized and approved by RPG's Board of Directors,
and no other corporate proceedings on the part of RPG are necessary to authorize
or approve this Merger Agreement or to consummate the transactions contemplated
hereby (other than, with respect to the Merger, the approval of this Merger
Agreement and the transactions contemplated hereby (including the Merger) by the
necessary vote of the holders of shares of RPG Common Stock). This Merger
Agreement has been duly executed and delivered by RPG, and assuming the due
authorization, execution and delivery hereof by Parent and Sub, and subject to
the shareholder approval referred to in the preceding sentence, constitutes the
valid and binding obligation of RPG enforceable against RPG in accordance with
its terms.
Section 5.4 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) None of the execution and delivery of this Merger
Agreement by RPG, the consummation by RPG of the transactions contemplated
hereby or compliance by RPG with any of the provisions hereof will (i) subject
to approval by the holders of shares of RPG Common Stock referred to in Section
5.3, conflict with or violate the Articles of Incorporation or Bylaws of RPG,
(ii) subject to receipt or filing of the required Consents referred to in
Section 5.4(b), result in a Violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to RPG or by which RPG or any
of its properties or assets may be bound or affected or (iii) result in a
Violation pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which RPG
is a party or by which RPG or any of its properties may be bound or affected,
except in the case of the foregoing clause (ii) or (iii) for any such Violations
which would not have an RPG Material Adverse Effect.
(b) None of the execution and delivery of this Merger
Agreement by RPG, the consummation by RPG of the transactions contemplated
hereby or compliance by RPG with any of the provisions hereof will require any
Consent of any Governmental Entity or any other person, except for (i) filings
with the SEC pursuant to the Securities Act and the Exchange Act, (ii) the
filing of articles of merger pursuant to the South Carolina Act, (iii)
compliance with certain state securities statutes, (iv) such filings as may be
required in connection with the taxes described in Section 7.7 (v) the approval
of the South Carolina banking authorities and certain federal banking
authorities and (vi) Consents the failure of which to obtain or make would not
have an RPG Material Adverse Effect.
Section 5.5 FINANCIAL STATEMENTS. RPG has previously delivered to
Parent true and complete copies of (a) RPG's financial statements for the year
ended December 31, 1996, certified by Price Waterhouse LLP, independent
accountants for RPG and (b) RPG's financial statements for the nine month period
ended September 30, 1997 and the ten month period ended October 31, 1997. The
financial statements of RPG furnished to Parent were prepared in accordance with
generally accepted accounting
12
<PAGE>
principles applied on a consistent basis (except as otherwise indicated in such
financial statements or the notes thereto) and present fairly the financial
condition, results of operations and cash flows of RPG as at the dates or for
the periods indicated therein, subject in the case of the unaudited interim
financial statements to year-end adjustments consisting only of normal recurring
accruals and the absence of footnotes.
Section 5.6 RESALE OF PARENT COMMON STOCK. RPG knows of no present plan
or intention on the part of its shareholders to sell, assign, transfer or
otherwise dispose of shares of Parent Common Stock to be received by such
shareholders in connection with the Merger which would reduce said shareholders'
holdings of Parent Common Stock to a number of shares having, in the aggregate,
a value of less than 50% of the value of RPG Common Stock outstanding as of the
Effective Time. For purposes of this representation, shares of RPG Common Stock
sold, redeemed or otherwise disposed of prior or subsequent to and as part of
the Merger, will be considered as shares received by shareholders of RPG and
then disposed of by shareholders of RPG.
Section 5.7 LITIGATION. Except as provided in Section 5.7 of the RPG
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
knowledge of RPG, threatened against or affecting RPG that, individually or in
the aggregate, is reasonably expected to have an RPG Material Adverse Effect,
nor is there any judgment, decree, injunction or order of any Governmental
Entity or arbitrator outstanding against RPG having or which is reasonably
expected to have, individually or in the aggregate, an RPG Material Adverse
Effect. Section 5.7 also sets forth each pending claim against RPG related to
the Occupational Safety and Health Act, each claim related to RPG pending before
the Wage/Hour Division of the Department of Labor, each claim against RPG
relating to conciliation agreements or complaints by the Office of Federal
Contract Compliance Programs, charges filed with the Equal Employment
Opportunity Commission with respect to RPG, and charges filed with the
Department of Labor alleging violations of the Family Medical Leave Act by RPG,
regardless of whether such matters are expected to have an RPG Material Adverse
Effect.
Section 5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
contemplated by this Merger Agreement, since October 31, 1997, RPG has conducted
its business only in the ordinary course, and there has not been (a) any change
that would have an RPG Material Adverse Effect, other than changes relating to
or arising from general economic, market or financial conditions or generally
affecting the industries in which RPG operates; (b) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of RPG's capital stock; (c) any split,
combination or reclassification of any of RPG's capital stock; (d) any granting
by RPG to any executive officer of RPG of any increase in compensation, except
in the ordinary course of business or as required under employment agreements in
effect as of or prior to the date of this Merger Agreement; (e) any granting by
RPG to any such executive officer of any increase in severance or termination
pay, except as required under employment, severance or termination agreements or
plans in effect as of the date of this Merger Agreement; (f) any entry by RPG
into any employment, severance or termination agreement with any such executive
officer; (g) any damage, destruction or loss, whether or not covered by
insurance, that is reasonably expected to have an RPG Material Adverse Effect;
or (h) any change in accounting methods, principles or practices by RPG
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting principles.
Section 5.9 EMPLOYEE BENEFIT PLANS AND CONTRACTS.
13
<PAGE>
(a) Section 5.9(a) of the RPG Disclosure Schedule contains a
complete list of all benefit plans sponsored by RPG which include, without
limitation, all employee benefit plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), stock
option or similar plans, and any related or separate contracts, plans, trusts,
annuities, programs, policies, arrangements and practices 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 ("RPG
Benefit Plans"). RPG has delivered to Parent (i) accurate and complete detailed
summaries of all unwritten RPG Benefit Plans and (ii) with respect to all RPG
Benefit Plans for which written documents are required or have been prepared,
accurate and complete copies of (A) all RPG Benefit Plan documents and all other
material documents relating thereto, including all summary plan descriptions,
summary annual reports and insurance contracts, (B) the most recent financial
statements and actuarial reports and (C) all determination letter applications
and determination letters from the Internal Revenue Service for any RPG Benefit
Plan maintained or intended to be maintained under Section 401(a) of the Code.
Any RPG Benefit Plan providing benefits that are funded through a policy of
insurance is indicated by the word "insured" placed by the listing of the RPG
Benefit Plan in Section 5.9(a) of the RPG Disclosure Schedule.
(b) All RPG 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 RPG 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 RPG Benefit Plans that
could subject RPG to any material penalty or tax imposed under the Code or
ERISA.
(c) Except as provided in Section 5.9(c) of the RPG Disclosure
Schedule, any RPG 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. Prior to the Closing Date, any RPG
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 will be terminated by
proper action of the Board of Directors of RPG to be effective prior to the
Effective Time. Nothing has occurred since the date of 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 RPG Benefit Plan.
(d) Any RPG Benefit Plan that is a nonqualified retirement or
deferred compensation plan that is designed to provide benefits to directors or
any employees meets the requirements of Sections 201(2), 301(3) and 401(a)(1) of
ERISA. Except for reserves for severance payments which will be reserved prior
to the Closing Date, RPG has adequately reserved for all liabilities accrued
prior to the Effective Time under RPG's nonqualified retirement or deferred
compensation plans. On or before the Closing Date, such RPG Benefit Plans
(excluding severance plans and arrangements and stock option plans) will be
terminated by proper action of the Board of Directors of RPG to be effective
before or as of the Effective Time.
(e) RPG does not have any current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA). RPG
does not have any liability with respect
14
<PAGE>
to any employee benefit plan (as defined in Section 3(3) of ERISA) other than
with respect to the RPG Benefit Plans.
(f) There are no pending or threatened claims by or on behalf
of any RPG Benefit Plans, or by or on behalf of any individual participants or
beneficiaries of any RPG Benefit Plans alleging any breach of fiduciary duty on
the part of RPG or any of RPG'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 RPG Benefit Plans are
not the subject of any investigation, audit or action by the Internal Revenue
Service, the United States Department of Labor or the Pension Benefit Guaranty
Corporation (the "PBGC"). RPG has made all required contributions and premium
payments under the RPG Benefit Plans, including the payment of any premiums
payable to the PBGC and other insurance premiums. There is no underfunding
liability for any RPG Benefit Plan that is subject to the funding requirements
of Section 412 of the Code.
