Filed Pursuant to Rule 424(b)(1)
File Number 333-60753
POINSETT FINANCIAL CORPORATION
6514-B State Park Road
Travelers Rest, South Carolina 29690
August 12, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Poinsett Financial Corporation ("Poinsett Special Meeting") to be held at the
main office of Poinsett Financial Corporation ("Poinsett") located at 6514-B
State Park Road, Travelers Rest, South Carolina 29690, on Tuesday, September 15,
1998, at 10:00 a.m., local time.
At the Poinsett Special Meeting you will be asked to consider and vote
upon the Reorganization Agreement ("Reorganization Agreement") by and among
Poinsett and Carolina First Corporation, Greenville, South Carolina, dated as of
June 26, 1998. If the Reorganization Agreement is approved by the holders of at
least two-thirds of the outstanding shares of common stock of Poinsett (and
certain other conditions are met), Poinsett will be merged with and into
Carolina First Corporation (the "Merger"). In connection with the Merger,
Poinsett shareholders will receive shares of Carolina First Corporation common
stock having a fair market value (as defined in the Reorganization Agreement) of
$82.00 for each share of Poinsett common stock held by them. On August 6, 1998,
the last reported sale price of Carolina First Corporation common stock on the
Nasdaq National Market was $24.38 per share. In connection with the
Reorganization Agreement, Poinsett's wholly-owned thrift subsidiary, The
Poinsett Bank, a federal savings bank , would continue to operate as a
wholly-owned subsidiary of Carolina First Corporation (except that after the
Merger, Poinsett Bank's name may be changed to "Carolina First Savings Bank" and
certain branch locations of Poinsett Bank may be transferred to Carolina First
Corporation's wholly-owned bank subsidiary, Carolina First Bank). The
Reorganization Agreement is described in detail in the accompanying Proxy
Statement/Prospectus and is attached as Annex 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 Poinsett
Special Meeting. The Proxy Statement/Prospectus includes a description of the
terms and conditions of the Merger and related agreements, financial and other
information about Carolina First Corporation and Poinsett, and other
information. You are urged to consider carefully the entire Proxy
Statement/Prospectus, including the annexes thereto.
THE BOARD OF DIRECTORS OF POINSETT BELIEVES THAT THE REORGANIZATION
AGREEMENT IS IN THE BEST INTERESTS OF POINSETT AND ITS SHAREHOLDERS AND
RECOMMENDS A VOTE FOR THE APPROVAL OF THE REORGANIZATION AGREEMENT.
Because the affirmative vote of the holders of at least two-thirds of the
issued and outstanding shares of Poinsett common stock is required to approve
the Reorganization Agreement, it is important that your shares of Poinsett
common stock be represented at the Poinsett Special Meeting, whether or not you
are personally able to attend. A failure to vote, either by not returning the
enclosed Proxy or by checking the "Abstain" box thereon, will have the same
effect as a vote against the Reorganization Agreement. You are therefore urged
to complete, date and sign the enclosed Proxy, and return it promptly in the
enclosed return envelope, which does not require any postage if mailed in the
United States. If you attend the Poinsett Special Meeting, you may vote shares
of Poinsett common stock of which you are the record owner in person, even if
you have already returned your Proxy.
Sincerely,
/s/ James D. King
--------------------
James D. King
President and Chief Executive Officer
<PAGE>
POINSETT FINANCIAL CORPORATION
6514-B State Park Road
Travelers Rest, South Carolina 29690
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 1998
TO THE SHAREHOLDERS OF POINSETT FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Poinsett
Financial Corporation ("Poinsett Special Meeting") is to be held at the main
office of Poinsett Financial Corporation ("Poinsett") located at 6514-B State
Park Road, Travelers Rest, South Carolina 29690, on Tuesday, September 15, 1998,
at 10:00 a.m., local time, for the following purposes:
1. Consideration of the Reorganization Agreement. To consider and vote
upon a proposal to adopt the Reorganization Agreement ("Reorganization
Agreement") dated as of June 26, 1998, between Carolina First Corporation and
Poinsett, pursuant to which Poinsett will be merged into Carolina First
Corporation and Poinsett shareholders will receive Carolina First Corporation
common stock in exchange for their shares of Poinsett common stock ("Merger"),
all on and subject to the terms and conditions contained therein.
2. Other Business. To transact such other business as may properly come
before the Poinsett Special Meeting or any adjournments thereof.
Only shareholders of record at the close of business on August 1, 1998,
are entitled to notice of and to vote at the Poinsett Special Meeting or any
adjournments thereof. The affirmative vote of the holders of at least two-thirds
of the issued and outstanding shares of Poinsett common stock is required to
approve the Reorganization Agreement. All shareholders, whether or not they
expect to attend the Poinsett 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 Poinsett at any time before it is voted, (ii) by submitting
a proxy having a later date, or (iii) by such person appearing at the Poinsett
Special Meeting and giving notice of revocation to the corporate officers
responsible for maintaining the list of shareholders.
By Order of the Board of Directors,
/s/ James D. King
------------------------
August 12, 1998 James D. King
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE POINSETT SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
Proxy Statement/Prospectus
CAROLINA FIRST CORPORATION Prospectus for
807,040 Shares of Common Stock, $1.00 Par Value Per Share
POINSETT FINANCIAL CORPORATION
Proxy Statement for Special Meeting of Shareholders
This Proxy Statement/Prospectus relates to the issuance by Carolina First
Corporation of up to 807,040 shares (the "Carolina First Corporation Shares") of
its $1.00 par value common stock ("Carolina First Corporation common stock") in
connection with the proposed merger ("Merger") of Poinsett Financial Corporation
("Poinsett") with and into Carolina First Corporation. Upon consummation of the
Merger, each outstanding share of Poinsett common stock will be converted into
shares of Carolina First Corporation common stock having a fair market value (as
defined in the Reorganization Agreement) of $82.00 per share. The Carolina First
Corporation Shares are offered to the Poinsett shareholders subject to the terms
and conditions specified in the Reorganization Agreement, dated as of June 26,
1998 ("Reorganization Agreement") and entered into by and between Carolina First
Corporation and Poinsett. The Reorganization Agreement provides that as a result
of the transactions specified in the Reorganization Agreement, the Poinsett
common stock will be canceled and Carolina First Corporation will be the
surviving parent corporation. Upon consummation of the transactions specified in
the Reorganization Agreement, Poinsett's wholly-owned thrift subsidiary, The
Poinsett Bank, a federal savings bank, would continue to operate as a
wholly-owned subsidiary of Carolina First Corporation (except that after the
Merger, Poinsett Bank's name may be changed to "Carolina First Savings Bank" and
certain branch locations of Poinsett Bank may be transferred to Carolina First
Corporation's wholly-owned bank subsidiary, Carolina First Bank). Cash will be
paid in lieu of fractional shares to which a Poinsett shareholder becomes
entitled. See "THE PROPOSED TRANSACTION -- General Description of the Terms of
the Reorganization Agreement."
This Proxy Statement/Prospectus serves as the Proxy Statement of Poinsett
in connection with the solicitation of proxies to be used at the Special Meeting
of Shareholders of Poinsett ("Poinsett Special Meeting") to be held on September
15, 1998 for the purposes described herein. This Proxy Statement/Prospectus is
first being sent to Poinsett shareholders on or about August 12, 1998.
Consummation of the transactions contemplated in the Reorganization
Agreement is subject to certain conditions, including, among others, approval by
the respective shareholders of Poinsett at the Poinsett Special Meeting and
approval by applicable regulatory authorities.
Any Poinsett shareholder who, at or prior to the Special Meeting, gives
written notice that he dissents from the Merger and does not vote in favor of
the Merger shall be entitled, upon strict compliance with certain statutory
procedures, to receive the value of the Poinsett common stock owned by such
shareholder at the time and in the manner set forth herein. See "THE PROPOSED
TRANSACTION -- Rights of Dissenting Shareholders of Poinsett."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY SHAREHOLDERS OF POINSETT.
POINSETT'S BOARD OF DIRECTORS RECOMMENDS THAT THE POINSETT SHAREHOLDERS
VOTE TO APPROVE THE REORGANIZATION AGREEMENT.
The Carolina First Corporation common stock is traded on the Nasdaq
National Market under the Nasdaq market symbol "CAFC." On June 26, 1998 (the
last business day prior to the announcement of the execution of the
Reorganization Agreement), the closing bid price of the Carolina First
Corporation common stock, as reported by Nasdaq, was $26.625 per share. The
Poinsett common stock is not traded on any established market. Poinsett does not
have information regarding recent sales of Poinsett common stock in 1998.
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 CAROLINA FIRST CORPORATION SHARES OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS AND LOAN
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is August 12, 1998.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<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 Poinsett Special Meeting............. 3
Parties to the Reorganization Agreement.............................. 3
General Terms of the Proposed Transaction............................ 3
Vote Required and Record Date........................................ 4
Recommendation of Poinsett's Board of Directors...................... 4
Rights of Dissenting Shareholders.................................... 4
Certain Differences in Shareholders' Rights.......................... 4
Conditions and Regulatory Approvals.................................. 4
Termination of the Reorganization Agreement.......................... 5
Effective Time of the Merger......................................... 5
Opinion of Financial Advisor......................................... 5
Certain Federal Income Tax Consequences.............................. 5
Interests of Certain Persons......................................... 5
Restrictions on Resales by Affiliates................................ 6
Accounting Treatment................................................. 6
Market Prices and Dividends.......................................... 6
Selected Consolidated Financial Data........................... 8
Comparative Per Share Data.................................... 11
RISK FACTORS................................................................. 12
Dependence on Senior Management..................................... 12
Growth Through Acquisitions......................................... 12
Antitakeover Measures............................................... 12
Commercial Lending Activities ...................................... 12
INFORMATION CONCERNING THE POINSETT SPECIAL MEETING.......................... 13
Poinsett Special Meeting............................................ 13
Purpose of the Poinsett Special Meeting....................... 13
Poinsett Record Date and Voting Rights........................ 13
Proxies....................................................... 13
Recommendation................................................ 14
THE PROPOSED TRANSACTION..................................................... 15
General Description of the Terms of the Reorganization Agreement.... 15
Background of and Reasons for the Reorganization Agreement.......... 16
Opinion of Poinsett's Financial Advisor............................. 19
Exchange of Poinsett Stock Certificates............................. 22
Conditions to Consummation of the Merger............................ 23
Termination......................................................... 24
Amendment........................................................... 24
Conduct of Poinsett's and Carolina First Corporation's Business
Prior to the Effective Time................................... 24
Required Regulatory Approvals....................................... 25
Operations After the Merger......................................... 25
Interests of Certain Persons in the Merger.......................... 25
Accounting Treatment................................................ 27
Certain Federal Income Tax Consequences............................. 27
Cash Received by Holders of Poinsett Common Stock
Who Dissent.............................................. 28
Fractional Share Interests.................................... 28
Restrictions on Resales by Affiliates............................... 29
Rights of Dissenting Shareholders of Poinsett....................... 29
Recommendation of Board of Directors................................ 32
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION........................... 33
INFORMATION ABOUT CAROLINA FIRST CORPORATION................................. 38
Capital Adequacy.................................................... 39
<PAGE>
<CAPTION>
Recent Developments................................................. 41
INFORMATION ABOUT POINSETT................................................... 42
Poinsett............................................................ 42
Recent Developments................................................. 42
Management's Discussional Analysis of Financial and Results of
Operations...................................................... 42
Net Interest Income................................................. 43
Interest Rate Sensitivity........................................... 45
Provision for Loan Losses........................................... 47
Inflation........................................................... 54
Properties.......................................................... 55
Employees........................................................... 55
Monetary Policies................................................... 55
Legal Proceedings................................................... 55
MANAGEMENT INFORMATION....................................................... 57
Management and Principal Shareholders of Poinsett Financial
Corporation.................................................... 56
Certain Transactions................................................ 57
COMPARATIVE RIGHTS OF SHAREHOLDERS........................................... 58
General............................................................. 58
Authorized Capital.................................................. 58
Amendment of Articles of Incorporation or Bylaws.................... 59
Size and Classification of Board of Directors....................... 59
Shareholder Nomination of Directors................................. 60
Removal of Directors by Shareholders................................ 60
Director Exculpation................................................ 60
Director and Officer Indemnification................................ 61
Shareholder Meetings................................................ 61
Shareholder Voting in General....................................... 62
Shareholder Voting in Certain Business Combinations................. 62
Change in Control, Business Combinations and Anti-Takeover
Provisions.................................................... 64
Action by Shareholders Without a Meeting............................ 65
CAROLINA FIRST CORPORATION CAPITAL STOCK..................................... 66
Common Stock........................................................ 66
Preferred Stock..................................................... 66
Certain Matters..................................................... 66
Shareholders' Rights Agreement................................ 66
Management Contracts.......................................... 68
Board of Directors............................................ 68
Voting ....................................................... 69
Control Share Acquisition/Business Combination Statutes....... 70
Transfer Agent................................................ 70
Dividend Reinvestment Plan.................................... 70
LEGAL MATTERS................................................................ 70
EXPERTS...................................................................... 70
OTHER MATTERS................................................................ 71
INDEX TO FINANCIAL STATEMENTS................................................F-1
ANNEXES
Reorganization Agreement.......................................... Annex A
Opinion of Capital Resources Group, Inc........................... Annex B
South Carolina Dissenter's Rights Statute......................... Annex C
Financial Statements of Carolina First Corporation ............... Annex D
</TABLE>
<PAGE>
AVAILABLE INFORMATION
Carolina First Corporation 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 Carolina First Corporation)
that file electronically with the Commission.
Carolina First Corporation has filed with the Commission a Registration
Statement (which shall include any amendments thereto) on Form S-4
("Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with respect to the Carolina First Corporation Shares
offered hereby. This 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 annexes and schedules thereto are available for
inspection and copying as set forth in the preceding paragraph. For further
information with respect to Carolina First Corporation, Poinsett and the
Carolina First Corporation Shares offered hereby, reference is hereby made to
the Registration Statement, including the annexes and schedules thereto.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus with respect to Carolina First Corporation has been
supplied by Carolina First Corporation, and all information contained or
incorporated by reference in this Proxy Statement/Prospectus with respect to
Poinsett has been supplied by Poinsett.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WITH
RESPECT TO CAROLINA FIRST CORPORATION WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS (OTHER THAN ANNEXES TO SUCH A
DOCUMENT UNLESS SUCH EXHIBIT IS SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS 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 SEPTEMBER
3, 1998.
The following documents filed with the Commission by Carolina First
Corporation pursuant to Section 13(a) or 15(d) of the Exchange Act are
incorporated herein by reference:
(i) Carolina First Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997;
(ii) Carolina First Corporation's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998;
(iii) Carolina First Corporation's Current Reports on Form 8-K dated
February 13, 1998; and
(iv) The description of the Carolina First Corporation common stock which is
contained in Carolina First Corporation's Form 8-A filed with the
Commission on or about October 20, 1986, including any amendment or
report filed for the purpose of updating such description.
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<PAGE>
All documents filed by Carolina First Corporation pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the Poinsett Special Meeting shall be deemed to be incorporated by reference in
this Proxy Statement/Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained herein or in a
document incorporated herein shall be deemed to be modified or superseded for
purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently-filed document which also is
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
OTHER INFORMATION
This Proxy Statement/Prospectus does not cover any resales of the Carolina
First Corporation common stock offered hereby to be received by shareholders
deemed to be "affiliates" of Carolina First Corporation or Poinsett 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 Carolina First Corporation not deemed to be "affiliates" of
Carolina First Corporation or Poinsett.
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 Carolina First Corporation
or Poinsett. This Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any of the securities offered hereby
to any person or in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any sale hereunder shall under any circumstances create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof or that there has been no change in the affairs of
Carolina First Corporation or Poinsett 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 ANNEXES, AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND
INCLUDED HEREWITH. A COPY OF THE REORGANIZATION AGREEMENT (EXCLUDING THE
SCHEDULES ATTACHED THERETO) IS ATTACHED HERETO AS ANNEX A AND IS INCORPORATED
HEREIN BY REFERENCE. AS USED HEREIN, THE TERMS "CAROLINA FIRST CORPORATION" AND
"POINSETT" REFER TO CAROLINA FIRST CORPORATION AND POINSETT FINANCIAL
CORPORATION, RESPECTIVELY, AND UNLESS THE CONTEXT OTHERWISE REQUIRES, TO THEIR
RESPECTIVE CONSOLIDATED SUBSIDIARIES.
INTRODUCTION . This Proxy Statement/Prospectus is furnished in connection
with (i) the issuance by Carolina First Corporation of the Carolina First
Corporation Shares and (ii) the solicitation of proxies by the Poinsett Board of
Directors with respect to the Poinsett Special Meeting to be held on September
15, 1998 and at any adjournment thereof. The Poinsett Special Meeting is being
held for the purpose of considering and voting upon the Reorganization
Agreement. This Proxy Statement/Prospectus is first being mailed to Poinsett
shareholders on or about August 12, 1998.
TIME, PLACE AND PURPOSES OF THE POINSETT SPECIAL MEETING . The Poinsett
Special Meeting will be held on September 15, 1998 at 10:00 a.m., local time, at
Poinsett's main office, located at 6514-B State Park Road, Travelers Rest, South
Carolina. At the Poinsett Special Meeting, shareholders of Poinsett will
consider and vote on the proposal to approve the Reorganization Agreement, which
provides for the Merger of Poinsett into Carolina First Corporation and the
exchange of Poinsett common stock for Carolina First Corporation common stock.
See "INFORMATION CONCERNING THE POINSETT SPECIAL MEETING."
PARTIES TO THE REORGANIZATION AGREEMENT . CAROLINA FIRST CORPORATION.
Carolina First Corporation is a bank holding company headquartered in
Greenville, South Carolina which engages in a general banking business through
its four principal 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) Resource Processing Group, Inc., a credit card origination and
servicing operation headquartered in Columbia, South Carolina. Carolina First
Corporation is a South Carolina corporation which was organized in 1986. At
March 31, 1998, it had total consolidated assets of approximately $2.3 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."
POINSETT. Poinsett is a thrift holding company headquartered in Travelers
Rest, South Carolina which conducts business primarily through its sole direct
subsidiary, The Poinsett Bank, a federal savings bank ("Poinsett Bank") which
converted from the mutual to stock form of organization in August 1988. Poinsett
is a South Carolina corporation organized in June 1990 and became the holding
company for Poinsett Bank in February 1991. At March 31, 1998, Poinsett had
total assets of approximately $88.9 million. Its principal executive offices are
located at 6514-B State Park Road, Travelers Rest, South Carolina 29690, and its
telephone number is (864) 834-4135. See "INFORMATION ABOUT POINSETT" and the
documents that accompany this Proxy Statement/Prospectus.
GENERAL TERMS OF THE PROPOSED TRANSACTION . Pursuant to the terms of the
Reorganization Agreement, upon consummation of the Merger, holders of Poinsett
common stock will be entitled to receive shares of Carolina First Corporation
common stock having a "fair market value" (as defined in the Reorganization
Agreement) of $82.00 for each outstanding share of Poinsett common stock held by
them. The "fair market value" is defined in the Reorganization Agreement as the
average of the closing prices as quoted on the Nasdaq National Market for
3
<PAGE>
Carolina First Corporation common stock for the 20 days in which Carolina First
Corporation common stock was traded immediately prior to the date of closing of
the transactions contemplated in the Reorganization Agreement (the "Closing" and
the "Closing Date"), except that if prior to the effective time of the Merger,
any other person or entity shall have publicly announced an intention to acquire
control of Carolina First Corporation by merger or otherwise or Carolina First
Corporation shall have publicly acknowledged that it is seeking to be acquired
by another person or entity or is discussing being acquired by another person or
entity, then the average of the closing prices as quoted on the Nasdaq National
Market for Carolina First Corporation common stock for the 20 days for which the
Carolina First Corporation common stock was traded immediately prior to such
announcement or acknowledgment shall be determined and, if such average is less
than the average derived from the 20 trading days immediately prior to the
Closing Date, then the smaller average shall be the fair market value. All of
the stock prices set forth above are subject to equitable adjustment for stock
splits, stock dividends, reverse stock splits and similar items. See "THE
PROPOSED TRANSACTION -- General Description of the Terms of the Reorganization
Agreement."
Assuming a fair market value of $26.00 per share, this results in a
conversion ratio of 3.1538 shares of Carolina First Corporation common stock for
each share of Poinsett common stock. The number of shares of Carolina First
Corporation common stock issuable in the Merger for each share of Poinsett
common stock is hereinafter referred to as the ("Conversion Ratio") .
VOTE REQUIRED AND RECORD DATE . Only Poinsett shareholders of record at
the close of business on August 1, 1998 ("Record Date") will be entitled to
notice of and to vote at the Poinsett Special Meeting. The Merger must be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Poinsett common stock eligible to vote at the Poinsett
Special Meeting. As of the Record Date, there were 193,365 shares of Poinsett
common stock entitled to vote. As of the date hereof, the directors and
executive officers of Poinsett and their affiliates beneficially owned 78,328
shares, or approximately 40.5% of Poinsett common stock. Upon consummation of
the transactions contemplated hereby (and assuming no adjustment of the
Conversion Ratio), such persons will beneficially own 247,031 shares of Carolina
First Corporation common stock, or 1.3% of the outstanding Carolina First
Corporation common stock.
RECOMMENDATION OF POINSETT'S BOARD OF DIRECTORS .
THE BOARD OF DIRECTORS OF POINSETT HAS APPROVED THE REORGANIZATION
AGREEMENT AND BELIEVES THAT THE REORGANIZATION AGREEMENT IS IN THE BEST
INTERESTS OF POINSETT AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS RECOMMEND
THAT POINSETT'S SHAREHOLDERS VOTE FOR THE REORGANIZATION AGREEMENT. SEE "THE
PROPOSED TRANSACTION -- RECOMMENDATION OF BOARD OF DIRECTORS."
RIGHTS OF DISSENTING SHAREHOLDERS . Shareholders of Poinsett who give
written notice at or prior to the Special Meeting that they dissent to the
proposed Merger and who do not vote in favor of the proposed Merger, will be
entitled to obtain payment of the value of their shares of Poinsett common stock
under South Carolina law. Failure to comply strictly with certain statutory
procedures may result in the forfeiture of such rights. See "THE PROPOSED
TRANSACTION -- Rights of Dissenting Shareholders of Poinsett."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS . Upon effectiveness of the
Merger, the former Poinsett shareholders will become shareholders of Carolina
First Corporation, and their rights as shareholders will be determined by
Carolina First Corporation's Articles of Incorporation and Bylaws. The rights of
shareholders of Carolina First Corporation differ from the rights of
shareholders of Poinsett in several important respects, including, among other
things, the existence of certain antitakeover provisions. See "COMPARATIVE
RIGHTS OF SHAREHOLDERS."
CONDITIONS AND REGULATORY APPROVALS . Consummation of the transactions
contemplated by the
4
<PAGE>
Reorganization Agreement is subject to various conditions, including receipt of
the necessary regulatory approvals (including the approval by the Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the South
Carolina State Board of Financial Institutions (the "State Board")), and the
requisite shareholder approval of Poinsett. Applications to the necessary
regulatory authorities seeking approval of the proposed transaction have been
filed and the parties expect that such applications will be approved. Carolina
First Corporation and Poinsett may waive certain of the conditions to their
respective obligations to consummate the Merger, other than conditions required
by law. See "THE PROPOSED TRANSACTION -- Conditions to Consummation of the
Merger" and "THE PROPOSED TRANSACTION -- Required Regulatory Approvals."
TERMINATION OF THE REORGANIZATION AGREEMENT . The Reorganization Agreement
may be terminated at any time prior to the Closing Date: (a) by mutual consent
of the parties; (b) by either Carolina First Corporation or Poinsett, at that
party's option, (i) if a permanent injunction or other order (including any
order denying any required regulatory consent or approval) shall have been
issued by any Federal or state court of competent jurisdiction in the United
States or by any United States Federal or state governmental or regulatory body,
which order prevents the consummation of the transactions contemplated herein,
or (ii) if the requisite Poinsett shareholder approval is not received at the
Poinsett Special Meeting; (c) by either Carolina First Corporation or Poinsett
if the other party has failed to comply with the agreements or failed to fulfill
the conditions contained in the Reorganization Agreement (except that any such
failure of compliance or fulfillment must result in a "material adverse event"
(as defined in the Reorganization Agreement) and the breaching party must be
given notice of the failure to comply and a reasonable period of time to cure);
or (d) by either Carolina First Corporation or Poinsett in the event that
closing has not occurred by March 31, 1999. The Reorganization Agreement may be
amended by mutual written consent of both parties.
EFFECTIVE TIME OF THE MERGER . The effective time of the Merger will be
the time and date specified in the Articles of Merger ("Effective Time") that
are delivered for filing to the Secretary of State of South Carolina. The
Effective Time will occur after all conditions specified in the Reorganization
Agreement have been satisfied or waived, on such date as Carolina First
Corporation shall notify Poinsett in writing not less than five days prior
thereto, which date shall not be more than 30 days after all conditions have
been satisfied or waived in writing. The Effective Time currently is anticipated
to be approximately September 30, 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 ADVISOR . Capital Resources Group, Inc. ("Capital
Resources") has served as financial advisor to Poinsett in connection with the
Reorganization Agreement and has rendered an opinion to the Poinsett Board of
Directors that the consideration to be received by shareholders of Poinsett is
fair from a financial point of view to the Poinsett shareholders. For additional
information concerning Capital Resources and its opinion, see "THE PROPOSED
TRANSACTION -- Opinion of Poinsett's Financial Advisor" and the opinion of
Capital Resources attached as Annex B to this Proxy Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . Poinsett will receive an opinion
of counsel to Carolina First Corporation stating that the Merger will constitute
a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended ("Code"), subject to certain
conditions. However, this opinion of counsel is not binding on the Internal
Revenue Service ("IRS"). In such opinion, counsel will opine that if certain
conditions are met, no taxable gain or loss for federal income tax purposes will
be recognized by Poinsett shareholders upon the exchange of Poinsett common
stock solely for Carolina First Corporation common stock. To the extent that
shareholders receive cash consideration for fractional shares, such shareholders
will be taxed to the extent that the cash exceeds such shareholder's allocated
basis in such Poinsett common stock. See "THE PROPOSED TRANSACTION -- Certain
Federal Income Tax Consequences." Because of the complexities of the federal
income tax laws and because the tax consequences may vary depending upon a
holder's individual circumstances or tax status, it is recommended that each
shareholder of Poinsett consult his or her tax adviser
5
<PAGE>
concerning the Federal (and any applicable state, local or other) tax
consequences of the Merger.
INTERESTS OF CERTAIN PERSONS . The Reorganization Agreement provides that
Carolina First Corporation will indemnify Poinsett directors and executive
officers against certain liabilities and will maintain such directors' and
officers' insurance for these persons after the Closing Date as shall be
obtainable for an aggregate premium not in excess of $25,000.
James D. King, James D. King, Jr., Edward R. Blakemore, Jr. and Louise P.
Ellenburg (each of whom are officers of Poinsett) will receive certain payments
and benefits provided for in their employment agreements with Poinsett Bank
because the Merger constitutes a change of control giving rise to a right to
those payments and benefits under those employment contracts. The aggregate
amount payable under such contracts is $817,954.
The Reorganization Agreement provides that, at closing, Carolina First
Corporation shall enter into consulting agreements with James D. King, Jr. and
James D. King which have terms of twelve months and six months, respectively,
and provide for compensation substantially the same as is currently being paid
by Poinsett to such individuals. Copies of forms of these consulting agreements
are attached to the Reorganization Agreement as annexes thereto.
The Reorganization Agreement provides that each option to purchase
Poinsett common stock outstanding at the Effective Time of the Merger will be
converted into an option to acquire Carolina First Corporation common stock
based on the Conversion Ratio. These options will continue to have the same
terms and conditions as were in effect with respect to such options prior to the
Merger. The Reorganization Agreement also provides that an option holder may
elect immediately prior to the Effective Time (in lieu of having such options
converted into the right to receive Carolina First Corporation common stock as
provided above), to surrender such options in exchange for a cash payment per
share equal to the difference between $82.00 and the exercise price per share of
each option.
RESTRICTIONS ON RESALES BY AFFILIATES . Poinsett has agreed that, prior to
closing, it will use its best efforts to cause certain affiliates of Poinsett to
deliver written agreements to Carolina First Corporation that they will not
dispose of any shares of Carolina First Corporation common stock received upon
consummation of the Merger except in compliance with the Securities Act and
rules and regulations promulgated thereunder. See "THE PROPOSED TRANSACTION --
Restrictions on Resales by Affiliates."
ACCOUNTING TREATMENT . The Merger will be accounted for as a "purchase" of
Poinsett by Carolina First Corporation under generally accepted accounting
principles. See "THE PROPOSED TRANSACTION -- Accounting Treatment."
MARKET PRICES AND DIVIDENDS . Carolina First Corporation common stock is
traded on the Nasdaq National Market. Carolina First Corporation currently pays
a regular quarterly dividend of $.08 per share. Although Carolina First
Corporation currently expects to continue payment of its regular cash dividend
on the Carolina First Corporation common stock, there can be no assurance that
Carolina First Corporation's current dividend policy will continue unchanged
after consummation of the Merger. The declaration and payment of dividends on
Carolina First Corporation common stock is subject to legal restrictions and
further depends upon business conditions, operating results, capital and reserve
requirements and the Carolina First Corporation Board of Directors'
consideration of other relevant factors.
Poinsett common stock is not traded on any established market. Poinsett
management is aware of a trade of Poinsett common stock at $25.00 per share
in October 1997 and is not aware of any trades since that time. Poinsett has
paid dividends of $0.60, $0.60 and $0 per share in each of the three fiscal
years ended September 30, 1995, 1996 and 1997. Poinsett has not declared or
paid any dividends since September 30, 1997.
6
<PAGE>
South Carolina and federal banking regulations restrict the amount of
dividends that Carolina First Corporation and Poinsett can pay to shareholders.
The information presented in the following table reflects the last
reported sales prices for Carolina First Corporation common stock on June 26,
1998, the last trading day prior to the public announcement of the proposed
Merger, and on August 6, 1998. The Poinsett Equivalent is the total dollar
amount of consideration to be received by holders of Poinsett common stock. The
actual Conversion Ratio is subject to adjustment based on the "fair market
value" of Carolina First Corporation common stock. The table also includes a
historical price for Poinsett common stock. This information is based on a
single transaction in October 1997. Management is not aware of any other sales
of Poinsett common stock since that time.
<TABLE>
<S> <C>
Market Values Per Share
------------------------------------------------------
Carolina First Corporation Poinsett
-------------------------- -------------------------
Historical Historical Equivalent
---------- ---------- ----------
June 26, 1998 $27.00 $ 25.00 $82.00
August 6, 1998 $24.38 $ 25.00 $82.00
</TABLE>
Poinsett shareholders are advised to obtain current market quotations for
the Carolina First Corporation common stock. The market price of Carolina First
Corporation common stock at the Effective Time may be higher or lower than the
market price at the time the Reorganization Agreement was executed, at the date
of mailing this Proxy Statement/Prospectus, or at the time of the Special
Meeting.
7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA. The following tables present
selected unaudited historical financial information and selected unaudited
combined pro forma financial information of Carolina First Corporation
(consolidated) and Poinsett (consolidated). This information is derived from the
historical financial statements of Carolina First Corporation (consolidated) and
Poinsett (consolidated), 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 accompany this Proxy
Statement/Prospectus or incorporated herein by reference. The pro forma
financial data are presented using the purchase method of accounting. The
selected pro forma combined unaudited financial information showing the combined
results of Carolina First Corporation (consolidated) and Poinsett (consolidated)
is provided for informational purposes only. It is not necessarily indicative of
actual results that would have been achieved had the Reorganization Agreement
been consummated on the dates or at the beginning of the periods presented, nor
is it necessarily indicative of future results. For additional pro forma
information, see "PRO FORMA COMBINED FINANCIAL INFORMATION."
CAROLINA FIRST CORPORATION
(Dollars in thousands, except per share data)
<TABLE>
<S> <C>
Three Months
Years Ended December 31, Ended March 31,
----------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(unaudited)
STATEMENT OF INCOME DATA
Net interest income $29,358 $43,260 $50,772 $57,070 $66,706 $15,452 $20,227
Provision for loan losses 1,106 1,197 6,846 10,263 11,646 2,952 2,136
Noninterest income, excluding
securities transactions 6,085 8,151 16,557 20,368 16,604 3,008 4,473
Securities transactions 680 75 769 973 3,011 84 140
Noninterest income 6,765 8,226 17,326 21,341 19,615 3,092 4,613
Noninterest expenses (1) 27,294 51,839 46,882 51,675 52,243 12,866 15,259
Net income (loss) (1) 5,418 (1,740) 9,414 10,474 14,340 1,717 4,694
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 1,717 4,694
BALANCE SHEET DATA (Period End)
Total assets $904,474 $1,204,350 $1,414,922 $1,574,204 $2,156,346 $1,613,906 $2,250,747
Securities and temporary
investments 190,683 137,091 187,029 271,396 333,236 278,185 542,180
Loans, net of unearned income 623,646 923,068 1,062,660 1,124,775 1,602,415 1,183,443 1,494,590
Allowance for loan losses 6,679 6,002 8,661 11,290 16,211 12,039 15,349
Nonperforming assets 5,366 4,722 4,868 5,880 3,767 5,109 3,164
Total earning assets 814,579 1,059,455 1,249,689 1,396,171 1,935,651 1,461,628 2,036,770
Total deposits 804,549 1,001,748 1,095,491 1,281,050 1,746,542 1,257,005 1,826,029
Borrowed funds 16,779 106,074 186,789 145,189 139,739 171,379 110,390
Long-term debt 1,274 1,162 26,347 26,442 39,119 26,476 39,395
Total liabilities 834,059 1,117,868 1,319,955 1,469,240 1,954,687 1,508,567 2,007,364
Preferred stock 15,662 37,014 32,909 943 -- -- --
Shareholders' equity 70,415 86,482 94,967 104,964 201,659 105,339 243,383
PER SHARE DATA (2) Net income (loss)
per common share:
Basic(1) $0.63 $(0.59) $0.89 $0.97 $1.19 $0.15 $0.28
Diluted(1) 0.63 (0.59) 0.84 0.92 1.18 0.15 0.28
Cash dividends declared 0.04 0.17 0.21 0.25 0.29 0.07 0.08
Book value per common
share (period end) 7.70 6.61 7.61 9.26 12.88 9.28 13.74
Common shares outstanding:
Weighted average - basic 5,505,461 7,004,214 7,516,620 10,705,107 11,989,517 11,304,437 16,588,163
Weighted average - diluted 8,208,935 10,114,812 11,183,726 11,368,035 12,175,561 11,478,383 16,922,202
Period end 6,969,484 7,079,866 7,820,839 11,225,568 15,659,338 11,355,443 17,709,935
FINANCIAL RATIOS
Return on average assets 0.69% (0.16)% 0.74% 0.71% 0.84% 0.44% 0.86%
Return on average equity 8.27 (1.99) 10.43 10.56 11.62 6.50 8.42
Net interest margin 4.16 4.65 4.54 4.35 4.36 4.52 4.17
</TABLE>
- -------------------------------------------
(1) Includes 1996 Savings Association Insurance Fund special assessment of
$1,184 (pre-tax) and 1994 restructuring charges of $12,214 (pre-tax).
(2) Adjusted for stock dividends and stock split.