(g) RPG does not maintain any defined benefit plan and has not
incurred, nor has any reason to expect that it will incur, any liability to the
PBGC or otherwise under Title IV of ERISA (including early withdrawal liability)
or under the Code with respect to any such plan. No RPG 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 RPG Benefit Plan
has been instituted or threatened.
(h) With respect to any RPG 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 RPG 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
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) Section 5.9(i) of the RPG Disclosure Schedule lists by
employee name all potential severance payments payable to any employee of RPG in
the event of such employee's termination of employment as a result of a change
in control or similar event.
(j) Section 5.9(j) of the RPG Disclosure Schedule lists all
outstanding stock options, rights or warrants for RPG stock.
(k) Except as set forth in Section 5.9(k)of the RPG Disclosure
Schedule, as of the Effective Time, 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 RPG, Parent or Sub by reason of Section 280G of
the Code. As of the Effective Time, there will be no non-deductible compensation
as a result of any employment contracts between RPG and any of its employees.
Section 5.10 EMPLOYEE MATTERS. RPG is not and has not been party to any
collective bargaining agreement. Except as provided in Section 5.10 of the RPG
Disclosure Schedule, there have been no
15
<PAGE>
disputes or grievances subject to any grievance procedure, unfair labor practice
proceedings, arbitration or litigation which have not been fully resolved,
settled or otherwise disposed. Except as provided in Section 5.10 of the RPG
Disclosure Schedule, there have been no strikes, lockouts or work stoppages or
slow-downs or, to the best knowledge of RPG, labor jurisdictional disputes or
labor organizing activity occurring or threatened with respect to the business
or operations of RPG.
Section 5.11 TAXES. RPG has duly filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports (including, but not limited to, those filed on a consolidated, combined
or unitary basis) required to have been filed by RPG prior to the date hereof,
except for such returns or reports the failure to file which would not have an
RPG Material Adverse Effect. All of the foregoing returns and reports are true
and correct in all material respects, and RPG has paid or, prior to the
Effective Time will pay, all taxes, interest and penalties shown on such returns
or reports as being due or (except to the extent the same are contested in good
faith) claimed to be due to any federal, state, local or other taxing authority.
RPG has established adequate reserves in accordance with generally accepted
accounting principles applied on a consistent basis for the payment of all
income, franchise, property, sales, payroll or other taxes anticipated to be
payable after the date hereof. RPG 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. RPG
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. RPG 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 RPG which, if
determined adversely, would result in the assertion of any deficiency. As of the
date hereof, all deficiencies proposed as a result of any audits have been paid
or settled.
Section 5.12 COMPLIANCE WITH APPLICABLE LAWS. RPG holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for RPG to own, lease or operate its properties and assets
and to carry on its businesses substantially as now conducted (the "RPG
Permits"), except for such permits, licenses, variances, exemptions, orders and
approvals the failure of which to hold would not have an RPG Material Adverse
Effect. RPG is in substantial compliance with applicable laws and the terms of
the RPG Permits, except for such failures so to comply which would not have an
RPG Material Adverse Effect. The business operations of RPG are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which, individually or in the aggregate,
would not have an RPG Material Adverse Effect.
Section 5.13 VOTING REQUIREMENTS. The affirmative vote of the holders
of a majority of the total number of votes entitled to be cast by the holders of
RPG Common Stock outstanding as of the record date for the RPG Special Meeting
are the only votes of the holders of any class or series of RPG's capital stock
necessary to adopt and approve this Merger Agreement and the transactions
contemplated by this Merger Agreement (including the Merger).
Section 5.14 BROKERS. Except for First Annapolis Capital, Inc., no
broker or finder is entitled to any broker's or finder's fee in connection with
the transactions contemplated by this Merger Agreement based upon arrangements
made by or on behalf of RPG.
Section 5.15 MATERIAL CONTRACTS. Section 5.15 of the RPG Disclosure
Schedule contains a true and complete list of the following (hereinafter
referred to as the "RPG Material Contracts"):
16
<PAGE>
(a) All bonds, debentures, notes, mortgages, indentures or
guarantees to which RPG is a party as obligor or by which any of its assets is
bound;
(b) All loans and credit commitments to RPG which are
outstanding, together with a brief description of such commitments and the name
of each financial institution granting the same;
(c) All contracts or agreements which limit or restrict RPG
from engaging in any business in any jurisdiction or that limit any third party
from engaging in competition with RPG;
(d) All contracts and commitments (other than those described
in subparagraphs (a), (b) or (c) of this Section 5.15) which relate to the
business of RPG or by which any of its assets may be bound involving an
aggregate commitment or aggregate payment by any party thereto of more than
$100,000 individually or which, upon breach by RPG, would be reasonably likely
to have an RPG Material Adverse Effect; and
(e) All material contracts, agreements, arrangements or
understandings between RPG and any shareholder, employee, officer or director of
RPG, except those listed in another section of the RPG Disclosure Schedule.
True and complete copies of all RPG Material Contracts, including all
amendments thereto, have been made available to Parent. The RPG Material
Contracts are valid and enforceable in accordance with their respective terms
with respect to RPG, and, to the knowledge of RPG, are valid and enforceable in
accordance with their respective terms with respect to each other party thereto.
There is not under any of the RPG Material Contracts any existing breach,
default or event of default by RPG or event that with notice or lapse of time or
both would constitute a breach, default or event of default by RPG, nor does RPG
know of, and RPG has not received notice of, or made a claim with respect to,
any breach or default by any other party thereto which, in any such case, is
reasonably likely to have an RPG Material Adverse Effect.
Section 5.16 TAX MATTERS. Neither RPG nor any of its affiliates has
taken or agreed to take any action that would prevent the Merger from
constituting a transaction qualifying under Section 368(a) of the Code. RPG is
not aware of any agreement, plan or other circumstance that would prevent the
Merger from so qualifying under Section 368(a) of the Code.
Section 5.17 PROPERTIES, ENCUMBRANCES. RPG owns no real property. RPG
has good and merchantable title to all of the depreciable tangible personal
property owned by it, free and clear of any Lien, except for any Lien for (a)
current taxes not yet due and payable, (b) Liens incurred in the ordinary course
of its business, (c) such imperfections of title, easements and other
encumbrances, if any, as are not material in character, amount or extent, or (d)
such items as are set forth in Section 5.17 of the RPG Disclosure Schedule. Set
forth in Section 5.17 of the RPG Disclosure Schedule is a listing of all
business locations of RPG as of the date hereof, indicating whether such
locations are owned or leased and a statement of when such locations were first
occupied by RPG. All buildings and all fixtures, equipment and other property
and assets which are material to its business and are held under leases or
subleases by RPG are held under valid leases or subleases enforceable in
accordance with their respective terms.
Section 5.18 INSURANCE. Section 5.18 of the RPG Disclosure Schedule
lists the policies of fire, liability, life and other types of insurance held by
RPG, setting forth with respect to each such policy, the policy number, name of
the insured party, type of insurance, insurance company, annual premium,
17
<PAGE>
expiration date, deductible amount, if any, and amount of coverage. RPG 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 RPG 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
Effective Time. There is no reason known to RPG that any such policy would not
be renewable on terms and conditions as favorable as those set forth in such
policy.
Section 5.19 ENVIRONMENTAL MATTERS. RPG is in material compliance with
all federal, state and local environmental statutes, laws, rules, regulations
and permits, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA") and the Toxic
Substances Control Act. RPG has not, nor to the best of RPG's knowledge, without
any inquiry, 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 RPG (including, without limitation, the buildings or
structures thereon) (the "Real Property"). RPG has not, nor to the best of RPG's
knowledge, without any inquiry, have other parties, installed, used or disposed
of any asbestos or asbestos-containing material on, in or under any of the Real
Property. RPG has not, nor to the best of RPG's knowledge, without any inquiry,
have other parties, installed or used underground storage tanks in or under any
of the Real Property. RPG has provided Parent with copies of all complaints,
citations, orders, reports, written data, notices or other communications sent
or received by it with respect to any federal, state or local environmental law,
ordinance, rule or regulation as any of them relate to RPG.
Section 5.20 DERIVATIVES CONTRACTS, ETC. RPG is not a party to, and has
not 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 its balance sheet which is a derivative contract (including
various combinations thereof) (each a "Derivatives Contract") and does not own
any securities that (a) are referred to as "structured notes," "high risk
mortgage derivatives," "capped floating rate notes" or "capped floating rate
mortgage derivatives" or (b) 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 Section 5.20 of the RPG Disclosure Schedule,
including a list, as applicable, of any RPG assets pledged as security for each
such instrument.
ARTICLE VI
COVENANTS
Section 6.1 CONDUCT OF BUSINESS BY RPG PENDING THE MERGER.
(a) Prior to the Effective Time, except as contemplated by
this Merger Agreement and except for the matters set forth in the RPG Disclosure
Schedule or unless Parent shall otherwise agree in writing, RPG shall carry on
its businesses in the usual and customary manner and shall use reasonable
efforts to preserve intact its present business organizations, keep available
the services of its employees and preserve its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with RPG to the end that RPG's goodwill and ongoing businesses shall
not be impaired in any material respect at the Effective Time; provided,
however, that the resignation of one or more officers or employees of RPG or
layoffs due to changes in business needs shall not be deemed
18
<PAGE>
a breach of the foregoing requirement. Without limiting the generality of the
foregoing, and except as contemplated by this Merger Agreement and except for
the matters set forth in the RPG Disclosure Schedule or unless Parent shall
otherwise agree in writing, prior to the Effective Time, RPG shall not:
(i) (A) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its capital stock, (B)
split, combine or reclassify any of its capital stock or, other than pursuant to
the exercise of RPG Stock Options, issue any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or any other equity
security of RPG or any rights, warrants or options to acquire any such shares or
other securities or (C) purchase, redeem or otherwise acquire, any shares of
capital stock of RPG or any other equity securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, or any securities convertible into, or
any rights, warrants or options to acquire, any such shares (other than the
issuance of RPG Common Stock upon the exercise of RPG Stock Options);
(iii) amend its Articles of Incorporation or Bylaws;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or (B)
any assets that are material, individually or in the aggregate, to RPG, except,
in any such case, in the ordinary course of business;
(v) subject to a Lien or sell, lease or otherwise
dispose of any of its material properties or assets, except in the ordinary
course of business;
(vi) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities of RPG, guarantee any debt securities of another person or enter into
any "keep well" or other agreement to maintain any financial condition of
another person, except, in any such case, for borrowings or other transactions
incurred in the ordinary course of business (aa) under RPG's existing credit
line with Carolina First Bank or (bb) not in excess of $100,000 (except upon the
written consent of Parent, which consent shall not be unreasonably withheld),
including to fund overnight advances for clients and repay existing indebtedness
pursuant to the terms thereof, or (B) except in the ordinary course of business,
make any loans, advances or capital contributions to, or investments in, any
other person; or
(vii) authorize any of, or commit or agree to take
any of, the foregoing actions.
(b) RPG will promptly advise Parent in writing of any change
in the businesses of RPG which is or may reasonably be expected to have an RPG
Material Adverse Effect.
(c) RPG 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 conduct of the business of
RPG, or otherwise, which would be contrary to or in breach in any material
respect of any of the terms or provisions of this Merger Agreement, or which
would cause any of the representations of RPG contained herein to be or become
untrue in any material respect.
19
<PAGE>
(d) Except for expenses attendant to the Merger and current
contractual obligations or the renewal thereof in the ordinary course of
business, RPG will not incur after the execution of this Merger Agreement any
expense in an amount in excess of $100,000 without the prior written consent of
Parent.
(e) After the execution of this Merger Agreement, RPG will not
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 Parent) or enter into any employment agreement with any executive
officer without the consent of Parent except as may be required under employment
or termination agreements in effect on the date hereof which have been
previously disclosed to Parent in writing.
(f) After the execution of this Merger Agreement, except as
may be directed by any Governmental Entity or required by law, as may be
undertaken in the ordinary course of business in accordance with past practices,
as may be reasonably appropriate in view of changes in economic circumstances or
at the request of clients or as may be contractually required by third party
vendors or subcontractors or with the prior written consent of Parent, RPG shall
not (i) change its servicing, investment, liability management or other material
policies in any material respect, or (ii) implement or adopt any material change
in accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
Section 6.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER.
Prior to the Effective Time, except as contemplated by this Merger Agreement or
by Parent's budgets and plans heretofore made available to RPG and except for
the matters set forth in the Parent Disclosure Schedule or unless RPG shall
otherwise consent in writing, which consent shall not be unreasonably withheld,
Parent shall, and shall cause its subsidiaries to, carry on their respective
businesses in the usual and customary manner (it being acknowledged that Parent
shall not be required to refrain from transactions outside the ordinary course
of its business) and shall, and shall cause its subsidiaries to, use reasonable
efforts to preserve intact their present business organizations, keep available
the services of their employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
not be impaired in any material respect at the Effective Time; provided,
however, that the resignation of one or more officers of Parent or its
subsidiaries shall not be deemed a breach of the foregoing requirement.
Section 6.3 PLAN OF REORGANIZATION. This Merger Agreement is intended
to constitute a "plan of reorganization" within the meaning of Section
1.368-2(g) of the income tax regulations promulgated under the Code. From and
after the date of this Merger Agreement, each party hereto shall use all
reasonable efforts to cause the Merger to qualify, and shall not, without the
prior written consent of the other parties hereto, knowingly take any actions or
cause any actions to be taken which could prevent the Merger from qualifying as
a reorganization under the provisions of Section 368(a) of the Code. In the
event that counsel is unable to issue its opinion to the effect that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Code as described in Sections 8.2(c) hereof, then the parties hereto agree to
negotiate in good faith to restructure the Merger in order that such opinion can
be issued. Following the Effective Time, and consistent with any such consent,
none of the Surviving Corporation, RPG or Parent, nor any of their affiliates
shall knowingly take any action or knowingly cause any action to be taken which
would cause the Merger to fail to qualify as a reorganization under Section
368(a) of the Code. Notwithstanding the foregoing, the qualification of the
Merger as a reorganization under Section 368(a) of the Code shall not be a
condition precedent to the obligations of the parties to consummate the Merger.
20
<PAGE>
Section 6.4 ACCESS TO INFORMATION. From the date hereof through the
Effective Time, RPG, on the one hand, and Parent and its subsidiaries, on the
other hand, shall each afford to the other and the other's accountants, counsel
and other representatives reasonable access during normal business hours (and at
such other times as the parties may mutually agree) to all of their respective
properties, books, contracts, commitments, records and personnel and, during
such period, shall furnish promptly to the other such information concerning its
business, properties and personnel as the other may reasonably request. RPG and
Parent and its subsidiaries and their respective accountants, counsel and other
representatives shall, in the exercise of the rights described in this Section
6.4, not unduly interfere with the operation of the business of the other. RPG
and Parent and its subsidiaries shall hold, and shall cause their respective
employees, agents and representatives to hold, in strict confidence all such
information in accordance with the terms of paragraph B.1 of the Letter of
Interest dated December 29, 1997 from Parent to RPG, which shall remain in full
force and effect in accordance with the terms thereof, including, without
limitation, in the event of termination of this Merger Agreement.
Section 6.5 EFFORTS; CONSENTS.
(a) Subject to the terms and conditions herein provided and,
in the case of RPG, fiduciary duties under applicable law, each of the parties
hereto agrees to use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Merger Agreement and the Merger and to
cooperate with each other in connection with the foregoing. Without limiting the
generality of the foregoing, each of RPG, Sub and Parent shall make, or cause to
be made, all required filings with or applications to Governmental Entities
(including under the Securities Act, the Exchange Act, and applicable federal
and state banking laws and regulations) and use its reasonable best efforts to
(i) obtain all necessary waivers of any Violations and other Consents of all
Governmental Entities and other third parties, necessary for the parties to
consummate the transactions contemplated hereby, (ii) oppose, lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby and
(iii) fulfill all conditions to this Merger Agreement.