8
<PAGE>
POINSETT FINANCIAL CORPORATION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
At and for the Six
Months Ended
Atand for the Years Ended September 30, March 31,
----------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(unaudited)
STATEMENT OF INCOME DATA
Net interest income $1,553 $1,724 $1,872 $2,209 $2,975 $1,257 $1,479
Provision for loan losses 32 36 53 84 142 69 335
Noninterest income, excluding
securities transactions 479 492 753 426 578 289 623
Securities transactions -- -- -- 7 37 24 --
Noninterest income 479 492 753 433 615 313 623
Noninterest expenses 1,531 1,562 1,713 2,709 2,885 1,241 1,678
Net income (loss) 300 381 532 (98) 337 158 55
BALANCE SHEET DATA (Period End)
Total assets $43,525 $50,071 $59,534 $65,701 $78,672 $69,958 $88,869
Securities and temporary
investments 181 3,232 4,479 3,730 456 474 1,483
Loans, net of unearned income 36,485 39,421 47,482 55,298 69,319 61,441 68,601
Allowance for loan losses 153 169 190 222 343 316 561
Nonperforming assets 529 548 307 1,224 611 1,371 2,086
Total earning assets 39,250 45,336 53,404 61,666 74,741 71,719 69,586
Total deposits 32,850 43,589 42,562 58,131 72,821 63,798 81,684
Borrowed funds 4,650 -- 8,850 1,500 -- 1,500 2,044
Long-term debt 2,020 1,796 2,221 958 614 785 --
Total liabilities 39,743 45,970 54,862 61,271 73,822 65,328 83,965
Shareholders' equity 3,782 4,101 4,672 4,430 4,850 4,630 4,904
PER SHARE DATA
Net income (loss) per common share:
Basic $ 1.84 $ 2.29 $ 2.89 $ ($0.53) $ 1.79 $ 0.85 $ 0.29
Diluted 1.84 2.29 2.89 (0.53) 1.79 0.85 0.29
Cash dividends declared -- 0.60 0.60 0.60 -- -- --
Book value per common share
(period end) 23.11 24.39 25.36 23.74 25.58 24.74 25.54
Common shares outstanding:
Weighted average-basic
and diluted 163,639 166,295 184,229 185,422 188,488 189,615 189,615
Period end 163,639 168,139 184,229 186,615 189,615 189,615 190,365
FINANCIAL RATIOS
Return on average assets 0.76% 0.82% 0.97% (0.15)% 0.47% 0.22% 0.13%
Return on average equity 8.32 9.68 12.13 (2.16) 7.26 3.38 2.25
Net interest margin 3.96 3.80 3.81 3.85 4.38 3.91 4.15
</TABLE>
9
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
CAROLINA FIRST CORPORATION AND POINSETT FINANCIAL CORPORATION
<TABLE>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997(1) MARCH 31, 1998
-------------------- ------------------
(Dollars in thousands, except per share data)
<S> <C>
STATEMENT OF INCOME DATA
Net interest income $ 69,681 $ 20,954
Provision for loan losses 11,788 2,462
Noninterest income 20,230 4,897
Noninterest expenses 55,864 16,271
Net income 14,026 4,433
PER SHARE DATA
Net income per common share:
Basic $1.11 $0.26
Diluted 1.10 0.25
Cash dividends declared 0.29 0.08
Book value per common share (period end) 13.50 14.26
Common shares outstanding:
Weighted average - basic 12,583,970 17,186,171
Weighted average - diluted 12,778,274 17,520,210
Period end 16,257,346 18,310,308
BALANCE SHEET DATA MARCH 31, 1998
--------------
Total assets $ 2,353,676
Securities and temporary investments 543,663
Loans, net of unearned income 1,563,191
Allowance for loan losses 15,910
Total earning assets 2,106,854
Total deposits 1,907,713
Borrowed funds 112,434
Long-term debt 39,395
Total liabilities 2,092,545
Shareholders' equity 261,131
- -----------------------------
</TABLE>
(1) Includes September 30, 1997 year ended data for Poinsett Financial
Corporation combined with December 31, 1997 year ended data for Carolina First
Corporation.
10
<PAGE>
COMPARATIVE PER SHARE DATA. The following tables present at the dates and
for the periods indicated (i) certain consolidated historical and pro forma
combined per share data for the Carolina First Corporation common stock after
giving effect to the Reorganization Agreement and (ii) certain historical and
pro forma data for the Poinsett common stock. The pro forma financial data are
presented using the purchase method of accounting, and an assumed Conversion
Ratio of 3.1538 shares of Carolina First Corporation common stock for each share
of Poinsett common stock (which is based on an assumed "fair market value" of
Carolina First Corporation common stock of $26.00 per share). The data presented
should be read in conjunction with the historical financial statements and the
related notes thereto included elsewhere herein or incorporated herein by
reference and in conjunction with the pro forma combined condensed financial
information included elsewhere herein. The data are not necessarily indicative
of actual results that would have been achieved had the Reorganization Agreement
been consummated at the beginning of the periods presented and are not
indicative of future results.
<TABLE>
Carolina First
Corporation Poinsett
----------- --------
Three Months Ended Three Months Ended Pro Forma Poinsett
March 31, 1998 March 31, 1998 Combined Equivalent(1)
---------------- -------------- -------- -------------
<S> <C>
Diluted earnings (loss) per
common share $0.28 $(0.52) $0.25 $0.79
Cash dividends declared per
common share 0.08 -- 0.08 0.25
Book value per common
share (3/31/98) 13.74 25.54 14.26 44.97
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by an assumed Conversion
Ratio of 3.1538.
<TABLE>
Carolina First
Corporation Poinsett
----------- --------
Year Ended Year Ended Pro Forma Poinsett
December 31, 1997 September 30, 1997 Combined Equivalent(1)
----------------- ------------------ -------- -------------
<S> <C>
Diluted earnings per
common share $1.18 $ 1.79 $1.11 $3.50
Cash dividends declared per
common share 0.29 -- 0.29 0.91
Book value per common
share (year end) 12.88 25.58 13.50 42.58
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by an assumed Conversion
Ratio of 3.1538.
11
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY WHEN
EVALUATING CAROLINA FIRST CORPORATION AND THE CAROLINA FIRST CORPORATION COMMON
STOCK.
DEPENDENCE ON SENIOR MANAGEMENT. Carolina First Corporation is dependent
upon the services of certain of the senior executive officers of Carolina First
Corporation and its subsidiaries. The loss of the services of one or more of
such individuals could have an adverse effect on Carolina First Corporation. No
assurance can be given that replacements for any of these officers could be
employed if their services were no longer available. Carolina First Corporation
maintains key employee insurance on Mack I. Whittle, Jr., Carolina First
Corporation's Chief Executive Officer.
GROWTH THROUGH ACQUISITIONS. Carolina First Corporation has experienced
significant growth in assets as a result of acquisitions. Moreover, Carolina
First Corporation anticipates engaging in selected acquisitions of financial
institutions and branch locations in the future. There are certain risks
associated with Carolina First Corporation's acquisition strategy that could
adversely impact net income. Such risks include, among others, incorrectly
assessing the asset quality of a particular institution being acquired,
encountering greater than anticipated costs of incorporating acquired businesses
into Carolina First Corporation and being unable to profitably deploy funds
acquired in an acquisition. Furthermore, there can be no assurance as to the
extent that Carolina First Corporation can continue to grow through
acquisitions. In the past, Carolina First Corporation has engaged in
acquisitions accounted for by the purchase method of accounting. Acquisitions
accounted for by the purchase method of accounting may lower the capital ratios
of the entities involved. Consequently, in the event that Carolina First
Corporation engages in significant acquisitions accounted for by the purchase
method of accounting in the future, Carolina First Corporation may be required
to raise additional capital in order to maintain capital levels required by the
Federal Reserve. In the future, Carolina First Corporation may issue capital
stock in connection with additional acquisitions. Such acquisitions and related
issuances of stock may have a dilutive effect on earnings per share and
ownership. Although Carolina First Corporation is engaged from time to time in
discussions relating to possible acquisitions, Carolina First Corporation
presently has no agreements or understandings relating to any acquisitions
except for the pending acquisitions of Colonial Bank of South Carolina, Inc. and
First National Bank of Pickens County as described below in "INFORMATION ABOUT
CAROLINA FIRST CORPORATION--Recent Developments."
ANTITAKEOVER MEASURES. Carolina First Corporation has certain
antitakeover measures in place. These include (i) a Shareholders' Rights Plan
which, among other things, provides for the dilution of the Carolina First
Corporation common stock holdings of certain shareholders who acquire 20% or
more of the Carolina First Corporation common stock and attempt to acquire
Carolina First Corporation without the consent of management, (ii) certain
management contracts which provide for additional management compensation in the
event that executive officers who are a party thereto are terminated after a
change in control of Carolina First Corporation, and (iii) various charter
provisions providing for, among other things, a "staggered" board of directors
and supermajority voting requirements in connection with the removal of
directors without cause and certain business combinations involving Carolina
First Corporation. Any one or more of these measures may impede the takeover of
Carolina First Corporation without the approval of Carolina First Corporation's
Board of Directors and may prevent shareholders from taking part in a
transaction in which they could realize a premium over the current market price
of Carolina First Corporation common stock. See "CAROLINA FIRST CORPORATION
CAPITAL STOCK."
COMMERCIAL LENDING ACTIVITIES. Over the past several years, Carolina First
Corporation has experienced significant growth in commercial 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. While Carolina First Corporation's nonperforming loans as
a percentage of total loans is below its peer group average, there is a risk
that the quality of Carolina First Corporation's loan portfolio could decline,
particularly in connection with the rapid growth in loans Carolina First
Corporation has experienced over the past several years.
12
<PAGE>
INFORMATION CONCERNING THE POINSETT SPECIAL MEETING
POINSETT SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to shareholders of
Poinsett as of the Record Date in connection with the solicitation of proxies by
the Board of Directors of Poinsett for use at the Poinsett Special Meeting and
at any adjournments thereof. The Poinsett Special Meeting is to be held on
September 15, 1998 at 10:00 a.m., local time, at the main office of Poinsett,
6514-B State Park Road, Travelers Rest, South Carolina. Holders of Poinsett
common stock are requested to complete, date and sign the accompanying Proxy and
return it promptly to Poinsett in the enclosed postage-paid envelope.
PURPOSE OF THE POINSETT SPECIAL MEETING. The purpose of the Poinsett
Special Meeting is to consider and take action with respect to approval of the
Reorganization Agreement. As required by South Carolina law, approval of the
Reorganization Agreement will require the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Poinsett common stock entitled to
vote on the Reorganization Agreement. See "--Poinsett Record Date and Voting
Rights." This Proxy Statement/Prospectus, Notice of Special Meeting and the
Proxy are first being mailed to shareholders of Poinsett on or about August 12,
1998.
POINSETT RECORD DATE AND VOTING RIGHTS. Only the holders of Poinsett
common stock on the Record Date are entitled to receive notice of and to vote at
the Poinsett Special Meeting and at any adjournments thereof. On the Record
Date, there were 193,365 shares of Poinsett common stock outstanding, which were
held by approximately 130 holders of record. Each share of Poinsett common stock
outstanding on the Record Date is entitled to one vote as to each of the matters
submitted at the Poinsett Special Meeting.
A majority of the shares entitled to be voted at the Poinsett Special
Meeting constitutes a quorum. If a share is represented for any purpose at the
Poinsett 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
Poinsett Special Meeting.
THE MERGER MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT
LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF POINSETT COMMON STOCK ELIGIBLE TO
VOTE AT THE POINSETT SPECIAL MEETING. ACCORDINGLY, PROXIES MARKED "ABSTAIN" AND
SHARES THAT ARE NOT VOTED (INCLUDING BROKER NON-VOTES) WILL HAVE THE SAME EFFECT
AS VOTES AGAINST THE REORGANIZATION AGREEMENT.
On August 1, 1998, the directors and executive officers of Poinsett and
their affiliates owned a total of 78,328 shares, or approximately 40.5% of
Poinsett's common stock.
PROXIES. The accompanying Proxy is for use at the Poinsett Special
Meeting. A record shareholder may use this Proxy if he is unable to attend the
Poinsett Special Meeting in person or wishes to have his shares voted by proxy
even if he does attend the Poinsett Special Meeting. All shares represented by
valid proxies received pursuant to this solicitation that are not revoked before
they are exercised will be voted in the manner specified therein. If no
specification is made, the proxies will be voted FOR approval of the
Reorganization Agreement. The Board of Directors of Poinsett is not aware of any
other matters that may be presented for action at the Poinsett Special Meeting,
but if other matters do properly come before the Poinsett 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 Poinsett common stock
are voted in favor of approval of the Reorganization Agreement than the number
required for approval, it is expected that the Poinsett Special Meeting will
13
<PAGE>
be postponed or adjourned for the purpose of allowing additional time for
obtaining additional proxies or votes, and, at any subsequent reconvening of the
Poinsett 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 Poinsett 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 Poinsett
at any time before it is voted, (ii) by submitting a signed proxy having a later
date, or (iii) by such person appearing at the Poinsett 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
Poinsett, 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. Poinsett will bear the costs
associated with the solicitation of proxies and other expenses associated with
the Poinsett Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by Poinsett, Carolina First
Corporation or any other person. The delivery of this Proxy Statement/Prospectus
will not, under any circumstances, create any implication that there has been no
change in the affairs of Poinsett or Carolina First Corporation since the date
of this Proxy Statement/Prospectus.
RECOMMENDATION. THE POINSETT BOARD OF DIRECTORS HAS APPROVED THE
REORGANIZATION AGREEMENT AND BELIEVES THAT THE PROPOSED TRANSACTION IS FAIR TO
AND IN THE BEST INTERESTS OF POINSETT AND ITS SHAREHOLDERS. THE POINSETT BOARD
OF DIRECTORS RECOMMENDS THAT POINSETT'S SHAREHOLDERS VOTE FOR APPROVAL OF THE
REORGANIZATION AGREEMENT.
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THE PROPOSED TRANSACTION
THE FOLLOWING DESCRIPTION OF THE TERMS AND PROVISIONS OF THE
REORGANIZATION AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
REORGANIZATION AGREEMENT, WHICH IS SET FORTH IN FULL AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE.
GENERAL DESCRIPTION OF THE TERMS OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement provides for the merger of Poinsett with and
into Carolina First Corporation. As a result of the Merger, the separate
corporate existence of Poinsett will cease and Carolina First Corporation, as
the surviving entity, will possess all rights, franchises and interests of
Poinsett. As of the Effective Time of the Merger, certificates of Poinsett
common stock will represent only the right to receive the requisite number of
shares of Carolina First Corporation common stock and cash for any fractional
shares. After the Merger, Poinsett Bank will be operated as a separate
subsidiary of Carolina First Corporation (except that after the Merger, Poinsett
Bank's name may be changed to "Carolina First Savings Bank" and certain branch
locations of Poinsett Bank may be transferred to Carolina First Bank). However,
the Reorganization Agreement also provides that Carolina First Corporation may
restructure the transactions contemplated therein, provided that any such
restructuring shall not (i) alter the type of consideration to be issued to the
holders of Poinsett common stock as provided for in the Reorganization
Agreement, (ii) reduce the value of such consideration, (iii) adversely affect
the intended tax-free treatment to Poinsett's shareholders as a result of
receiving such consideration or prevent the parties from obtaining the tax
opinion of Wyche, Burgess, Freeman & Parham, P.A. referred to herein, (iv)
materially impair the ability to receive the required regulatory approvals, or
(v) materially delay the closing.
Pursuant to the terms of the Reorganization Agreement, upon consummation
of the Merger, holders of Poinsett common stock will be entitled to receive
shares of Carolina First Corporation common stock having a "fair market value"
(as defined in the Reorganization Agreement) of $82.00 for each outstanding
share of Poinsett common stock held by them. The "fair market value" is defined
in the Reorganization Agreement as the average of the closing prices as quoted
on the Nasdaq National Market for Carolina First Corporation common stock for
the 20 days in which Carolina First Corporation common stock was traded
immediately prior to the Closing Date, except that if prior to the Effective
Time of the Merger, any other person or entity shall have publicly announced an
intention to acquire control of Carolina First Corporation by merger or
otherwise or Carolina First Corporation shall have publicly acknowledged that it
is seeking to be acquired by another person or entity or is discussing being
acquired by another person or entity, then the average of the closing prices as
quoted on the Nasdaq National Market for Carolina First Corporation common stock
for the 20 days for which the Carolina First Corporation common stock was traded
immediately prior to such announcement or acknowledgment shall be determined
and, if such average is less than the average derived from the 20 trading days
immediately prior to the Closing Date, then the smaller average shall be the
fair market value. All of the stock prices set forth above are subject to
equitable adjustment for stock splits, stock dividends, reverse stock splits and
similar items.
Because the number of shares of Carolina First Corporation common stock to
be received by Poinsett shareholders will depend on the market price of Carolina
First Corporation common stock, the exact number of shares to be received by
Poinsett shareholders will not be known until the Closing Date. On August 6,
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 Carolina First Corporation common stock, as reported on the Nasdaq
National Market, was $24.38. Poinsett shareholders should note, however, that
the market price of the Carolina First Corporation common stock they receive
will continue to be subject to market fluctuations, as well as the future
results of operations and financial condition of Carolina First Corporation,
among other factors, and therefore may be worth less than, or more than, such
amount as of the date they
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receive their Carolina First Corporation common stock certificates.
The Reorganization Agreement provides that holders of options to purchase
Poinsett common stock outstanding at the Effective Time of the Merger will be
converted into an option to acquire Carolina First Corporation common stock
based on the Conversion Ratio. These options will continue to have the same
terms and conditions as were in effect with respect to such options prior to the
Merger. The Reorganization Agreement also provides that an option holder may
elect immediately prior to the Effective Time (in lieu of having such options
converted into the right to receive Carolina First Corporation common stock as
provided above), to surrender such options in exchange for a cash payment per
share equal to the difference between $82.00 and the exercise price per share of
each option.
No fractional shares of Carolina First Corporation common stock will be
issued as a result of the Merger. In lieu of the issuance of fractional shares,
cash will be paid to the holders of the Poinsett common stock in respect of any
fractional share that would otherwise be issuable based on the "fair market
value" of Carolina First Corporation common stock (as defined in the
Reorganization Agreement).
The Reorganization Agreement generally provides that Carolina First
Corporation and Poinsett will each bear and pay their own costs and expenses
incurred in connection with the transactions contemplated in the Reorganization
Agreement, including fees of attorneys and accountants. The Reorganization
Agreement specifically provides that Carolina First Corporation will bear the
cost of the filing fees for the Registration Statement and the cost for all
filing fees associated with obtaining necessary regulatory approvals.
The Merger will become effective at the Effective Time, which will be
specified in the Articles of Merger to be filed with the South Carolina
Secretary of State. At the Effective Time, by operation of law, Poinsett
shareholders will no longer be owners of Poinsett common stock and (to the
extent that they receive Carolina First Corporation common stock as
consideration) will automatically become owners of Carolina First Corporation
common stock. After the Effective Time, each outstanding certificate
representing shares of Poinsett common stock prior to the Effective Time shall
be deemed for all corporate purposes (other than the payment of dividends and
other distributions by Poinsett to which the former shareholders of Poinsett
common stock may be entitled) to evidence only the right of the holder thereof
to surrender such certificate and receive the consideration as provided in the
Reorganization Agreement.
BACKGROUND OF AND REASONS FOR THE REORGANIZATION AGREEMENT
POINSETT'S BACKGROUND OF THE MERGER. Poinsett Bank converted from the
mutual to stock form of organization ("Conversion") in August 1988. Since the
consummation of the Conversion, Poinsett Bank has concentrated its efforts
primarily on growing its core business of obtaining deposits from the general
public and originating residential real estate mortgage loans.
Poinsett management and the Poinsett Board of Directors have been aware of
the significant and rapid consolidation that has been occurring among providers
of banking and financial services in Poinsett Bank's market. Management and the
Board have also been aware that the larger financial institutions that emerge
from such consolidations may acquire substantial competitive advantages,
including greater diversity in their loan production, cost savings through the
integration of redundant operations and support functions, improved access to
capital and funding and the ability to spread the cost of developing new
products and services over a wider customer base.
In light of the continuing consolidation and increasing competition in the
banking and financial services industries both nationwide and in South Carolina,
Poinsett has continuously reviewed its strategic business
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alternatives with the intended objective of increasing shareholder value.
Poinsett Bank has undertaken since 1991 four significant corporate actions
designed to expand its business operations profitably with the goal of
increasing shareholder value. First, Poinsett Bank reorganized into the holding
company structure in February 1991. Second, Poinsett Bank opened a branch office
in Greenville, South Carolina in December 1992. Third, Poinsett Bank expanded
into the York County market by opening a branch office in Rock Hill, South
Carolina in November 1995. Finally, Poinsett Bank established a mortgage banking
operation in September 1996.
Although the holding company formation did not contribute directly to the
growth of Poinsett Bank, the transaction provided Poinsett Bank with operational
flexibility that it did not have as a thrift institution outside of a holding
company structure. The other three actions, however, contributed directly to the
growth of Poinsett, with total assets increasing by more than 175% since the
consummation of the Conversion, to approximately $88.9 million at March 31,
1998. In light of this asset growth, Poinsett determined that a capital infusion
would likely be necessary to support further significant internal asset growth,
and in November 1997 Poinsett management and the Poinsett Board of Directors
began reviewing and analyzing the financial viability of conducting alternative
types of equity offerings.
During the first quarter of 1998, when Poinsett was considering possible
capital raising options, representatives of two South Carolina-headquartered
financial institutions informally contacted Poinsett regarding the possibility
of an acquisition. Each institution informally discussed a potential acquisition
price which was significantly below $82.00 per share.
In May 1998, Carolina First Corporation contacted Poinsett regarding a
possible acquisition. In view of Carolina First Corporation's serious interest
in a potential transaction, the Poinsett Board retained Capital Resources to
review and analyze Poinsett's strategic options. Shortly thereafter, Carolina
First Corporation outlined the terms of a possible business combination with
Poinsett, which provided for an offer price of $82.00 per share in Carolina
First Corporation common stock. Additional discussions and final negotiations
occurred in June 1998, during which time Poinsett conducted a due diligence
review of Carolina First Corporation, Poinsett management and the Poinsett Board
of Directors consulted with Capital Resources to analyze Carolina First
Corporation's proposal from a financial point of view and reviewed with Breyer &
Aguggia LLP, special legal counsel to Poinsett and Poinsett Bank, the draft of
the definitive Reorganization Agreement and the legal ramifications of a
business combination.
At a special meeting held on June 17, 1998, the Poinsett Board of
Directors considered at length the financial and legal terms of the proposed
Reorganization Agreement. In attendance were a representative of Capital
Resources and a representative of Breyer & Aguggia LLP. The Poinsett Board of
Directors reviewed with special legal counsel and Capital Resources (i) the
proposed financial terms of the transaction compared to other relevant
transactions, (ii) financial information concerning Carolina First Corporation,
(iii) the results of the due diligence analysis of Carolina First Corporation,
and (iv) alternative pricing structures based on the $82.00 offer price. The
Poinsett Board of Directors also reviewed the prospects for realizing comparable
shareholder returns by remaining an independent entity. Capital Resources
indicated that it was prepared to present a written opinion that the proposed
transaction was fair to Poinsett's shareholders from a financial point of view
(see "-- Opinion of Poinsett's Financial Advisor").
Poinsett's Board of Directors reconvened a special meeting on June 26,
1998. After concluding that the Reorganization Agreement was in the best
interests of Poinsett and its shareholders, Poinsett's Board of Directors voted
unanimously to approve and adopt the Reorganization Agreement and authorized
management, in consultation with special legal counsel, to enter into and carry
out the definitive agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF POINSETT BOARD
The Poinsett Board of Directors
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believes that the terms of the definitive agreement, which is the product of
arm's length negotiations between representatives of Carolina First Corporation
and Poinsett, are fair and in the best interests of Poinsett and its
shareholders. In the course of reaching its determination, the Poinsett Board of
Directors consulted with special legal counsel with respect to its legal duties,
the terms of the Reorganization Agreement and the issued related thereto, with
its financial advisor with respect to the financial aspects and fairness of the
transaction; and with senior management regarding, among other things,
operational matters.
In reaching its determination to approve the Reorganization Agreement, the
Poinsett Board of Directors considered all factors it deemed material, which are
the following:
(a) The Poinsett Board of Directors analyzed information with respect to
the financial condition, results of operations, cash flow, businesses and
prospects of Poinsett. In this regard, the Board analyzed the options of selling
Poinsett or continuing on a stand-alone basis. Based on the consideration being
offered by Carolina First Corporation, the current sale of control value of the
Poinsett shares was determined to likely exceed the present value of Poinsett
shares on a stand-alone basis under business strategies which possibly could be
implemented by Poinsett.
(b) The Poinsett Board of Directors considered the written opinion of
Capital Resources that, as of June 26, 1998, the consideration to be received by
holders of Poinsett common stock pursuant to the Reorganization Agreement was
fair to Poinsett shareholders from a financial point of view. (See "-- Opinion
of Poinsett's Financial Advisor.").
(c) The Poinsett Board of Directors considered the current operating
environment, including, but not limited to, the continued consolidation and
increasing competition in the banking and financial services industries and the
prospect for further changes in these industries.
(d) The Poinsett Board of Directors considered the other terms of the
Agreement, including the opportunity for Poinsett shareholders to receive shares
of Carolina First Corporation common stock, which are listed on The Nasdaq
National Market, in a tax-free exchange.
(e) The Poinsett Board of Directors considered the detailed financial
analyses, pro forma and other information with respect to Poinsett and Carolina
First Corporation discussed by Capital Resources, as well as the Board's
knowledge of Poinsett, Carolina First Corporation and their respective
businesses. In this regard, the latest publicly-available financial and other
information for Poinsett and Carolina First Corporation were analyzed, including
a comparison to publicly-available financial and other information for other
similar financial institutions.
(f) The Poinsett Board of Directors considered the results of the contacts
and discussions between Poinsett and its financial advisor and various third
parties and the belief of the Board and management that the merger offered the
best transaction available to Poinsett and its shareholders.
(g) The Poinsett Board of Directors considered the likelihood of the
merger and related transactions being approved by the appropriate regulatory
authorities, including factors such as market share analyses, Carolina First
Corporation's Community Reinvestment Act ("CRA") rating at that time and the
estimated pro forma financial impact of the transaction on Carolina First
Corporation. (See "-- Required Regulatory Approvals.").
The foregoing discussion of the information and factors considered by the
Poinsett Board of Directors is not intended to be exhaustive, but constitutes
the material factors considered by it. In reaching its determination to approve
and recommend the Agreement, the Poinsett Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
weighed factors differently.
For the reasons set forth above, the Poinsett Board of Directors has
unanimously approved the Agreement as advisable and in the best interests of
Poinsett and its shareholders and recommends that the shareholders of Poinsett
vote FOR the approval of the Agreement.
CAROLINA FIRST CORPORATION REASONS. After consideration of relevant
business, financial, and market
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factors, the Board of Directors of Carolina First Corporation believes that the
Merger will provide it with a favorable means for entering the Travelers Rest
and Rock Hill markets. Carolina First Corporation's goal is to be the leading
South Carolina-headquartered, state-wide financial institution, and having a
strong market presence in these market areas is an important step in achieving
this goal. Carolina First Corporation believes that acquiring an existing
institution is a superior means of entering Poinsett's markets, as compared to
branching DE NOVO, primarily because of the acquisition of the established
customer relationships. Carolina First Corporation believes that Poinsett has
valuable community relationships which it will be able to use to expand its
banking operations in Poinsett's market areas. Carolina First Corporation also
believes that the terms of the proposed Merger are fair from its point of view
and from a financial perspective.
OPINION OF POINSETT'S FINANCIAL ADVISOR
Poinsett retained Capital Resources as its financial advisor in connection
with the Merger and requested that Capital Resources render its opinion with
respect to the fairness, from a financial point of view, of the Merger
Consideration, to the holders of the Poinsett common stock. Capital Resources
rendered its written opinion to Poinsett's Board of Directors on June 26, 1998,
and as updated on or about August 10, 1998, that, as of the date of such
opinion, the Consideration was fair, from a financial point of view, to the
holders of Poinsett common stock. Capital Resources has consented to the
inclusion of the opinion and the related disclosure in the Proxy
Statement/Prospectus.
THE FULL TEXT OF THE OPINION OF CAPITAL RESOURCES, WHICH SETS FORTH
CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEWS
UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS, AND
SHOULD BE READ IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF CAPITAL RESOURCES
AS OF JUNE 26, 1998, AS UPDATED ON OR ABOUT AUGUST 10, 1998 SET FORTH IN THIS
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THAT
OPINION. CAPITAL RESOURCES' OPINION SHOULD NOT BE CONSTRUED BY HOLDERS OF THE
POINSETT COMMON STOCK AS A RECOMMENDATION AS TO HOW SUCH HOLDERS SHOULD VOTE AT
THE SPECIAL MEETING.
Capital Resources is an investment banking and financial consulting firm
which, as part of its specialization in financial institutions, is regularly
engaged in providing financial valuations and analyses of business enterprises
and securities in connection with mergers, acquisitions, mutual-to-stock
conversions, initial and secondary stock offerings and other corporate
transactions. Poinsett has utilized the services of Capital Resources in the
past. Poinsett's Board of Directors chose Capital Resources because of its
expertise, experience and familiarity with Poinsett and the financial
institution industry. Capital Resources reviewed the terms of the Reorganization
Agreement and the related financial data and reviewed these issues with
Poinsett's Board and executive management of Poinsett. No limitations were
imposed on Capital Resources by Poinsett's Board with respect to the
investigation made or procedures followed by it in rendering its opinion.
Capital Resources participated in the negotiations between Poinsett and Carolina
First Corporation in which the amount of consideration for Poinsett's shares was
agreed upon.
In the course of rendering its fairness opinion, the following factors
were considered by Capital Resources:
1. The proposed terms of the Reorganization Agreement;
2. The audited consolidated financial statements of Poinsett for
the fiscal years ended September 30,1993 through 1997, the
unaudit consolidated financial statements of Poinsett for the
six
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months ended March 31,1998, certain regulatory reports
including the report for the quarter ended March 31,1998, the
latest available asset/liability reports, operating budget,
and other miscellaneous internally-generated management
information reports and business plan, as well as other
publicly-available information;
3. Annual Report to Shareholders for 1997, which provides a
discussion of Poinsett's business and operations and a review of
various financial data and trends;
4. Discussions with executive management of Poinsett regarding the
business, operations, recent financial condition and operating
results and future prospects of Poinsett;
5. Comparisons of Poinsett's financial condition and operating
results with those of similarly sized thrift institutions
operating in South Carolina and the United States;
6. Comparisons of Poinsett's financial condition and operating
performance with the published financial statements and market
price data of publicly traded thrift institutions in general and
publicly traded thrift institutions in Poinsett's region of the
United States specifically;
7. The relevant market information regarding Poinsett shares
including any trading activity and information on options to
purchase Poinsett shares;
8. Other financial and pricing analyses and investigations as deemed
necessary, including a comparative financial analysis and review
of the financial terms of other pending and completed
acquisitions of companies considered to be generally similar to
Poinsett;
9. Examination of Poinsett's economic operating environment and the
competitive environment of Poinsett's market area;
10. Available financial reports and financial data for Carolina First
Corporation, including annual reports to shareholders and Form
10-K reports covering the fiscal years ended through December 31,
1997, quarterly reports to shareholders, Form 10-Q reports, other
internal and regulatory financial reports provided by management
of Carolina First Corporation and other published financial data;
Carolina First Corporation's banking office network; and the
pricing trends of the Carolina First Corporation's common stock,
as reported on the Nasdaq National Market, and dividend payment
history;
11. A visit to Carolina First Corporation's administrative and
executive offices and interviews with senior management of
Carolina First Corporation, including a discussion of Carolina
First Corporation's business and prospects; and
12. The pro forma financial impact of the merger of Poinsett and
Carolina First Corporation.
The fairness opinion states that Capital Resources has relied on the
accuracy and completeness of the information provided by the parties to the
Reorganization Agreement and the representations and warranties in the
Reorganization Agreement, without independent verification. Capital Resources
did not make an independent evaluation or appraisal of the assets of Poinsett or
Carolina First Corporation.
The summary set forth below describes the approaches utilized by Capital
Resources in support of its June 26, 1998 fairness opinion, as updated on or
about August 10, 1998. It does not purport to be a complete description of the
analyses performed by Capital Resources in this regard.
OVERVIEW OF VALUATION METHODOLOGY. In preparing its fairness opinion,
Capital Resources evaluated whether the consideration payable upon consummation
of the Merger was fair from a financial point of view to the shareholders of
Poinsett. The fairness of the consideration was determined by comparing it to
acquisition offers received by other comparable types of companies over a
time-frame that reflects a similar economic environment. The comparison included
an examination of key financial characteristics of the comparative acquisition
companies, including balance sheet, earnings and credit risk characteristics.
Poinsett's key operating statistics and ratios through March 31, 1998,
were compared to a select group of thrift institutions that have also been the
subject of a proposed or completed acquisition. It is important to
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note that the comparative group utilized in the fairness opinion was comprised
only of thrift institutions (rather than commercial banks), given the
distinctive financial, operating and regulatory characteristics of the thrift
industry. Capital Resources reviewed relevant acquisition pricing ratios,
notably offer price-to-book value (and offer price-to-tangible book value),
offer price-to-earnings, offer price-to-deposits, and offer price-to-assets, of
the comparative group and compared these ratios to those of Poinsett. The
analysis included a review of and comparison of the mean and median pricing
ratios represented by a sample of 17 comparative thrifts concentrated in the
southeastern and midwestern United States.
PRICING COMPARISON. Based on an assumed consideration of $82.00 for each
outstanding share of Poinsett common stock, there resulted the following
acquisition pricing ratios for Poinsett relative to those of the comparative
group:
o Poinsett's price/fully-diluted tangible book value ratio of
325.0% exceeded the mean and median price/fully-diluted tangible
book value ratios of 202.1% and 194.8%, respectively, of the
comparative group;
o Poinsett's price/earnings multiple of 66.7x based on trailing 12
months reported net income (or 34.5x based on the calculation of
a normalized earnings stream of $2.38 per share) compared to the
mean and median price/earnings multiples of the comparative group
of 26.5x and 26.6x, respectively;
o Poinsett's price/assets ratio of 17.6% compared to the mean and
median price/assets ratios of 15.9% and 15.5%, respectively, of
the comparative group;
o Poinsett's price/deposits ratio of 19.1% compared to the mean and
median price/deposits ratios of 19.0% and 18.5%, respectively, of
the comparative group;
o Poinsett's tangible book premium (offer price minus tangible book
value)/core deposits ratio of 19.3% compared to the mean and
median ratios of 11.2% and 10.9%, respectively, of the
comparative group.
In analyzing the reasonableness of Poinsett's acquisition pricing ratios
relative to those of the comparative group, Capital Resources considered the
following factors:
o Poinsett reported a lower level of profitability relative to that
of the comparative group. Poinsett reported a return on assets
("ROA") of 29 basis points versus the comparative group which
reported an ROA of 73 basis points. However, Capital Resources
also calculated an adjusted ROA of 56 basis points for Poinsett
(adjusted to reflect a normal level of loan loss provisions).
Given that Poinsett has expanded in recent years to capitalize
upon a market area that has experienced economic growth and
diversity, Poinsett's earnings growth potential relative to that
of the comparative group appears at least similar.
o Poinsett's lower level of profitability reflected a higher net
interest margin and a higher non-interest operating income level
which were more than offset by a higher operating expense ratio
relative to the comparative group. Poinsett's yield/cost spread
is higher than the peer group's spread while Poinsett's net
earning asset position is lower than that of the comparative
group.
o Poinsett's lower adjusted ROA of 56 basis points and lower net
worth ratio of 5.5% translated into a higher ROE. Poinsett's
adjusted ROE of 9.4% compared to a mean and median ROE for the
peer group of 8.3% and 8.1%, respectively. Poinsett had a
reported ROE of 4.9%.
o A review of other important financial ratios, indicated that
Poinsett's non-performing assets ("NPA") level compared
unfavorably to that of the comparative peer group. Poinsett's
NPA/Assets ratio of 2.35% compared to mean and median ratios of
0.87% and 0.67%, respectively, for the comparative group.
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Therefore, based on the above financial comparisons, Capital Resources
believed that, on balance, Poinsett's acquisition pricing ratios were very
reasonable when compared to the comparative group's acquisition pricing ratios.
Also, Capital Resources noted that at the time of its initial public
offering in August 1988, Poinsett's conversion price was $8.00 per share. Thus,
the acquisition price of $82.00 per share represented a significant return on
Poinsett's conversion price, an annual compounded yield of just over 26%.
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Capital Resources
also performed an analysis of potential returns to shareholders of Poinsett,
which was based on an estimate of Poinsett's future cash dividend streams to
shareholders and Poinsett's future stock price and sell-out price (terminal
value). This analysis assumed Poinsett was not acquired but remained independent
for at least three to five years. The analysis utilized certain key assumptions
for Poinsett, including the most likely retail asset growth and earnings level
scenario as well as regular, periodic dividend payments. The analysis also
reflected the utilization of $10 million of wholesale borrowings to support
additional asset and earnings growth.
To approximate the range of terminal values of Poinsett common stock at
the end of a three year and five year period, Capital Resources applied a
price-to-earnings multiple of 23x, and a price/tangible book value ratio of
195%. The resulting terminal values and dividend streams were then discounted to
present values using different discount rates (ranging from 10% to 15%) chosen
to reflect different assumptions regarding required rates of return of holders
or prospective buyers of Poinsett common stock.
The analysis indicated a present value for Poinsett shares and future
dividend payments ranging from $59.70 per share (based on a 15% discount rate)
to $68.16 per share (based on a 10% discount rate) assuming Poinsett is acquired
after three years, and a present value ranging from $61.90 per share (based on a
15% discount rate) to $77.09 per share (based on a 10% discount rate) assuming
Poinsett is acquired after five years.
The results of the above described analysis confirmed that the merger
consideration being offered by Carolina First Corporation to Poinsett
shareholders was fair from a financial point of view.
Capital Resources will receive a fee from Poinsett for its services
including the rendering of the fairness opinion. Poinsett has also agreed to
reimburse Capital Resources for reasonable out-of-pocket expenses and to
indemnify Capital Resources and certain related persons against certain
liabilities relating to or arising out of its engagement. Capital Resources has
in the past provided and may in the future provide other financial advisory
services to Poinsett and has received and will receive its customary
compensation for such services. In the ordinary course of its business, Capital
Resources may actively trade the equity securities of Carolina First Corporation
and Poinsett and their respective affiliates for its own account and for the
accounts of customers and, may at any time hold a long or short position in such
securities.
EXCHANGE OF POINSETT STOCK CERTIFICATES
As soon as practicable after the Effective Time (but in no event more than
five days after the Effective Time), Carolina First Corporation or its transfer
agent (in such capacity, the "Exchange Agent") will mail, and otherwise make
available to each former record holder of shares of Poinsett 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 Poinsett common stock ("Certificates") for payment
therefor. Adequate provisions shall be made to permit Certificates to be
surrendered and exchanged in person not later than the business day following
the Effective Time.
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POINSETT SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE TRANSMITTAL FORMS.
Upon receipt of such notice and transmittal form, each holder of
Certificates at the Effective Time should send or provide the Certificate, or
Certificates, to the Exchange Agent, whereupon the holder shall promptly receive
the Carolina First Corporation common stock issuable to him in exchange for such
Certificates. If any portion of the payment to be made upon surrender and
exchange of a Certificate is to be paid to a person other than the person in
whose name the Certificate is registered, it shall be a condition of such
payment that the Certificate shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay in
advance any transfer or other taxes or establish to the satisfaction of Carolina
First Corporation that no such tax is applicable.
Carolina First Corporation is not obligated to deliver the Carolina First
Corporation common stock to which any former holder of Poinsett common stock is
entitled as a result of the Merger until such holder surrenders his or her
Certificates, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be reasonably required in each case by
Carolina First Corporation or Poinsett. In addition, no dividend or other
distribution payable to the holders of record of Carolina First Corporation
common stock as of any time subsequent to the Effective Time shall be paid to
the holder of any certificate representing shares of Poinsett common stock
issued and outstanding at the Effective Time until such holder surrenders such
Certificate to the Exchange Agent for exchange. However, upon surrender of the
Certificates, both the Carolina First Corporation common stock certificate,
together with all such withheld dividends or other distributions and any
withheld cash payments in respect of fractional share interest, but without any
obligation for payment of interest by such withholding, shall be delivered and
paid with respect to each share represented by such Certificates.
After the Effective Time, each outstanding Certificate shall be deemed for
all corporate purposes (other than voting and the payment of dividends and other
distributions to which the former shareholders of Poinsett common stock may be
entitled) to evidence only the right of the holder thereof to surrender such
Certificate and receive the requisite number of shares of Carolina First
Corporation common stock in exchange therefore (and cash in lieu of fractional
shares) as provided in the Reorganization Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Carolina First Corporation to consummate the
transactions contemplated in the Reorganization Agreement are subject to the
satisfaction of the following conditions (among others) at or before the Closing
Date: (i) the compliance by Poinsett with its covenants set forth in the
Reorganization Agreement and the material accuracy, on the Closing Date, of each
of the representations and warranties of Poinsett set forth in the
Reorganization Agreement (subject to certain limited exceptions); (ii) the
receipt by Carolina First Corporation of an opinion of counsel of Poinsett in
form and substance reasonably satisfactory to Carolina First Corporation and its
counsel; (iii) that there shall have been no "material adverse event" (as
defined in the Reorganization Agreement) with respect to Poinsett through the
Closing Date; (iv) the receipt of necessary regulatory approvals; and (v) the
receipt of the necessary shareholder approval of Poinsett.
The obligations of Poinsett to consummate the transactions contemplated in
the Reorganization Agreement are subject to the satisfaction of the following
conditions (among others) at or before the Closing Date: (i) the compliance by
Carolina First Corporation with its covenants set forth in the Reorganization
Agreement and the material accuracy, on the Closing Date, of each of the
representations and warranties of Carolina First Corporation set forth in the
Reorganization Agreement (subject to certain limited exceptions); (ii) the
receipt by Poinsett of an opinion of counsel of Carolina First Corporation in
form and substance reasonably satisfactory to Poinsett and its counsel; (iii)
that there shall have been no "material adverse event"
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(as defined in the Reorganization Agreement) with respect to Carolina First
Corporation through the Closing Date; (iv) the receipt of necessary regulatory
approvals; (v) the receipt of the necessary shareholder approval of Poinsett;
and (vi) the receipt of a tax opinion from Wyche, Burgess, Freeman & Parham,
P.A., reasonably satisfactory to Poinsett, opining, subject to reasonable
qualifications, that the Merger shall, upon compliance with reasonable
conditions, qualify as a tax-free reorganization under Section 368(a) of the
Code.
Carolina First Corporation and Poinsett may waive certain of the
conditions imposed with respect to their respective obligations to consummate
the Reorganization Agreement.
TERMINATION
The Reorganization Agreement may be terminated at any time prior to the
Closing Date: (a) by mutual consent of the parties; (b) by either Carolina First
Corporation or Poinsett, at that party's option, (i) if a permanent injunction
or other order (including any order denying any required regulatory consent or
approval) shall have been issued by any Federal or state court of competent
jurisdiction in the United States or by any United States Federal or state
governmental or regulatory body, which order prevents the consummation of the
transactions contemplated herein, or (ii) if the requisite Poinsett shareholder
approval is not received at the Poinsett Special Meeting; (c) by either Carolina
First Corporation or Poinsett if the other party (or its subsidiaries) has
failed to comply with the agreements or failed to fulfill the conditions
contained in the Reorganization Agreement except that any such failure of
compliance or fulfillment must result in a "material adverse event" (as defined
in the Reorganization Agreement) and the breaching party must be given notice of
the failure to comply and a reasonable period of time to cure; or (d) by either
Carolina First Corporation or Poinsett in the event that Closing has not
occurred by March 31, 1999.
AMENDMENT
The Reorganization Agreement may be amended or supplemented in writing by
mutual agreement of Carolina First Corporation and Poinsett.
CONDUCT OF POINSETT'S AND CAROLINA FIRST CORPORATION'S BUSINESS PRIOR TO THE
EFFECTIVE TIME
Under the terms of the Reorganization Agreement, Poinsett and Poinsett
Bank each has agreed with respect to the conduct of its respective businesses
pending closing, among other things: (a) to carry on its business only in the
ordinary course and to use all reasonable efforts to preserve intact its
business organization and goodwill, maintain the services of its present
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings; (b) not to amend its charter or bylaws; (c)
not to issue or acquire any shares of its capital stock of any class or any
securities convertible into its capital stock or declare or pay any dividends or
distributions, or make any change in its capital structure; (d) to promptly
advise Carolina First Corporation of any material adverse change in the business
of Poinsett or Poinsett Bank; (e) not to breach the Reorganization Agreement or
cause any of the representations of Poinsett or Poinsett Bank contained in the
Reorganization Agreement to become untrue; (f) not to incur any indebtedness
other than in the ordinary course of business; (g) except for Merger-related
expenses and current contractual obligations, not to incur any expense in excess
of $50,000; (h) not to grant any executive officers any increase in compensation
(except in the ordinary course of business) or enter into any employment
agreement; (i) not to engage in acquisitions, mergers or other reorganizations;
(j) except as may be directed by any regulatory authority or in certain other
limited instances, not change its lending, investment, liability management or
other material banking or other policies in any material respect, or implement
or adopt any change in accounting principles, practices or methods; or (k)
except in limited instances, not impose, or permit or suffer the imposition of
any liens on any of its assets, including its shares of capital stock of
Poinsett Bank.
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Under the terms of the Reorganization Agreement, Carolina First
Corporation has agreed, with respect to the conduct of its business pending
closing, among other things: (i) to carry on its business in substantially the
same manner as heretofore conducted; (ii) not to amend its Articles of
Incorporation or Bylaws in any manner that will adversely affect the Poinsett
shareholders in any material respect; (iii) to promptly advise Poinsett of any
material adverse change in its business; and (iv) not to take any action that
would be contrary to or breach any of the terms or provisions of the
Reorganization Agreement, or which would cause Carolina First Corporation's
representations in the Reorganization Agreement to become untrue in any material
respect.
REQUIRED REGULATORY APPROVALS
The Merger is subject to certain regulatory approvals as set forth below.
To the extent that the following information describes statutes and regulations,
it is qualified in its entirety by reference to the particular statutes and
regulations promulgated under such statutes.
The acquisition of Poinsett as contemplated herein is subject to approval
of the Federal Reserve under Section 4 of the Bank Holding Company Act of 1956
and as provided in 12 C.F.R. ss. 225.24(a)(2). The Federal Reserve will take
into account, among other factors, the financial and managerial resources and
future prospects of the institutions and any anti-competitive effects associated
with the Merger. Applicable regulations require publication of notice of the
application for approval of the Merger and provide an opportunity for the public
to comment on the application in writing and to request a hearing. The Merger
may not be consummated until the 15th day after approval, during which time the
United States Department of Justice ("DOJ") may challenge the Reorganization
Agreement on antitrust grounds. Carolina First Corporation has filed an
application with the Federal Reserve requesting approval of this acquisition.
The Merger also is subject to approval by the State Board under Section
34-24-30 of the South Carolina Bank Holding Company Act ("SCBHCA"). Under
Section 34-24-50 of the SCBHCA, the State Board may approve the Merger only
after determining that the Merger would not create anticompetitive or
monopolistic effects on the South Carolina banking business. The State Board
also must take into consideration the financial and managerial resources and
future prospects of the companies and banks involved as well as the convenience
and needs of the communities to be served. In making its determination, the
State Board will wait until after the Federal Reserve makes its determination
and will deny the application only if the State Board finds that the Federal
Reserve's determination is not supported by evidence that is substantial when
viewed in light of the whole record considered by the Federal Reserve. Carolina
First Corporation has submitted an application to the State Board for approval
to consummate the Merger.
Poinsett is required to provide prior notice of the Merger to the Office
of Thrift Supervision ("OTS") under various OTS regulations.
Carolina First Corporation and Poinsett are not aware of any other
governmental approvals or actions that are required for consummation of the
Merger except as described above. Should any such approval or action be
required, it is presently contemplated that such approval or action would be
sought or taken. There can be no assurance that any such approval or action, if
needed, could be obtained or would not delay consummation of the Merger.
OPERATIONS AFTER THE MERGER
After consummation of the Merger, the banking locations of Poinsett Bank
will continue to be operated as branch locations of Poinsett Bank and such
locations are expected to conduct their business in generally the same manner as
prior to the Merger, except that additional banking services and products
offered by Carolina First Bank will be offered by Poinsett Bank as well. Also,
after the Merger, Poinsett Bank's name may be
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changed to "Carolina First Savings Bank" and certain branch locations of
Poinsett Bank may be transferred to Carolina First Bank. It is generally
expected that the retained Poinsett Bank officers and employees will continue in
similar positions in an at-will employment capacity. In general, retained
Poinsett and Poinsett Bank officers and employees will continue at approximately
their current levels of compensation and will be eligible for benefits available
to other similarly situated officers and employees of Carolina First Bank. After
consummation of the Merger, it is anticipated that Carolina First Bank will
continue to conduct its business in generally the same manner in which it is now
conducted. See "--Interests of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
INDEMNIFICATION; ADVANCEMENT OF EXPENSES; DIRECTORS' AND OFFICERS'
INSURANCE. The Reorganization Agreement provides that Carolina First Corporation
will indemnify the Poinsett directors and executive officers against certain
liabilities (and will advance certain expenses) to the fullest extent that such
persons would have been entitled to indemnification (or advancement of expenses)
under the laws of the State of South Carolina and the Carolina First Corporation
Articles of Incorporation and Bylaws as in effect on the date of the
Reorganization Agreement. The Reorganization Agreement also provides that prior
to closing, Poinsett shall use its best efforts to extend its existing
directors' and officers' liability insurance policy past the Closing Date
(spending up to $25,000) and after Closing, Carolina First Corporation shall
take no action to terminate prematurely such policy.
EMPLOYMENT AGREEMENTS; CONSULTING AGREEMENTS. James D. King, James D.
King, Jr., Edward R. Blakemore, Jr. and Louise P. Ellenburg (the "Officers"),
have employment contracts with Poinsett which provide for certain payments,
among other things, in connection with the termination of their employment after
a change in control (as defined in such agreements). In the Reorganization
Agreement, Carolina First Corporation acknowledges the transactions contemplated
therein constitute a change in control for purposes of the employment agreements
and further acknowledges that the Officers are entitled to receive the certain
payments and benefits provided for therein upon a change in control of Poinsett
or Poinsett Bank. The benefits payable upon the change of control under these
agreements are $306,860, $162,674, $180,713 and $167,707 for James D. King,
James D. King, Jr., Edward R. Blakemore, Jr. and Louise P. Ellenburg,
respectively.
It is currently contemplated that Carolina First Corporation and James D.
King will enter into a consulting agreement that will be effective upon
consummation of the Merger, whereby Mr. King, as an independent contractor, will
assist Carolina First Corporation with certain transition matters. Compensation
under such agreement is expected to be at a rate not in excess of his current
total compensation and will include the provision of health and other employee
benefits to Mr. King and his family. This agreement will have a term of six
months.
It is currently contemplated that Carolina First Corporation and James D.
King, Jr. will enter into a consulting agreement that will be effective upon
consummation of the Merger, whereby Mr. King, as an independent contractor, will
assist Carolina First Corporation with certain transition matters. Compensation
under such agreement is expected to be at a rate not in excess of his current
total compensation and will include the provision of health and other employee
benefits to Mr. King and his family. This agreement will have a term of twelve
months.
STOCK OPTIONS. The Reorganization Agreement provides that each option to
purchase Poinsett common stock outstanding at the Effective Time of the Merger
will be converted into an option to acquire Carolina First Corporation common
stock based on the Conversion Ratio. These options will continue to have the
same terms and conditions as were in effect with respect to such options prior
to the Merger. The Reorganization Agreement also provides that an option holder
may elect immediately prior to the Effective Time (in lieu of having such
options converted into the right to receive Carolina First Corporation common
stock as provided
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above), to surrender such options in exchange for a cash payment per share equal
to the difference between $82.00 and the exercise price per share of each
option.
OTHER MATTERS RELATED TO EMPLOYEES AND EMPLOYEE BENEFIT PLANS. In the
Reorganization Agreement, Poinsett agreed to terminate the Poinsett Bank 401(k)
Profit Sharing Plan (the"401(k) Plan") and thereafter to distribute the assets
in the 401(k) Plan to participants in accordance with the requirements of the
Employee Retirement Income Security Act ("ERISA") and the Code. Poinsett further
agreed to terminate the Poinsett Bank Employee Stock Ownership Plan ("ESOP")
prior to the Effective Time. After such termination, Poinsett agreed that the
ESOP shall convert to cash a sufficient number of shares of Carolina First
Corporation common stock as may be received by the ESOP with respect to
unallocated shares of Poinsett common stock held by the ESOP at the Effective
Time to the repayment in full of the outstanding ESOP indebtedness. Any surplus
of Carolina First Corporation common stock remaining after repayment of such
indebtedness will be allocated as investment earnings of the ESOP to the
accounts of ESOP participants (and, if required, to the accounts of former
participants or their beneficiaries) in proportion to their account balances at
the Effective Time. Carolina First Corporation also agreed that the former
Poinsett employees who are employed by Carolina First Corporation or its
subsidiaries immediately following the Closing Date: (i) will be eligible, on
the same basis as current Carolina First Corporation employees, for all Carolina
First Corporation benefit plans; and (ii) will receive past service credit for
eligibility and vesting (but not benefit accrual) purposes under Carolina First
Corporation benefit plans for years of service with Poinsett as if such service
had been with Carolina First Corporation or its subsidiaries.
Carolina First Corporation has agreed that, prior to the Effective Time,
Poinsett Bank may transfer certain life insurance policies with respect to
Beauford W. Williams, James D. King, James D. King, Jr., and Edward R.
Blakemore, Jr., to the insureds in fully paid up form.
ADVISORY DIRECTORS. Carolina First Corporation has agreed that following
the Effective Time, and for a period of 18 months, the Advisory Board of
Directors of Poinsett Bank's Rock Hill division shall be continued at their
present level of compensation.
ACCOUNTING TREATMENT
Carolina First Corporation will account for the acquisition of Poinsett as
a "purchase" under generally accepted accounting principles. Under the purchase
method of accounting, the assets and liabilities of Poinsett will be adjusted to
their estimated market values and combined with the assets and liabilities of
Carolina First Bank. 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 10 to 25 years using
accelerated and straight-line methods. Prior period statements will not be
restated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material federal income tax
consequences of the Merger, including certain consequences to holders of the
Poinsett 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 Poinsett 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 Poinsett shareholders who acquired their shares of Poinsett
common stock pursuant to the exercise of employee stock options or rights or
otherwise as compensation. Shareholders are urged to consult their own tax
advisers as to the specific tax consequences to them of the Merger, including
the applicability and effect of state, local and other tax laws. The summary
does not address the state, local or foreign tax consequences
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of the Merger, if any.
Pursuant to the terms of the Reorganization Agreement, Poinsett will
receive the opinion of Wyche, Burgess, Freeman & Parham, P.A., dated as of the
Effective Time, to the effect that based upon the Code and regulations
thereunder and rulings issued by the IRS in transactions similar to those
contemplated by the Reorganization Agreement and assuming the Merger occurs in
accordance with the Reorganization Agreement and conditioned on the accuracy of
certain representations made by Poinsett and Carolina First Corporation, for
federal income tax purposes:
1. The Merger will qualify as a reorganization under the provisions
of Section 368(a)(1)(A) of the Code, provided that substantially
all of the assets of Poinsett are acquired in the Merger.
2. No gain or loss will be recognized either to Carolina First
Corporation or Poinsett as a result of the Merger.
3. No gain or loss will be recognized to the shareholders of
Poinsett upon their receipt of shares of Carolina First
Corporation common stock in the Merger (disregarding for this
purpose any cash received for whole or fractional shares or
otherwise in connection with the Merger).
4. The receipt of cash by Poinsett shareholders in the Merger in
exchange for fractional shares will be treated for federal income
tax purposes as a redemption of such shares.
5. The tax basis of the Carolina First Corporation common stock so
received by Poinsett shareholders in connection with the Merger
will be the same as the basis in the Poinsett common stock
surrendered in exchange for such Carolina First Corporation
common stock as set forth above.
6. The holding period of the Carolina First Corporation common stock
received by a Poinsett shareholder will include the holding
period of the shares of Poinsett surrendered therefor provided
that the Poinsett shares are capital assets in the hands of the
shareholder at the time of the Merger.
CASH RECEIVED BY HOLDERS OF POINSETT COMMON STOCK WHO DISSENT. A
shareholder of Poinsett who perfects his dissenter's rights under South Carolina
law and who receives payment of the value of his shares of Poinsett common stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section 302
of the Code, including the attribution rules of Section 318 of the Code. In
general, if the shares of Poinsett common stock are held by the holder as a
capital asset at the Effective Time, such holder will recognize capital gain or
loss measured by the difference between the amount of cash received by such
holder and the basis for such shares. Each holder of Poinsett common stock who
contemplates exercising his dissenter's rights should consult his own tax
advisor as to the possibility that any payment to him will be treated as
dividend income.
FRACTIONAL SHARE INTERESTS. A Poinsett shareholder who receives cash in
lieu of a fractional share interest in Carolina First Corporation common stock
will be treated as having received the cash in redemption of the fractional
share interest. The receipt of cash in lieu of a fractional share interest
should generally result in capital gain or loss to the holder equal to the
difference between the amount of cash received and the portion of the holder's
federal income tax basis in the Poinsett common stock allocable to the
fractional share interest. Such capital gain or loss will be long-term capital
gain or loss if the holder's holding period for the Carolina First Corporation
common stock received, determined as set forth above, is longer than one year.
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THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON THE CODE (AND AUTHORITIES THEREUNDER) AS IN
EFFECT ON THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, WITHOUT CONSIDERATION OF
THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER. SHAREHOLDERS ARE URGED
TO CONSULT WITH THEIR OWN TAX ADVISERS WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR SITUATIONS, AS WELL AS
CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL OR FOREIGN TAX LAWS.
RESTRICTIONS ON RESALES BY AFFILIATES
The issuance of the Carolina First Corporation Shares has been registered
under the Securities Act. Accordingly, resales of the Carolina First Corporation
Shares by non-affiliates of Poinsett will not require registration. However,
under existing law, any person who is an "affiliate" of Poinsett (as defined
below) at the time the proposed exchange is submitted to a vote of the Poinsett
shareholders who wishes to sell Carolina First Corporation Shares will be
required either to (a) register the sale of the Carolina First Corporation
Shares under the Securities Act, (b) sell in compliance with Rule 145
promulgated under the Securities Act (permitting limited sales under certain
circumstances), or (c) utilize an exemption (if any) from registration. Rule
145(d) requires that persons deemed to be Poinsett affiliates resell their
Carolina First Corporation Shares pursuant to certain of the requirements of
Rule 144 under the Securities Act if such Carolina First Corporation Shares are
sold within one year after receipt thereof. After one year, if such person is
not an affiliate of Carolina First Corporation and Carolina First Corporation is
current in the filing of its periodic securities law filings, a former Poinsett
affiliate may freely sell the Carolina First Corporation Shares without
limitation. After two years from the issuance of the Carolina First Corporation
Shares, if such person is not a Carolina First Corporation affiliate at the time
of sale or for at least three months prior to such sale, such person may freely
sell such Carolina First Corporation Shares without limitation, regardless of
the status of Carolina First Corporation's periodic securities law filings.
Poinsett has agreed that it will use its best efforts to cause affiliates of
Poinsett to agree in writing that they will not sell the Carolina First
Corporation common stock to be received by them except as provided above. Stop
transfer instructions will be given by Carolina First Corporation to the
Exchange Agent with respect to the Carolina First Corporation common stock to be
received by persons subject to the restrictions described above, and the
certificates for such stock may be appropriately legended. An "affiliate" of
Poinsett, 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, Poinsett at the
time of consummation of the Merger. In this context, an "affiliate" will
generally include the following persons: directors or executive officers, and
the holders of 10% or more of Poinsett 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).
RIGHTS OF DISSENTING SHAREHOLDERS OF POINSETT
THE FOLLOWING DISCUSSION IS MERELY A SUMMARY OF RIGHTS OF DISSENTING
SHAREHOLDERS PURSUANT TO SOUTH CAROLINA LAW AND IS QUALIFIED IN ITS ENTIRETY BY
THE PROVISIONS OF SECTION 13-13-101 ET SEQ. OF THE SOUTH CAROLINA BUSINESS
CORPORATION ACT OF 1988, AS AMENDED (THE "SCBCA"), A COPY OF WHICH IS INCLUDED
HEREWITH AS ANNEX C. DISSENTING SHAREHOLDERS HAVE ONLY THOSE RIGHTS PROVIDED BY
SUCH LAW. ANY SHAREHOLDER WISHING TO EXERCISE DISSENTERS' RIGHTS IS STRONGLY
ADVISED TO CONSULT WITH AN ATTORNEY.
Any shareholder of Poinsett entitled to vote on the Merger has the right
to dissent from the Merger and receive payment of the fair value of his shares
of Poinsett common stock upon compliance with Sections
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33-13-101 ET SEQ. of the
SCBCA. A shareholder may not dissent as to less than all of the shares that he
beneficially owns, regardless of the number of accounts maintained for the
benefit of such shareholder. A nominee or fiduciary may not dissent on behalf of
any beneficial owner as to less than all of the shares of such beneficial owner
held of record by such nominee or fiduciary. A beneficial owner asserting
dissenters' rights to shares held on his behalf must notify Poinsett in writing
of the names and addresses of the record holders of the shares, if known to him.
Any Poinsett shareholder intending to enforce this right may not vote in favor
of the Merger and must file a written notice of intent to demand payment for his
shares (the "Objection Notice") with the Corporate Secretary of Poinsett either
before the Special Meeting or before the vote is taken at the Special Meeting.
The Objection Notice must state that the shareholder intends to demand payment
for his shares of Poinsett common stock if the Merger is effected. Although any
Poinsett shareholder who has filed an Objection Notice must not vote in favor of
the Merger, a vote in favor of the Merger cast by the holder of a proxy
appointment solicited by Poinsett (whether pursuant to the instruction of the
shareholder or otherwise) will not disqualify the shareholder from demanding
payment for his shares under the SCBCA. A vote against approval of the Merger
will not, in and of itself, constitute an Objection Notice satisfying the
requirements of Section 33-13-210 of the SCBCA. If the Merger is approved by
Poinsett's shareholders at the Poinsett Special Meeting, each shareholder who
has filed an Objection Notice will be notified by Poinsett of such approval
within 10 days after the Poinsett Special Meeting (the "Dissenters' Notice").
The Dissenters' Notice will (i) state where dissenting shareholders must (a)
send the Payment Demand (as defined below) and (b) deposit their Certificates;
(ii) inform holders of uncertificated shares of Poinsett common stock of the
extent of any restrictions on the transferability of such shares; (iii) be
accompanied by a form for demanding payment that includes the date of the first
announcement to the news media or to shareholders of the terms of the proposed
Merger; (iv) set a date by which (x) Poinsett must receive the Payment Demand,
which may not be fewer than 30 or more than 60 days after the date the
Dissenters' Notice is delivered and (y) the Certificates must be deposited as
instructed in the Dissenters' Notice, which may not be earlier than 20 days
after the date the Payment Demand is received by Poinsett; and (v) be
accompanied by a copy of Sections 33-13-101 through 33-13-310 of the SCBCA.
Within the time prescribed in the Dissenters' Notice, a shareholder electing to
dissent must make a demand for payment (the "Payment Demand"), certify whether
he (or the beneficial shareholder on whose behalf he is asserting dissenters'
rights) acquired beneficial ownership of the shares of Poinsett common stock
before June 26, 1998 (the date of the first public announcement of the terms of
the Merger) and deposit his Certificates in accordance with the terms of the
Dissenter's Notice. Upon filing the Payment Demand and depositing the
Certificates, the shareholder will retain all other rights of a shareholder
until these rights are canceled or modified by consummation of the Merger.
FAILURE TO COMPLY SUBSTANTIALLY WITH THESE PROCEDURES WILL CAUSE THE SHAREHOLDER
TO LOSE HIS DISSENTERS' RIGHTS TO PAYMENT FOR THE SHARES. CONSEQUENTLY, ANY
POINSETT SHAREHOLDER WHO DESIRES TO EXERCISE HIS RIGHTS TO PAYMENT FOR HIS
SHARES IS URGED TO CONSULT HIS LEGAL ADVISOR BEFORE ATTEMPTING TO EXERCISE SUCH
RIGHTS.
As soon as the Merger is consummated, or upon receipt of a Payment Demand,
Carolina First Corporation shall, pursuant to Section 33-13-250 of the SCBCA,
pay to each dissenting shareholder who has substantially complied with the
requirements of Section 33-13-230 of the SCBCA, the amount that Carolina First
Corporation estimates to be the fair value of the shares of Poinsett common
stock plus accrued interest. Section 33-13-250 of the SCBCA requires that
payment to be accompanied by (i) certain of Poinsett's financial statements,
(ii) a statement of Carolina First Corporation's estimate of fair value of the
shares and explanation of how Carolina First Corporation's estimate of fair
value and the interest were calculated, (iii) notification of rights to demand
additional payment, and (iv) a copy of Sections 33-13-101 through 33-13-310 of
the SCBCA. As authorized by Section 33-13-270, Carolina First Corporation
intends to delay any payments with respect to any shares (the "After-acquired
sales") held by a dissenting shareholder which were not held by such shareholder
on June 26, 1998, the date of the first public announcement of the terms of the
Merger, unless the beneficial ownership devolved upon him by operation of law
from a person who was the beneficial owner on such date. Where payments are so
withheld, Sections 33-13-270(b) and 33-13-280(a) of the SCBCA will require
Carolina First Corporation, after the Merger, to send to the holder of the
After-acquired shares
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an offer to pay the holder an amount equal to Carolina First Corporation's
estimate of their fair value plus accrued interest, together with an explanation
of the calculation of fair value and interest and a statement of the holder's
right to demand additional payment under Section 33-13-280 of the SCBCA.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing Certificates, Poinsett, within the 60-day
period, shall return the deposited Certificates and release the transfer
restrictions imposed on the uncertificated shares. If, after returning deposited
Certificates and releasing transfer restrictions, the Merger is consummated,
Poinsett must send a new Dissenters' Notice and repeat the payment demand
procedure.
If the dissenting shareholder believes that the amount paid by Carolina
First Corporation pursuant to Section 33-13-250 of the SCBCA or offered under
Section 33-13-270 of the SCBCA is less than the fair value of his shares or that
the interest due is calculated incorrectly, or if Carolina First Corporation
fails to make payment or offer payment (or, if the Merger has not been
consummated, Poinsett does not return the deposited Certificates or release the
transfer restrictions imposed on uncertificated shares), within 60 days after
the date set in the Dissenters' Notice, then the dissenting shareholder may
within 30 days after (i) Carolina First Corporation made or offered payment for
the sales or failed to pay for the shares or (ii) Poinsett failed to return
deposited Certificates or timely release restrictions on uncertificated shares,
notify Carolina First Corporation in writing of his own estimate of the fair
market value of such shares (including interest due) and demand payment of such
estimate (less any payment previously received). FAILURE TO NOTIFY CAROLINA
FIRST CORPORATION IN WRITING OF ANY DEMAND FOR ADDITIONAL PAYMENT WITHIN 30 DAYS
AFTER CAROLINA FIRST CORPORATION MADE PAYMENT FOR SUCH SHARES WILL CONSTITUTE A
WAIVER OF THE RIGHT TO DEMAND ADDITIONAL PAYMENT.
If Carolina First Corporation and the dissenting shareholder cannot agree
on a fair price within 60 days after Poinsett receives such a demand for
additional payment, the statute provides that Carolina First Corporation will
institute judicial proceedings in the South Carolina Court of Common Pleas in
Greenville County (the "Court") to fix (i) the fair value of the shares
immediately before consummation of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger, unless such exclusion would be
inequitable and (ii) the accrued interest. The "fair value" of the Poinsett
common stock could be more than, the same as, or less than that produced by the
exchange ratio set by the Merger. Carolina First Corporation must make all
dissenters whose demands for additional payment remain unsettled parties to the
proceeding and all such parties must be served with a copy of the petition. The
Court may, in its discretion, appoint an appraiser to receive evidence and
recommend a decision on the question of fair value. The Court is required to
issue a judgment for the amount, if any, by which the fair value of the shares,
as determined by the Court, plus interest, exceeds the amount paid by Carolina
First Corporation. If Carolina First Corporation does not institute such
proceeding within such 60-day period, Carolina First Corporation shall pay each
dissenting shareholder whose demand remains unsettled the respective amount
demanded by each shareholder.
The Court will assess the costs and expenses of such proceeding (including
reasonable compensation for and the expenses of the appraiser but excluding fees
and expenses of counsel and experts) against Carolina First Corporation, except
that the Court may assess such costs and expenses as it deems appropriate
against any or all of the dissenting shareholders if it finds that their demand
for additional payment was arbitrary, vexatious or otherwise not in good faith.
The Court may award fees and expenses of counsel and experts in amounts the
Court finds equitable: (i) against Carolina First Corporation if the Court finds
that Carolina First Corporation did not comply substantially with the relevant
requirements of the SCBCA or (ii) against either Carolina First Corporation or
any dissenting shareholder, if the Court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in good
faith.
THE FOREGOING SUMMARY OF THE APPLICABLE PROVISIONS OF SECTIONS 33-13-101
THROUGH 33-13-310 OF THE
31
<PAGE>
SCBCA IS NOT INTENDED TO BE A COMPLETE STATEMENT OF SUCH PROVISIONS, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SECTIONS, WHICH ARE INCLUDED AS
ANNEX C HEREOF.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF POINSETT HAS CONCLUDED THAT THE MERGER IS IN THE
BEST INTERESTS OF POINSETT AND HAS AUTHORIZED CONSUMMATION THEREOF, SUBJECT TO
APPROVAL OF THE POINSETT SHAREHOLDERS, RECEIPT OF ALL REQUISITE REGULATORY
APPROVALS, AND SATISFACTION OF CERTAIN OTHER CONDITIONS. THE BOARD OF DIRECTORS
OF POINSETT RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION
AGREEMENT.
32
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Condensed Balance Sheet is based on
combining the historical consolidated balance sheet for Carolina First
Corporation at March 31, 1998 with the historical consolidated balance sheet of
Poinsett at March 31, 1998, adjusting for the issuance of additional shares
expected to be issued in the Merger.
The unaudited Pro Forma Combined Capitalization is based on combining the
historical consolidated capitalization of Carolina First Corporation at March
31, 1998 with the historical consolidated capitalization of Poinsett at March
31, 1998, adjusting for the issuance of additional shares expected to be issued
in the Merger.
The unaudited Pro Forma Combined Condensed Statement of Income is based on
combining the historical consolidated statements of income of Carolina First
Corporation for the year ended December 31, 1997 with the historical
consolidated statements of income of Poinsett for the twelve months ended
December 31, 1997, and the historical consolidated statements of income of
Carolina First Corporation for the three months ended March 31, 1998 with the
historical consolidated statements of income of Poinsett for the three months
ended March 31, 1998. Historical earnings for Poinsett, which has a September 30
fiscal year, have been adjusted to reflect a December 31 fiscal year-end by
adding the subsequent three-month period and subtracting the comparable
preceding year interim results from the results for the year ended September 30,
1997.
The Merger is expected to be accounted for under the purchase method of
accounting, and pro forma data are derived in accordance with such method.
The pro forma data do not, given the operational and market overlap
between Carolina First Corporation and Poinsett, reflect any potential benefits
from potential cost savings or synergies expected to be achieved following the
Merger.
Financial information presented at and for the three months ended March
31, 1998 and for the twelve months ended December 31, 1997 also includes pro
forma data for Carolina First Corporation's pending acquisitions of Colonial
Bank of South Carolina, Inc. ("Colonial") and First National Bank of Pickens
County ("First National"). See "INFORMATION ABOUT CAROLINA FIRST CORPORATION -
Recent Developments."
Information set forth below should be read in conjunction with such
historical and pro forma financial statements and the notes thereto. The
unaudited pro forma information is provided for informational purposes only and
is not necessarily indicative of actual results that would have been achieved
had the Merger been consummated at the beginning of the period presented, nor is
it necessarily indicative of future results.