(b) Without limiting the foregoing, RPG and Parent shall use
their reasonable best efforts and cooperate in promptly preparing and filing as
soon as practicable, any notifications to the Board of Governors of the Federal
Reserve System required in connection with the Merger and other transactions
contemplated hereby and to respond as promptly as practicable to any inquiries
or requests received from the Board of Governors of the Federal Reserve System
or any other Governmental Entities.
(c) In furtherance and not in limitation of the foregoing,
Parent and RPG shall use their reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Merger Agreement under any antitrust, competition or trade
regulatory laws, rules or regulations of any Governmental Entity ("Antitrust
Laws") and will take all necessary and proper steps (including, without
limitation, agreeing to hold separate, to place in trust and/or to divest any of
the businesses, product lines or assets of Parent or any of its subsidiaries or
affiliates or of any of RPG or its affiliates ("Divestitures")) as may be
required (i) for securing the expeditious termination of any applicable waiting
period and for resolving any objections to the transactions contemplated hereby
of any Governmental Entities under the Antitrust Laws or (ii) by any domestic or
foreign court or similar tribunal, in any suit brought by a private party or
Governmental Entity challenging the transactions contemplated by this Merger
Agreement as violative of any Antitrust Law, in order to avoid the entry of or
to effect the dissolution of, any injunction, temporary restraining order or
other order that has the
21
<PAGE>
effect of preventing the consummation of any of such transactions. The entry by
a court, in any suit brought by a private party or Governmental Entity
challenging the transactions contemplated by this Merger Agreement as violative
of any Antitrust Law, of any order or decree permitting the transactions
contemplated by this Merger Agreement but requiring Divestitures or otherwise
limiting Parent's freedom of action with respect to, or its ability to retain,
RPG or any portion thereof or any of Parent's or its subsidiaries' or
affiliates' other assets or businesses, shall not be deemed a failure to satisfy
the conditions specified in Section 8.1(b) or (c) or Section 8.3.
(d) Each of Parent and RPG shall promptly provide the other
with a copy of any inquiry or request for information (including notice of any
oral request for information), pleading, order or other document either party
receives from any Governmental Entities with respect to the matters referred to
in this Section 6.5.
Section 6.6 NOTICE OF BREACHES. RPG shall give prompt notice to Parent,
and Parent or Sub shall give prompt notice to RPG, of (a) any breach or
inaccuracy of a representation or warranty made by it contained in this Merger
Agreement which could reasonably be expected to have a Material Adverse Effect
on RPG or Parent, as the case may be or (b) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Merger Agreement; provided, however,
that such notification shall not excuse or otherwise affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Merger Agreement.
Section 6.7 NOTICES OF CERTAIN EVENTS. Each of RPG, on the one hand,
and Parent and Sub, on the other hand, shall give prompt notice to the other of
(a) any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the Merger; (b) any
notice or other communication from any Governmental Entity in connection with
the Merger; (c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting RPG, Parent or any subsidiary of Parent that relate to the
consummation of the Merger; (d) the occurrence of a default or event that, with
the giving of notice or lapse of time or both, will become a default under any
RPG Material Contract; and (e) any change that is reasonably likely to result in
an RPG Material Adverse Effect or a Parent Material Adverse Effect or is
reasonably likely to delay or impede the ability of any of RPG, Parent or Sub to
perform its respective obligations pursuant to this Merger Agreement and to
effect the consummation of the Merger.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 PREPARATION OF THE REGISTRATION STATEMENT AND PROXY
STATEMENT.
(a) Parent shall promptly prepare and file with the SEC under
the Securities Act, a Registration Statement on Form S-4 (the "Registration
Statement") with respect to the shares of Parent Common Stock to be issued in
the Merger and shall use its reasonable best efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable and to
maintain the Registration Statement in effect until after the issuance of the
Additional Consideration. Parent also shall take any action required to be taken
under the state blue sky or securities laws in connection with the issuance of
shares of Parent Common Stock in the Merger, and RPG shall furnish Parent with
all information and shall take such other action as Parent may reasonably
request in connection with any such action.
22
<PAGE>
(b) RPG and Parent will, as soon as practicable following the
date of this Merger Agreement, prepare the proxy statement to be mailed to the
holders of shares of RPG Common Stock in connection with the Merger (the "Proxy
Statement") which also will be the prospectus of Parent to be included in the
Registration Statement and shall cause the Proxy Statement to be mailed to RPG's
shareholders as promptly as practicable after the Registration Statement becomes
effective. RPG and Parent and Sub will cooperate with each other and furnish
promptly all information requested by the other or otherwise required for
inclusion in the Proxy Statement. If at any time prior to the RPG Special
Meeting there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, RPG and Parent will promptly prepare and mail
to the RPG shareholders such an amendment or supplement.
(c) Each of the Registration Statement and the Proxy Statement
will comply as to form in all material respects with the provisions of the
federal securities laws and the rules and regulations promulgated thereunder.
Section 7.2 RPG SPECIAL MEETING. RPG shall take all action reasonably
necessary, in accordance with applicable law and its Articles of Incorporation
and Bylaws, to convene the RPG Special Meeting as promptly as reasonably
practicable after the date on which the Proxy Statement has been mailed to the
RPG shareholders for the purpose of considering and taking action upon the
Merger and this Merger Agreement, unless the Board of Directors of RPG shall
have altered its determination to, or shall not, recommend that holders of RPG
Common Stock vote in favor of the approval of this Merger Agreement at the RPG
Special Meeting. Subject to the fiduciary duties of the Board of Directors of
RPG, the Board of Directors of RPG will recommend that the holders of RPG Common
Stock vote in favor of the approval of this Merger Agreement at the RPG Special
Meeting.
Section 7.3 RPG/PARENT INFORMATION. The written information with
respect to RPG and its officers, directors and affiliates which shall have been
supplied by RPG (or any of its accountants, counsel or other authorized
representatives) specifically for use in soliciting the requisite approval of
the shareholders of RPG, or which shall be contained in the Registration
Statement, will not, on the date the Proxy Statement is first mailed to
shareholders of RPG or on the date of the RPG Special Meeting, 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. The
written information with respect to Parent and its officers, directors and
affiliates which shall have been supplied by Parent (or any of its accountants,
counsel or other authorized representatives) specifically for use in soliciting
the requisite approval of the shareholders of RPG, or which shall be contained
in the Registration Statement, will not, on the date the Proxy Statement is
first mailed to shareholders of RPG or on the date of the RPG Special 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.
Section 7.4 EMPLOYEE MATTERS. Parent, Sub and RPG agree to cooperate to
develop staffing plans for the future operation of RPG. Parent and Sub agree
that those former RPG employees who are employed by RPG following the Closing
Date: (a) will be eligible to participate in Parent's benefit plans; and (b)
will receive past service credit for eligibility and vesting (but not benefit
accrual) purposes under Parent's qualified retirement plans for years of service
with RPG and its predecessor companies. Prior to the Closing Date, RPG shall, in
accordance with the requirements of the Code and ERISA and all regulations
thereunder, take steps to terminate, to the extent permitted by law, its
Employee Stock
23
<PAGE>
Ownership Plan (the "ESOP") and its 401(k) plan (the "401(k) Plan") to be
effective prior to the Effective Time. In addition, from and after the Effective
Time, Parent and Sub shall, and shall cause the Surviving Corporation to: (a)
provide credit for service as required by the Health Insurance Portability and
Accountability Act of 1996, as amended, for purposes of determining any
preexisting condition exclusion that may apply to an employee of RPG who becomes
covered under a medical plan sponsored by Parent; (b) provide each employee of
RPG, upon termination of such employee's employment with the Surviving
Corporation, with severance pay in accordance with the severance policies and
agreements described in Section 5.9(i) of the RPG Disclosure Schedule; and (c)
distribute the assets under the ESOP and the 401(k) Plan to their respective
participants, to the extent permitted by law.
Section 7.5 PUBLIC ANNOUNCEMENTS. So long as this Merger Agreement is
in effect, Parent, Sub and RPG agree to use their respective reasonable best
efforts to consult with each other before issuing any press release or otherwise
making any public statement with respect to the transactions contemplated by
this Merger Agreement.
Section 7.6 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) Parent covenants and agrees (i) that it will cause each person who
is an officer or director of RPG (an "Indemnitee") on the Closing Date to be
indemnified for any and all claims and liabilities arising out of such person's
service as an director or officer of RPG to the maximum extent that a South
Carolina corporation is permitted by law to indemnify or insure its officers and
directors, including indemnification for the cost of defending such claims as
well as any liability resulting therefrom, and (ii) to provide Indemnitees with
the maximum elimination of liability provided for in Section 33-2-102(e) as if
they were otherwise qualified to receive the benefits of such section
(notwithstanding the language in such section restricting its availability to
certain corporations). Except for expenses associated with claims described in
the immediately succeeding sentence, Parent, upon request of such Indemnitees,
shall advance expenses in connection with such indemnification, provided that
such advancement need be made if and only to the extent that such advancement
would have been proper under Section 33-8-530 if such Indemnitees had been
directors or officers of Parent. (In making any necessary determinations under
Section 33-8-530, Parent's Board of Directors shall construe any ambiguities
reasonably, giving Indemnitees the benefit of any reasonable doubt.)
Notwithstanding the foregoing, Parent shall have no obligation to (i) indemnify
any Indemnitee with respect to any claim brought by such Indemnitee against
Parent or any counterclaim made by Parent against such Indemnitee in connection
with such claim of Indemnitee (unless such Indemnitee prevails over Parent in
such litigation), or (ii) advance expenses to an Indemnitee with respect to any
litigation between such Indemnitee and Parent. The provisions of this Section
7.6 shall survive the closing and shall be enforceable directly by each officer
and director of RPG benefitted by this Section 7.6.
(b) Any Indemnitee wishing to claim indemnification under this
Section 7.6, upon learning of such claims or liabilities, shall promptly notify
Parent thereof; provided, that the failure so to notify shall not affect the
obligations of Parent hereunder unless and then only to the extent that such
failure materially increases Parent's liability hereunder. In the event of any
litigation giving rise to a claim hereunder, (i) Parent shall have the right to
assume the defense thereof, if it so elects, and Parent shall pay all reasonable
fees and expenses of counsel for the Indemnitees promptly as statements therefor
are received (which may be counsel for Parent), unless any such Indemnitee shall
have been advised that there may be one or more legal defenses available to it
that are different from or additional to those available to other Indemnitees,
and in any such case the reasonable fees and expenses of separate counsel shall
be borne by Parent; provided, however, that Parent shall be obligated pursuant
to this Section to
24
<PAGE>
pay for only one additional 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) Parent
shall not be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld and (iv) Parent 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.
(c) RPG and Parent shall use their reasonable best efforts to
maintain RPG's existing directors' and officers' liability insurance policy (or
a policy, similar to RPG's existing policy, providing comparable coverage on
terms no less favorable) past the Effective Time for a period of six years
covering persons who are currently covered by such insurance; provided that
Parent or RPG shall not make (aggregate) premium payments in respect of such
policy (or replacement policy) which exceeds $100,000 and provided further that
RPG and Parent shall obtain the maximum amount of such coverage as can be
obtained by paying an (aggregate) premium of $100,000. Parent shall take no
action to terminate prematurely any such policy.
(d) If Parent or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provisions shall be made so that the successors and assigns of
Parent shall assume all of the obligations set forth in this Section 7.6.
Section 7.7 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND
EXPENSES. Parent and Sub agree that the Surviving Corporation will pay all real
property transfer, gains and other similar taxes and all documentary stamps,
filing fees, recording fees and sales and use taxes, if any, and any penalties
or interest with respect thereto, payable in connection with consummation of the
Merger without any offset, deduction, counterclaim or deferment of the payment
of the Base Consideration or the Additional Consideration.
Section 7.8 NMS ADDITIONAL LISTING. Parent shall use its reasonable
best efforts to cause the Parent Common Stock to be issued in the Merger to be
listed on the NMS, subject to official notice of issuance and evidence of
satisfactory distribution.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time or, if permitted by
applicable law, waiver of the following conditions:
(a) This Merger Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite votes of the
holders of RPG Common Stock;
(b) Any necessary waiting periods applicable to the
consummation of the Merger shall have expired or been terminated, and any other
Consents from Governmental Entities and other third parties required prior to
the Effective Time with respect to the transactions contemplated hereby shall
25
<PAGE>
have been either filed or received other than those Consents, the absence of
which would not have a material adverse effect on the business, operations or
financial condition of the Surviving Corporation (as compared to the business,
operations and financial condition of RPG immediately prior to the Effective
Time);
(c) The consummation of the Merger shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction or ruling of a
court of competent jurisdiction; provided, however, that the parties shall
comply with the provisions of Section 6.5 and shall further use their reasonable
best efforts to cause any such order, judgment, decree, injunction or ruling to
be vacated or lifted;
(d) The Registration Statement shall have been declared
effective and no stop order with respect thereto shall be in effect at the
Effective Time;
(e) All permits required by state securities or blue sky laws
to carry out the transactions contemplated hereby shall have been received; and
(f) The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the NMS, subject to official
notice of issuance and evidence of satisfactory distribution.
Section 8.2 CONDITIONS TO OBLIGATION OF RPG TO EFFECT THE MERGER. The
obligation of RPG to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time or, if permitted by applicable law, waiver of the
following conditions:
(a) Parent and Sub shall have performed in all material
respects their respective agreements contained in this Merger Agreement required
to be performed at or prior to the Effective Time, and RPG shall have received a
certificate of the Chief Executive Officer or a Vice President of each of Parent
and Sub to that effect.
(b) The representations and warranties of Parent and Sub
contained in this Merger Agreement shall be true when made and (except for
representations and warranties made as of a specified date, which need only be
true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated by this Merger Agreement and except for
inaccuracies that in the aggregate do not constitute a Parent Material Adverse
Effect, and RPG shall have received a certificate of the Chief Executive Officer
or a Vice President of each of Parent and Sub to that effect.
(c) McNair Law Firm, P.A. shall have issued its opinions, such
opinions dated on or about the Effective Time and on or about the date that is
two business days prior to the date the Proxy Statement is first mailed to
shareholders of RPG, addressed to RPG, and reasonably satisfactory to it, based
upon customary representations of RPG and Parent and customary assumptions, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code and
that the shareholders of RPG will recognize no gain or loss upon the receipt of
shares of Parent Common Stock in exchange for shares of RPG Common Stock in the
Merger, which opinions shall not have been withdrawn or modified in any material
respect.
(d) Parent shall have furnished RPG with an opinion of its
counsel, dated as of the Closing Date, and in form and substance reasonably
satisfactory to RPG and its counsel, covering such matters as RPG shall
reasonably request, including that: (i) Parent and Sub are duly organized,
validly
26
<PAGE>
existing and in good standing under the laws of the State of South Carolina;
(ii) the consummation of the transactions contemplated by this Merger Agreement
will not (A) violate any provision of Parent's or Sub'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 Parent or Sub is a party, or
by which it is bound, except such as would not, in the aggregate, have a
material adverse effect on the business or financial condition of Parent, or (C)
violate or conflict in any material respect with any other restriction of any
kind or character of which such counsel has knowledge and to which Parent or any
of its subsidiaries is subject; (iii) all of the shares of Parent Common Stock
to be issued in connection with the Merger will be, when issued, validly
authorized and issued, fully paid and non-assessable; (iv) Parent and Sub have
all authorizations and approvals required by law to enter into this Merger
Agreement, 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 Parent for the consummation of the Merger have been
made; (vi) Parent and Sub have full corporate power and authority to enter into
this Merger Agreement, and this Merger Agreement has been duly authorized,
executed and delivered by Parent and Sub and constitutes a valid and legally
binding obligation of Parent and Sub enforceable against Parent and Sub in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to the relief of debtors generally and
general principles of equity; (vii) to the best knowledge of such counsel, no
material suit or proceeding is pending or threatened against Parent or other
parties which would have a material adverse effect on Parent's business or
properties or its abilities to make the representations and warranties and
perform the obligations set forth herein to be performed by Parent and Sub and
(viii) the Registration Statement became effective on [date] and, to counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and, to counsel's knowledge, no
proceedings for that purpose have been instituted or are pending under the
Securities Act.