33
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CAPITALIZATION
At March 31, 1998
(Dollars in thousands, except share data)
Purchase
Carolina First Accounting Pro Forma First (a) Pro-Forma
Corporation Poinsett Adjustments Combined National Colonial Adjustments Combined
----------- -------- ----------- -------- -------- -------- ----------- ---------
<S> <C>
LONG-TERM DEBT
Subordinated notes $ 25,522 $ -- $ -- $ 25,522 $ -- $ -- $ -- $ 25,522
FHLB advances 10,000 -- -- 10,000 -- 4,000 -- 14,000
ESOP debt 2,800 - -- 2,800 -- -- -- 2,800
Mortgage debt 1,073 -- -- 1,073 -- -- -- 1,073
-------- ------ ------ --------- ---- --- --- --------
Total long-term debt 39,395 -- -- 39,395 -- 4,000 -- 43,395
-------- ------ ------ --------- ----- ----- --- -------
SHAREHOLDERS' EQUITY
Common stock 17,710 2 596 (b) 18,308 200 583 2,016(e) 21,107
Surplus 201,967 1,387 13,560 (b) 219,114 300 4,412 5,756(e) 230,782
2,200 (c) 1,200(c)
Retained earnings 23,337 3,512 (3,512)(b) 23,337 15,038 231 (231)(e) 37,625
(750)(d)
Nonvested restricted stock and
guarantee of ESOP debt (3,617) -- -- (3,617) -- -- -- (3,617)
Unrealized gain on securities
available for sale 3,986 3 -- 3,989 333 (2) -- 4,320
------- ---- ------ ------- ------ ----- ----- -------
Total shareholders' equity 243,383 4,904 12,844 261,131 15,871 5,224 7,991 290,217
------- ----- ------ ------- ------ ----- ----- -------
Total capitalization $282,778 $ 4,904 $ 12,844 $300,526 $ 15,871 $ 9,224 $ 7,991 $ 333,612
======== ======= ======== ======== ======== ======= ======= =========
- --------------------
</TABLE>
(a) The merger with First National will be accounted for as a
"pooling-of-interests," and the merger with Colonial will be accounted for
as a "purchase."
(b) To reflect the issuance of 598,017 shares of Carolina First Corporation
common stock to holders of Poinsett's common stock based on an assumed
market price of $26.00 per share of Carolina First Corporation common
stock.
(c) To record the value of options acquired.
(d) To record estimated Merger costs, including transaction costs and buyout
of employee contracts relating to First National.
(e) To reflect the issuance of 2,307,938 shares of Carolina First Corporation
common stock to holders of First National's common stock, and the issuance
of 490,978 shares of Carolina First Corporation common stock to holders of
Colonial's common stock, based on an assumed market price of $26.00 per
share of Carolina First Corporation's common stock.
34
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
March 31, 1998
(Dollars in Thousands, except footnotes)
Purchase
Carolina First Accounting Pro Forma First (a) Pro-Forma
Corporation Poinsett Adjustments Combined National Colonial Adjustments Combined
------------ -------- ----------- -------- -------- -------- ----------- --------
<S> <C>
ASSETS
Cash and due from banks $ 67,095 $ 16,194 $ -- $ 83,289 $ 4,712 $ 2,027 $ -- $ 90,028
Interest-bearing bank balances 47,229 -- -- 47,229 -- 4,129 -- 51,358
Fed funds sold & resale agreements 105,000 -- -- 105,000 6,575 -- -- 111,575
Investment securities 389,951 1,483 -- 391,434 40,121 4,024 (308)(g) 435,271
Loans held for sale 139,033 -- -- 139,033 -- -- -- 139,033
Loans held for investment 1,366,018 68,631 -- 1,434,649 64,012 44,940 -- 1,543,601
Less unearned income (10,461) (30) -- (10,491) -- -- -- (10,491)
Less allowance for loan losses (15,349) (561) -- (15,910) (712) (368) -- (16,990)
--------- ------ ---- --------- ------ ------ ---- ---------
Net loans 1,479,241 68,040 -- 1,547,281 63,300 44,572 -- 1,655,153
Premises and equipment 38,774 2,231 -- 41,005 1,566 1,798 350(h) 44,719
Intangible assets 56,885 -- 14,060(b) 70,945 -- 224 9,849(i) 81,018
Other assets 66,572 921 -- 67,493 1,265 662 -- 69,420
--------- ------ ------ --------- ------- ----- ----- ---------
Total assets $ 2,250,747 $ 88,869 $14,060 $ 2,353,676 $117,539 $ 57,436 $ 9,891 $2,538,542
=========== ======== ======= ============ ======== ======== ======= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 228,866 $ 3,060 $ -- $ 231,926 $ 17,481 $ 3,146 $ -- $ 252,553
Interest-bearing 1,597,163 78,624 -- 1,675,787 78,760 40,480 -- 1,795,027
---------- ------ ----- --------- ------ ------ ----- ----------
Total deposits 1,826,029 81,684 -- 1,907,713 96,241 43,626 -- 2,047,580
Borrowed funds 149,785 2,044 -- 151,829 4,572 8,500 -- 164,901
Other liabilities 31,550 237 466(c) 33,003 855 86 400(c) 35,844
-------- ----- ------- ------ -- -------
750(d) 1,500(d)
----- -----
Total liabilities 2,007,364 83,965 1,216 2,092,545 101,668 52,212 1,900 2,248,325
--------- ------ ----- --------- ------- ------ ----- ----------
Total shareholders' equity 243,383 4,904 10,644(e) 261,131 15,871 5,224 7,541(j) 290,217
-------- ----- ------ ------- ------ ----- -------
2,200(f) 1,200(f)
-----
(750)(d)
Total liabilities and -----
shareholders' equity $ 2,250,747 $ 88,869 $ 14,060 $ 2,353,676 $ 117,539 $ 57,436 $ 9,891 $ 2,538,542
=========== ======== ======== =========== ========= ======== ======= ===========
</TABLE>
- -----------------------
(a) The merger with First National will be accounted for as a
"pooling-of-interests," and the merger with Colonial will be accounted for
as a "purchase."
(b) To record the excess cost of the acquisition over the estimated market
value of the net assets acquired (goodwill of $10,635,000), the valuation
of options acquired (goodwill of $2,200,000), and the core deposit premium
($1,225,000).
(c) To adjust the deferred tax liabilities as a result of the purchase
accounting adjustments using Carolina First Corporation's statutory rate
of 38%.
(d) To record estimated Merger costs, including transaction costs and buyout
of employee contracts.
(e) To give effect to the acquisition of Poinsett, assuming the issuance of
598,017 shares of Carolina First Corporation common stock, based on an
assumed market price of $26.00 per share of Carolina First Corporation
common stock and an exchange ration of 3.1538. The total value of Carolina
First Corporation common stock exchanged would be $15,548,000.
(f) To record the value of options acquired.
(g) To remove the carrying value of Colonial shares owned by Carolina First
Corporation.
(h) To adjust the fixed assets and property of Colonial to
estimated market value.
(i) To record the excess cost of the acquisition over the estimated market
value of the net assets acquired (goodwill of $7,995,000), the value of
options acquired (goodwill of $1,200,000) and the core deposit premium
($654,000).
(j) To give effect to the acquisition of Colonial, assuming the issuance of
490,978 shares of Carolina First Corporation common stock, based on an
assumed market price of $26.00 per share of Carolina First Corporation
common stock and an exchange ratio of .885. The total value of Carolina
First Corporation common stock exchanged would be $12,765,000.
35
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Three Months Ended March 31, 1998
(Dollars in thousands, except share data)
Purchase
Carolina First Accounting Pro Forma First (a) Pro Forma
Corporation Poinsett Adjustments Combined National Colonial Adjustments Combined
----------- -------- ----------- -------- -------- -------- ----------- ---------
<S> <C>
Interest income $ 42,127 $ 1,643 $ -- $ 43,770 $2,160 $ 1,122 $ -- $ 47,052
Interest expense 21,900 916 -- 22,816 829 601 -- 24,246
------- ----- ---- ------ ----- ----- ----- ------
Net interest income 20,227 727 -- 20,954 1,331 521 -- 22,806
Provision for loan losses 2,136 326 -- 2,462 -- 20 -- 2,482
----- ---- ----- ------ ----- ----- ----- ------
Net interest income after
provision for loan losses 18,091 401 -- 18,492 1,331 501 -- 20,324
Noninterest income 4,613 284 -- 4,897 134 79 -- 5,110
Noninterest expenses 15,259 828 128(b) 16,271 805 477 92(b) 17,679
------ ---- ------ ----- ----- ------
56(c) 30(c)
-----
4(e)
-----
Income before income taxes 7,445 (143) (184) 7,118 660 103 (126) 7,755
Income taxes 2,751 (45) (21)(d) 2,685 219 33 (13)(d) 2,924
------ ---- ----- ----- ---- --- ----- ------
Net income $ 4,694 $ (98) $ (163) $ 4,433 $ 441 $ 70 $ (113) $ 4,831
========== ======= ======= ======= ====== ====== ======== =======
Net income per common share:
Basic $0.28 $(0.52) $ -- $0.26 $ 5.51 $0.12 $ -- $ 0.24
Diluted 0.28 (0.52) -- 0.25 5.51 0.12 -- 0.24
Average shares outstanding:
Basic 16,588,163 190,365 -- 17,186,171 80,000 583,019 -- 20,010,081
Diluted 16,922,202 190,365 -- 17,520,210 80,000 593,530 - 20,353,422
</TABLE>
(a) The merger with First National will be accounted for as a
"pooling-of-interests," and the merger with Colonial will be accounted for
as a "purchase."
(b) Record amortization of goodwill using the straight-line method over 25
years.
(c) Record amortization of core deposit intangible using the
sum-of-the-year's digits method over 10 years.
(d) To show impact of taxes at 38% tax rate.
(e) To increase depreciation expense from mark-up of Colonial premises and
equipment to an estimated market value.
36
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Twelve Months Ended December 31, 1997
(Dollars in thousands, except share data)
Purchase
Carolina First Accounting Pro Forma First (a) Pro Forma
Corporation Poinsett Adjustments Combined National Colonial Adjustments Combined
------------ -------- ----------- --------- -------- -------- ----------- ---------
<S> <C>
Interest income $ 135,706 $ 6,076 $ -- $ 141,782 $ 8,400 $ 3,968 $ -- $ 154,150
Interest expense 69,000 3,251 -- 72,251 3,204 2,203 -- 77,658
------- ----- ---- ------- ----- ----- ----- --------
Net interest income 66,706 2,825 -- 69,531 5,196 1,765 -- 76,492
Provision for loan losses 11,646 69 -- 11,715 151 309 -- 12,175
------- --- ---- ------ ----- ----- ----- ------
Net interest income after
provision for loan losses 55,060 2,756 -- 57,816 5,045 1,456 -- 64,317
Noninterest income 19,615 819 -- 20,434 528 335 -- 21,297
Noninterest expenses 52,243 2,864 513(b) 55,843 3,019 1,807 368(b) 61,174
------- ----- ------ ----- ----- ------
223(c) 119(c)
---
18(e)
-----
Income before income taxes 22,432 711 (736) 22,407 2,554 (16) (505) 24,440
Income taxes 8,092 240 (85)(d) 8,247 788 59 (52)(d) 9,042
----- ---- ---- ------- ----- --- ---- ------
Net income $ 14,340 $ 471 $ (651) $ 14,160 $ 1,766 $ (75) $ (453) $ 15,398
========== ======= ====== ========= ======= ===== ======= ========
Net income per common share:
Basic $1.19 $2.48 $ -- $1.12 $22.08 $(0.15) $ -- $ 1.00
Diluted 1.18 2.45 -- 1.11 22.08 (0.15) -- 0.99
Average shares outstanding:
Basic 11,989,517 189,426 -- 12,586,929 80,000 486,851 -- 15,325,730
Diluted 12,175,561 192,045 -- 12,781,233 80,000 497,362 -- 15,529,336
</TABLE>
(a) The merger with First National will be accounted for as a
"pooling-of-interests," and the merger with Colonial will be accounted for
as a "purchase."
(b) Record amortization of goodwill using the straight-line method over 25
years.
(c) Record amortization of core deposit intangible using the sum-of-the-year's
digits method over 10 years.
(d) To show impact of taxes at 38% tax rate.
(e) To increase depreciation expense from mark-up of Colonial premises and
equipment to an estimated market value.
37
<PAGE>
INFORMATION ABOUT CAROLINA FIRST CORPORATION
CAROLINA FIRST CORPORATION. Carolina First Corporation is a bank holding
company headquartered in Greenville, South Carolina which engages in a general
banking business through its four principal operating subsidiaries: (1) Carolina
First Bank, a South Carolina-chartered bank headquartered in Greenville, South
Carolina, (2) Carolina First Mortgage Company, a mortgage loan origination and
servicing company headquartered in Columbia, South Carolina, (3) Blue Ridge
Finance Company, Inc., an automobile finance company headquartered in
Greenville, South Carolina, and (4) Resource Processing Group, Inc., a credit
card origination and servicing company headquartered in Columbia, South
Carolina. Through its subsidiaries, Carolina First Corporation provides a full
range of banking services, including mortgage, trust and investment services,
designed to meet substantially all of the financial needs of its customers.
Carolina First Corporation, which commenced operations in December 1986,
currently conducts business in 61 locations in South Carolina and is one of the
largest independent South Carolina-headquartered financial institutions. At
March 31, 1998, it had total assets of approximately $2.3 billion, total loans
of approximately $1.5 billion, total deposits of approximately $1.8 billion and
approximately $245 million in shareholders' equity.
Carolina First Corporation was formed principally in response to
opportunities resulting from the takeovers of several South Carolina-based banks
by large southeastern regional bank holding companies. A significant number of
Carolina First Corporation's executive officers and management personnel were
previously employed by certain of the larger South Carolina-based banks that
were acquired by these southeastern regional institutions. Consequently, these
officers and management personnel have significant customer relationships and
commercial banking experience that have contributed to Carolina First
Corporation's loan and deposit growth. Carolina First Corporation targets
individuals and small- to medium-sized businesses in South Carolina that require
a full range of quality banking services typically provided by larger regional
banking concerns, but that prefer the personalized service afforded by a South
Carolina-based institution.
Carolina First Corporation's objective is to become the leading South
Carolina-based banking institution headquartered in the state. It believes that
it can accomplish this goal by being a "super-community" bank which offers both
the personalized service and "relationship" banking typically found in community
banks, as well as the sophisticated banking products offered by the regional and
super-regional institutions. Carolina First Corporation currently serves four
principal market areas: the Greenville metropolitan area and surrounding
counties (located in the upstate region of South Carolina); the Columbia
metropolitan area and surrounding counties (located in the midlands region of
South Carolina); Georgetown and Horry counties (located in the northern coastal
region of South Carolina); and the Charleston metropolitan area (located in the
central coastal region of South Carolina). Carolina First Corporation's market
areas are located in the four largest Metropolitan Statistical Areas of the
state. Carolina First Corporation also has branch locations in other counties in
South Carolina.
Carolina First Corporation began its operations with the de novo opening
of Carolina First Bank in Greenville and has pursued a strategy of growth
through internal expansion and through the acquisition of branch locations and
financial institutions in selected market areas. Its more significant
acquisitions include the acquisition in August 1990 of First Federal Savings and
Loan Association of Georgetown (subsequently renamed Carolina First Savings
Bank, which was subsequently merged into Carolina First Bank on February 3,
1995), the acquisition of 12 branch locations of Republic National Bank in March
1993, and the acquisition of First Southeast Financial Corporation in November
1997. Approximately half of Carolina First Corporation's total deposits have
been generated through acquisitions. Carolina First Corporation anticipates that
it will continue to expand in the future and is frequently in discussions
regarding possible acquisitions. See "--Recent Developments."
Carolina First Corporation is a legal entity separate and distinct from
its subsidiary bank
38
<PAGE>
and non-banking subsidiaries. Accordingly, the right of Carolina First
Corporation, and thus the right of Carolina First Corporation's creditors and
shareholders, to participate in any distribution of the assets or earnings of
any subsidiary is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of Carolina First Corporation in
its capacity as a creditor may be recognized. The principal source of Carolina
First Corporation's revenues is dividends from its subsidiaries.
CAROLINA FIRST BANK. Carolina First Bank is a South Carolina-chartered,
Federal Reserve non-member bank and a wholly-owned subsidiary of Carolina First
Corporation. It currently engages in a general banking business through 58
locations, which are located throughout South Carolina. It began its operations
in December 1986 and at March 31, 1998 had total assets of approximately $2.2
billion, total loans of approximately $1.5 billion and total deposits of
approximately $1.9 billion. Its deposits are insured by the Federal Deposit
Insurance Corporation (the "FDIC").
CAROLINA FIRST MORTGAGE COMPANY. Carolina First Mortgage Company is a
South Carolina corporation which principally originates and services one-to-four
family mortgage loans through its six offices located in South Carolina. It is
headquartered in Columbia, South Carolina. At March 31, 1998, Carolina First
Mortgage Company was servicing or subservicing approximately 20,504 loans having
an aggregate principal balance of approximately $1.8 billion.
BLUE RIDGE FINANCE COMPANY, INC. On December 29, 1995, Carolina First
Corporation acquired Blue Ridge Finance Company, an automobile finance company
headquartered in Greenville, South Carolina. Blue Ridge operates from one
location and, at March 31, 1998, had approximately $22 million in total assets.
Blue Ridge is engaged primarily in indirect automobile lending.
RESOURCE PROCESSING GROUP, INC. On June 1, 1998, Carolina First
Corporation acquired Resource Processing Group, Inc., a credit card origination
and servicing company headquartered in Columbia, South Carolina. Resource
Processing Group, Inc. operates from one location and, at March 31, 1998, was
servicing approximately $257 million in credit card receivables.
CAPITAL ADEQUACY
CAROLINA FIRST CORPORATION. The Federal Reserve has adopted risk-based
capital guidelines for bank holding companies. Under these guidelines, the
minimum ratio of total capital to risk-weighted assets (including certain off-
balance sheet activities, such as standby letters of credit) is 8%. At least
half of the total capital is required to be "Tier 1 capital," principally
consisting of common shareholders' equity, noncumulative preferred stock, a
limited amount of cumulative perpetual preferred stock, and minority interests
in the equity accounts of consolidated subsidiaries, less certain goodwill
items. The remainder (Tier 2 capital) may consist of a limited amount of
subordinated debt and intermediate-term preferred stock, certain hybrid capital
instruments and other debt securities, perpetual preferred stock, and a limited
amount of the general loan loss allowance. In addition to the risk-based capital
guidelines, the Federal Reserve has adopted a minimum Tier 1 (leverage) capital
ratio under which a bank holding company must maintain a minimum level of Tier 1
capital (as determined under applicable rules) to average total consolidated
assets of at least 3% in the case of bank holding companies which have the
highest regulatory examination ratios and are not contemplating significant
growth or expansion. All other bank holding companies are required to maintain a
ratio of at least 100 to 200 basis points above the stated minimum. At March 31,
1998, Carolina First Corporation was in compliance with both the risk-based
capital guidelines and the minimum leverage capital ratio.
CAROLINA FIRST BANK. As a state-chartered, FDIC-insured institution which
is not a member of the Federal Reserve, Carolina First Bank is subject to
capital requirements imposed by the FDIC. The
39
<PAGE>
FDIC requires state-chartered nonmember banks to comply with risk-based capital
standards substantially similar to those required by the Federal Reserve, as
described above. The FDIC also requires state-chartered nonmember banks to
maintain a minimum leverage ratio similar to that adopted by the Federal
Reserve. Under the FDIC's leverage capital requirement, state nonmember banks
that (a) receive the highest rating during the examination process and (b) are
not anticipating or experiencing any significant growth are required to maintain
a minimum leverage ratio of 3% of Tier 1 capital to total assets; all other
banks are required to maintain a minimum ratio of 100 to 200 basis points above
the stated minimum, with an absolute minimum leverage ratio of not less than 4%.
At March 31, 1998, Carolina First Corporation and Carolina First Bank were both
in compliance with each of the applicable regulatory capital requirements.
PRO FORMA REGULATORY CAPITAL. The following tables sets forth Carolina
First Corporation's regulatory capital position at March 31, 1998, on a
historical basis as well as a pro forma basis assuming consummation of the
Merger. See "PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION."
At March 31, 1998
--------------------------------------
Historical Pro Forma
---------- ---------
(Dollars in thousands)
Shareholders' Equity....................$ 243,383 10.81% $ 261,131 11.09%
========= ====== ========= ======
Regulatory Capital
Tier 1 risk-based:
Actual...............................$ 181,432 11.31% $ 188,733 11.28%
Required*............................ 64,150 4.00 66,921 4.00
--------- ------ --------- -----
Excess...............................$ 117,282 7.31% $ 121,812 7.28%
========== ===== ========= ======
Total risk-based:
Actual............................... 222,281 13.86% $ 230,143 13.76%
Required*............................ 128,300 8.00 133,841 8.00
---------- ----- --------- ------
Excess...............................$ 93,981 5.86% $ 96,302 5.76%
========== ===== ========= ======
Leverage:
Actual...............................$ 181,432 8.27% $ 188,733 8.27%
Required*............................ 87,759 4.00 91,314 4.00
---------- ---- --------- -----
Excess...............................$ 93,673 4.27% $ 97,419 4.27%
========== ===== ========= =====
Total risk-based assets.................$1,603,755 $1,673,013
========== ==========
Total assets............................$2,250,747 $2,353,676
========== ==========
- ---------------------------
* For capital adequacy purposes.
RECENT DEVELOPMENTS
SECOND QUARTER 1998 EARNINGS AND FINANCIAL DATA. On July 16, 1998,
Carolina First Corporation announced its earnings and other financial data at
and for the quarter ended June 30, 1998. For the quarter, Carolina First
Corporation's net income totaled $5.5 million, or $0.33 per diluted share,
compared with second quarter 1997 net income of $4.7 million, or $0.41 per
diluted share. Second quarter 1997 earnings included a $1.5 million after-tax
gain on the sale of branches. At June 30, 1998, Carolina First Corporation's
total assets, loans, deposits and shareholders' equity were approximately $2.3
billion, $1.6 billion, $1.8 billion and $257 million, respectively. At June 30,
1998, Carolina First Corporation's ratio of nonperforming assets to loans and
other real estate owned was 0.16%.
ACQUISITION OF RESOURCE PROCESSING GROUP, INC. On June 1, 1998, Carolina
First Corporation acquired Resource Processing Group, Inc., a credit card
origination and servicing company headquartered
40
<PAGE>
in Columbia, South Carolina ("RPGI"), through the merger of RPGI with and into
an interim subsidiary of Carolina First Corporation. The RPGI transaction was
accounted for as a purchase and resulted in the issuance of approximately
398,600 shares of Carolina First Corporation common stock for the outstanding
shares of RPGI common stock. Additional shares of Carolina First Corporation
common stock may become issuable in the event that certain performance related
criteria are met. At June 30, 1998, RPGI operated through one location, had
approximately $16.0 million in assets and was servicing approximately $135
million in credit card receivables. For the years ended December 31, 1996 and
1997, RPGI had net income of approximately $448,000 and a loss of $2,296,000,
respectively. RPGI does not have any receivables associated with credit cards or
other loans.
PENDING ACQUISITION OF FIRST NATIONAL BANK OF PICKENS COUNTY. On June 9,
1998, Carolina First Corporation signed a definitive agreement to acquire First
National Bank of Pickens County ("First National") through the merger of First
National with and into Carolina First Bank. First National is a national bank
headquartered in Easley, South Carolina. At June 30, 1998, First National
operated through three locations and had total assets, loans, deposits and
shareholders' equity of approximately $120.6 million, $64.6 million, $97.6
million and $16.4 million, respectively. Under the terms of the merger
agreement, First National shareholders will receive compensation of $750.08 per
share for each First National share (for an aggregate consideration amount of
approximately $60 million), payable in the form of Carolina First Corporation
common stock. The per share consideration increases to $769.89 in the event that
the closing of the transaction occurs after September 30, 1998. The fair market
value of Carolina First Corporation common stock will be determined in a manner
similar to which it is being determined for purposes of the Merger (i.e., based
on the 20 trading days immediately prior to the closing date of the transaction,
except in certain instances involving a change of control, in which case the
value may be determined based on the 20 trading days immediately prior to the
announcement regarding such matter).
PENDING ACQUISITION OF COLONIAL BANK OF SOUTH CAROLINA, INC. On July 9,
1998, Carolina First Corporation signed a definitive agreement to acquire
Colonial Bank of South Carolina, Inc. through the merger of Colonial with and
into Carolina First Bank. Colonial is a state-chartered banking corporation
headquartered in Camden, South Carolina. At June 30, 1998, Colonial operated
through four locations and had total assets, loans, deposits and shareholders'
equity of approximately $59.8 million, $48.1 million, $43.0 million and $5.3
million, respectively. Under the terms of the merger agreement, Colonial
shareholders will receive compensation of $23.00 per share for each Colonial
share (for an aggregate consideration amount of approximately $12.8 million,
excluding the shares owned by Carolina First Corporation), payable in the form
of Carolina First Corporation common stock. The Carolina First Corporation
common stock will be determined in a manner similar to which it is being
determined for purposes of the Merger (i.e., based on the 20 trading days
immediately prior to the closing date of the transaction, except in certain
instances involving a change of control, in which case the value may be
determined based on the 20 trading days immediately prior to the announcement
regarding such matter).
OTHER ACQUISITIONS. Carolina First Corporation continues to explore
opportunities to acquire banks and other companies engaging in financial
institutions-related activities. It is not presently known whether, or on what
terms, such discussions will result in further acquisitions. Carolina First
Corporation's acquisition strategy is flexible in that it does not require
Carolina First Corporation to effect specific acquisitions so as to enter
certain markets or to attain specified growth levels. Rather than being market
driven or size motivated, Carolina First Corporation's acquisition strategy
reflects its willingness to consider potential acquisitions wherever and
whenever such opportunities arise based on the then-existing market conditions
and other circumstances. Carolina First Corporation's acquisitions may be made
by the exchange of stock, through cash purchases, or with other consideration.
Other than as described above, Carolina First Corporation does not currently
have any definitive understandings or agreements for any acquisitions material
to Carolina First Corporation. However, Carolina First Corporation anticipates
that it will continue to expand by acquisition in the future.
41
<PAGE>
INFORMATION ABOUT POINSETT
POINSETT
Poinsett is a South Carolina corporation that was organized in June 1990
and on February 15, 1991 became the holding company of Poinsett Bank. The
primary business of Poinsett is the business of Poinsett Bank.
Poinsett Bank was organized in 1958 under the name of "Poinsett Federal
Savings and Loan Association of Travelers Rest." In August 1988, it converted
from a federal mutual association to a federal capital stock association. In
August 1992, it changed its name from "Poinsett Federal Savings and Loan
Association of Travelers Rest" to its current name, "The Poinsett Bank, a
federal savings bank." Poinsett Bank conducts its business through three
offices, which are located in Travelers Rest, South Carolina, Rock Hill, South
Carolina, and Greenville, South Carolina.
Recent Developments
THIRD QUARTER 1998 EARNINGS AND FINANCIAL DATA. For the quarter ended June
30, 1998, Poinsett's net income totaled $26,000, or $0.12 per diluted share.
This represented a decrease from $120,000 for the quarter ended June 30, 1997.
In an effort to bolster Poinsett's general valuation allowance it elected to
make a provision for loan loss in the amount of $249,000 during the quarter
ended June 30, 1998. At June 30, 1998, Poinsett operated through three locations
and had total assets, loans, deposits and shareholders' equity of approximately
$88.6 million, $58.5 million, $81.6 million and $4.9 million, respectively. At
June 30, 1998, Poinsett's ratio of nonperforming assets to loans and other real
estate owned was 3.75%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion is intended to assist in understanding the financial
condition and results of operations of Poinsett and should be read in
conjunction with the financial statements and related notes contained elsewhere
herein.
EARNINGS PERFORMANCE
1997 COMPARED WITH 1996
Net income for the year ended September 30, 1997 was $337,099 or $1.79 per
share, compared with a net loss of $98,124 or ($0.53) per share for the year
ended September 30, 1996. This was an increase of $435,223 or $2.32 per share.
The improvement in earnings was achieved largely by a $764,524 or a 35% rise in
net interest income. Due to strong loan growth, the provision for loan losses
amounted to $142,113 for the year ended September 30, 1997. This compared to a
provision for loan losses of $83,921 for the year ended September 30, 1996.
Noninterest income was $614,536 and $432,549 for the years ended September 30,
1997 and 1996, respectively.
1996 COMPARED WITH 1995
Net loss for the year ended September 30, 1996 was $98,124 or ($0.53) per
share. This compared to net income of $532,123 or $2.89 per share for the year
ended September 30, 1995. This was a decrease
42
<PAGE>
of $630,247 or $3.42 per share. The drop in earnings in 1996 was largely the
result of an increase of $995,533 or 58% in noninterest expenses. Net interest
income grew by $336,711 or 18% to $2,207,909 for the year ended September 30,
1996. The provision for loan losses for the year ended September 30, 1996 was
$83,291 versus a $53,231 provision for loan losses for the year ended September
30, 1995. Noninterest income fell 42% to $432,549 for the year ended September
30, 1996.
Six Months Ended March 31, 1998 Compared with Six Months Ended March 31, 1997
Net income for the six months ended March 31, 1998 was $55,000, or $0.29 per
share. This compares to a net income of $158,000, or $0.85 per share, for the
six months ended March 31, 1997. The $104,000 decrease in net income was due to
increasing the provision for loan losses to $335,000 for the six months ended
March 31, 1998 compared with $69,000 for the comparable period a year earlier.
Management elected to increase the provision for loan losses to more
conservatively position Poinsett Bank in connection with an increase in loans
contractually past due. Net interest income and noninterest income increased
during the six months ended March 31, 1998 which was partially offset by an
increase in noninterest expenses.
NET INTEREST INCOME
Net interest income is the amount of interest earned on interest earning
assets (loans, investment securities, and federal funds sold), less the interest
expense incurred on interest bearing liabilities (interest bearing deposits),
and is the principal source of Poinsett's earnings. Net interest income is
affected by the level of interest rates, volume and mix of interest earning
assets and interest bearing liabilities and the relative funding of these
assets.
For the year ended September 30, 1997, net interest income increased
approximately $766,000 or 35% to approximately $3.0 million. Much of this growth
can be attributed to a 29% increase in loan interest income and fees. For the
fiscal years ended September 30, 1997 and 1996 loan interest income amounted to
$5.8 million and $4.5 million, respectively. Investment income declined 35% to
$286,324 for the year ended September 30, 1997. Interest expense for the twelve
months ended September 30, 1997 increased 14%. For the year ended September 30,
1997 the net interest margin improved by 0.53% to 4.38%.
Net interest income was $2.2 million and $1.9 million for the years ended
September 30, 1996 and 1995, respectively. The increase of $336,711 or 18% in
1996 when compared to 1995 is attributed to a $873,548 in interest income versus
only a $536,837 increase in interest expense. Net interest margin increased
0.04% to 3.85% for the year ended September 30, 1996.
The table, "Comparative Average Balances, Yields and Rates," provides a
detailed analysis of the effective yields and rates on the categories of
interest earning assets and interest bearing liabilities for the years ended
September 30, 1995, 1996 and 1997.
43
<PAGE>
<TABLE>
<S> <C>
COMPARATIVE AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)
Year Ended Year Ended
September 30, 1995 September 30,1996
--------------------------- --------------------------
Income/ Yield/ Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- ------- ------
ASSETS
Earning assets
Loans (including fees) $ 43,272 $ 3,725 8.61% $ 51,184 $ 4,530 8.85%
Securities 3,856 257 6.67% 4,105 301 7.33%
Federal funds sold 2,063 118 5.72% 2,040 143 7.01%
Total earnings assets 49,191 4,100 8.33% 57,329 4,974 8.68%
Non-earning assets
Cash and due from banks 487 653
Property and equipment 1,366 1,170
Other 3,760 3,466
-------- --------
Total assets $ 54,804 $ 62,618
======== ========
LIABILITIES
Interest-bearing liabilities
Demand and savings deposits $ 18,754 $ 591 3.15% $ 20,717 $ 814 3.93%
Time deposits >$100,000 7,068 385 5.45% 8,514 502 5.90%
Time deposits <$100,000 16,472 808 4.91% 19,877 1,101 5.54%
Other liabilities 6,434 444 6.90% 6,763 348 5.14%
Total interest bearing liabilities 48,728 2,228 4.57% 55,871 2,765 4.95%
Noninterest-bearing liabilities
Noninterest-bearing deposits 782 1,240
Other liabilities 907 956
--------- --------
Total liabilities 50,417 58,067
Shareholders' equity 4,387 4,551
Total liabilities and shareholders'
equity $ 54,804 $ 62,618
========= ========
Net interest income and net yield
on earning assets (1) $ 1,872 3.81% $ 2,209 3.85%
======= =======
Interest rate spread (2) 3.76% 3.73%
<CAPTION>
Year Ended
September 30, 1997
------------------------
Income/ Yield/
Balance Expense Rate
-------- -------- ------
ASSETS
Earning assets
Loans (including fees) $ 62,026 $ 5,839 9.41%
Securities 2,093 124 5.92%
Federal funds sold 3,802 165 4.34%
Total earnings assets 67,921 6,128 9.02%
Non-earning assets
Cash and due from banks 687
Property and equipment 2,134
Other 1,446
--------
Total assets $ 72,188
========
LIABILITIES
Interest-bearing liabilities
Demand and savings deposits $ 29,094 $ 1,214 4.17%
Time deposits >$100,000 14,982 849 5.67%
Time deposits <$100,000 18,540 894 4.82%
Other liabilities 1,534 196 12.76%
Total interest bearing liabilities 64,150 3,153 4.92%
Noninterest-bearing liabilities
Noninterest-bearing deposits 2,863
Other liabilities 535
---------
Total liabilities 67,548
Shareholders' equity 4,640
Total liabilities and shareholders'
equity $ 72,188
========
Net interest income and net yield
on earning assets (1) $ 2,975 4.38%
=======
Interest rate spread (2) 4.11%
- -------------------------------------
</TABLE>
(1) Net interest income divided by total average earning assets.
(2) Total interest earning assets yield minus total interest bearing liabilities
rate.
44
<PAGE>
The table, "Volume and Rate Variance Analysis," provides a summary of
changes in net interest income resulting from changes in volumes of interest
earning assets and interest bearing liabilities, and the rates earned and paid
on such assets and liabilities. As reflected in the table, net interest income
for fiscal 1997 increased $766,000. Increases in volume accounted for $568,000
of such increase, while changes in rates accounted for $198,000 of the increase.
In 1996, increased volumes accounted for $369,000 of the increase in net
interest income Changes in rates accounted for a $29,000 decrease, for a total
increase in net interest income of $337,000. The rate/volume variance for each
category has been allocated on a consistent basis between rate and volume
variances based on the percentage of rate or volume variance to the sum of the
two absolute variances.
<TABLE>
<S> <C>
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in thousands)
September 30, 1996 compared September 30, 1995 compared
to September 30, 1997 to September 30, 1996
-------------------------------- ------------------------------------
Amount Amount Amount Amount
Caused Caused Caused Caused
By By By By
Total Change in Change in Total Change in Change in
Change Volume (1) Rate (1) Change Volume (1) Rate (1)
------- ----------- -------- ------- ---------- ----------
Earning assets
Loans (including fees) $ 1,309 $ 960 $ 349 $ 805 $ 682 $ 123
Securities (177) (148) (29) 44 18 26
Federal funds sold 22 123 (101) 25 (0) 25
------- ------- ------- ------- ------- -------
Total interest income 1,154 935 219 874 700 174
------- ------- ------- ------- ------- -------
Interest-bearing liabilities
Demand and savings deposits $ 400 $ 329 $ 71 $ 223 $ 62 $ 161
Time deposits >$100,000 347 381 (34) 117 79 38
Time deposits <$100,000 (207) (74) (133) 293 167 126
Other liabilities (152) (269) 117 (96) 23 (119)
------- ------- ------- ------- ------- -------
Total interest expense 388 367 21 537 331 206
------- ------- ------- ------- ------- -------
Net interest income $ 766 $ 568 $ 198 $ 337 $ 369 $ (32)
======= ======= ======= ======= ======= =======
- ---------------------
</TABLE>
(1) The rate/volume variance for each category has been allocated on a
consistent basis between rate and volume variances based on the
percentage of rate or volume variance to the sum of the two absolute
variances.
INTEREST RATE SENSITIVITY
Interest rate sensitivity management is concerned with the management of
the timing and magnitude of repricing assets compared to liabilities and is an
important part of asset/liability management. It is the objective of interest
rate sensitivity management to generate stable growth in net interest income,
and to control the risks associated with interest rate movement. The
Asset/Liability Management Committee, along with Poinsett's asset/liability
management consultant, reviews interest rate risk exposure and the expected
interest rate environment on a monthly basis so that adjustments in interest
rate sensitivity can be timely made.