Section 8.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time or, if permitted by
applicable law, waiver of the following conditions:
(a) RPG shall have performed in all material respects its
agreements contained in this Merger Agreement required to be performed at or
prior to the Effective Time; and Parent and Sub shall have received a
certificate of the Chief Executive Officer or a Vice President of RPG to that
effect.
(b) The representations and warranties of RPG contained in
this Merger Agreement shall be true when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated by this Merger Agreement and except for inaccuracies that in the
aggregate do not constitute an RPG Material Adverse Effect; and Parent and Sub
shall have received a certificate of the Chief Executive Officer or a Vice
President of RPG to that effect.
(c) RPG shall have furnished Parent with an opinion of its
counsel, dated as of the Closing Date, and in form and substance reasonably
satisfactory to Parent and its counsel, covering such matters as Parent shall
reasonably request, including that: (i) RPG is duly organized, validly existing
and in good standing under the laws of South Carolina; (ii) the consummation of
the transactions contemplated by this Merger Agreement will not (A) violate any
provision of RPG's Articles of Incorporation or Bylaws, as applicable, (B)
violate any provision of, result in the termination of or result in the accelera
tion of any obligation under, any agreement listed in Section 5.15 of the RPG
Disclosure Schedule or any order, arbitration award, judgment or decree known to
counsel to which RPG is a party, or by which it is bound, except such as would
not, in the aggregate, have an RPG Material Adverse Effect, except as disclosed
in the RPG Disclosure Schedule, or (C) violate or conflict in any material
respect with any other restriction of any kind or character of which such
counsel has knowledge and to which RPG is subject which would have a Material
Adverse Effect on RPG; (iii) all of the shares of RPG Common Stock are validly
authorized and issued, fully paid and non-assessable; (iv) RPG has all
authorizations and approvals required by law to enter into this Merger Agreement
and to consummate the transactions contemplated herein and all applicable
regulatory waiting periods have passed; (v) other than filings and registrations
required under applicable law to be made by Parent, all filings and
registrations with, and notifications to, all federal and state authorities
required on the part of RPG for the consummation of the Merger have been made;
(vi) RPG has full corporate power and authority to enter into this Merger
Agreement, and this Merger Agreement has been duly authorized, executed and
delivered by RPG and constitutes a valid and legally binding obligation of RPG
enforceable against RPG in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to the relief of debtors generally and general principles of equity;
and (vii) to the best knowledge of such counsel, no material suit or proceeding
is pending or threatened against RPG or other parties which would have a
Material Adverse Effect on RPG's business or properties, which would result in a
breach or inaccuracy of the representations and warranties of RPG set forth
herein which would have a Material Adverse Effect on RPG or which would
adversely affect RPG's ability to perform in all material respects the
obligations set forth herein to be performed by RPG.
(d) All existing contractual arrangements between RPG and Mercantile
National Bank shall have been terminated prior to Closing without further
liability to RPG (except in connection with trailing transactions) and in
connection with such termination, Mercantile National Bank shall have paid RPG
at least $6.01 million in cash.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Merger Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of RPG:
(a) by mutual written consent of Parent and RPG;
(b) by RPG, upon a material breach of this Merger Agreement on
the part of Parent or Sub which has not been cured and which would cause the
conditions set forth in Sections 8.2(a) or 8.2(b) to be incapable of being
satisfied by September 30, 1998;
(c) by Parent, upon a material breach of this Merger Agreement
on the part of RPG which has not been cured and which would cause the conditions
set forth in Section 8.3(a) or 8.3(b) to be incapable of being satisfied by
September 30, 1998;
(d) subject to Section 6.5 by either Parent or RPG if any
court of competent jurisdiction shall have issued, enacted, entered, promulgated
or enforced any order, judgment, decree, injunction or
27
<PAGE>
ruling which restrains, enjoins or otherwise prohibits the Merger and such
order, judgment, decree, injunction or ruling shall have become final and
nonappealable;
(e) by either Parent or RPG if the Merger shall not have been
consummated on or before September 30, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations under this Merger Agreement);
(f) by either Parent or RPG if the RPG Special Meeting
(including as it may be adjourned from time to time) shall have concluded
without RPG having obtained the required shareholder approvals of this Merger
Agreement and the transactions contemplated hereby; and
(g) by RPG if a third party, including any group, shall have
made a proposal regarding the acquisition of any of the capital stock of, or any
other equity interest in, RPG or a merger, consolidation or other business
combination involving RPG or a sale of all or (other than in the ordinary course
of business) any substantial portion of the assets of RPG or commenced a tender
or exchange offer to acquire any shares of RPG Common Stock, which, in any such
case, RPG's Board of Directors determines, after consultation with RPG's
financial advisor, may reasonably be expected to result in a transaction or
series of transactions that will be more favorable to RPG's shareholders than
the transactions contemplated hereby; provided, however, that in the event that
RPG elects to terminate this Merger Agreement under this clause (g), RPG shall
pay to Parent, within five business days of such termination, the sum of
$500,000, which amount shall be payable by wire transfer to Carolina First Bank.
Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
Merger Agreement by either Parent or RPG, as provided in Section 9.1, this
Merger Agreement shall forthwith become void and there shall be no liability
hereunder on the part of any of RPG, Parent or Sub or their respective officers
or directors except for intentional breaches; provided that Sections 9.2, 9.3
and 10.6 and the last sentence of Section 6.4 shall survive the termination.
Section 9.3 FEES AND EXPENSES. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated by this Merger Agreement shall be
paid by the party incurring such expenses, except that Parent and RPG will each
bear 50% of the printing and mailing costs incurred in connection with the Proxy
Statement and the Registration Statement.
Section 9.4 AMENDMENT. This Merger Agreement may be amended by the
parties hereto at any time before or after approval hereof by the holders of
shares of RPG Common Stock, but, after such approval, no amendment shall be made
which (a) changes the form or decreases the amount of the Base Consideration or
the Additional Consideration, (b) in any way materially adversely affects the
rights of holders of shares of RPG Common Stock or (c) under applicable law
would require approval of the RPG shareholders, in any such case referred to in
clauses (a), (b) and (c), without the further approval of such shareholders.
Except as permitted in Section 1.5, this Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.5 WAIVER. At any time prior to the Effective Time, the
parties hereto may, to the extent permitted by applicable law, (a) extend the
time for the performance of any of the obligations or other acts of any other
party hereto, (b) waive any inaccuracies in the representations and warranties
by any other party contained herein or in any documents delivered by any other
party pursuant hereto and (c) waive compliance with any of the agreements of any
other party or with any conditions to its own
28
<PAGE>
obligations contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
No representations, warranties or agreements in this Merger Agreement shall
survive the Merger, except that the agreements contained in Article III and the
agreements of Parent and Sub referred to in Article III and in Sections 6.3,
7.4, 7.6, 7.7, 9.3, 10.1, 10.2 and 10.6 shall survive the Merger indefinitely
(except to the extent a shorter period of time is explicitly specified
therein)(except that this sentence shall not be construed to extend any
applicable statutes of limitations).
Section 10.2 NOTICES. All notices or other communications under this
Merger Agreement shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by telecopy (with
confirmation of receipt), by overnight courier service or by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
If to RPG:
Resource Processing Group, Inc.
101 Executive Center Drive
Columbia, South Carolina 29210
Attention: Mr. Angelo R. Palombi
Telecopy: (803) 731-4871
With a copy to:
McNair Law Firm, P.A.
1301 Gervais Street, 17th Floor
Columbia, South Carolina 29201
Attention: John W. Currie, Esq.
Telecopy: (803) 376-2277
If to Parent or Sub:
Carolina First Corporation
200 East Camperdown Way
Greenville, South Carolina 29601
Attention: Mr. William S. Hummers, III
Telecopy: (864) 239-4065
With a copy to:
Wyche, Burgess, Freeman & Parham, P.A.
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: William P. Crawford, Jr.
Telecopy: (864) 242-8324
29
<PAGE>
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 10.3 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Merger Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Merger
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 10.4 ENTIRE AGREEMENT. This Merger Agreement (including the
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof (other than as provided in the last sentence of Section 6.4).
Section 10.5 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Merger
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party. Subject to the preceding
sentence, this Merger Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Merger Agreement, express or
implied, is intended to, or shall confer upon any person not a party hereto, any
right, benefit or remedy of any nature whatsoever under or by reason of this
Merger Agreement, including to confer third party beneficiary rights, except for
the provisions of Article III and Sections 6.3, 7.4, 7.6 and 7.7.
Section 10.6 GOVERNING LAW. This Merger Agreement shall be governed in
all respects by the laws of the State of South Carolina (without giving effect
to the provisions thereof relating to conflicts of law).
Section 10.7 HEADINGS; DISCLOSURE. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Merger Agreement. Any disclosure
by RPG, Parent or Sub in any portion of its respective disclosure schedule shall
be deemed disclosure in each other portion of such disclosure schedule.
Section 10.8 CERTAIN DEFINITIONS. As used in this Merger Agreement:
(a) the term "affiliate," as applied to any person, shall mean
any other person directly or indirectly controlling, controlled by or under
common control with that person; for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "knowledge," "best knowledge" or any similar
formulation of "knowledge" shall mean, with respect to a corporation, the
knowledge of its senior executive officers.
(c) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is used in Section 13(d)(3) of the Exchange Act); and
30
<PAGE>
(d) the term "subsidiary" or "subsidiaries" shall mean, with
respect to Parent or any other person, any corporation, partnership, joint
venture or other legal entity of which Parent or such other person, as the case
may be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
Section 10.9 COUNTERPARTS. This Merger Agreement may be executed in two
or more counterparts which together shall constitute a single agreement.
Section 10.10 SEVERABILITY. If any term or other provision of this
Merger Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Merger
Agreement shall nevertheless remain in full force and effect so long as the
economics or legal substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon determination that
any term or other provision hereof is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this Merger
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
31
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and RPG have caused this
Merger Agreement to be signed by their respective officers thereunder duly
authorized all as of the date first written above.
Parent: CAROLINA FIRST CORPORATION
By:/s/ William S. Hummers III
Title: Executive Vice President
Sub: CFC MERGER SUB, INC.
By:/s/ William S. Hummers III
Title: Executive Vice President
RPG: RESOURCE PROCESSING GROUP, INC.
By:/s/ Angelo R. Palombi
Title: President & Chief Executive Officer
32
<PAGE>
PARENT DISCLOSURE SCHEDULE
SECTION 4.2
All items disclosed in Parent's public filings with the Securities and Exchange
Commission.
Options and stock issuable in connection with employee arrangements
2,000,000 shares were issued in a "Reg S" offering consummated February 1998
SHARES ISSUABLE AFTER FEBRUARY 1, 1998
Less than 100,000 shares may have been issued in the ordinary course of business
under existing arrangements disclosed in Parent's public filings with the
Securities and Exchange Commission.
2,000,000 shares were issued in a "Reg S" offering consummated February 1998
OTHER DISCLOSURE
All information contained in Parent's public filings with the Securities and
Exchange Commission is incorporated by reference herein.
33
<PAGE>
EXHIBIT B
[FIRST ANNAPOLIS CAPITAL, INC. LETTERHEAD]
February 5, 1998
Board of Directors
Resource Processing Group
101 Executive Center Drive
Columbia, SC 29210
Members of the Board:
Resource Processing Group, Inc. (the "Company"), Carolina First
Corporation ("Parent"), and CFC Merger Sub, Inc., a wholly-owned subsidiary of
Parent ("Merger Sub"), propose to enter into an agreement (the "Agreement")
pursuant to which the Company will be merged with Merger Sub (the "Merger"). In
connection with the Merger, each share of common stock of the Company ("Company
Common Stock") issued and outstanding immediately prior to the acceptance for
filing of articles of merger with the Secretary of the State of South Carolina
(the "Effective Time") shall by virtue of the Merger and without any action on
the part of the holder thereof, be converted into merger consideration equal to
$1.2442 per share (the "Base Consideration") plus the right to receive the
Additional Consideration (as defined below). Except for cash payable in lieu of
fractional shares, 100 percent of the Base Consideration shall be paid in the
form of shares of common stock, $1.00 par value per share, of Parent ("Parent
Common Stock"), which shall be valued at the average closing price of a share of
Parent Common Stock as reported on the Nasdaq National Market for the 20 trading
days immediately preceding the date of closing of the Merger ("the Closing
Price"). The ratio of shares of Parent Common Stock issuable for each share of
Company Common Stock is referred to as the "Conversion Ratio," which Conversion
Ratio shall be calculated to four decimals. Notwithstanding the foregoing, no
fractional shares of Parent Common Stock will be issued as a result of the
Merger, and in lieu of the issuance of fractional shares, cash will be paid to
the holders of the Company Common Stock in respect of any fractional share that
would otherwise be issued based on the Closing Price.
In addition to the Base Consideration, additional shares (the
"Additional Consideration") of Parent Common Stock shall be issuable (pro rata)
to the holders of Company Common Stock issued and outstanding prior to the
Effective Time, other than those held by Parent or any wholly owned subsidiary
of Parent (including Sub) and holders of Dissenting Shares (as defined in the
Agreement) (the "RPG Stockholders") generally as follows:
(a) If net chargeoffs during the year ended December 31, 1998 that are
associated with credit card accounts originated by the Company on
behalf of Parent during the year ended December 31, 1997 are less than
4 percent of the weighted average daily outstanding balance of such
accounts during 1998, Parent shall issue to RPG Stockholders shares of
Parent Common Stock having a Fair Market Value (as defined below) of
$500,000. Such shares, if issuable, shall be issued on January 31,
1999.
(b) If net chargeoffs during the year ended December 31, 1999 that are
associated with Parent credit card accounts are less than 4.5 percent
of the average daily outstanding balance of such accounts during 1999,
Parent shall issue to RPG Stockholders shares of Parent Common Stock
having a Fair Market Value (as defined below) equal to 1.33 percent of
the weighted average daily outstanding balance of such accounts during
1999. Such shares, if issuable, shall be issued on January 31, 2000.
"Fair Market Value" of Parent Stock, as of a particular day, shall be
the average of the closing prices of Parent Common Stock for the 20
trading days immediately prior to the date in question.
You have asked us whether, in our opinion, the proposed consideration
to be received by the stockholders of the Company pursuant to the Merger is fair
to such stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
<PAGE>
(1) Reviewed the Company's audited financial statements and
related financial information for the two fiscal years ended
December 31, 1996 and the Company's unaudited financial
statements and related unaudited financial information for the
ten months ended October 31, 1997;
(2) Reviewed Parent's Annual Reports, Forms 10-K and related
financial information for the two fiscal years ended December
31, 1996, Parent's Form 10-Q and the related unaudited
financial information for the nine months ended September 30,
1997 and the Proxy Statement dated March 21, 1997 for the 1997
Annual Meeting of Stockholders.
(3) Reviewed with management of the Company and Parent,
respectively, certain information, including financial
forecasts, relating to the business, earnings, cash flow,
assets and prospects of the Company and Parent, furnished to
us by the Company and Parent;
(4) Conducted discussions with members of senior management of the
Company and Parent concerning their respective businesses and
prospects;
(5) Reviewed the reported prices and trading activity for shares
of Parent Common Stock and compared them with those of certain
publicly traded companies which we deemed to be reasonably
similar to Parent;
(6) Compared financial and operating data of the Company and
Parent to financial and operating data of certain
publicly-traded companies which we deemed reasonably similar
to the Company and Parent;
(7) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of
certain other mergers and acquisitions which we deemed to be
relevant to our inquiry;
(8) Reviewed a draft dated January 30, 1998 of the Agreement; and,
(9) Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
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 Company or Parent; nor
have we made or obtained any independent evaluations or appraisals of any such
properties or facilities. We did not specifically evaluate the loan portfolio or
the adequacy of reserves for possible loan losses of Parent or any subsidiaries
or affiliates.
With respect to the financial forecasts of the Company and Parent
provided to us by management of the two companies, respectively, we have assumed
that they have been reasonably prepared and reflect the best currently available
estimates and judgment of the senior management of the Company and Parent as to
the future financial performance of the respective companies and have not
undertaken any independent analysis to verify the reasonableness of the
assumptions underlying such forecasts. Our Opinion is necessarily based upon
information available to us and on economic, financial, market and other
conditions as they exist and can be evaluated as of the date hereof. No
limitations were imposed on, or instructions given by either the Company or
Parent with respect to our investigation or the procedures we followed in
rendering our Opinion, and the management of the Company and Parent cooperated
fully in connection with our investigation.