The table, "Interest Sensitivity Analysis," indicates that, on a
cumulative basis through twelve months, rate sensitive liabilities exceeded rate
sensitive assets, resulting in a liability sensitive position at September 30,
1997 of $27 million. When interest sensitive assets exceed interest sensitive
liabilities for a
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<PAGE>
specific repricing "horizon," a positive interest sensitivity gap results. The
gap is negative when interest sensitive liabilities exceed interest sensitive
assets, as is the case at September 30, 1997 with respect to the one year time
horizon. For a bank with a negative gap, falling interest rates would be
expected to have a positive effect on net interest income and rising rates would
be expected to have the opposite effect.
The table below reflects the balances of interest earnings assets and
interest bearing liabilities at the earlier of their repricing or maturity
dates. Scheduled payment amounts to amortizing fixed rate loans are reflected at
each scheduled payment date. Variable rate amortizing loans reflect scheduled
payments at each scheduled payment date until the loan may be repriced
contractually; the unamortized balances are reflected at that point. Overnight
federal funds sold are reflected in the earliest repricing interval due to the
immediately available nature of these funds. Interest bearing liabilities with
no contractual maturity, such as interest bearing transaction accounts and
savings deposits are reflected in the earliest repricing interval due to
contractual arrangements which give management the opportunity to vary the rates
paid on these deposits within a thirty-day or shorter period. However, Poinsett
is under no obligation to vary the rates paid on those deposits within any given
period. Fixed rate time deposits, principally certificates of deposit, are
reflected at their contractual maturity dates. Variable rate time deposits,
principally Individual Retirement Accounts, are reflected at the earlier of
their next repricing or maturity dates.
46
<PAGE>
<TABLE>
<S> <C>
INTEREST RATE SENSITIVITY AS OF SEPTEMBER 30, 1997
(Dollars in thousands)
Within 4-12 Over 1-5 Over 5
3 months months years years Total
-------- -------- ------- ------- -------
Assets
Earning assets
Loans (including fees) $ 13,533 $ 20,213 $25,297 $ 9,933 $68,976
Securities -- 25 425 -- 450
Federal funds sold 4,966 -- -- -- 4,966
Total earning assets 18,499 20,238 25,722 9,933 74,392
Non-earning assets
Cash and due from banks -- -- -- 579 579
Property and equipment -- -- -- 1,377 1,377
Other -- -- -- 2,324 2,324
------- ------- ------- ------- -------
Total assets $ 18,499 $ 20,238 $25,722 $14,213 $78,672
======= ======= ======= ======= =======
LIABILITIES
Interest-bearing liabilities
Demand and savings deposits $ 33,319 $ -- $ -- $ -- $33,319
Time deposits >$100,000 7,486 10,639 1,576 -- 19,701
Time deposits <$100,000 5,804 8,471 1,245 -- 15,520
-------- ------- ------ ------ --------
Total interest bearing liabilities 46,609 19,110 2,821 -- 68,540
Noninterest-bearing liabilities
Non-interest bearing deposits -- -- -- 4,281 4,281
Other liabilities -- -- -- 1,001 1,001
-------- ------- ------ ------- --------
Total liabilities 46,609 19,110 2,821 5,282 73,822
Shareholders' equity -- -- -- 4,850 4,850
-------- ------- ------ ------- --------
Total liabilities and shareholders'
equity $ 46,609 $ 19,110 $ 2,821 $10,132 $78,672
========= ======= ====== ======= =======
Interest sensitive gap $ (28,110) $ 1,128 $22,901 $ 9,933 $ 5,852
Cumulative interest sensitive gap $ (28,110) $(26,982 $(4,081) $ 5,852 $ --
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses is charged to earnings based on management's
continuing review and evaluation of the loan portfolio and general economic
conditions. Provisions for loan losses were $142,113 and $83,921 for the years
ended September 30, 1997 and 1996, respectively. The larger provision in 1997
resulted principally from an increase in loan volume.
Net loan charge-offs for fiscal 1997 totaled $21,000, compared with
$52,000 in fiscal 1996. For the six months ended March 31, 1998, the provision
for loan losses was $256,000 and for the same period, net charge-offs were
$9,000. Management is not aware of any trend toward significantly higher
charge-offs in any particular loan category in fiscal 1997. See "Nonperforming
Loans; Other Problem Assets" and "Allowance for Loan Losses" for a discussion of
the factors management considers in its review of the adequacy of the allowance
and provisions for loan losses.
OTHER INCOME
For the year ended September 30, 1997, other income increased $181,987 or
42% from the same period in 1996. This increase primarily resulted from an
increase in gains on the sale of real estate of $50,915 and an $80,311 increase
in service fees on deposits.
For the year ended September 30, 1996, other income decreased $320,582 or
43% from the comparable period in 1995, primarily resulting from a decline in
unrealized gains on real estate held for sale.
GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended September 30, 1997, general and administrative expenses
grew $175,999 or 0.07% to $2,884,507. The increased expenses reflect slightly
higher salaries and employee benefits, but are offset by lower deposit insurance
premiums.
General and administrative expenses for the year ended September 30, 1996
increased $995,533 or 58% over the comparable period in 1995. The increased
expenses reflect higher salaries and employee benefits, higher deposit insurance
premiums, and higher advertising and other general expenses.
INCOME TAXES
For fiscal 1997, federal and state income tax expense was $223,250
compared to an income tax benefit of $53,847 for fiscal 1996. Income taxes for
fiscal 1997 were charged to expense at the regular income tax rates. Management
estimates that the effective combined federal and state income tax rates on
income before income taxes will be approximately 38% for fiscal 1998.
INVESTMENT PORTFOLIO
At September 30, 1997, securities comprised approximately .006% of
Poinsett's assets. The following table summarizes the carrying value amounts of
securities held by Poinsett at each of the dates indicated. Available-for-sale
securities are stated at estimated fair value and held-to-maturity and
investment securities are stated at amortized cost.
48
<PAGE>
<TABLE>
<S> <C>
SECURITIES PORTFOLIO COMPOSITION
(Dollars in thousands)
September 30,
1996 1997
---- ----
Net Unrealized
Book Holding Fair Book
Value Gain/(Loss) Value Value
-------- ----------- -------- -------
AVAILABLE FOR SALE:
U.S. Treasury obligations $ -- $ -- $ -- $ --
U.S. Agency obligations 1,915 4 1,919 300
Municipal obligations 175 -- 175 150
Mortgage backed obligations 1,133 4 1,137 --
Corporate obligations -- -- -- --
--------- --------- -------- -------
$ 3,223 $ 8 $ 3,231 $ 450
========= ========= ========= =======
HELD TO MATURITY:
U.S. Treasury obligations $ -- $ -- $ -- $ --
U.S. Agency obligations 500 (17) 483 --
Municipal obligations -- -- -- --
--------- --------- --------- -------
$ 500 $ (17) $ 483 $ --
========= ========= ========= =======
<CAPTION>
March 31,
1998
-----
Net Unrealized Net Unrealized
Holding Fair Book Holding Fair
Gain/(Loss) Value Value Gain/(Loss) Value
------- --------- ------ ----------- --------
AVAILABLE FOR SALE:
U.S. Treasury obligations $ -- $ -- $ -- $ -- --
U.S. Agency obligations -- 300 600 (2) 598
Municipal obligations 6 156 150 6 156
Mortgage backed obligations -- -- 250 -- 250
Corporate obligations -- -- -- -- --
------ ------ ------ ------ -------
$ 6 $ 456 $1,000 $ 4 $ 1,004
====== ====== ====== ====== =======
HELD TO MATURITY:
U.S. Treasury obligations $ -- $ -- $ -- $ -- --
U.S. Agency obligations -- -- -- -- --
Municipal obligations -- -- -- -- --
------- ------- ------ ------ --------
$ -- $ -- $ -- $ -- $ --
======= ======= ====== ====== ========
</TABLE>
SECURITIES PORTFOLIO MATURITIES AND YIELDS
(Dollars in thousands) March 31, 1998
Book Value Yield (%)
---------- --------
AVAILABLE FOR SALE:
U.S. Agency obligations:
1 to 5 years $300 6.2%
Municipal obligations:
1 to 5 years 125 6.75
5 to 10 years 25 6.75
49
<PAGE>
LOAN PORTFOLIO COMPOSITION
Management believes the loan portfolio is adequately diversified. There
are no significant concentrations of loans in any particular individuals or
industry or group of related individuals or industries, and there are no foreign
loans.
The amount of loans outstanding at September 30, 1996 and 1997 and at March
31, 1998 are shown in the following table according to type of loan:
September 30, March 31,
------------- ---------
1996 1997 1998
(Dollars in thousands)
Real estate - mortgage $ 45,070 $ 55,330 $ 51,536
Real estate - construction 2,416 4,044 3,459
Commercial 1,430 918 1,180
Installment loans to individuals 6,382 9,027 12,426
------- -------- --------
$ 55,298 $ 69,319 $ 68,601
======== ======== ========
A certain degree of risk taking is inherent in the extension of credit.
Management has established loan and credit policies designed to control both the
types and amounts of risks assumed and to ultimately minimize losses. Such
policies include limitations on loan-to-collateral values for various types of
collateral, requirements for appraisals of real estate collateral, problem loan
management practices and collection procedures, and nonaccrual and charge-off
guidelines.
Commercial loans primarily represent loans made to businesses, and may be
made on either a secured or an unsecured basis. When taken, collateral consists
of liens on receivables, equipment, inventories, furniture and fixtures.
Unsecured business loans are generally short-term with emphasis on repayment
strengths and low debt to worth ratios. Commercial lending involves significant
risk because repayment usually depends on the cash flows generated by a
borrower's business, and the debt service capacity of a business can deteriorate
because of downturns in national and local economic conditions. To control risk,
sophisticated initial and continuing financial analysis of a borrower's
financial information is required.
Real estate construction loans generally consist of financing the
construction of one-to-four family dwellings and some nonfarm, nonresidential
real estate. Usually, loan to cost ratios are limited to 75% and permanent
financing commitments are required prior to the advancement of loan proceeds.
Loans secured by real estate mortgages comprised approximately 79.8% and
81.5% of Poinsett's loan portfolio at the end of fiscal 1997 and fiscal 1996,
respectively. Residential real estate loans consist mainly of first and second
mortgages on single family homes, with some multifamily loans. Loan-to-value
ratios for these instruments are generally limited to 95%. Nonfarm,
nonresidential loans are secured by business and commercial properties with
loan-to-value ratios generally limited to 80%. The repayment of both residential
and business real estate loans is dependent primarily on the income and cash
flows of the borrowers, with the real estate serving as a secondary or
liquidation source of repayment.
50
<PAGE>
NONACCRUAL AND PAST DUE LOANS; OTHER PROBLEM ASSETS
(Dollars in thousands)
September 30, March 31,
------------------------ -------------
1996 1997 1998
----- ----- -----
Non-accrual loans $ -- $ -- $ --
Loans contractually past due 1,224 611 1,867
90 days or more on which
interest is still being accrued.
Other real estate owned -- -- 219
----- ------- ------
Total nonperforming assets $ 1,224 $ 611 $ 2,086
======= ======= ======
When a loan is 90 days past due as to interest or principal or there is
serious doubt as to collectibility, the accrual of interest income is generally
discontinued unless the estimated net realizable value of collateral is
sufficient to assure collection of the principal balance and accrued interest.
Previously accrued interest on loans placed in a nonaccrual status is reversed
against current income, and subsequent interest income is recognized when
received. At March 31, 1998, Poinsett had no non-accrual loans, $1.9 million in
loans past due 90 days and still accruing interest, and $219,000 in other real
estate owned, compared to $0, $611,000 and $0 respectively, at September 30,
1997.
When the collectibility of a significant amount of principal is in serious
doubt, the principal balance is reduced to the estimated fair value of
collateral by charge-off to the allowance for loan losses and any subsequent
collections are credited first to the remaining principal balance and then to
the allowance for loan losses as a recovery of the amount charged off. A
nonaccrual loan is not returned to accrual status unless principal and interest
are current and the borrower has demonstrated the ability to continue making
payments as agreed.
Net loan charge-offs for fiscal 1997 were $21,000 or 0.03% of average loans
compared to $52,000 or 0.1% of average loans for fiscal 1996.
POTENTIAL PROBLEM LOANS
Management has identified and maintains a list of potential problem loans.
These are loans that are not included in the nonaccrual or the past due 90 days
or more and still accruing categories. A loan is added to the potential problem
list when management becomes aware of information about possible credit problems
of borrowers that causes serious doubts as to the ability of such borrowers to
comply with the current loan repayment terms.
The total amount of loans determined by management to be potential problem
loans was $735,000 at September 30, 1997 and $1.0 million at March 31, 1998.
These amounts do not represent management's estimate of potential losses since a
large proportion of such loans is secured by various types of collateral.
OTHER REAL ESTATE OWNED
Real estate owned consists of foreclosed and in-substance foreclosed
properties and was $219,000 at March 31, 1998, $0 at September 30, 1997 and $0
at September 30, 1996. Real estate owned is located
51
<PAGE>
in areas where sales of the property are expected to be moderate or better. Real
estate owned is initially recorded at the lower of net loan principal balance or
its estimated fair market value less estimated selling costs. The estimated fair
value is determined by appraisal at the time of acquisition.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by direct charges to operating
expense. Losses on loans are charged against the allowance in the period in
which management has determined that it is more likely than not such loans have
become uncollectible. Recoveries of previously charged off loans are credited to
the allowance. The table, "Summary of Loan Loss Experience," summarizes loan
balances at the end of each period indicated, changes in the allowance arising
from charge-offs and recoveries by loan category, and additions to the allowance
which have been charged to expense.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands) Years Ended Six Months Ended
September 30, March 31,
------------------
1996 1997 1998
---- ----- -----
Balance at beginning of period $ 190 $ 222 $ 343
Charge-offs:
Real estate -- -- --
Installment (52) (21) (174)
Commercial -- -- --
Recoveries:
Real estate -- -- --
Installment -- -- 57
Commercial -- -- --
-------- -------- -------
Net charge-offs (52) (21) (117)
Provision charged to expense 84 142 335
-------- -------- -------
Balance at end of period $ 222 $ 343 $ 561
======== ======== =======
Net charge-offs to average loans 0.10% 0.03% 0.22%
======== ======== =======
In reviewing the adequacy of the allowance for loan losses at each year
end, management took into consideration the historical loan losses experienced
by Poinsett, current economic conditions affecting the borrowers' ability to
repay, the volume of loans, the trends in delinquent, nonaccruing, and potential
problem loans, and the quality of collateral securing nonperforming and problem
loans. After charging off all known losses, management considers the allowance
for loan losses adequate to cover its estimate of possible future loan losses
inherent in the loan portfolio as of September 30, 1997 and at March 31, 1998.
In calculating the amount required in the allowance for loan losses,
management applies a consistent methodology that is updated monthly. The
methodology utilizes a loan risk grading system, detailed loan reviews to assess
credit risks, mix of the loan portfolio and the overall quality of the loan
portfolio, as well as other off-balance-sheet credit risks such as loan
commitments and standby letters of credit. Also, the calculation provides for
management's assessment of trends in national and local economic conditions that
might affect the general quality of the loan portfolio. Regulators review the
adequacy of the allowance for loan losses as part of their examination of
Poinsett and may require adjustments to the allowance based upon information
available to them at the time of the examination. Although management's
calculation of the allowance for loan losses does not provide an allocation by
individual loan categories, the various categories have differing degrees of
risk.
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<PAGE>
DEPOSITS
The average amounts and percentage composition of deposits held by
Poinsett for the years ended September 30, 1997 and 1996 and the six months
ended March 31, 1998 are summarized below:
<TABLE>
<S> <C>
AVERAGE DEPOSITS
(Dollars in thousands) September 30, March 31,
-------------------------- ----------
1996 1997 1998
Amount % Amount % Amount %
-------- --- ------- --- ------ ----
Noninterest-bearing demand $ 1,240 2.5% $ 2,863 4.4% $ 3,493 4.5%
Interest-bearing demand and savings 20,717 41.1 29,094 44.4 38,228 49.5
Time deposits $100,000 and greater 8,514 16.9 14,982 22.9 22,465 29.1
Time deposits under $100,000 19,877 39.5 18,540 28.3 13,068 16.9
-------- ----- -------- ----- -------- -----
$ 50,348 100.0% $ 65,479 100.0% $ 77,254 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
As of September 30, 1997, Poinsett held $15.0 million in time deposits of
$100,000 or more. Average wholesale time deposits (certificates generated
through corporations, banks, credit unions, etc., on a national level) were $8.5
million in fiscal 1996 and $22.5 million through the first six months of fiscal
1998. The vast majority of time deposits of $100,000 and over are acquired from
customers within Poinsett's service area in the ordinary course of business.
It is a common industry practice not to consider these types of deposits
as core deposits because their retention can be expected to be heavily
influenced by rates offered, and therefore they have the characteristics of
shorter-term purchased funds. Wholesale time deposits involve the maintenance of
an appropriate matching of maturity distribution and a diversification of
sources to achieve an appropriate level of liquidity. Such deposits are
generally more volatile and interest rate sensitive than other deposits.
RETURN ON EQUITY AND ASSETS
The following table shows the return on assets (net income divided by
average total assets), return on equity (net income divided by average equity),
and equity to assets ratio (average equity divided by average total assets) for
each period indicated.
<TABLE>
<S> <C>
For The
Six Months
For The Years Ended Ended
September 30, March 31,
----------------------- --------------
1996 1997 1998
---- ---- ----
Return on average equity (annualized) (2.15)% 7.26% 2.25%
Return on average assets (annualized) (0.16) 0.47 0.13
Average equity to average assets 7.27 6.43 5.83
</TABLE>
LIQUIDITY
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of additional
liabilities. Adequate liquidity is necessary to meet the requirements of
customers for loans and deposit withdrawals in the most timely and economical
manner. Some liquidity is ensured by maintaining assets which may be immediately
converted into cash at minimal
53
<PAGE>
cost (amounts due from banks and federal funds sold). However, the most
manageable sources of liquidity are composed of liabilities, with the primary
focus on liquidity management being on the ability to obtain deposits within
Poinsett's service area. Core deposits (total deposits less wholesale time
deposits) provide a relatively stable funding base. Average core deposits were
equal to 65% of average assets for the year ended September 30, 1997. Asset
liquidity is provided from several sources, including amounts due from banks and
federal funds sold, and funds from maturing loans. Poinsett also has available
unused short-term lines of credit to purchase up to $2.0 million of federal
funds from unrelated correspondent institutions. Management believes that
Poinsett's overall liquidity sources are adequate to meet its operating needs.
CAPITAL RESOURCES
The equity capital of Poinsett increased by $420,331 during fiscal 1997 as
the result of net income. Equity capital decreased $242,577 during fiscal 1996,
largely as a result of a net loss in earnings for the year. During the six
months of the 1998 fiscal year, Poinsett increased equity capital $54,000 to
$4.9 million.
Poinsett is subject to regulatory capital adequacy standards. Under these
standards, financial institutions are required to maintain certain minimum
ratios of capital to risk-weighted assets and average total assets. Under the
provisions of the FDIC, federal financial institution regulatory authorities are
required to implement prescribed "prompt corrective actions" upon the
deterioration of the capital position of a bank. If the capital position of an
affected institution were to fall below certain levels, increasingly stringent
regulatory corrective actions are mandated.
Poinsett's September 30, 1997 capital ratios are presented in the
following table, compared with the "well capitalized" and minimum ratios under
the FDIC regulatory definitions and guidelines:
<TABLE>
<CAPTION>
<S> <C>
As a Percentage of
Adjusted Total Assets
---------------------- As a Percentage of
Core Tangible Risk Weighted Assets
------- --------- -------------------
Poinsett
September 30, 1997 5.5% 5.5% 9.5%
March 31, 1998 6.2% 6.2% 11.3%
"Well Capitalized" requirement 5.0% n/a n/a
Minimum requirement 3.0% 1.5% 8.0%
</TABLE>
INFLATION
Since the assets and liabilities of a bank are primarily monetary in
nature (payable in fixed, determinable amounts), the performance of a bank is
affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may not be the same.
While the effect of inflation on banks is normally not as significant as
is its influence on those businesses which have large investments in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally corresponding increases in the money supply, and banks will normally
experience above-average growth in assets, loans and deposits. Also, general
increases in the prices of goods and services will result in increased operating
expenses.
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<PAGE>
PROPERTIES
Poinsett owns the real property where its main office is located at 6514-B
State Park Road, Travelers Rest, South Carolina, where its main offices are
located. The net book value of the main office is approximately $392,000. It
leases the property associated with its other two branch facilities. Both leases
associated with these branches expire in 2015. The lessors under the leases are
Oakland Group, LLC (in the case of the Rock Hill branch facility) and Brendan
Group, LLC (in the case of the Greenville branch facility). Rental payments will
respect to the Greenville and Rock Hill branches total approximately $100,000
and $35,000 per year, respectively. James D. King, Sr, James D. King, Jr. and
Edward Blakemore are principals in both of the lessors.
Management of Poinsett believes that all of Poinsett's offices are
suitable and adequate for the business of Poinsett.
EMPLOYEES
At March 31, 1998, Poinsett employed 38 persons on a full-time equivalent
basis.
MONETARY POLICIES
The results of operations of Poinsett are affected by credit policies of
monetary authorities, particularly the Federal Reserve. The instruments of
monetary policy employed by the Federal Reserve include open market operations
in U.S. Government securities, changes in the discount rate on member bank
borrowings, changes in reserve requirements against member bank deposits and
limitations on interest rates which member banks may pay on time, and savings
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of Poinsett.
LEGAL PROCEEDINGS
Poinsett is from time to time engaged in routine litigation in the
ordinary course of its business, but is not engaged in any litigation that is
expected to have a material adverse effect on Poinsett's business or results of
operations. There are no material proceedings known to Poinsett, pending or
contemplated, in which any director, officer or affiliate of Poinsett or any
holder of 5% or more of Poinsett's outstanding stock, or any associate of any of
the foregoing, is a party or has an interest adverse to Poinsett.
55
<PAGE>
MANAGEMENT INFORMATION
MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF POINSETT FINANCIAL CORPORATION
The following table sets forth (i) as of August 1, 1998, the number and
percent of total outstanding shares of Poinsett common stock beneficially owned
by all directors and executive officers of Poinsett individually and by all
directors and executive officers of Poinsett as a group, and (ii) pro forma upon
consummation of the Merger, the number and percent of total outstanding shares
of CFC common stock beneficially owned by such persons individually and as a
group. The pro forma calculation assumes that all shares of Poinsett common
stock held by such persons are converted solely into CFC common stock.
<TABLE>
<CAPTION>
<S> <C>
Pro Forma After Merger
-------------------------------------------------
Number of Number of
Name and address of Poinsett Shares Percent Carolina First Corporation Percent
5% Beneficial Owner Beneficially Owned of Class Shares Beneficially Owned of Class
- ------------------- ---------------------- -------- --------------------------- ----------
James D. King (1) 59,601 26.33% 187,970 *
201 E. Round Hill Rd.
Greenville, SC 29609
Beauford W. Williams (2) 4,153 1.83% 13,098 *
William C. Bates (3) 2,582 1.14% 8,143 *
D. Rudolph Blakely (4) 12,768 5.64% 40,268 *
1127 Tubbs Mtn Rd.
Travelers Rest, SC 29690
Calvin H. Garrett (5) 8,943 3.95% 28,204 *
William E. Tucker 4,068 1.80% 12,829 *
Louise P. Ellenburg (6) 12,224 5.40% 38,552 *
6 Highlander Ct.
Travelers Rest, SC 29690
James D. King, Jr. (7) 4,316 1.91% 13,612 *
Edward R. Blakemore, Jr. (8) 2,673 1.18% 8,430 *
All Executive Officers and
Directors as a group
(9 persons)(9) 111,328 49.18% 351,106 1.86%
* Less than 1%.
(1) Includes exercisable options to purchase 30,000 shares; 13,159 shares held in Mr. King's profit sharing plan;
4,501 shares in Mr. King's ESOP and 500 shares held by his wife.
(2) Includes 3,653 shares held in Mr. Williams' IRA; 500 shares owned by Mr. Williams' wife.
(3) Includes 1,701 shares held in Mr. Bates' IRA.
(4) Includes 1,207 shares held in Mr. Blakely's IRA; 1,293 shares held in Mr. Blakely's wife's IRA; and 325 shares
owned by Mr. Blakely's wife.
(5) Includes 4,981 shares held in Mr. Garrett's IRA.
(6) Includes 6,739 shares held in Mrs. Ellenburg's profit sharing plan; 2,360 shares in Mrs. Ellenburg's ESOP and
125 shares owned by Mrs. Ellenburg's husband.
(7) Includes exercisable options to purchase 3,000 shares; 471 shares held in Mr. King's profit sharing plan; and 820
shares held in Mr. King's ESOP.
(8) Includes 849 shares held in Mr. Blakemore's profit sharing plan and 1,724 shares held in Mr. Blakemore's ESOP.
(9) Includes exercisable options to purchase 33,000 shares.
</TABLE>
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<PAGE>
CERTAIN TRANSACTIONS
Poinsett had outstanding loans to certain of Poinsett's directors,
executive officers, their associates and members of the immediate families of
such directors and executive officers. None of these loans are nonaccrual, past
due, restructured, or potential problems. These loans were all made in the
ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with persons not affiliated with Poinsett and did not
involve more than the normal risk of collectibility or present other unfavorable
features.
Poinsett leases the property associated with its two branch facilities. The
lessors under the leases are Oakland Group, LLC (in the case of the Rock Hill
branch facility) and Brendan Group, LLC (in the case of the Greenville branch
facility). Rental payments will respect to the Greenville and Rock Hill branches
total approximately $100,000 and $35,000 per year, respectively. James D. King,
Sr, James D. King, Jr. and Edward Blakemore, Jr. are principals in both of the
lessors.
57
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time, the shares of Poinsett common stock will be
converted into shares of Carolina First Corporation common stock with the
exception of fractional shares, which will be exchanged for cash. Accordingly,
shareholders of Poinsett will become shareholders of Carolina First Corporation,
and their rights as Carolina First Corporation shareholders will be determined
by Carolina First Corporation's Articles of Incorporation and Bylaws. The rights
of Carolina First Corporation shareholders differ from the rights of Poinsett's
shareholders with respect to certain matters, including the required shareholder
votes as to mergers, consolidations, exchanges, sales of assets or dissolution,
removal of directors and amendments to the articles of incorporation, nomination
of directors, and statutory and other restrictions on certain business
combinations and control share acquisitions.
A comparison of the respective rights of Poinsett's shareholders and
Carolina First Corporation's shareholders with respect to these matters is set
forth immediately below. A description of the Carolina First Corporation common
stock is set forth below under "CAROLINA FIRST CORPORATION CAPITAL STOCK."
GENERAL
Carolina First Corporation is a bank holding corporation subject to the
provisions of the SCBCA. Poinsett is a savings and loan holding company also
subject to the provisions of the SCBCA. Shareholders of Poinsett will, upon
consummation of the Merger become shareholders of Carolina First Corporation
and, accordingly, their rights as shareholders will be governed by the SCBCA and
the Articles of Incorporation and Bylaws of Carolina First Corporation.
Set forth below are the material differences between the rights of a
Poinsett shareholder under the Poinsett Articles of Incorporation and Bylaws,
and the rights of a Carolina First Corporation shareholder under the Carolina
First Corporation Articles of Incorporation and Bylaws.
The following summary does not reflect any rules of Nasdaq that may apply
to Poinsett or Carolina First Corporation in connection with the matters
discussed. This summary does not purport to be a complete discussion of, and is
qualified in its entirety by reference to, the SCBCA and the constituent
documents of each corporation.
AUTHORIZED CAPITAL
POINSETT. The authorized capital stock of Poinsett consists of 15,000,000
shares of Poinsett common stock (par value $0.01 per share) and 5,000,000 shares
of preferred stock (par value $0.01 per share). As of August 4, 1998, Poinsett
had 193,365 shares of common stock outstanding and no shares of preferred stock
outstanding.
CAROLINA FIRST CORPORATION. The authorized capital stock of Carolina First
Corporation consists of 100,000,000 shares of Carolina First Corporation common
stock (par value $1.00 per share) and 10,000,000 shares of Carolina First
Corporation preferred stock. As of August 4, 1998, Carolina First Corporation
had 18,152,750 shares of common stock outstanding and no shares of preferred
stock outstanding.
58
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION OR BYLAWS
POINSETT. Pursuant to Poinsett's Articles of Incorporation, the approval
of two-thirds of Poinsett's directors and holders of two-thirds of Poinsett's
shares entitled to vote is required to amend its Articles of Incorporation,
except that the approval of holders of only a majority of Poinsett's shares
entitled to vote thereon is required to amend certain provisions thereof,
including the provisions relating to its name, corporate purpose, duration,
capital stock, preemptive rights, and supermajority voting provisions applicable
to certain business combinations.
Pursuant to Poinsett's Articles of Incorporation, the approval of
two-thirds of Poinsett's directors is required to amend its Bylaws. The Poinsett
Bylaws may also be amended by the Poinsett shareholders upon the approval of
holders of at least two-thirds of Poinsett's shares entitled to vote generally
in the election of directors.
CAROLINA FIRST CORPORATION. The approval of two-thirds of Carolina First
Corporation shares entitled to vote is required to amend its Articles of
Incorporation. However, Carolina First Corporation's Articles of Incorporation
require an 80% affirmative vote of shareholders entitled to vote thereon to
amend provisions of its Articles of Incorporation relating to the following
issues unless 80% of the directors approve the amendment:
(i) supermajority voting requirements to approve certain mergers,
sales or exchanges of assets or stock exchanges (See
"--Shareholder Voting in Certain Business Combinations");
(ii) provisions regarding the Board of Directors' powers to
evaluate proposals for business combinations;
(iii) provision of notice requirements for shareholder nominations
of directors;
(iv) supermajority voting requirements for removal of directors
without cause;
(v) provision of staggered terms for three classes of directors;
and
(vi) supermajority voting provisions for dissolution of Carolina
First Corporation.
If 80% of the directors approve amendments pertaining to the Articles of
Incorporation listed above, then only a two-thirds affirmative vote of
shareholders is needed to approve the amendments.
Carolina First Corporation's Board of Directors may amend or repeal its
Bylaws unless: (i) the Articles of Incorporation or the SCBCA reserve this power
exclusively to shareholders; (ii) Carolina First Corporation shareholders in
adopting, amending or repealing any bylaw provide expressly that the board of
directors may not amend that bylaw; or (iii) the bylaw either established,
amends or deletes a supermajority shareholder quorum or voting requirement.
Amendments to the Bylaws by the Board of Directors must be proposed at a meeting
of the Board of Directors prior to the meeting at which such amendments are
adopted. Carolina First Corporation's Bylaws may also be amended by a majority
vote of Carolina First Corporation shareholders.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
POINSETT. The Poinsett Articles of Incorporation permit the Board of
Directors to have from five to 15 directors. The Bylaws currently set the number
of directors at six. The Poinsett Board is not "staggered" into two or more
classes. The Poinsett Articles of Incorporation provide that there will be no
cumulative voting for directors.
59
<PAGE>
CAROLINA FIRST CORPORATION. Carolina First Corporation's Bylaws provide
that the number of directors shall be determined by action of the board or
shareholders at any board meeting or annual meeting of shareholders. The
Carolina First Corporation Board of Directors currently consists of 13 persons.
Carolina First Corporation's Articles of Incorporation divide the Carolina First
Corporation Board into three classes. Carolina First Corporation's Articles of
Incorporation provide that there will be no cumulative voting for directors.
SHAREHOLDER NOMINATION OF DIRECTORS
POINSETT. Under Poinsett's Articles of Incorporation, shareholders
entitled to vote to elect directors may nominate directors for election.
Nominations must be received at the principal executive offices of Poinsett no
less than 30 days and no more than 90 days before the annual meeting at which
directors are elected. If shareholders are given less than 45 days notice of a
special meeting, they must submit nominations within 15 days of the day on which
notice of the meeting was mailed to shareholders. Nominations must conform to
informational requirements stated in the Articles of Incorporation. Holders of
Poinsett preferred stock may elect directors under specified circumstances.
CAROLINA FIRST CORPORATION. Under Carolina First Corporation's Bylaws,
shareholders entitled to vote to elect directors may nominate directors for
election. Nominations must be received at the principal executive offices of
Carolina First Corporation no later than 30 days and no earlier than 60 days
before the annual meeting at which directors are elected. Nominations must
conform to informational requirements stated in the Bylaws. Holders of Carolina
First Corporation preferred stock may elect directors under specified
circumstances.
REMOVAL OF DIRECTORS BY SHAREHOLDERS
POINSETT. The Poinsett Articles of Incorporation provide that, except for
directors elected under specified circumstances by holders of Poinsett preferred
stock, no director may be removed except for cause and then only by an
affirmative vote of holders of at least two-thirds of the outstanding shares of
capital stock entitled to vote generally in the election of directors.
CAROLINA FIRST CORPORATION. The Carolina First Corporation Articles of
Incorporation provide that, except for directors elected under specified
circumstances by holders of Carolina First Corporation preferred stock, any
director or the entire board of directors of Carolina First Corporation may be
removed without cause by an affirmative vote of at least 80% of the outstanding
shares of capital stock. A majority of a quorum of shareholders present at a
meeting may remove a director or the entire board of directors for cause.
DIRECTOR EXCULPATION
POINSETT. The Poinsett Articles of Incorporation provide for the
elimination of personal liability of each director of Poinsett except: (i) for
any breach of the director's duty of loyalty to Poinsett or its shareholders,
(ii) for acts or omissions not made in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for improper distributions, or
(iv) for any transaction from which a director derived an improper personal
benefit. If the SCBCA is amended to further limit the personal liability of
directors, then the Articles of Incorporation provide that liability is further
eliminated or limited to the fullest extent allowable by the SCBCA.
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<PAGE>
CAROLINA FIRST CORPORATION. The Carolina First Corporation Articles of
Incorporation provide for the elimination of personal liability of each director
of Carolina First Corporation except: (i) for any breach of the director's duty
of loyalty to Carolina First Corporation or its shareholders, (ii) for acts or
omissions not made in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for improper distributions, or (iv) for any
transaction from which a director derived an improper personal benefit.
DIRECTOR AND OFFICER INDEMNIFICATION
POINSETT. The Poinsett Articles of Incorporation effectively require that
Poinsett indemnify its directors and officers to the fullest extent permissible
by law and advance expenses to the maximum extent permitted by applicable law.
CAROLINA FIRST CORPORATION. The Carolina First Corporation Bylaws provide
for indemnification of officers and directors to the fullest extent permissible
by law and for the advancement of expenses to the maximum extent permitted by
applicable law.
SHAREHOLDER MEETINGS
POINSETT. Poinsett has annual meetings, and pursuant to Poinsett's
Articles of Incorporation and Bylaws, it may have special meetings called by the
President, Chairman of the Board, the Board of Directors or as otherwise
required by law. The Board of Directors chooses the place of meetings. Poinsett
must mail written notice of meetings to shareholders of record no less than 10
days and no more than 60 days before the meeting. The Poinsett Board of
Directors sets the record date for shareholders entitled to vote at a meeting,
which can be no more than 70 days before the date on which shareholders are to
take action.
Shareholders may propose business for consideration at shareholder
meetings. Shareholders must give notice of proposals to the secretary of
Poinsett, which must be received at the principal place of business of Poinsett
no more than 90 days and no less than 30 days prior to the meeting. In the event
that shareholders receive less than 45 days notice of a meeting, notice of
shareholder proposals must be received by the secretary within 15 days following
the day on which notice of the meeting was mailed to shareholders. Business
proposals must conform to the informational requirements stated in the Articles
of Incorporation.
CAROLINA FIRST CORPORATION. Carolina First Corporation has annual
meetings, and pursuant to Carolina First Corporation's Bylaws, it may have
special meetings called by the President, the Board of Directors, or by request
of holders of one-tenth of all outstanding votes of Carolina First Corporation
entitled to be cast on any issue at the meeting. The Board of Directors chooses
the place of meetings. Except as described below for shareholder-requested
special meetings, the Board of Directors must send Carolina First Corporation
shareholders written notice of meetings not more than 60 and not less than 10
days before the date of the meeting. The Board of Directors may set the record
date for shareholders entitled to vote at a meeting 70 days in advance of the
meeting. If the Board of Directors does not set a record date, the Bylaws list
default record dates for various types of meetings and business.
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<PAGE>
If shareholders wish to request a special meeting, they must first give
written notice to the secretary of Carolina First Corporation requesting that a
record date be fixed. The Board of Directors must fix the record date within 10
days of receipt of the request. Carolina First Corporation must receive, within
60 days of the record date, written requests from the requisite 10% of
shareholders requesting the special meeting for the shareholder request to be
valid. If an adequate number of valid written requests are received, the Board
of Directors must set a new record date for the special meeting and give notice
of the meeting to shareholders within 30 days of the date on which the 10%
written request requirement was satisfied.
Shareholders may propose business for shareholder meetings. Shareholders
must deliver notice of their proposals to the principal place of business of
Carolina First Corporation no more than 90 days and no less than 60 days prior
to the first anniversary of the preceding 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
POINSETT. Shareholder action requires a quorum of shares entitled to vote.
A majority of Poinsett's shares entitled to vote constitutes a quorum. The
affirmative vote of a majority of shares present suffices to approve any
proposed action unless otherwise required by law or by Poinsett's Articles of
Incorporation or Bylaws. If a separate vote by class or classes is required, a
majority of the outstanding shares of that class or classes constitutes a quorum
and a majority of shares of that class or classes present suffices to approve
any proposed action.
CAROLINA FIRST CORPORATION. A majority of Carolina First Corporation
shares entitled to vote constitutes a quorum and an affirmative vote of a
majority of shares present suffices to approve any proposed action unless
otherwise required by law or by Carolina First Corporation's Articles of
Incorporation or Bylaws. If a separate vote by class or classes is required, a
majority of the outstanding shares of that class or classes constitutes a quorum
and a majority of shares of that class or classes present suffices to approve
any proposed action.
Carolina First Corporation's Bylaws provide that a bylaw adding, changing
or deleting a supermajority quorum or voting requirement must be approved by the
same vote and voting groups required to take action under the bylaws as then in
effect or as in the proposed amendment, whichever requires a greater quorum
and/or vote for approval.
SHAREHOLDER VOTING IN CERTAIN BUSINESS COMBINATIONS
POINSETT. Under the SCBCA, a plan of merger must generally be approved by
the affirmative vote of the holders of at least two-thirds of the votes entitled
to be cast on the plan regardless of the class or voting group to which the
shares belong, and two-thirds of the votes entitled to be cast on the plan
within each voting group entitled to vote as a separate voting group on the
plan. A corporation's articles of incorporation may require a lower or higher
vote for approval, but the required vote must be at least a majority of the
votes entitled to be cast on the plan by each voting group entitled to vote
separately on the plan.
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<PAGE>
Under the SCBCA, to authorize the sale, lease, exchange or other
disposition of all or substantially all of the property of a corporation, other
than in the usual and regular course of business, or to voluntarily dissolve the
corporation, South Carolina law requires the affirmative vote of at least
two-thirds of all the votes entitled to be cast on the transaction. A
corporation's articles of incorporation may require a lower or higher vote for
approval, but the required vote must be least a majority of all the votes
entitled to be cast on the transaction.
The Poinsett Articles of Incorporation require an affirmative vote of
holders of two-thirds of all shares entitled to vote and holders of two-thirds
of the shares (other than shares held by a Related Person, as defined below) to
approve certain "Business Combinations," unless two-thirds of the Continuing
Directors (as defined below) have approved the action. "Business Combinations"
include (among others):
(i) any merger or consolidation of Poinsett with or into a Related
Person (as defined below) or of a Related Person with or into
Poinsett;
(ii) any sale, lease, exchange, transfer or other disposition of
25% or more of the assets of Poinsett to a Related Person or
of 25% or more of the assets of a Related Person to Poinsett;
(iii) any acquisition by Poinsett of securities of a Related Person;
(iv) any reclassification of the common stock of Poinsett, or any
recapitalization involving the common stock of Poinsett; and
(v) the issuance or transfer by Poinsett to a Related Person of
any equity securities having an aggregate "market value" in
excess of 5% of the total "market value" of the outstanding
shares of Poinsett.
A Related Person is any person, corporation or other entity and/or its
affiliates that beneficially owns 10% or more of the common stock of Poinsett.
"Continuing Directors" are directors who are unaffiliated with the Related
Person and were members of the Board of Directors prior to the time a Related
Person became a Related Person. Successors of Continuing Directors are also
Continuing Directors if they are unaffiliated with the Related Person and are
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
CAROLINA FIRST CORPORATION. The Carolina First Corporation Articles of
Incorporation alter the default rules of the SCBCA to require the affirmative
vote of 80% of the outstanding stock of Carolina First Corporation entitled to
vote for approval of the following actions unless 80% of the directors of
Carolina First Corporation have approved the action:
(i) a merger of Carolina First Corporation or any of its
subsidiaries with any other corporation;
(ii) the sale or exchange of all or a substantial part of
Carolina First Corporation's assets to or with any other
corporation; or
(iii) the issue or delivery of Carolina First Corporation
common stock or other Carolina First Corporation
securities in exchange or payment for properties or
assets of or securities issued by any other corporation.
Transactions solely between Carolina First Corporation and another corporation
are excluded from this 80% approval requirement if Carolina First Corporation
owns 50% or more of the other corporation's voting stock.
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CHANGE IN CONTROL, BUSINESS COMBINATIONS AND ANTI-TAKEOVER PROVISIONS
South Carolina's legislation respecting Control Share Acquisitions (as
defined in the SCBCA) and Business Combinations (as defined herein) was enacted
in 1988. The South Carolina Control Share Acquisition law applies to several
categories of South Carolina corporations, including any South Carolina
corporation, such as Carolina First Corporation, that has a class of voting
shares registered with the Securities and Exchange Commission under Section 12
of the Exchange Act, has a principal place of business, its principal office or
substantial assets in South Carolina and has a specified shareholder presence in
South Carolina. The South Carolina Business Combination Law applies to certain
South Carolina corporations, such as Carolina First Corporation and Poinsett,
and certain non-South Carolina corporations that have a significant presence in
South Carolina.
SOUTH CAROLINA CONTROL SHARE ACQUISITIONS LAW. Unless a corporation has
opted out of the provisions of the South Carolina statute before the "control
share acquisition" in question through an amendment to its articles of
incorporation or bylaws, "control shares" of the corporation acquired in a
"control share acquisition" have no voting rights unless and until granted by
resolution approved by a majority of the shares of each voting group, excluding
all "interested shares." "Interested shares" are shares of the corporation voted
by an acquiring person or a member of a group with respect to a "control share
acquisition," any officer of the corporation or any employee of the corporation
who is also a director of the corporation.
If authorized by such a corporation's articles of incorporation or bylaws
before a "control share acquisition" has occurred, "control shares" acquired in
a "control share acquisition" may under certain circumstances be subject to
redemption by the corporation at the fair value thereof.
Unless otherwise provided in such a corporation's articles of
incorporation or bylaws before a "control share acquisition" has occurred, if
"control shares" acquired in a "control share acquisition" are accorded full
voting rights which will constitute a majority or more of all voting power, all
shareholders of the corporation have dissenters' rights to receive fair value
for their shares.
For purposes of the Control Share Acquisition law, "control shares" are
shares, the acquisition of which would give a person, acting alone or with a
group, the power to exercise one of the following amounts of voting power in an
election of directors: (i) one-fifth or more but less than one-third of all
voting power, (ii) one-third or more but less than a majority of all voting
power or (iii) a majority or more of all voting power. For purposes of the law,
a "control share acquisition" means the acquisition, directly or indirectly, by
any person of ownership of, or the power to direct the exercise of voting power
with respect to, issued and outstanding "control shares." Among certain other
circumstances, a "control share acquisition" is deemed not to occur when the
share acquisition is pursuant to a merger or plan of share exchange where the
corporation is a party to the agreement of merger or plan of share exchange.
Accordingly, the statute would not, by its terms, apply to the Reorganization
Agreement.
POINSETT ARTICLES PROVISION. Poinsett's Articles of Incorporation have
provisions which provide, among other things, (1) that no person may acquire
beneficial ownership of 15% or more of Poinsett's voting stock unless such
acquisition has been approved prior to its consummation by the affirmative vote
of holders of at least two-thirds of the outstanding shares of the voting stock
or by the affirmative vote of at least two-thirds of the directors then in
office; and (2) that no person shall make an offer or acquire beneficial
ownership of 10% or more of Poinsett's voting stock unless (among certain other
things) such offer shall have been approved by the affirmative vote of at least
two-thirds of the directors then in office.
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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.
Neither Poinsett nor Carolina First Corporation has opted out of coverage
of either the South Carolina Control Shares Acquisition law or the South
Carolina Business Combination law.
DISSENTERS' RIGHTS. Poinsett shareholders have the right, in cases of
merger or consolidation, to be paid the fair value of their shares under
applicable dissenters' rights provisions. Because Carolina First Corporation
common stock is traded on the Nasdaq National Market, its shareholders do not
have similar rights.
RIGHTS PLAN. Carolina First Corporation has adopted a Shareholders' Rights
Plan, discussed below, which may serve to impede certain takeovers not favored
by the Carolina First Corporation Board of Directors.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Under the SCBCA, unless a corporation's Articles of Incorporation provide
otherwise, any action that is required to be or that may be taken at a meeting
of shareholders may be taken without a meeting, without prior notice and without
a vote, by the unanimous written consent of holders of outstanding shares
entitled to vote.
The Poinsett Articles of Incorporation specifically deny shareholders the
power to take action by consent without a meeting. Carolina First Corporation's
Articles of Incorporation contain no such limitation.
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CAROLINA FIRST CORPORATION CAPITAL STOCK
COMMON STOCK
Carolina First Corporation has 100,000,000 shares of common stock
authorized, of which 18,152,750 shares were outstanding as of August 4, 1998.
The holders of the Carolina First Corporation common stock are entitled to
dividends when, as and if declared by the Board of Directors in their discretion
out of funds legally available therefor. The principal source of funds for
Carolina First Corporation is dividends from its subsidiaries. Carolina First
Corporation's subsidiaries are subject to certain legal restrictions on the
amount of dividends they are permitted to pay. See "INFORMATION ABOUT CAROLINA
FIRST CORPORATION." All outstanding shares of Carolina First Corporation common
stock are fully paid and nonassessable. No holder of Carolina First Corporation
common stock has any redemption or sinking fund privileges, any preemptive or
other rights to subscribe for any other shares or securities, or any conversion
rights. In the event of liquidation, the holders of Carolina First Corporation
common stock are entitled to receive pro rata any assets distributable to
shareholders in respect of shares held by them, subject to the rights of any
senior stock which may be issued in the future. Holders of the Carolina First
Corporation common stock are entitled to one vote per share.
PREFERRED STOCK
Carolina First Corporation has 10,000,000 shares of "blank check"
preferred stock authorized ("Preferred Stock"), none of which is outstanding.
Carolina First Corporation's Board of Directors has the sole authority, without
shareholder vote, to issue shares of authorized but unissued Preferred Stock to
whomever and for whatever purposes it, in its sole discretion, deems
appropriate. The relative rights, preferences and limitations of the Preferred
Stock are determined by Carolina First Corporation's Board of Directors in its
sole discretion. Among other things, the Board may designate with respect to the
Preferred Stock, without further action of the shareholders of Carolina First
Corporation, the dividend rate and whether dividends shall be cumulative or
participating or possess other special rights, the voting rights, Carolina First
Corporation's rights and terms of redemption, the liquidation preferences, any
rights of conversion and any terms related thereto, and the price or other
consideration for which the Preferred Stock shall be issued. The Preferred Stock
could be utilized by Carolina First Corporation to impede the ability of third
parties who attempt to acquire control of Carolina First Corporation without the
cooperation of Carolina First Corporation's Board of Directors.
CERTAIN MATTERS
SHAREHOLDERS' RIGHTS AGREEMENT . In 1993, the Carolina First Corporation
Board of Directors adopted a Shareholders' Rights Agreement, which was
subsequently amended and restated in December 1996 ("Rights Agreement"). Under
the Rights Agreement, the Board of Directors declared a distribution of one
common stock purchase right (a "Right") for each outstanding share of Carolina
First Corporation common stock outstanding on November 23, 1993 and each share
to be issued by Carolina First Corporation thereafter. Each Right entitles the
registered holder to purchase from Carolina First Corporation one-half share of
Carolina First Corporation common stock at a cash exercise price of $30.00,
subject to adjustment.
Initially, the Rights are not exercisable and no separate rights
certificates are distributed. However, the Rights will separate from the
Carolina First Corporation common stock and a "Distribution Date" will occur
upon the earlier of (i) the close of business on the 10th calendar day after the
Share Acquisition Date (as defined below), or (ii) the close of business on the
10th business day after the date of (x) the commencement, by any person, other
than an "exempt person", of, or (y) the first public announcement
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of the intention of any person (other than an exempt person) to commence, a
tender or exchange offer if, upon consummation thereof, such person would be an
Acquiring Person (defined as a person or group which has acquired beneficial
ownership of 20% or more of the outstanding shares of the Carolina First
Corporation common stock) (the date of said announcement being referred to as
the "Share Acquisition Date"). Until the Distribution Date, (i) the Rights will
be evidenced by the Carolina First Corporation common stock certificates and
will be transferred with and only with such certificates, and (ii) the surrender
for transfer of any certificates for Carolina First Corporation common stock
will also constitute the transfer of the Rights associated with the Carolina
First Corporation common stock represented by such certificate. The Rights are
not exercisable until the Distribution Date and will expire at the close of
business on December 18, 2006, unless previously redeemed by Carolina First
Corporation as described below. As soon as practicable after the Distribution
Date, rights certificates will be mailed to holders of record of Carolina First
Corporation common stock as of the close of business on the Distribution Date
and, thereafter, the separate rights certificates alone will represent the
Rights. Except as otherwise determined by the Board of Directors, only shares of
Carolina First Corporation common stock issued prior to the Distribution Date
will be issued with Rights.
ln the event that (i) a person acquires beneficial ownership of 20% or
more of the Carolina First Corporation common stock, (ii) Carolina First
Corporation is the surviving corporation in a merger with an Acquiring Person or
any Affiliate or Associate (as defined in the Rights Agreement) and the Carolina
First Corporation common stock is not changed or exchanged, (iii) an Acquiring
Person engages in one of a number of self-dealing transactions specified in the
Rights Agreement, or (iv) an event occurs which results in an Acquiring Person's
ownership interest being increased by more than 1% (e.g., a reverse stock
split), proper provision will be made so that each holder of a Right will
thereafter have the right to receive upon exercise thereof at the then current
exercise price, that number of shares of Carolina First Corporation common stock
(or in certain circumstances, cash, property, or other securities of Carolina
First Corporation) having a market value of two times such exercise price.
However, the Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable as
set forth below. Notwithstanding any of the foregoing, Rights that are or were
beneficially owned by an Acquiring Person shall become null and void. In the
event that following the Share Acquisition Date, (i) Carolina First Corporation
is acquired in a merger or other business combination transaction, or (ii) 50%
or more of Carolina First Corporation's assets or earning power is sold, each
holder of a Right shall thereafter have the right to receive, upon exercise,
common stock of the acquiring company having a market value equal to two times
the exercise price of the Right. At any time after any person becomes an
Acquiring Person and prior to such time such Acquiring Person, together with its
Affiliates and Associates, becomes the Beneficial Owner of 50% or more of the
outstanding Carolina First Corporation common stock, the Board of Directors may
exchange the Rights (other than Rights which have become void), in whole or in
part, at the exchange rate of one share of Carolina First Corporation common
stock per Right, subject to adjustment as provided in the Rights Agreement.
The exercise price payable, and the number of shares of Carolina First
Corporation common stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Carolina First Corporation common stock, (ii) if
holders of the Carolina First Corporation common stock are granted certain
rights or warrants to subscribe for Carolina First Corporation common stock or
securities convertible into Carolina First Corporation common stock at less than
the current market price of the Carolina First Corporation common stock, or
(iii) upon the distribution to holders of the Carolina First Corporation common
stock of evidence of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The Rights may be redeemed in whole, but not in part, at a price of $.001
per Right (payable in
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cash, Carolina First Corporation common stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors at any time
prior to a Share Acquisition Date or the final expiration Date of the Rights
(whichever is earlier); provided that under certain circumstances, the Rights
may not be redeemed unless there are Disinterested Directors (as defined in the
Rights Agreement) in office and such redemption is approved by a majority of
such Disinterested Directors. After the redemption period has expired, Carolina
First Corporation's right of redemption may be reinstated upon the approval of
the Board of Directors if an Acquiring Person reduces his beneficial ownership
to 15% or less of the outstanding shares of Carolina First Corporation common
stock in a transaction or series of transactions not involving Carolina First
Corporation and there are no other Acquiring Persons. Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and thereafter the only right of the holders of Rights will be to
receive the redemption price.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of Carolina First Corporation prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement, other than those
relating to the principal economic terms of the Rights, may be amended by the
Board to cure any ambiguity, defect or inconsistency, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement. Amendments adjusting time periods may, under certain
circumstances, require the approval of a majority of Disinterested Directors, or
otherwise be limited. This summary description of the Rights does not purport to
be complete and is qualified in its entirety by reference to the Shareholder
Rights Agreement, a copy of which has been included in Carolina First
Corporation's public filings with the Securities and Exchange Commission.
MANAGEMENT CONTRACTS . Carolina First Corporation has entered into
Noncompetition, Severance and Employment Agreements with Mack I. Whittle, Jr.,
William S. Hummers III, James W. Terry, Jr., David L. Morrow and Joseph C.
Reynolds. These agreements set forth general provisions regarding compensation,
confidentiality, termination and noncompetition. However, they also provide that
in the event that the named executive's employment with Carolina First
Corporation is voluntarily or involuntarily terminated after a "change in
control" (as defined in such agreement), then, except in very limited instances,
the named executive becomes entitled to receive immediately amounts
substantially equal to three years' compensation (including bonus compensation).
BOARD OF DIRECTORS .
Classification of Board of Directors. Carolina First Corporation's Board
of Directors currently consists of thirteen persons. In accordance with its
Articles of Incorporation, whenever the Board consists of nine or more persons,
the Board shall be divided into three classes of directors (with each class
having as close to an equal number as possible). The members of each class are
elected for staggered three-year terms. The staggering of Board terms has the
effect of making it more difficult to replace current Directors than would
otherwise be the case. Accordingly, unless the shareholders vote to remove one
or more Directors as described below, it would take three annual meetings for
shareholders to change the members of the entire Board of Directors. Carolina
First Corporation's Articles of Incorporation also provide that any shareholder
entitled to vote for the election of directors may make nominations for the
election of directors only by giving written notice to the Secretary of Carolina
First Corporation at least 30 days but not more than 60 days prior to the annual
meeting of shareholders at which directors are to be elected, unless such
requirement is waived in advance of the meeting by the Board of Directors.
Removal of Directors. Carolina First Corporation's Articles of
Incorporation require the affirmative vote of the holders of not less than 80%
of the outstanding voting securities of Carolina First Corporation to remove any
Director or the entire Board of Directors without cause. Directors may be
removed for cause
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as provided under South Carolina law.
Limitation of Director Liability. The members of the Board of Directors of
Carolina First Corporation are exempt under Carolina First Corporation's
Articles of Incorporation from personal monetary liability to the extent
permitted by Section 33-2-102(e) of the SCBCA. This statutory provision provides
that a director of the corporation shall not be personally liable to the
corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not be deemed
to eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve gross negligence, intentional
misconduct, or a knowing violation of law, (iii) imposed under Section 33-8-330
of the SCBCA (improper distribution to shareholder), or (iv) for any transaction
from which the director derived an improper personal benefit.
Evaluation of Proposed Business Combinations. Carolina First Corporation's
Articles of Incorporation provide that the Board of Directors, when evaluating
any proposed business combination with Carolina First Corporation, shall give
due consideration to (i) all relevant factors, including without limitation, the
social, legal, environmental and economic effects on the employees, customers,
suppliers and other constituencies of Carolina First Corporation, and on its
subsidiaries, the communities and geographical areas in which Carolina First
Corporation and its subsidiaries operate or are located, and on any of the
businesses and properties of Carolina First Corporation or any of its
subsidiaries, as well as such other factors as the directors deem relevant, and
(ii) not only the consideration being offered in relation to the then current
market price for Carolina First Corporation's outstanding shares, but also in
relation to the then current value of Carolina First Corporation in a
freely-negotiated transaction and in relation to the Board of Directors'
estimate of the future value of Carolina First Corporation (including the
unrealized value of its properties and assets) as an independent going concern.
VOTING.
Voting For Directors. Carolina First Corporation's Articles of
Incorporation provide that shareholders may not cumulate votes for the election
of directors. Accordingly, holders of more than 50% of the shares voting at the
election of directors can elect all of the directors if they choose to do so
and, in such event, the holders of the remaining shares (less than 50%) voting
would not be able to elect any board members. In cases where there are more
nominees for Directors than positions available, the nominees receiving the
largest number of votes are elected.
Supermajority Voting Requirements. Carolina First Corporation's Articles
of Incorporation require the affirmative vote of holders of at least 80% of the
outstanding stock of Carolina First Corporation entitled to vote for approval
before Carolina First Corporation may (i) merge or consolidate with any other
corporation, (ii) sell or exchange all or a substantial part of its assets to or
with any other corporation, or (iii) issue or deliver any stock or other
securities of its issue in exchange or in payment for any properties or assets
of any other corporation, or securities issued by any other corporation, or in a
merger of any subsidiary of Carolina First Corporation with or into any other
corporation (the foregoing being hereinafter referred to as a "business
combination"). This 80% supermajority is reduced to the percentage required by
applicable law if such business combination was approved (or adopted) and
recommended without condition by the affirmative vote of at least 80% of the
directors. The Articles of Incorporation expressly permit the Board of Directors
to condition its approval (or adoption) of any business combination upon the
approval of holders of 80% of the outstanding stock of Carolina First
Corporation entitled to vote on such business combination. The 80% supermajority
provision is not applicable to any transaction solely between Carolina First
Corporation and another corporation, 50% or more of the voting stock of which is
owned by Carolina First Corporation. Under present South Carolina law, a merger
or the sale of substantially all the assets
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requires the approval of holders of two-thirds of the outstanding shares
entitled to vote. The amendment of the foregoing business combination provisions
requires the approval of holders of 80% of the outstanding shares entitled to
vote. The foregoing supermajority voting provision could impede the ability of
third parties who attempt to acquire control of Carolina First Corporation
without the cooperation of Carolina First Corporation's Board of Directors.
CONTROL SHARE ACQUISITION/BUSINESS COMBINATION STATUTES. The SCBCA has
business combination and control share acquisition statutes which may serve to
impede takeovers not favored by management. See "COMPARATIVE RIGHTS OF
SHAREHOLDERS -- Change in Control, Business Combinations and Anti-Takeover
Provisions."
TRANSFER AGENT. The transfer agent for the Carolina First Corporation
common stock is Reliance Trust Company, Atlanta, Georgia.
DIVIDEND REINVESTMENT PLAN. Carolina First Corporation has in place a
dividend reinvestment plan with respect to the Carolina First Corporation common
stock. As set forth in the plan, holders of such shares may elect to receive
Carolina First Corporation common stock in lieu of receiving the cash dividends
to which such holder may otherwise be entitled. The plan also provides for
purchases of Carolina First Corporation common stock through optional cash
payments.
LEGAL MATTERS
Certain legal matters in connection with the Reorganization Agreement,
including the validity of the Carolina First Corporation Shares offered hereby,
will be passed upon for Carolina First Corporation by Wyche, Burgess, Freeman &
Parham, P.A., Greenville, South Carolina. Wyche, Burgess, Freeman & Parham, P.A.
is also rendering a tax opinion to Poinsett regarding the Reorganization
Agreement. As of July 21, 1998, members and attorneys of Wyche, Burgess, Freeman
& Parham, P.A. beneficially owned a total of approximately 18,944 shares of
Carolina First Corporation common stock.
Certain legal matters in connection with the Reorganization Agreement will
be passed upon for Poinsett by Breyer & Aguggia LLP, Washington, D.C.
EXPERTS
The financial statements of Poinsett as of September 30, 1996 and 1997,
and for each of the years in the three year period ended September 30, 1997,
have been included herein and in the registration statement in reliance upon the
report of Elliott Davis & Company, L.L.P., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Carolina First Corporation as of
December 31, 1997 and 1996 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.
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OTHER MATTERS
The Board of Directors of Poinsett is not aware of any other matters which
may be presented for action at the Poinsett Special Meeting, but if other
matters do properly come before the meeting, it is intended that the shares of
Poinsett common stock represented by proxies in the accompanying form will be
voted by the persons named in the proxies in accordance with their best
judgment.
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POINSETT FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
AT AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Report of Independent Certified Public Accountants..................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Income...................................... F-4
Consolidated Statements of Stockholders' Equity........................ F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements.........................F-7 - 21
AT AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Report of Independent Certified Public Accountants.................... F-22
Consolidated Balance Sheets........................................... F-23
Consolidated Statements of Income..................................... F-24
Consolidated Statements of Stockholders' Equity....................... F-25
Consolidated Statements of Cash Flows................................. F-26
Notes to Consolidated Financial Statements........................F-27 - 42
AT AND FOR THE PERIODS ENDED MARCH 31, 1998
Consolidated Balance Sheets........................................... F-43
Consolidated Statements of Income..................................... F-44
Consolidated Statements of Cash Flows................................. F-45
Notes to Interim Consolidated Financial Statements.................... F-46
F-1
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
POINSETT FINANCIAL CORPORATION
Travelers Rest, South Carolina
We have audited the accompanying consolidated balance sheets of
POINSETT FINANCIAL CORPORATION AND SUBSIDIARY as of September 30, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity and cash
flows for the two years then ended. These consolidated financial statements are
the responsibility of the management of POINSETT FINANCIAL CORPORATION AND
SUBSIDIARY. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of POINSETT
FINANCIAL CORPORATION AND SUBSIDIARY as of September 30, 1996 and 1995 and the
results of their operations and their cash flows for the two years then ended,
in conformity with generally accepted accounting principles.
December 2, 1996
F-2
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POINSETT FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 30,
---------------------------
1996 1995
------------ ----------
ASSETS
Cash and amounts due from depository institutions
(noninterest-bearing) $ 791,718 $ 512,471
Overnight interest-bearing deposits - Note 2 2,637,916 1,443,224
----------- ------------
Total cash and cash equivalents 3,429,634 1,955,695
Investments and mortgage-backed securities - Note 3
Available for sale 3,230,267 -
Held to maturity (fair value $482,500 and $4,501,776) 500,000 4,479,216
Loans receivable - net - Notes 4 and 8 55,076,137 47,292,134
Office properties and equipment - net - Note 5 753,419 1,585,776
Real estate
Held for sale - Note 6 - 1,000,000
Held for development and sale - Note 6 1,313,162 1,673,823
Acquired in settlement of loans - 51,921
Federal Home Loan Bank stock - at cost - Note 8 420,400 442,500
Accrued interest receivable 418,270 264,986
Other assets 559,689 787,651
----------- ------------
TOTAL $65,700,978 $59,533,702
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts - Notes 2 and 7 $58,131,254 $ 42,561,777
Advances from Federal Home Loan Bank - Note 8 1,500,000 8,850,000
Notes payable - Note 9 957,803 2,220,979
Accounts payable 6,161 486,017
Income taxes payable - Note 10
Current 30,936 -
Deferred 90,860 351,860
Other liabilities 554,070 390,598
----------- ------------
Total liabilities 61,271,084 54,861,231
----------- ------------
COMMITMENTS AND CONTINGENCIES - Note 13
STOCKHOLDERS= EQUITY - Notes 11, 16 and 17
Preferred stock; authorized, 5,000,000 shares; none outstanding Common stock,
$0.01 par value; authorized, 15,000,000 shares;
outstanding, 186,615 and 184,229 shares, respectively 1,866 1,842
Additional paid-in capital 1,360,288 1,341,225
Retained earnings - substantially restricted 3,120,252 3,329,404
Loan to ESOP (57,120) -
Unrealized holding gain on securities available for sale 4,608 -
----------- ------------
Total stockholders' equity 4,429,894 4,672,471
----------- ------------
TOTAL $65,700,978 $ 59,533,702
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral
part of these statements.
F-3
<PAGE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
----------- ------------
INTEREST INCOME
Interest and fees on loans $ 4,529,783 $ 3,724,603
Interest and dividends on investments 443,667 375,299
----------- ------------
Total interest income 4,973,450 4,099,902
----------- ------------
INTEREST EXPENSE
Interest on deposit accounts - Note 7 2,417,358 1,784,363
Interest on advances from Federal Home Loan Bank and
other borrowed money - Notes 8 and 9 348,183 444,341
----------- ------------
Total interest expense 2,765,541 2,228,704
----------- ------------
Net interest income 2,207,909 1,871,198
PROVISION FOR LOAN LOSSES - Note 4 83,921 53,231
----------- ------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 2,123,988 1,817,967
----------- ------------
NONINTEREST INCOME
Fees for services to customers 154,231 74,063
Insurance commissions and services 179,646 151,073
Loss on sale of office properties and equipment (3,370) -
Gain (loss) on sale of real estate held for development
and sale - Note 6 (13,364) 36,480
Unrealized gain on real estate held for sale - Note 6 - 410,263
Gain on sale of securities 7,073 -
Other income 108,333 81,252
----------- ------------
Total noninterest income 432,549 753,131
----------- ------------
NONINTEREST EXPENSE
Salaries and employee benefits 1,186,323 933,688
Occupancy and equipment expense 260,990 190,974
Federal deposit insurance premiums 390,208 80,227
Advertising, office supplies, computer services, etc. 485,358 248,197
Other expenses 385,629 259,889
----------- ------------
Total noninterest expense 2,708,508 1,712,975
----------- ------------
Income (loss) before income taxes (151,971) 858,123
INCOME TAX (BENEFIT) EXPENSE - Note 10 (53,847) 326,000
----------- ------------
NET INCOME (LOSS) $ (98,124) $ 532,123
=========== ============
NET INCOME (LOSS) PER COMMON SHARE $ (.53) $ 2.89
=========== ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 185,422 184,229
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral
part of these statements.
F-4
<PAGE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
UNREALIZED
HOLDING GAIN TOTAL
ADDITIONAL ON SECURITIES STOCK-
COMMON PAID-IN RETAINED LOAN TO AVAILABLE HOLDERS'
STOCK CAPITAL EARNINGS ESOP FOR SALE EQUITY
-------- ---------- ---------- -------- -------- -------------
BALANCE AT
SEPTEMBER 30, 1994 $ 1,681 $1,191,940 $2,907,818 $ - $ - $ 4,101,439
Exercise of stock options 161 149,285 - - - 149,446
Cash dividend - - (110,537) - - (110,537)
Net income for the year - - 532,123 - - 532,123
-------- ---------- ---------- -------- -------- -------------
BALANCE AT
SEPTEMBER 30, 1995 1,842 1,341,225 3,329,404 - - 4,672,471
-------- ---------- ---------- -------- -------- -------------
Exercise of stock options 24 19,063 - - - 19,087
Cash dividend - - (111,028) - - (111,028)
Loan to ESOP - - - (57,120 ) - (57,120)
Net loss for the year - - (98,124) - - (98,124)
Net change in unrealized holding
gain on securities available for
sale, net of taxes of $2,482 - - - - 4,608 4,608
-------- ---------- ---------- -------- -------- -------------
BALANCE AT
SEPTEMBER 30, 1996 $ 1,866 $1,360,288 $3,120,252 $(57,120) $ 4,608 $ 4,429,894
======== ========== ========== ======== ======== =============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral
part of these statements.
F-5
<PAGE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (98,124) $ 532,123
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities
Provision for loan losses 83,921 53,231
Loss on sale of office properties and equipment 3,370 -
Net loss (gain) on sales of real estate 13,364 (36,480)
Gain on sale of securities available for sale (7,073) -
Provision for deferred income taxes (261,000) 191,000
Increase in real estate acquired in settlement of loans - (41,865)
Unrealized gain on real estate held for sale - (410,263)
Depreciation 107,017 86,563
Increase in accrued interest receivable (153,284) (36,193)
Decrease (increase) in other assets 227,962 (336,072)
Increase (decrease) in income taxes payable - current 30,936 (57,246)
Increase (decrease) in accounts payable and other
liabilities (390,998) 509,602
------------ ------------
Net cash provided by (used for) operating activities (443,909) 454,400
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (7,925,044) (8,093,326)
Proceeds from the sale of securities available for sale 628,736 -
Proceeds from sale of real estate 1,682,035 906,811
Proceeds from the maturity of securities available
for sale 2,271,876 652,284
Purchase of securities available for sale (2,137,500) (1,899,812)
Proceeds from sale of Federal Home Loan Bank stock 22,100 -
Purchase of Federal Home Loan Bank stock - (22,100)
Disbursements for real estate purchases and construction (282,817) (946,017)
Proceeds from the sale of office properties and equipment 1,069,659 -
Purchase of office properties and equipment (204,873) (526,926)
------------ ------------
Net cash used for investing activities (4,875,828) (9,929,086)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposit accounts 15,498,793 (1,026,942)
Repayment of notes payable (1,263,176) (507,267)
Proceeds from notes payable - 932,440
Repayment of advances from Federal Home Loan Bank (8,850,000) (3,000,000)
Proceeds from advances from Federal Home Loan Bank 1,500,000 11,850,000
Dividends on common stock (111,028) (110,537)
Exercised stock options 19,087 149,446
------------ ------------
Net cash provided by financing activities 6,793,676 8,287,140
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,473,939 (1,187,546)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,955,695 3,143,241
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,429,634 $ 1,955,695
============ ============
CASH PAID FOR
Interest $2,762,673 $ 2,225,298
============ ============
Income taxes $ 84,783 $ 195,500
============ ============
</TABLE>
See Notes to Consolidated Financial Statements which are an
integral part of these statements.
F-6
<PAGE>
POINSETT FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
POINSETT FINANCIAL CORPORATION ("Corporation") is a unitary savings and
loan holding company whose subsidiary, THE POINSETT BANK, a Federal Savings Bank
("Bank"), is primarily engaged in the business of accepting savings and demand
deposits and originating mortgage loans and loans to individuals and small
businesses located primarily in upstate South Carolina for various personal and
commercial purposes. The Bank has a diversified loan portfolio and the
borrowers' ability to repay their loans is not dependent upon any specific
economic sector.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation, the Bank and the Bank's wholly-owned subsidiaries, Poinsett
Service Corporation, Stokes Farnham Insurance and Gateway Appraisers.
Poinsett Service Corporation is engaged in the development and sale of
residential real estate. Stokes Farnham is an insurance agency.
Significant intercompany balances and transactions have been eliminated in
consolidation.
ESTIMATES
The financial statements include estimates and assumptions that affect the
Corporation's financial position and results of operations and disclosure
of contingent assets and liabilities. Actual results could differ from
these estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from depository institutions and overnight
interest-bearing deposits.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
The Financial Accounting Standards Board ("FASB") Statement No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES,
addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities. The Statement requires investments to be
classified in three categories. Debt securities that the Corporation has
the positive intent and ability to hold to maturity are to be classified
as "held to maturity" and reported at amortized cost. Debt and equity
securities that are bought and held principally for the purpose of selling
them in the near term are to be classified as "trading securities" and
reported at fair value with unrealized gains and losses included in
earnings. The Corporation has no trading securities. Debt and equity
securities not classified as either "held to maturity securities" or
"trading securities" are classified as "available for sale" securities and
reported at fair value, with unrealized gains and losses excluded from
earnings and reported in a separate component of stockholders' equity. The
Corporation adopted the Statement as of October 1, 1994. There was no
effect on stockholders' equity or net income as a result of adopting the
Statement.
Gains or losses on the sale of securities are recognized on a specific
identification, trade date basis. Interest earned on securities is
included in interest income.
LOANS RECEIVABLE
Interest on loans is accrued and taken into income based upon the interest
method. The recognition of interest income is discontinued when, in
management's judgment, the interest will not be collectible in the normal
course of business.