Our firm is experienced in providing advice in connection with mergers
and acquisitions and related transactions. We have acted as financial advisor to
the Company in connection with the Merger and will be paid a fee for our
services as financial advisor which is in substantial part contingent upon the
consummation of the Merger.
2
<PAGE>
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by the holders of Company Common Stock in the
Merger is fair from a financial point of view to such holders. The standard
employed by us in reaching our judgment as to fairness of such consideration
from a financial point of view was whether our estimation of the economic value
of such consideration is within the range of estimated economic values within
which companies having the characteristics of Company and Parent might negotiate
a merger transaction and not whether such consideration is at or approaching the
higher end of such range.
Our advisory services and the Opinion expressed herein are provided for
the use of the Board of Directors of the Company in its evaluation of the
proposed Merger, and our Opinion is not intended to be and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
Merger. This Opinion may be reproduced in full in any proxy or information
statement mailed to stockholders of the Company but may not otherwise be
disclosed publicly, referred to or communicated by you in any manner without our
prior written approval and this Opinion must be treated as confidential.
Very truly yours,
First Annapolis Capital, Inc.
By: /s/ Lee E. Manfred
----------------------
Title: Principal
----------------------
3
<PAGE>
[FIRST ANNAPOLIS CAPITAL, INC. LETTERHEAD]
March 6, 1998
Board of Directors
Resource Processing Group, Inc.
101 Executive Center Drive
Columbia, SC 29210
Members of the Board:
We understand that Resource Processing Group, Inc. ("Company") and Carolina
First Corporation ("CFC") have agreed that the fair market value of fully
registered CFC common stock to be issued to holders of shares of common stock of
the Company ("Company Common Stock") at closing will be reduced from $11.300
million, or $1.2442 per share, to $11.235 million, or $1.2370 per share.
You have requested that we confirm that this change would not cause us to change
the conclusion expressed in our opinion to you dated February 5, 1998 that the
consideration to be received by the holders of Company Common Stock in the
Merger (as defined in the opinion dated February 5, 1998) is fair from a
financial point of view to such holders. With your permission, we have assumed
that all other material facts in connection with the Merger have not changed
since we completed our review and analysis in support of our opinion dated
February 5, 1998. In view of this assumption, the agreed change in consideration
would not cause us to withdraw our opinion regarding the fairness of the
proposed Merger.
Very truly yours,
First Annapolis Capital, Inc.
By: /s/ Lee E. Manfred
------------------------
Title: Principal
------------------------
4
<PAGE>
EXHIBIT C
CFC MERGER SUB, INC.
BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
ASSETS
Cash................................................................ $ 100
-----
$ 100
=====
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities......................................................... --
Shareholders' Equity:
Common stock.................................................... 100
Retained Earnings............................................... --
------
Total shareholders' equity...................................... 100
------
$ 100
======
C-1
<PAGE>
EXHIBIT D
DISSENTERS' RIGHTS
Title 33, Chapter 13 of the Code of Laws of South Carolina 1976,
Dissenters' Rights, provides as follows:
ARTICLE 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
sec. 33-13-101. Definitions.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that
issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 33-13-102 and who
exercises that right when and in the manner required by
Sections 33-13-200 through 33-13-280.
(3) "Fair Value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable. The value of the
shares is to be determined by techniques that are accepted
generally in the financial community.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank
loans or, if none, at a rate that is fair and equitable under
all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial
owner of shares to the extent of the rights granted by a
nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
sec. 33-13-102. Right to dissent.
A shareholder is entitled to dissent from, and obtain payment of the fair
value of, his shares in the event of any of the following corporate actions:
(1) consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger
by Section 33-11-103 or the articles of incorporation and the
shareholder is entitled to vote on the merger or (ii) if the
corporation is a subsidiary that is merged with its parent
under Section 33-11-104 or 33-11-108 or if the corporation is
a parent that is merged with its subsidiary under Section
33-11-108;
(2) 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;
(3) 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, including a sale in
dissolution, but not including a sale pursuant to court order
or 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;
(4) an amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's
shares because it:
(i) alters or abolishes a preferential right of the
shares;
(ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the
shares;
(iii) alters or abolishes a preemptive right of the holder
of the shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on
any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or
other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so
created is to be acquired for cash under Section
33-6-104; or
(5) the approval of a control share acquisition under Article 1 of
Chapter 2 of Title 35;
(6) any corporate action to the extent the articles of
incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
<PAGE>
sec. 33-13-103. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if he dissents with respect to all shares of which he is the
beneficial shareholder or over which he has the power to direct the vote. A
beneficial shareholder asserting dissenters' rights to shares held on his behalf
shall notify the corporation in writing of the name and address of the record
shareholder of the shares, if known to him.
ARTICLE 2
PROCEDURES FOR EXERCISE OF DISSENTERS' RIGHTS
sec. 33-13-200. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section 33-13-102
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Section 33-13-220.
sec. 33-13-210. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) must give to the corporation before the
vote is taken written notice of his intent to demand payment for his shares if
the proposed action is effectuated and (2) must not vote his shares in favor of
the proposed action. A vote in favor of the proposed action cast by the holder
of a proxy solicited by the corporation shall not disqualify a shareholder from
demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his shares under this chapter.
sec. 33-13-220. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days after
the corporate action was taken and must: (1) state where the payment demand must
be sent and where certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of
the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he or, if he is a nominee
asserting dissenters' rights on behalf of a beneficial shareholder,
the beneficial shareholder acquired beneficial ownership of the
shares before that date;
(4) set a date by which the corporation must receive the payment demand,
which may not be fewer than thirty nor more than sixty days after
the date the subsection (a) notice is delivered and set a date by
which certificates for certificated shares must be deposited, which
may not be earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
sec. 33-13-230. Shareholders' payment demand.
(a) A shareholder sent a dissenters' notice described in Section 33-13-220
must demand payment, certify whether he (or
2
<PAGE>
the beneficial shareholder on whose behalf he is asserting dissenters' rights)
acquired beneficial ownership of the shares before the date set forth in the
dissenters' notice pursuant to Section 33-13-220(b)(3), and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not comply substantially with the requirements
that he demand payment and deposit his share certificates where required, each
by the date set in the dissenters' notice, is not entitled to payment for his
shares under this chapter.
sec. 33-13-240. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under Section
33-13-260.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporate action.
sec. 33-13-250. Payment.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an
income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of the
shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional payment
under Section 33-13-280; and
(5) a copy of this chapter.
sec. 33-13-260. Failure to take action.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation, within the same sixty-day period, shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
sec. 33-13-270. After-acquired shares.
(a) A corporation may elect to withhold payment required by Section
33-13-250 from a dissenter as to any shares of which he (or the beneficial owner
on whose behalf he is asserting dissenters' rights) was not the beneficial owner
on the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action, unless the beneficial ownership of the shares devolved upon
him by operation of law from a person who was the beneficial owner on the date
of the first announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the fair value and interest were
calculated, and a statement of the dissenters' right to demand additional
payment under Section 33-13-280.
sec. 33-13-280. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due and demand payment of
his estimate (less any payment under Section 33-13-250) or reject the
corporation's offer
3
<PAGE>
under Section 33-13-270 and demand payment of the fair value of his shares and
interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or
offered under Section 33-13-270 is less than the fair value of his
shares or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to
offer payment under Section 33-13-270 within sixty days after the
date set for demanding payment; or
(3) corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty days
after the date set for demanding payment.
(b) A dissenter waives his right to demand additional payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
ARTICLE 3
JUDICIAL APPRAISAL OF SHARES
sec. 33-13-300. Court action.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this State,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this State, it shall commence the proceeding in
the county in this State where the principal office (or, if none in this State,
the registered office) of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this State) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint persons as
appraisers to receive evidence and recommend decisions on the question of fair
value. The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
sec. 33-13-310. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Section 33-13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not comply substantially with the
requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability under
Section 33-13-300(a) of a corporation that has failed to commence an appraisal
proceeding within the sixty-day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against the
corporation and in favor of the dissenters.
4