(Continued)
F-7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
ALLOWANCE FOR LOAN LOSSES AND LOSS PROVISION
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
Management considers the year end allowance appropriate and adequate to
cover possible losses in the loan portfolio; however, management's
judgment is based upon a number of assumptions about future events, which
are believed to be reasonable, but which may or may not prove valid. Thus,
there can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases in the
allowance for loan losses will not be required.
The Corporation adopted FASB Statement No. 114, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN, October 1, 1994. The statement requires that
impaired loans be measured based on the present value of expected future
cash flows discounted at the loans' effective interest rate or, as a
practical matter, at the loan's observable market value or fair value of
the collateral if the loan is collateral dependent. Implementation of the
statement did not have any material impact on the Corporation's financial
condition or results of operations.
OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
the related assets' estimated useful lives, which range from 5 to 40
years.
REAL ESTATE HELD FOR SALE, DEVELOPMENT AND SALE, AND ACQUIRED IN SETTLEMENT
OF LOANS
Real estate held for sale is recorded at market value as established by a
contractual agreement for the sale of certain land. The unrealized gain is
included in income under the full accrual method of accounting. Real
estate held for development and sale is stated at the lower of cost or net
realizable value. In determining net realizable value, the Corporation
deducts from the estimated selling price the projected cost to complete
and dispose of the property and the estimated cost (i.e., interest,
property taxes, etc.) to hold the property to an expected date of sale.
Recovery of net realizable value is dependent to a great extent on
economic, operating and other conditions that may be beyond the
Corporation's control. Accordingly, these estimates are particularly
susceptible to changes that could result in material adjustments in the
near term.
Costs relating to the development and improvement of property are
capitalized; whereas those costs relating to holding the property are
charged to expense. Real estate acquired in settlement of loans is
recorded at fair value.
LOAN ORIGINATION FEES AND COSTS
Non-refundable loan origination fees and certain direct loan origination
costs are deferred and amortized over the lives of the related loans. The
net amortization of those deferrals is recognized as an adjustment to
interest income.
INCOME TAXES
The Corporation and its subsidiaries file a consolidated federal income
tax return. Separate state income tax returns are filed for each
subsidiary.
The Corporation accounts for income taxes in accordance with FASB
Statement No. 109, ACCOUNTING FOR INCOME TAXES (FASB 109).
(Continued)
F-8
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
Under FASB 109, deferred income taxes reflect the net tax effects of (A)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes, and (B) operating loss carryforwards. A valuation
allowance is established for deferred tax assets that may not be realized.
Also, FASB 109 eliminates the exception from the requirement to record
deferred taxes on tax basis bad debt reserves in excess of the base year
amounts. The tax basis bad debt reserve that arose prior to the fiscal year
1988 (the base year amount) is frozen, and the book reserves at that date
and all subsequent changes in book and tax basis reserves are included in
the determination of deferred taxes.
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
common shares outstanding (185,422 and 184,229 for the years ended
September 30, 1996 and 1995, respectively). Stock options outstanding (see
Note 11) are not considered in determining weighted average shares
outstanding because the estimated dilutive effect is less than three
percent.
RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting standards that have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future
date are not expected to have a material impact on the financial
statements upon adoption. The Financial Accounting Standards Board has
issued Statement No. 126, "Exemption from Certain Required Disclosures
About Financial Instruments for Certain Nonpublic Entities". In accordance
with this statement, the Corporation is not presenting fair value of
financial instrument disclosures.
RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
NOTE 2 - OVERNIGHT INTEREST-BEARING DEPOSITS
Overnight interest bearing deposits at September 30, 1996 totaling
$108,000 are pledged as collateral for deposits of the State of South Carolina.
NOTE 3 - INVESTMENTS AND MORTGAGE-BACKED SECURITIES
The amortized cost and estimated fair value of securities are as
follows:
<TABLE>
<CAPTION>
<S> <C>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ---------- ---------
AVAILABLE FOR SALE
SEPTEMBER 30, 1996
Securities of U.S. government
agencies $ 1,914,812 $ 3,750 $ - $1,918,562
States and political subdivisions 175,000 - - 175,000
--------- ----- ------- ---------
Total debt securities 2,089,812 3,750 - 2,093,562
--------- ----- ------- ---------
GNMA pass-through certificates 757,425 6,864 - 764,289
FHLMC pass-through certificates 375,940 - (3,524) 372,416
--------- ----- ------ ---------
Mortgage-backed securities 1,133,365 6,864 (3,524) 1,136,705
--------- ----- ------ ---------
Total investments and mortgage-
backed securities $ 3,223,177 $ 10,614 $ (3,524) $3,230,267
============ ======== ======== ==========
</TABLE>
(Continued)
F-9
<PAGE>
NOTE 3 - INVESTMENTS AND MORTGAGE-BACKED SECURITIES, CONTINUED
<TABLE>
<CAPTION>
<S> <C>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ----------
HELD TO MATURITY
SEPTEMBER 30, 1996
Securities of U.S. government
agencies $ 500,000 $ - $ (17,500) $ 482,500
============ ======== ========= ==========
SEPTEMBER 30, 1995
Securities of U.S. government
agencies $ 2,699,812 $ 11,776 $ (32,875) $2,678,713
States and political subdivisions 321,663 12,867 - 334,530
------------ -------- --------- ----------
Total debt securities 3,021,475 24,643 (32,875) 3,013,243
------------ -------- --------- ----------
GNMA pass-through certificates 1,003,791 29,800 - 1,033,591
FHLMC pass-through certificates 453,950 992 - 454,942
------------ -------- --------- ----------
Mortgage-backed securities 1,457,741 30,792 - 1,488,533
------------ -------- --------- ----------
Total investments and mortgage-
backed securities $ 4,479,216 $ 55,435 $ (32,875) $4,501,776
============ ======== ========= ==========
</TABLE>
The amortized cost and estimated fair value of debt securities at
September 30, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 30,
----------------------------------
1996 1995
--------- -----------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
---------- --------- ---------- ------------
AVAILABLE FOR SALE
Due in one year or less $ - $ - $ - $ -
Due after one year through five years 1,615,000 1,615,000 - -
Due after five years through ten years 474,812 478,562 - -
Due after ten years - - - -
---------- --------- ---------- ------------
Total debt securities 2,089,812 2,093,562 - -
Mortgage-backed securities 1,133,365 1,136,705 - -
---------- --------- ---------- ------------
$3,223,177 $3,230,267 $ - $ -
========== ========= ========== ============
HELD TO MATURITY
Due in one year or less $ 500,000 $ 482,500 $ - $ -
Due after one year through five years - - 1,900,000 1,867,125
Due after five years through ten years - - 499,812 519,588
Due after ten years - - 621,663 626,530
---------- --------- ---------- ------------
Total debt securities 500,000 482,500 3,021,475 3,013,243
Mortgage-backed securities - - 1,457,741 1,488,533
---------- --------- ---------- ------------
$ 500,000 $ 482,400 $4,479,216 $ 4,501,776
========== ========= ========== ============
</TABLE>
(Continued)
F-10
<PAGE>
NOTE 3 - INVESTMENTS AND MORTGAGE-BACKED SECURITIES, CONTINUED
On December 30, 1995, the Bank transferred securities from held to
maturity to the available for sale classification. These securities had an
amortized cost of $3,134,568 and an unrealized gain of $52,730 on the date of
transfer. This one-time reassessment of securities was done in compliance with
the "Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," issued by the Financial Accounting
Standards Board.
NOTE 4 - LOANS RECEIVABLE
Loans receivable consisted of the following:
SEPTEMBER 30,
--------------------------
1996 1995
TYPE OF LOAN
Mortgage loans
Fixed rate $ 7,830,496 $ 9,210,194
Adjustable rate 42,416,241 35,604,804
Undisbursed portion of loans in process (3,451,738) (2,031,195)
----------- -----------
Total mortgage loans 46,794,999 42,783,803
Savings account loans 98,259 128,648
Consumer, installment and other loans 8,404,879 4,570,030
----------- -----------
Total 55,298,137 47,482,481
Less allowance for loan losses (222,000) (190,347)
----------- -----------
Loans receivable - net $55,076,137 $47,292,134
=========== ===========
Weighted average rate % 8.62% 8.72%
=========== ===========
Adjustable rate mortgage loans are subject to rate adjustment annually
based on the Federal Home Loan Bank's published contract rate, which represents
the national average rate for purchases of previously occupied homes. There are
no established interest rate ceilings or floors associated with such loans;
however, the maximum that rates can be adjusted on these loans is 200 basis
points in any one year to a maximum of 500 basis points from the original
lending rate.
The Bank originates commercial real estate loans, which totaled
approximately $5,507,458 and $5,429,000 at September 30, 1996 and 1995,
respectively. These loans are considered by management to be of somewhat greater
risk of uncollectibility due to the dependency on income production or future
development of the real estate. These commercial real estate loans are
collateralized by office buildings, apartments and warehouses.
At September 30, 1996 and 1995, loans which are contractually past due
ninety days or more totaled approximately $1,223,591 and $307,000, respectively.
The amount the Bank will ultimately realize from these loans could differ
materially from their carrying value because of future developments affecting
the underlying collateral or the borrower's ability to repay the loans. During
the years ended September 30, 1996 and 1995, the Bank realized no material
losses of interest income on loans past due 90 days or more.
(Continued)
F-11
<PAGE>
NOTE 4 - LOANS RECEIVABLE, CONTINUED
The changes in the allowance for loan losses consisted of the
following:
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ -----------
Allowance for loan losses
Balance, beginning of year $ 190,347 $ 169,345
Write-offs during the year (52,268) (32,229)
Provision 83,921 53,231
------------ -----------
Balance, end of year $ 222,000 $ 190,347
============ ===========
Directors and officers of the Corporation and the Bank are customers of
the Bank in the ordinary course of business. Deposits and loans of directors and
officers have terms consistent with those offered to other customers. Loans to
officers and directors were $936,379 and $978,856 at September 30, 1996 and
1995, respectively.
Under current regulations, aggregate commercial real estate loans may
not exceed 400 percent of the Bank's capital as determined under regulatory
capital standards. The Bank is in compliance with this limitation.
Also, under current regulations, the Bank may not, after August 9,
1989, make real estate loans to one borrower in excess of 15 percent of its
unimpaired capital and surplus, unless such loans do not exceed $500,000. At
September 30, 1996, the Bank is in compliance with this limitation.
NOTE 5 - OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
SEPTEMBER 30,
--------------------------
1996 1995
------------ -----------
Major classifications
Land and land improvements $ 81,556 $ 369,889
Office buildings 571,596 1,279,503
Furniture, fixtures and equipment 618,446 461,753
------------ -----------
Total 1,271,598 2,111,145
Less accumulated depreciation (518,179) (525,369)
------------ -----------
Office property and equipment, net $ 753,419 $ 1,585,776
============ ===========
Depreciation of office properties and equipment charged to occupancy
and equipment expense at September 30, 1996 and 1995 was $107,017 and $86,563,
respectively.
F-12
<PAGE>
NOTE 6 - REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale consists of several tracts of
land in Travelers Rest, South Carolina and is summarized as follows:
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ -----------
Land held for future development and sale $ 307,784 $ 405,196
Residential subdivision
Capitalized interest 34,411 38,842
Improved lots 367,741 312,393
Home construction in progress - net 603,226 917,392
----------- -----------
Total $ 1,313,162 $ 1,673,823
=========== ===========
During the year ended September 30, 1996, Poinsett Service Corporation
substantially completed construction of all infrastructure (streets, underground
utilities, grading, etc.) for the first phase of a residential subdivision known
as Watson Crossing which consists of 53 lots. The service corporation is
marketing and serving as the general contractor for custom constructed homes.
Operations for fiscal years 1996 and 1995 are summarized as follows:
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ -----------
Sale of homes $ 625,504 $ 881,735
Cost of homes sold 638,868 875,115
------------ -----------
Gain (loss) on sale of homes $ (13,364) $ 6,620
============ ===========
On December 21, 1995, the Corporation completed the closing on the sale
of approximately 109 acres of land under contractual agreements dated May 1,
1995. The Corporation received $500,000 of the $1,000,000 sales price in cash
and holds a $500,000 mortgage with principal due equally in June 1997 and
December 1998 bearing interest at eight percent per annum.
NOTE 7 - DEPOSIT ACCOUNTS Deposit accounts are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 30,
-----------------------------------------------------
1996 1995
-------------------------- --------------------------
WEIGHTED WEIGHTED
AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE
------------ ------------ ----------- ------------
TRANSACTION AND PASSBOOK ACCOUNTS
Negotiable order of withdrawal (NOW):
Noninterest-bearing $ 1,798,744 - % $ 681,027 - %
Interest-bearing 14,286,549 4.20% 8,487,298 4.41%
Passbook savings 10,227,375 3.54% 8,431,580 2.92%
------------ -----------
Total 26,312,668 17,599,905
------------ -----------
SAVINGS CERTIFICATES
3.25% - 5.00% 1,661,288 12,156,851
5.01% - 6.00% 28,080,895 5,763,984
6.01% - 8.00% 2,076,403 7,041,037
------------ -----------
Total 31,818,586 5.31% 24,961,872 5.32%
$ 58,131,254 4.54% $42,561,777 4.56%
============ ===========
</TABLE>
(Continued)
F-13
<PAGE>
NOTE 7 - DEPOSIT ACCOUNTS, CONTINUED
At September 30, 1996 deposit accounts with balances of $100,000 and
over totaled $10,262,482 as compared to $6,766,382 at September 30, 1995.
The amounts and scheduled maturities of deposit accounts are as
follows:
SEPTEMBER 30,
--------------------------
1996 1995
----------- -----------
SAVINGS CERTIFICATES MATURING WITHIN
One year $29,703,925 $21,559,137
After one but within two years 1,481,772 2,183,441
After two but within three years 632,889 1,066,555
----------- -----------
Total certificate accounts 31,818,586 24,809,133
TRANSACTION AND PASSBOOK ACCOUNTS 26,312,668 17,752,644
----------- -----------
TOTAL $58,131,254 $42,561,777
=========== ===========
Interest expense on deposits consisted of the following:
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ -----------
Account type
NOW accounts $ 481,293 $ 484,418
Passbook deposit accounts 290,555 168,238
Certificate accounts 1,645,510 1,131,707
------------ -----------
TOTAL INTEREST ON DEPOSITS $2,417,358 $ 1,784,363
============ ===========
NOTE 8 - ADVANCES FROM FEDERAL HOME LOAN BANK AND FEDERAL HOME LOAN BANK STOCK
The Bank has an $8,500,000 credit line with the Federal Home Loan Bank
of Atlanta. Advances under the credit line accrue interest at a variable
interest rate and mature within one year. The weighted average interest rate
paid during the current period for such advances was 5.62 percent.
The Bank has pledged as collateral for borrowings under the credit line
its Federal Home Loan Bank stock and has entered into a blanket collateral
agreement whereby the Bank will maintain, free of other encumbrances, qualifying
mortgages (as defined) with a book value of at least 133 percent of total
advances.
The Bank, as a member institution of the Federal Home Loan Bank
("FHLB") of Atlanta, is required to own capital stock in the FHLB of Atlanta
based generally upon the Bank's balances of residential mortgage loans and FHLB
advances. FHLB capital stock is pledged to secure FHLB advances. No ready market
exists for this stock and it has no quoted market value. However, redemption of
this stock has historically been at par value.
(Continued)
F-14
<PAGE>
NOTE 9 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 30,
--------------------------
1996 1995
----------- ----------
First mortgage on real estate, due in monthly installments of
$7,768 including interest at 9.75 percent. $ - $ 756,458
First mortgage on real estate, interest due in monthly
installments adjusted annually at the prime rate plus 2.0
percent (10.25 percent at September 30, 1996); minimum
principal payments of $104,000 due annually with remaining
unpaid balance due in February, 1997. 533,607 1,047,267
First mortgages on real estate, interest paid semi-annually at
rates ranging from 8.75 to 9.5 percent on funds drawn. The
entire indebtedness is due in September, 1997. 424,196 366,210
First mortgages on real estate, due in monthly installments
of $628 including interest at 8.5 percent. - 51,044
----------- ----------
TOTAL $ 957,803 $2,220,979
=========== ==========
</TABLE>
These notes mature during the year ending September 30, 1997.
NOTE 10 - INCOME TAXES
Income tax expense (benefit) is summarized as follows:
FOR THE YEARS ENDED
SEPTEMBER 30,
------------------------
1996 1995
---------- ---------
Current $ 207,153 $ 135,000
Deferred (261,000) 191,000
---------- ---------
TOTAL INCOME TAXES $ (53,847) $ 326,000
========== =========
The cumulative sources of temporary differences and the resulting
deferred tax assets (liabilities) are as follows:
SEPTEMBER 30,
--------------------------
1996 1995
------------ -----------
Tax depreciation in excess of book depreciation $ 26,000 $ 20,000
FHLB dividends 77,000 77,000
Accrual to cash basis of accounting 143,000 99,000
Provision for loan losses in excess of amount
deductible for taxes 4,000 (3,000)
Deferred gain on sale of real estate (54,000) 158,000
SAIF assessment (104,000) -
Other, net (1,140) 860
------------ -----------
$ 90,860 $ 351.860
============ ===========
(Continued)
F-15
<PAGE>
NOTE 10 - INCOME TAXES, CONTINUED
Income taxes differed from amounts computed by applying the statutory
federal rates to income before income taxes as follows:
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 30,
--------------------------
1996 1995
------------- -----------
Income tax expense (benefit) at statutory federal
income tax rate (34%) $ (51,670) $ 291,762
Increase resulting from
State income taxes, net of federal tax benefit (6,839) 28,318
Other - net 4,662 5,920
------------ -----------
TOTAL $ (53,847) $ 326,000
============ ===========
</TABLE>
As of September 30, 1996, the Corporation had, for state income tax
return purposes, net operating loss carryforwards of approximately $580,000 that
may be used to reduce future state taxable income. Such carryforwards expire in
the years 2006 - 2009. The Corporation has no loss carryforwards for federal
income tax purposes. The deferred tax asset created by the loss carryforwards is
offset by a valuation allowance of an equal amount.
Legislation has been passed which repeals the "reserve" method of
accounting for thrift bad debt reserves for the first tax year beginning after
December 31, 1995 (the fiscal year ending September 30, 1997 for the
Corporation). This legislation requires all thrifts (including the Corporation)
to account for bad debts using either the specific charge-off method (available
to all thrifts) or the experience method (available only to thrifts that qualify
as "small banks", i.e. under $500 million in assets). The Corporation currently
uses the Percent of Taxable Income ("PTI") method of accounting, when
beneficial, for its tax bad debt reserves. The change in accounting method
referred to above would trigger bad debt reserve recapture for post-1987
reserves over a six year period.
Through September 30, 1996 and prior to the effective date of the
legislation, the Corporation is permitted a special bad debt deduction under PTI
in determining federal taxable income, subject to certain limitations. If the
amounts that qualify as bad debt deductions for federal income tax purposes are
later used for purposes other than for bad debt losses, they will be subject to
federal income tax at the then current corporate rate. As permitted under SFAS
109, no deferred tax liability is provided for approximately $154,000 ($58,000
approximate tax effect) of such tax bad debt reserves that arose prior to
October 1, 1988.
NOTE 11 - STOCK OPTION AND OWNERSHIP PLANS
The Corporation has an Incentive Stock Option Plan (Plan) for the
benefit of certain directors, officers and employees. Under the Plan, at
September 30, 1996, 9,750 shares of authorized common stock are reserved for
future issuance pursuant to grants issued by the Board of Directors. The options
have a maximum duration of ten years and may not be exercised at less than the
market value of the Corporation's common stock on the date of grant of the
option. At September 30, 1996, the following options were outstanding:
SHARES SHARES OPTION PRICE EXPIRATION
GRANT DATE GRANTED EXERCISABLE PER SHARE DATE
- ------------- ------- ----------- ------------ -------------
February 1991 3,750 3,750 $ 8.00 February 2001
February 1994 6,000 6,000 $10.00 February 2004
(Continued)
F-16
<PAGE>
NOTE 11 - STOCK OPTION AND OWNERSHIP PLANS, CONTINUED
During the year ended September 30, 1996, options to purchase 2,386
shares were exercised at $8.00 per share. During the year ended September 30,
1995, options to purchase 5,725 shares and 10,365 shares were exercised at $8.00
per share, respectively.
The Corporation has an Employee Stock Ownership Plan (ESOP) which
enables employees who are not participants in the Incentive Stock Option Plan to
purchase the Corporation's common stock. The ESOP contribution is determined
annually by the Board of Directors but not in excess of the maximum amount
deductible under the Internal Revenue Code. Contributions of $37,826 and $24,064
were made to the ESOP for the years ended September 30, 1996 and 1995,
respectively.
The ESOP has a loan used to acquire shares of stock of the Corporation.
In accordance with the requirements of the American Institute of Certified
Public Accountants Statements of Position 76-3 and 93-6, the Corporation
presents the outstanding loan amount as a reduction of stockholders' equity in
the accompanying consolidated balance sheets and the note payable has been
offset with loans receivable. Corporation contributions to the ESOP are the
primary source of funds used to service the debt.
NOTE 12 - PROFIT SHARING PLAN
The Corporation has a non-contributory profit sharing plan for
employees. Discretionary contributions to the Plan are determined annually by
the Board of Directors and are subject to a percentage of earnings limitation
imposed by the Internal Revenue Code.
Profit sharing expense for the years ended September 30, 1996 and 1995
was $40,695 and $25,674, respectively. Eligible participants in the Plan include
all full-time employees over the age of twenty-one having completed one year of
continuous employment at the anniversary date of the Plan.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
LOAN COMMITMENTS
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments extend over periods of time with the majority of such
commitments disbursed within a thirty day period. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Commitments to extend credit at fixed rates expose the
Bank to some degree of interest rate risk. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The type and amount
of collateral obtained varies and is based on management's credit
evaluation of the potential borrower.
Those instruments involve, to varying degrees, elements of credit and
interest-rate-risk in excess of the amount recognized in the consolidated
balance sheets. The contract amounts of those instruments reflect the
extent of the Corporation's involvement in particular classes of financial
instruments.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments. The
Corporation uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
(Continued)
F-17
<PAGE>
NOTE 13 - COMMITMENTS AND CONTINGENCIES, CONTINUED
At September 30, 1996, the Bank had commitments of approximately $1,200,000
excluding undisbursed portions of loans in process. All commitments, which
are disbursed subject to certain limitations, are for adjustable interest
rate mortgage loans and extend over periods of time with the majority
disbursed within a twelve-month period.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
FASB Statement No. 105 requires certain additional disclosures in the
financial statements regarding financial instruments with off-balance sheet
risk. The Corporation has no additional financial instruments with
off-balance sheet risk.
LITIGATION
The Corporation is involved in legal actions in the normal course of
business. In the opinion of management, based on the advice of counsel, the
resolution of these matters will not have a material adverse impact on
future results of operations or the financial position of the Corporation.
SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") ASSESSMENT
On September 30, 1996, legislation was enacted which provided for a
one-time assessment on all SAIF-insured deposits for the purpose of
recapitalizing the SAIF. The one-time assessment is 0.657 percent of
SAIF-insured deposits as of March 31, 1995. The Corporation has accrued
with a charge to operations approximately $273,000 representing its
estimated liability for the one-time assessment as of September 30, 1996.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Bank's profitability depends to a large extent on its net interest
income, which is the difference between interest income from loans and
investments and interest expense on deposits and borrowings. Like most
financial institutions, the Bank's interest income and interest expense are
significantly affected by changes in market interest rates and other
economic factors beyond its control. The Bank's interest earning assets
consist primarily of long-term, adjustable rate mortgage loans and
short-term investments, and its interest bearing liabilities are primarily
short-term deposits. Accordingly, the Bank's exposure to changes in
interest rates is considered minimal. However, uncertainties about the
potential impact of future changes in interest rates exist. For example,
although certain assets and liabilities may have similar repricing
characteristics, they may react in different degrees to changes in market
interest rates. Additionally, the interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Furthermore, certain assets, such as adjustable rate mortgages, have
features which restrict changes in interest rates on a short-term basis and
over the life of the assets. The Bank considers the anticipated effects of
those various factors in implementing its asset/liability management
objectives.
NOTE 14 - RELATED PARTY TRANSACTIONS
The Corporation has entered into two leases with companies in which
certain directors have an interest. These leases were made in the ordinary
course of business and were on terms comparable to those which would have been
obtained between unrelated parties.
As of September 30, 1996, the Corporation sold and leased back two
locations (its offices in Greenville, South Carolina and Rock Hill, South
Carolina). The properties were sold to partnerships comprised of certain
officers and directors of the Corporation. The gross sales price for the two
properties was $1,185,000 and the Corporation deferred the gain on the sale of
approximately $142,000. This gain will be amortized over the lease term (20
years) on a straight-line basis.
(Continued)
F-18
<PAGE>
NOTE 15 - LEASE COMMITMENTS
On September 30, 1996, the Bank was obligated under two non-cancelable
operating leases on office properties that had initial or remaining terms of
more than one year. Future minimum rental payments under these leases on
September 30, 1996 are:
PAYABLE IN THE YEAR
ENDING SEPTEMBER 30, AMOUNT
-------------------- ------------
1997 $ 136,200
1998 136,200
1999 136,200
2000 136,200
2001 and thereafter 2,179,200
-----------
TOTAL MINIMUM PAYMENTS REQUIRED $ 2,724,000
===========
No lease payments were charged to operations for the year ended
September 30, 1996. The above leases provide that the Bank pay property taxes,
insurance and maintenance costs.
NOTE 16 - STOCKHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS
The Bank completed a conversion from a federally chartered mutual to a
federally chartered capital stock form of organization and ownership on August
4, 1988. At the time of conversion the Bank established a liquidation account in
an amount equal to its retained income as of December 31, 1987 (approximately
$1.2 million). The liquidation account will be maintained for the benefit of
depositors who held a savings or demand account with a balance of $50 or more as
of the September 30, 1987 eligibility date who continue to maintain their
deposits at the Bank after conversion. In the event of a future liquidation (and
only in such an event), each eligible and supplemental eligible account holder
who continues to maintain his or her savings account will be entitled to receive
a distribution from the liquidation account. The total amount of the liquidation
account will be decreased in an amount proportionately corresponding to
decreases in the savings account balances of eligible and supplemental eligible
account holders on each subsequent annual determination date. Except for
repurchase of stock and payment of dividends by the Bank, the existence of the
liquidation account will not restrict the use or application of stockholders=
equity.
The Corporation and the Bank are prohibited from declaring cash
dividends on their common stock or repurchasing their common stock if the effect
thereof would cause the Bank's capital to be reduced below either the amount
required for the liquidation account or the minimum regulatory capital
requirements. In addition, the Bank is also prohibited from declaring cash
dividends and repurchasing its own stock without prior regulatory approval in
any amount in a calendar year in excess of 100 percent of its current year's net
income to the date of any such dividend or repurchase, plus 50 percent of the
excess of its capital at the beginning of the year over its fully phased-in
capital requirement.
(Continued)
F-19
<PAGE>
NOTE 17 - REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Under present regulations, the Bank must maintain core capital
(leverage requirement) at least equal to 3.0 percent of adjusted total assets,
of which 1.5 percent must be tangible capital, and risk-based capital at least
equal to 8.0 percent of risk weighted assets. For purposes of measuring capital
compliance, the Bank's capital must be reduced based on investments in and
extensions of credit to its subsidiary. Management believes, as of September 30,
1996, that the Bank meets all capital adequacy requirements to which it is
subject.
At September 30, 1996, the Bank was in compliance with all minimum
capital requirements, as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
------------ ------------ -----------
Actual capital of the Bank $ 3,893 $ 3,893 $ 3,893
Adjustments
General allowance for loan losses - - 222
Investments in and extensions of credit
to subsidiaries (332) (332) (332)
------------ ------------ -----------
Adjusted regulatory capital 3,561 3,561 3,783
Minimum capital requirement 962 1,925 3,296
------------ ------------ -----------
Regulatory capital excess $ 2,599 $ 1,636 $ 487
============ ============ ===========
Actual regulatory capital ratio 5.51% 5.51% 9.18%
============ ============ ===========
Required capital ratio for capital
adequacy purposes 1.50% 3.00% 8.00%
============ ============ ===========
</TABLE>
NOTE 18 - POINSETT FINANCIAL CORPORATION FINANCIAL INFORMATION
Condensed financial information of the Corporation are presented as
follows:
SEPTEMBER 30,
1996 1995
------------- ----------
CONDENSED BALANCE SHEETS
ASSETS
Cash $ 192,256 $ 65,566
Investment securities 150,000 150,000
Notes receivable 179,464 270,702
Investment in subsidiaries 3,822,754 3,778,430
Property and real estate investments, net 235,974 1,456,071
Other assets 68,262 55,573
------------ -----------
TOTAL ASSETS $ 4,648,710 $ 5,776,342
============ ===========
(Continued)
F-20
<PAGE>
NOTE 18 - POINSETT FINANCIAL CORPORATION FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30,
--------------------------
1996 1995
------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ - $ 756,458
Other liabilities 218,816 347,413
Stockholders' equity 4,429,894 4,672,471
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,648,710 $ 5,776,342
============ ===========
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------- -----------
Equity in earnings of subsidiaries $42,607 $ 560,782
Other income (expenses), net (140,731) (28,659)
------------- -----------
NET INCOME (LOSS) $ (98,124) $ 532,123
============= ===========
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------- -----------
OPERATING ACTIVITIES
Net income (loss) $ (98,124) $ 532,123
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities
Equity in earnings of subsidiary (42,607) (560,782)
Depreciation and amortization 20,141 29,306
Increase in other assets (12,689) (41,632)
Increase (decrease)in other liabilities (128,597) 237,156
----------- ----------
Net cash provided by (used for) operating
activities (261,876) 196,171
----------- ----------
INVESTING ACTIVITIES
Issuance of notes receivable - (270,702)
Repayment of notes receivable 91,238 -
Purchase of property and real estate investments - (330,196)
Proceeds from sale of real estate 1,199,956 -
Investment on subsidiary 2,891 (20,000)
----------- ----------
Net cash provided by (used for)
operating activities 1,294,085 (620,898)
----------- ----------
FINANCING ACTIVITIES
Proceeds from long-term notes payable - 607,040
Repayment of notes payable (756,458) (203,300)
Dividend on common stock (111,028) (110,537)
Exercise of stock options 19,087 149,446
Loan to ESOP (57,120) -
----------- ----------
Net cash provided by (used for)
financing activities (905,519) 442,649
----------- ----------
Net increase in cash 126,690 17,922
CASH AT BEGINNING OF YEAR 65,566 47,644
----------- ----------
CASH AT END OF YEAR $ 192,256 $ 65,566
=========== ==========
F-21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
POINSETT FINANCIAL CORPORATION
Travelers Rest, South Carolina
We have audited the accompanying consolidated balance sheets of
POINSETT FINANCIAL CORPORATION AND SUBSIDIARIES as of September 30, 1997 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the management of POINSETT FINANCIAL CORPORATION AND
SUBSIDIARIES. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of POINSETT
FINANCIAL CORPORATION AND SUBSIDIARIES as of September 30, 1997 and 1996 and the
results of their operations and their cash flows for the two years then ended,
in conformity with generally accepted accounting principles.
December 19, 1997
F-22
<PAGE>
<TABLE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
1997 1996
------------- ------------
<S> <C>
ASSETS
Cash and amounts due from depository institutions
(noninterest-bearing) $ 578,553 $ 791,718
Overnight interest-bearing deposits 4,965,957 2,637,916
------------ ------------
Total cash and cash equivalents 5,544,510 3,429,634
Investments and mortgage-backed securities
Available for sale 456,000 3,230,267
Loans receivable - net 68,976,340 55,076,137
Office properties and equipment - net 1,376,629 753,419
Real estate held for development and sale 823,891 1,313,162
Federal Home Loan Bank stock - at cost 420,400 420,400
Accrued interest receivable 531,433 418,270
Other assets 543,101 559,689
----------- -----------
$ 78,672,304 $65,700,978
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $ 72,821,065 $58,131,254
Advances from Federal Home Loan Bank - 1,500,000
Notes payable 613,680 957,803
Income taxes payable
Current - 30,936
Deferred 185,248 90,860
Other liabilities 202,086 560,231
----------- -----------
Total liabilities 73,822,079 61,271,084
COMMITMENTS AND CONTINGENCIES - NOTE 12
STOCKHOLDERS' EQUITY
Preferred stock; authorized 5,000,000 shares; none outstanding
Common stock, $.01 par value; authorized 15,000,000 shares;
outstanding, 189,615 and 186,615 shares, respectively 1,896 1,866
Additional paid-in capital 1,387,258 1,360,288
Retained earnings - substantially restricted 3,457,351 3,120,252
Loan to ESOP - (57,120)
Unrealized holding gain on securities availiable
for sale 3,720 4,608
---------- ---------
Total stockholders' equity 4,850,225 4,429,894
----------- ------------
TOTAL $ 78,672,304 $ 65,700,978
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-23
<PAGE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
FOR THE YEARS ENDED
SEPTEMBER 30,
1997 1996
----------- ------------
<S> <C>
INTEREST INCOME
Interest and fees on loans $ 5,838,889 $ 4,529,783
Interest and dividends on investments 286,324 443,667
----------- ------------
Total interest income 6,125,213 4,973,450
----------- ------------
INTEREST EXPENSE
Interest on deposit accounts 2,957,181 2,417,358
Interest on advances from Federal Home Loan Bank and
other borrowed money 195,599 348,183
----------- ------------
Total interest expense 3,152,780 2,765,541
----------- ------------
Net interest income 2,972,433 2,207,909
PROVISION FOR LOAN LOSSES 142,113 83,921
----------- ------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 2,830,320 2,123,988
----------- ------------
NONINTEREST INCOME
Fees for services to customers 234,542 154,231
Insurance commissions and services 197,078 179,646
Loss on sale of office properties and equipment - (3,370)
Net gain (loss) on sale of real estate held for
development and sale 37,551 (13,364)
Gain on sale of securities available for sale 36,797 7,073
Other income 108,568 108,333
----------- ------------
Total noninterest income 614,536 432,549
----------- ------------
NONINTEREST EXPENSE
Salaries and employee benefits 1,581,915 1,186,323
Occupancy and equipment expense 446,323 260,990
Federal deposit insurance premiums 45,354 390,208
Advertising, office supplies, computer services, etc. 444,691 485,358
Other expenses 366,224 385,629
----------- ------------
Total noninterest expense 2,884,507 2,708,508
----------- ------------
Income (loss) before income taxes 560,349 (151,971)
INCOME TAX EXPENSE (BENEFIT) 223,250 (53,847)
----------- ------------
NET INCOME (LOSS) $ 337,099 $ (98,124)
=========== ============
NET INCOME (LOSS) PER COMMON SHARE $ 1.79 $ (.53)
=========== ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 188,488 185,422
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-24
<PAGE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
RETAINED HOLDING GAIN TOTAL
ADDITIONAL EARNINGS - ON SECURITIES STOCK-
COMMON PAID-IN SUBSTANTIALLY LOAN TO AVAILABLE HOLDERS'
STOCK CAPITAL RESTRICTED ESOP FOR SALE EQUITY
---------------------- ------------- ------- -------------------------
<S> <C>
BALANCE AT
SEPTEMBER 30, 1995 $ 1,842 $1,341,225 $3,329,404 $ - $ - $ 4,672,471
Exercise of stock options 24 19,063 - - - 19,087
Cash dividend - - (111,028) - - (111,028)
Loan to ESOP - - - (57,120) - (57,120)
Net loss for the year - - (98,124) - - (98,124)
Net change in unrealized holding
gain on securities available for
sale, net of taxes of $2,482 - - - - 4,608 4,608
---------- -------------- --------- ---------- ------------- ------------
BALANCE AT
SEPTEMBER 30, 1996 1,866 1,360,288 3,120,252 (57,120) 4,608 4,429,894
Exercise of stock options 30 26,970 - - - 27,000
Repayment of loan to ESOP - - - 57,120 - 57,120
Net income for the year - - 337,099 - - 337,099
Net change in unrealized holding
gain on securities available for
sale, net of taxes of $382 - - - - (888) (888)
---------- ------------- ---------- ---------- ------------- ------------
BALANCE AT
SEPTEMBER 30, 1997 $ 1,896 $1,387,258 $3,457,351 $ - $3,720 $4,850,225
======== ========= ========== ========= ====== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-25
<PAGE>
POINSETT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
FOR THE YEARS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 337,099 $ (98,124)
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities
Provision for loan losses 142,113 83,921
Loss on sale of office properties and equipment - 3,370
Net (gain) loss on sale of real estate held for
development and sale (37,551) 13,364
Gain on sale of securities available for sale (36,797) (7,073)
Deferred income taxes 94,388 (261,000)
Depreciation 90,671 107,017
Increase in accrued interest receivable (113,163) (153,284)
Decrease in other assets 16,588 227,962
Increase (decrease) in income taxes payable - current (30,936) 30,936
Decrease in other liabilities (358,145) (390,998)
------------ ------------
Net cash provided by (used for) operating activities 104,267 (443,909)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (13,985,196) (7,925,044)
Proceeds from the sale of securities available for sale 2,468,401 628,736
Proceeds from the maturity of securities available for sale 1,665,571 2,271,876
Proceeds from the maturity of securities held to maturity 500,000 -
Purchase of securities available for sale (1,300,000) (2,137,500)
Proceeds from sale of Federal Home Loan Bank stock - 22,100
Proceeds from sale of real estate 503,026 1,682,035
Disbursements for real estate purchases and construction - (282,817)
Proceeds from the sale of office properties and equipment - 1,069,659
Purchase of office properties and equipment (713,881) (204,873)
Net cash used for investing activities (10,862,079) (4,875,828)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposit accounts 14,689,811 15,498,793
Repayment of notes payable (344,123) (1,263,176)
Repayment of advances from Federal Home Loan Bank (1,500,000) (8,850,000)
Proceeds from advances from Federal Home Loan Bank - 1,500,000
Dividends on common stock - (111,028)
Exercised stock options 27,000 19,087
Net cash provided by financing activities 12,872,688 6,793,676
------------ ------------
Net increase in cash and cash equivalents 2,114,876 1,473,939
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,429,634 1,955,695
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $5,544,510 $ 3,429,634
============ ============
CASH PAID FOR
Interest $3,145,546 $ 2,762,673
============ ============
Income taxes $ 220,730 $ 84,783
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-26
<PAGE>
POINSETT FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
ACTIVITIES
POINSETT FINANCIAL CORPORATION ("Corporation") is a unitary savings and
loan holding company whose subsidiary, THE POINSETT BANK, a Federal
Savings Bank ("Bank"), is primarily engaged in the business of accepting
savings and demand deposits and originating mortgage loans and loans to
individuals and small businesses located primarily in upstate South
Carolina for various personal and commercial purposes. The Bank has a
diversified loan portfolio and the borrowers' ability to repay their loans
is not dependent upon any specific economic sector.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and the Corporation's wholly-owned subsidiaries, the Bank and
Gateway Appraisers. The Bank has two wholly-owned subsidiaries, Poinsett
Service Corporation and Stokes Farnham Insurance. Poinsett Service
Corporation is engaged in the development and sale of residential real
estate. Stokes Farnham is an insurance agency. Significant intercompany
balances and transactions have been eliminated in consolidation.
ESTIMATES
The financial statements include estimates and assumptions that affect the
Corporation's financial position and results of operations and disclosure
of contingent assets and liabilities. Actual results could differ from
these estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from depository institutions and overnight
interest-bearing deposits.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
The Financial Accounting Standards Board ("FASB") Statement No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES,
addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities. The Statement requires investments to be
classified in three categories. Debt securities that the Corporation has
the positive intent and ability to hold to maturity are to be classified
as "held to maturity" and reported at amortized cost. Debt and equity
securities that are bought and held principally for the purpose of selling
them in the near term are to be classified as "trading securities" and
reported at fair value with unrealized gains and losses included in
earnings. The Corporation has no trading securities. Debt and equity
securities not classified as either "held to maturity securities" or
"trading securities" are classified as "available for sale" securities and
reported at fair value, with unrealized gains and losses excluded from
earnings and reported in a separate component of stockholders' equity.
Gains or losses on the sale of securities are recognized on a specific
identification, trade date basis. Interest earned on securities is
included in interest income.
LOANS RECEIVABLE
Interest on loans is accrued and taken into income based upon the interest
method. The recognition of interest income is discontinued when, in
management's judgment, the interest will not be collectible in the normal
course of business.
(CONTINUED)
F-27
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
ALLOWANCE FOR LOAN LOSSES AND LOSS PROVISION
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
Management considers the year end allowance appropriate and adequate to
cover possible losses in the loan portfolio; however, management's
judgment is based upon a number of assumptions about future events, which
are believed to be reasonable, but which may or may not prove valid. Thus,
there can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases in the
allowance for loan losses will not be required.
The Corporation accounts for impaired loans in accordance with FASB
Statement No. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN. The
statement requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loans' effective
interest rate or, as a practical matter, at the loan's observable market
value or fair value of the collateral if the loan is collateral dependent.
The statement was adopted in fiscal 1996; implementation of the statement
did not have a material impact on financial condition or results of
operations. The Corporation maintains an allowance for impaired loans
based on a combination of evaluation of impairment of smaller balance,
homogeneous loans (primarily consumer loans and 1-4 family real estate
mortgages) and specific identification of impaired loans based on
delinquency status and other factors related to the borrower's ability to
repay the loan. The risk characteristics used to aggregate loans are
collateral type, borrower's financial condition and geographic location.
The Corporation generally determines a loan to be impaired at the time
management believes that it is probable that the principal and interest
may be uncollectible. Management has determined that, generally, a failure
to make a payment within a 90-day period constitutes a minimum delay or
shortfall and does not generally constitute an impaired loan. However,
management reviews each past due loan on a loan-by-loan basis and may
determine a loan to be impaired prior to the loan becoming over 90 days
past due, depending upon the circumstances of that particular loan. A loan
is classified as a nonaccrual loan at the time management believes that
the collection of interest is improbable, generally when a loan becomes 90
days past due. The Corporation's policy for charge-off of impaired loans
is on a loan-by-loan basis. At the time management believes the collection
of interest and principal is remote, the loan is charged off. The
Corporation's policy is to evaluate impaired loans based on the fair value
of the collateral. Interest income from impaired loans is recorded using
the cash method. The Corporation has no impaired loans at September 30,
1997 or 1996.
OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
the related assets' estimated useful lives, which range from 5 to 40
years.
REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale is stated at the lower of cost
or net realizable value. Costs relating to the development and improvement
of property are capitalized. Gains on the sale of real estate held for
development and sale are recorded at the time of sale provided certain
criteria relating to property type, cash down payment, loan terms, and
other factors are met. Market values of real estate held for development
and sale are reviewed regularly and allowance for losses are established
when the carrying value exceeds the estimated net realizable value.
LOAN ORIGINATION FEES AND COSTS
Non-refundable loan origination fees and certain direct loan origination
costs are deferred and amortized over the lives of the related loans. The
net amortization of those deferrals is recognized as an adjustment to
interest income.
(CONTINUED)
F-28
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
INCOME TAXES
The Corporation and its subsidiaries file a consolidated federal income
tax return. Separate state income tax returns are filed for each
subsidiary.
The Corporation accounts for income taxes in accordance with FASB
Statement No. 109, ACCOUNTING FOR INCOME TAXES (FASB 109).
Under FASB 109, deferred income taxes reflect the net tax effects of (A)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes, and (B) operating loss carryforwards. A valuation
allowance is established for deferred tax assets that may not be realized.
Also, FASB 109 eliminates the exception from the requirement to record
deferred taxes on tax basis bad debt reserves in excess of the base year
amounts. The tax basis bad debt reserve that arose prior to the fiscal year
1988 (the base year amount) is frozen, and the book reserves at that date
and all subsequent changes in book and tax basis reserves are included in
the determination of deferred taxes.
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
common shares outstanding. Stock options outstanding (see Note 10) are not
considered in determining weighted average shares outstanding because the
estimated dilutive effect is less than three percent.
RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting standards that have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future
date are not expected to have a material impact on the financial
statements upon adoption.
RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
NOTE 2 - INVESTMENTS AND MORTGAGE-BACKED SECURITIES
The amortized cost and estimated fair value of investments and
mortgage-backed securities are as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- --------
AVAILABLE FOR SALE
SEPTEMBER 30, 1997
Securities of U.S. government
agencies ..................... $300,000 $ -- $-- $300,000
States and political subdivisions 150,000 6,000 -- 156,000
-------- ----- --------
Total ........................ $450,000 $ 6,000 $-- $456,000
======== ======== ===== ========
(CONTINUED)
F-29
<PAGE>
NOTE 2 - INVESTMENTS AND MORTGAGE-BACKED SECURITIES, CONTINUED
<TABLE>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- ---------
<S> <C>
AVAILABLE FOR SALE
SEPTEMBER 30, 1996
Securities of U.S. government
agencies .................................. $1,914,812 $ 3,750 $ -- $1,918,562
States and political subdivisions ............ 175,000 -- -- 175,000
---------- ---------
Total debt securities ..................... 2,089,812 3,750 -- 2,093,562
---------- ---------- ---------- ---------
GNMA pass-through certificates ............... 757,425 6,864 -- 764,289
FHLMC pass-through certificates .............. 375,940 -- 3,524 372,416
---------- ---------
Mortgage-backed securities ................... 1,133,365 6,864 3,524 1,136,705
---------- ---------- ---------
Total ........................................ $3,223,177 $ 10,614 $ 3,524 $3,230,267
========== ========== ========== =========
HELD TO MATURITY
SEPTEMBER 30, 1996
Securities of U.S. government
agencies .................................. $ 500,000 $ -- $ 17,500 $ 482,500
============================================== ========== ========== ========== =========
</TABLE>
The amortized cost and estimated fair value of debt securities by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
SEPTEMBER 30,
------------------------------------------------
1997 1996
------------------------- ---------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
--------- ---------- ---------- ----------
<S> <C>
AVAILABLE FOR SALE
Due in one year or less .............. $ 25,000 $ 26,000 $ -- $ --
Due after one year through five years 425,000 430,000 1,615,000
1,615,000
Due after five years through ten years -- -- 474,812 478,562
---------- ---------- ---------- ----------
Total debt securities ............. 450,000 456,000 2,089,812 2,093,562
Mortgage-backed securities ........... -- -- 1,133,365 1,136,705
---------- ---------- ---------- ----------
$ 450,000 456,000 $3,223,177 $3,230,267
========== ========== ========== ==========
HELD TO MATURITY
Due in one year or less .............. $ -- $ -- $ 500,000 $ 482,500
========== ========== ========== ==========
</TABLE>
On December 30, 1995, the Bank transferred securities from held to
maturity to the available for sale classification. These securities had an
amortized cost of $3,134,568 and an unrealized gain of $52,730 on the date of
transfer. This one-time reassessment of securities was done in compliance with
the "Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," issued by the Financial Accounting
Standards Board.
F-30
<PAGE>
NOTE 3 - LOANS RECEIVABLE
Loans receivable consisted of the following:
<TABLE>
SEPTEMBER 30,
1997 1996
-------------- --------------
<S> <C>
TYPE OF LOAN
Mortgage loans
Fixed rate .................................................................... $ 11,638,515 $ 7,830,496
Adjustable rate ............................................................... 49,016,583 42,416,241
Undisbursed portion of loans in process ....................................... (4,273,199) (3,451,738)
------------
Total mortgage loans ........................................................ 56,381,899 46,794,999
Savings account loans .............................................................. 156,755 98,259
Consumer, installment and other loans .............................................. 12,780,999 8,404,879
------------ ------------
Total ....................................................................... 69,319,653 55,298,137
Less allowance for loan losses ..................................................... (343,313) (222,000)
Loans receivable - net ...................................................... $ 68,976,340 $ 55,076,137
=========== ============
Weighted average rate .............................................................. 8.73% 8.62%
============ ============
</TABLE>
Adjustable rate mortgage loans are subject to rate adjustment annually
based on the Federal Home Loan Bank's published contract rate, which represents
the national average rate for purchases of previously occupied homes. There are
no established interest rate ceilings or floors associated with such loans;
however, the maximum that rates can be adjusted on these loans is 200 basis
points in any one year to a maximum of 500 basis points from the original
lending rate.
The Bank originates commercial real estate loans, which totaled
approximately $5,002,000 and $5,507,000 at September 30, 1997 and 1996,
respectively. These loans are considered by management to be of somewhat greater
risk of uncollectibility due to the dependency on income production or future
development of the real estate. These commercial real estate loans are
collateralized by office buildings, apartments and warehouses.
At September 30, 1997 and 1996, loans which are contractually past due
ninety days or more totaled approximately $611,000 and $1,224,000, respectively.
The amount the Bank will ultimately realize from these loans could differ
materially from their carrying value because of future developments affecting
the underlying collateral or the borrower's ability to repay the loans. During
the years ended September 30, 1997 and 1996, the Bank realized no material
losses of interest income on loans past due 90 days or more.
The changes in the allowance for loan losses consisted of the following:
FOR THE YEARS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
Allowance for loan losses
Balance, beginning of year $222,000 $190,347
Write-offs during the year (20,800) (52,268)
Provision ................ 142,113 83,921
-------- --------
Balance, end of year ..... $343,313 $222,000
======== ========
(CONTINUED)
F-31
<PAGE>
NOTE 3 - LOANS RECEIVABLE, CONTINUED
Directors and officers of the Corporation and the Bank are customers of
the Bank in the ordinary course of business. Deposits and loans of directors and
officers have terms consistent with those offered to other customers. Loans to
officers and directors were $908,327 and $936,379 at September 30, 1997 and
1996, respectively.
Under current regulations, aggregate commercial real estate loans may
not exceed 400 percent of the Bank's capital as determined under regulatory
capital standards. The Bank is in compliance with this limitation.
Also, under current regulations, the Bank may not, after August 9,
1989, make real estate loans to one borrower in excess of 15 percent of its
unimpaired capital and surplus, unless such loans do not exceed $500,000. At
September 30, 1997, the Bank is in compliance with this limitation.
NOTE 4 - OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
SEPTEMBER 30,
1997 1996
----------- -----------
<S> <C>
Major classifications
Land and land improvements $ 423,771 $ 81,556
Office buildings ......................................................... 571,596 571,596
Furniture, fixtures and equipment ........................................ 990,112 618,446
---------- ----------
Total .................................................................. 1,985,479 1,271,598
Less accumulated depreciation ............................................ (608,850) (518,179)
---------- ----------.
Office property and equipment, net ....................................... $1,376,629 $ 753,419
========== ==========
</TABLE>
Depreciation of office properties and equipment charged to occupancy
and equipment expense at September 30, 1997 and 1996 was $90,671 and $107,017,
respectively.
NOTE 5 - REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale consists of several tracts of
land in Travelers Rest, South Carolina and is summarized as follows:
<TABLE>
FOR THE YEARS ENDED
SEPTEMBER 30,
1997 1996
------------ -----------
<S> <C>
Land held for future development and sale .................................... $ 312,594 $ 307,784
Residential subdivision
Capitalized interest ....................................................... 25,434 34,411
Improved lots .............................................................. 285,684 367,741
Home construction in progress .............................................. 200,179 603,226
---------- ----------
Total .................................................................... $ 823,891 $1,313,162
========== ==========
</TABLE>
(CONTINUED)
F-32
<PAGE>
NOTE 5 - REAL ESTATE HELD FOR DEVELOPMENT AND SALE, CONTINUED
Poinsett Service Corporation substantially completed construction of
all infrastructure (streets, underground utilities, grading, etc.) for the first
phase of a residential subdivision known as Watson Crossing. The service
corporation is marketing and serving as the general contractor for custom
constructed homes. Operations for fiscal years 1997 and 1996 are summarized as
follows:
FOR THE YEARS ENDED
SEPTEMBER 30,
1997 1996
------------ -----------
Sale of homes $ 503,026 $ 625,504
Cost of homes sold 489,271 638,868
------------ -----------
Gain (loss) on sale of homes $13,755 $ (13,364)
For the year ended September 30, 1997, the Corporation recognized a
gain of $23,796 on the sale of its offices in Greenville and Rock Hill, South
Carolina (See Note 13). This gain is included in the caption net gain (loss) on
sale of real estate held for development and sale.
NOTE 6 - DEPOSIT ACCOUNTS Deposit accounts are as follows:
<TABLE>
SEPTEMBER 30,
-----------------------------------------------------
1997 1996
-------------------------- ------------------------
WEIGHTED WEIGHTED
AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE
---------- ------------ --------- ------------
<S> <C>
TRANSACTION AND PASSBOOK ACCOUNTS
Negotiable order of withdrawal (NOW):
Noninterest-bearing $3,925,548 $ 1,798,744
Interest-bearing 19,084,889 4.19 % 14,286,549 4.20%
Passbook savings 14,587,766 4.15 10,227,375 3.54
---------- -----------
Total 37,598,203 26,312,668
---------- -----------
SAVINGS CERTIFICATES
3.25% - 5.00% 942,842 1,661,288
5.01% - 6.00% 27,399,166 28,080,895
6.01% - 8.00% 6,880,854 2,076,403
----------- -----------
Total 35,222,862 5.53 31,818,586 5.31
---------- -----------
Total deposits $72,821,065 4.60 $58,131,254 4.54
=========== ===========
</TABLE>
At September 30, 1997 deposit accounts with balances of $100,000 and
over totaled approximately $19,701,000 as compared to $10,262,000 at September
30, 1996.
(CONTINUED)
F-33
<PAGE>
NOTE 6 - DEPOSIT ACCOUNTS, CONTINUED
The amounts and scheduled maturities of deposit accounts are as
follows:
SEPTEMBER 30,
1997 1996
----------- -----------
SAVINGS CERTIFICATES MATURING WITHIN
One year $31,584,921 $29,703,925
After one but within two years 3,378,909 1,481,772
After two but within three years 259,032 632,889
------------ -----------
Total certificate accounts 35,222,862 31,818,586
TRANSACTION AND PASSBOOK ACCOUNTS 37,598,203 26,312,668
----------- -----------
TOTAL $72,821,065 $58,131,254
=========== ===========
Interest expense on deposits consisted of the following:
FOR THE YEARS ENDED
SEPTEMBER 30,
1997 1996
-------------- -------------
Account type
NOW accounts $ 715,754 $ 481,293
Passbook deposit accounts 454,318 290,555
Certificate accounts 1,787,109 1,645,510
------------- ------------
TOTAL INTEREST ON DEPOSITS $ 2,957,181 $2,417,358
============ ============
NOTE 7 - ADVANCES FROM FEDERAL HOME LOAN BANK AND FEDERAL HOME LOAN BANK STOCK
The Bank has an $8,500,000 credit line with the Federal Home Loan Bank
of Atlanta. Advances under the credit line accrue interest at a variable
interest rate and mature within one year. The weighted average interest rate
paid during the current period for such advances was 5.62 percent.
The Bank has pledged as collateral for borrowings under the credit line
its Federal Home Loan Bank stock and has entered into a blanket collateral
agreement whereby the Bank will maintain, free of other encumbrances, qualifying
mortgages (as defined) with a book value of at least 133 percent of total
advances.
The Bank, as a member institution of the Federal Home Loan Bank
("FHLB") of Atlanta, is required to own capital stock in the FHLB of Atlanta
based generally upon the Bank's balances of residential mortgage loans and FHLB
advances. FHLB capital stock is pledged to secure FHLB advances. No ready market
exists for this stock and it has no quoted market value. However, redemption of
this stock has historically been at par value.
F-34
<PAGE>
NOTE 8 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
SEPTEMBER 30,
1997 1996
-------- --------
<S> <C>
First mortgage on real estate, interest paid monthly at 10.25
percent. The unpaid balance is due in April, 1998 .... $491,999 $533,607
First mortgage on real estate, interest paid semi-annually at
8.75 percent. The unpaid balance is due in January, 1998.. 121,681 424,196
-------- --------
TOTAL ................................................ $613,680 $957,803
======== ========
</TABLE>
NOTE 9 - INCOME TAXES
Income tax expense (benefit) is summarized as follows:
FOR THE YEAR ENDED
SEPTEMBER 30,
1997 1996
------------ ----------
Current $104,390 $207,153
Deferred 118,860 (261,000)
--------- ---------
TOTAL INCOME TAXES $ 223,250 $ (53,847)
========= ===========
The cumulative sources of temporary differences and the resulting
deferred tax assets (liabilities) are as follows:
SEPTEMBER 30,
1997 1996
------------ ----------
Tax depreciation in excess of book depreciation $ (37,000) $ (26,000)
FHLB dividends (75,000) (77,000)
Accrual to cash basis of accounting (106,000) (143,000)
Provision for loan losses in excess of amount
deductible for taxes (11,000 (4,000)
Deferred gain on sale of real estate 43,000 54,000
SAIF assessment - 104,000
Other, net 752 1,140
------------ -----------
$ (185,248) $ (90,860)
============= ============
(CONTINUED)
F-35
<PAGE>
NOTE 9 - INCOME TAXES, CONTINUED
Income taxes differed from amounts computed by applying the statutory
federal rates to income before income taxes as follows:
SEPTEMBER 30,
1997 1996
--------- ---------
Income tax expense (benefit) at statutory federal income
tax rate (34%) $190,520 $(51,670)
Increase resulting from
State income taxes, net of federal tax benefit 25,614 (6,839)
Other - net 7,116 4,662
-------- ---------
TOTAL $223,250 $(53,847)
========= =========
As of September 30, 1997, the Corporation had, for state income tax
return purposes, net operating loss carryforwards of approximately $380,000 that
may be used to reduce future state taxable income. Such carryforwards expire in
the years 2006 - 2009. The Corporation has no loss carryforwards for federal
income tax purposes. The deferred tax asset created by the loss carryforwards is
offset by a valuation allowance of an equal amount.
Legislation has been passed which repeals the "reserve" method of
accounting for thrift bad debt reserves for the first tax year beginning after
December 31, 1995 (the fiscal year ending September 30, 1997 for the
Corporation). This legislation requires all thrifts (including the Corporation)
to account for bad debts using either the specific charge-off method (available
to all thrifts) or the experience method (available only to thrifts that qualify
as "small banks," i.e. under $500 million in assets). The Corporation currently
uses the experience method of accounting for its tax bad debt reserves. The
legislation also suspends recapture of bad debt reserves taken through 1987
(i.e., the base year reserve), but requires thrifts to recapture or repay bad
debt deductions taken after 1987 over six years. As of September 30, 1997, the
bad debt reserve subject to recapture, for which deferred taxes have previously
been provided, totaled approximately $47,000. As permitted under SFAS 109, no
deferred tax liability is provided for approximately $154,000 ($58,000
approximate tax effect) of such tax bad debt reserves that arose prior to
October 1, 1988.
NOTE 10 - STOCK OPTION AND OWNERSHIP PLANS
The Corporation has an Incentive Stock Option Plan through which the
Board of Directors may grant stock options to officers and employees to purchase
common stock of the Corporation at prices not less than 100 percent of the fair
market value on the date of the grant. The outstanding options are exercisable
upon being granted and expire ten years from the date of the grant. The
Corporation applies Accounting Principles Board (APB) Opinion 25 and related
Interpretations in accounting for the plan. Accordingly, no compensation cost
has been charged to operations. Had compensation cost for the plan been
determined based on the fair value at the grant dates for awards under the plan
consistent with the accounting method available under SFAS No. 123, "Accounting
for Stock B Based Compensation", the Corporation's net income and net income per
share of common stock would not have been affected. All options under the plan
were granted prior to the effective date of SFAS No. 123.
(CONTINUED)
F-36
<PAGE>
NOTE 10 - STOCK OPTION AND OWNERSHIP PLANS, CONTINUED
A summary of the status of the plan as of September 30, 1997 and 1996,
and changes during the years ending on those dates is presented below:
<TABLE>
1997 1996
-------------------- --------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ ------------- ----- -------------
<S> <C>
Outstanding at beginning of year 9,750 $ 9.23 12,136 $ 8.99
Granted ..................... -- -- -- --
Exercised ................... 3,000 9.00 2,386 8.00
Forfeited or expired ........ -- -- -- --
------ ----- ------ -----
Outstanding at end of year ..... 6,750 $ 9.33 9,750 $ 9.23
====== ===== ====== ======
Options exercisable at year-end 6,750 $ 9.33 9,750 $ 9.23
</TABLE>
The weighted average remaining contractual life of exercisable options
is 5.5 years at September 30, 1997. No shares are available for grant under the
plan.
The Corporation has an Employee Stock Ownership Plan (ESOP) which
enables employees who are not participants in the Incentive Stock Option Plan to
purchase the Corporation's common stock. The ESOP contribution is determined
annually by the Board of Directors but not in excess of the maximum amount
deductible under the Internal Revenue Code. Contributions of $48,827 and $37,826
were made to the ESOP for the years ended September 30, 1997 and 1996,
respectively.
NOTE 11 - PROFIT SHARING PLAN
The Corporation has a non-contributory profit sharing plan for
employees. Discretionary contributions to the Plan are determined annually by
the Board of Directors and are subject to a percentage of earnings limitation
imposed by the Internal Revenue Code.
Profit sharing expense for the years ended September 30, 1997 and 1996
was $68,867 and $40,695, respectively. Eligible participants in the Plan include
all full-time employees over the age of twenty-one having completed one year of
continuous employment at the anniversary date of the Plan.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
LOAN COMMITMENTS
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments extend over periods of time with the majority of such
commitments disbursed within a thirty day period. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Commitments to extend credit at fixed rates expose the
Bank to some degree of interest rate risk. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The type and amount
of collateral obtained varies and is based on management's credit
evaluation of the potential borrower.
(CONTINUED)
F-37
<PAGE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES, CONTINUED
LOAN COMMITMENTS, CONTINUED
Those instruments involve, to varying degrees, elements of credit and
interest-rate-risk in excess of the amount recognized in the consolidated
balance sheets. The contract amounts of those instruments reflect the
extent of the Corporation's involvement in particular classes of financial
instruments.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments. The
Corporation uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
At September 30, 1997, the Bank had commitments of approximately $2,632,000
excluding undisbursed portions of loans in process. All commitments, which
are disbursed subject to certain limitations, are for adjustable interest
rate mortgage loans and extend over periods of time with the majority
disbursed within a twelve-month period.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
FASB Statement No. 105 requires certain additional disclosures in the
financial statements regarding financial instruments with off-balance sheet
risk. The Corporation has no additional financial instruments with
off-balance sheet risk.
LITIGATION
The Corporation is involved in legal actions in the normal course of
business. In the opinion of management, based on the advice of counsel, the
resolution of these matters will not have a material adverse impact on
future results of operations or the financial position of the Corporation.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Bank's profitability depends to a large extent on its net interest
income, which is the difference between interest income from loans and
investments and interest expense on deposits and borrowings. Like most
financial institutions, the Bank's interest income and interest expense are
significantly affected by changes in market interest rates and other
economic factors beyond its control. The Bank's interest earning assets
consist primarily of long-term, adjustable rate mortgage loans and
short-term investments, and its interest bearing liabilities are primarily
short-term deposits. Accordingly, the Bank's exposure to changes in
interest rates is considered minimal. However, uncertainties about the
potential impact of future changes in interest rates exist. For example,
although certain assets and liabilities may have similar repricing
characteristics, they may react in different degrees to changes in market
interest rates. Additionally, the interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Furthermore, certain assets, such as adjustable rate mortgages, have
features which restrict changes in interest rates on a short-term basis and
over the life of the assets. The Bank considers the anticipated effects of
those various factors in implementing its asset/liability management
objectives.
F-38
<PAGE>
NOTE 13 - RELATED PARTY TRANSACTIONS
The Corporation has entered into two leases with companies in which
certain directors have an interest. These leases were made in the ordinary
course of business and were on terms comparable to those which would have been
obtained between unrelated parties (See Note 14).
During 1996, the Corporation sold and leased back two locations (its
offices in Greenville and Rock Hill, South Carolina). The properties were sold
to partnerships comprised of certain officers and directors of the Corporation.
The gross sales price for the two properties was $1,185,000 and the Corporation
deferred the gain on the sale of approximately $142,000. This gain will be
amortized over the lease term (5 years) on a straight-line basis.
NOTE 14 - LEASE COMMITMENTS
On September 30, 1997, the Bank was obligated under two non-cancelable
operating leases on office properties that had initial or remaining terms of
more than one year. Future minimum rental payments under these leases on
September 30, 1997 are:
PAYABLE IN THE YEAR
ENDING SEPTEMBER 30, AMOUNT
-------------------- ------------
1998 $ 136,200
1999 136,200
2000 136,200
2001 136,200
2002 and thereafter 2,043,000
---------
TOTAL MINIMUM PAYMENTS REQUIRED $2,587,800
The above leases provide that the Bank pay property taxes, insurance
and maintenance costs. Lease payments charged to operations were $136,200 and $0
for the years ended September 30, 1997 and 1996, respectively.
NOTE 15 - STOCKHOLDERS' EQUITY
The Bank completed a conversion from a federally chartered mutual to a
federally chartered capital stock form of organization and ownership on August
4, 1988. At the time of conversion the Bank established a liquidation account in
an amount equal to its retained income as of December 31, 1987 (approximately
$1.2 million). The liquidation account will be maintained for the benefit of
depositors who held a savings or demand account with a balance of $50 or more as
of the September 30, 1987 eligibility date who continue to maintain their
deposits at the Bank after conversion. In the event of a future liquidation (and
only in such an event), each eligible and supplemental eligible account holder
who continues to maintain his or her savings account will be entitled to receive
a distribution from the liquidation account. The total amount of the liquidation
account will be decreased in an amount proportionately corresponding to
decreases in the savings account balances of eligible and supplemental eligible
account holders on each subsequent annual determination date. Except for
repurchase of stock and payment of dividends by the Bank, the existence of the
liquidation account will not restrict the use or application of stockholders'
equity.
F-39
<PAGE>
NOTE 16 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Under present regulations, the Bank must maintain core capital
(leverage requirement) at least equal to 3.0 percent of adjusted total assets,
of which 1.5 percent must be tangible capital, and risk-based capital at least
equal to 8.0 percent of risk weighted assets. For purposes of measuring capital
compliance, the Bank's capital must be reduced based on investments in and
extensions of credit to its subsidiary. Management believes, as of September 30,
1997 and 1996, that the Bank met all capital adequacy requirements to which it
was subject.
The Bank had the following actual and required amounts and ratios (in
thousands):
<TABLE>
SEPTEMBER 30, 1997
--------------------------------
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITA
--------- -------- ----------
<S> <C>
Actual capital of the Bank .................................. $ 4,414 $ 4,414 $ 4,414
Adjustments
Unrealized gain on available for sale securities ......... (3) (3) (3)
General allowance for loan losses ........................ -- -- 255
Investments in and extensions of credit
to subsidiaries ........................................ (113) (113) (113)
------- ------- ------
Adjusted regulatory capital .............................. 4,298 4,298 4,553
Minimum capital requirement .............................. 1,168 2,337 3,820
------- ------- -------
Regulatory capital excess ................................... $ 3,130 $ 1,961 $ 733
======= ======= =======
Actual regulatory capital ratio ............................. 5.49% 5.49% 9.50 %
======== ======= =======
Required capital ratio for capital adequacy purposes ........ 1.50% 3.00% 8.00 %
======== ======= =======
</TABLE>
<TABLE>
SEPTEMBER 30, 1996
----------------------------------
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
--------- ------- --------
<S> <C>
Actual capital of the Bank ......................... $ 3,897 $ 3,897 $ 3,897
Adjustments
Unrealized gain on available for sale securities (4) (4) (4)
(4 .................................................
General allowance for loan losses ............... -- -- 222
Investments in and extensions of credit
to subsidiaries ............................... (332) (332) (332)
------- ------- ------
Adjusted regulatory capital ..................... 3,561 3,561 3,783
Minimum capital requirement ..................... 962 1,925 3,296
-------- ------- ------
Regulatory capital excess .......................... $ 2,599 $ 1,636 $ 487
======== ======= ======
Actual regulatory capital ratio .................... 5.51% 5.51% 9.18%
======= ======== ======
Required capital ratio for capital adequacy purposes 1.50% 3.00% 8.00%
======== ======== ======
</TABLE>
(CONTINUED)
F-40
<PAGE>
NOTE 16 - REGULATORY MATTERS, CONTINUED
The Corporation and the Bank are prohibited from declaring cash
dividends on their common stock or repurchasing their common stock if the effect
thereof would cause the Bank's capital to be reduced below either the amount
required for the liquidation account (Note 15) or the minimum regulatory capital
requirements. In addition, the Bank is also prohibited from declaring cash
dividends and repurchasing its own stock without prior regulatory approval in
any amount in a calendar year in excess of 100 percent of its current year's net
income to the date of any such dividend or repurchase, plus 50 percent of the
excess of its capital at the beginning of the year over its fully phased-in
capital requirement.
NOTE 17 - CONDENSED FINANCIAL INFORMATION
Condensed financial information of the Corporation (parent company
only) is presented as follows:
<TABLE>
SEPTEMBER 30,
1997 1996
------------ -----------
<S> <C>
CONDENSED BALANCE SHEETS
ASSETS
Cash $ 51,474 $ 192,256
Investment securities 150,000 150,000
Notes receivable 131,169 179,464
Investment in subsidiaries 4,462,723 3,822,754
Property and real estate investments, net 53,190 235,974
Other assets 120,449 68,262
----------- ----------
TOTAL ASSETS $ 4,969,005 $4,648,710
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 118,780 $ 218,816
Stockholders' equity 4,850,225 4,429,894
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,969,005 $4,648,710
=========== ==========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
FOR THE YEARS ENDED
SEPTEMBER 30,
1997 1996
---------- -----------
<S> <C>
Equity in earnings of subsidiaries $375,334 $ 42,607
Other income (expenses), net (38,235) (140,731)
NET INCOME (LOSS) $337,099 $(98,124)
=========== ===========
</TABLE>
F-41
<PAGE>
(CONTINUED)
NOTE 17 - CONDENSED FINANCIAL INFORMATION, CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------
1997 1996
------------- ------------
<S> <C>
OPERATING ACTIVITIES
Net income (loss) ............................................. $ 337,099 $ (98,124)
Adjustments to reconcile net income (loss) to net cash used for
operating activities
Equity in earnings of subsidiary ............................ (375,334) (42,607)
Depreciation and amortization ............................... -- 20,141
Gain on sale of real estate ................................. (23,796)
--
Increase in other assets .................................... (52,187) (12,689)
Decrease in other liabilities ............................... (100,036) (128,597)
---------- ----------
Net cash used for operating activities .................... (214,254) (261,876)
---------- ----------
INVESTING ACTIVITIES
Proceeds from repayment of notes receivable ................... 48,295
91,238
Proceeds from sale of real estate ............................. 205,692
1,199,956
Investment in subsidiary ...................................... (264,635) 2,891
---------- ----------
Net cash provided by (used for) investing activities ...... (10,648) 1,294,085
FINANCING ACTIVITIES
Repayment of notes payable .................................... -- (756,458)
Dividend on common stock ...................................... -- (111,028)
Exercise of stock options ..................................... 27,000 19,087
Loan to ESOP .................................................. 57,120 (57,120)
----------- -----------
Net cash provided by (used for) financing activities ...... 84,120 (905,519)
----------- -----------
Net increase (decrease) in cash ........................... (140,782) 126,690
CASH AT BEGINNING OF YEAR ........................................ 192,256 65,566
----------- -----------
CASH AT END OF YEAR .............................................. $ 51,474 $ 192,256
=========== ===========
</TABLE>
F-42
<PAGE>
Poinsett Financial Corporation
Condolidated Balance sheets
Unaudited
ASSETS March 31 September 30,
1998 1997
---------- --------------
Cash $16,194 $5,545
Investments and mortgage backed securities 985 456
Loans receivable, net 68,040 68,976
Office properties and equipment, net 1,332 1,377
Real estate:
Held for development and sale 680 824
In settlement in loans 219 -
Federal Home Loan Bank stock 498 420
Accrued interest receivable 502 531
Other assets 419 543
--------- ----------
Total Assets $88,869 $78,672
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $81,684 $72,821
Notes payable 2,044 614
Income taxes payable 185 185
Other liabilities 46 202
--------- ----------
Total liabilities 83,965 73,822
========= ==========
STOCKHOLDERS EQUITY
Preferred stock
Common stock $.01 par value; authorized 15,000,000
shares outstanding, 190,365 and 189,615 shares,
respectively 2 2
Additional paid in capital 1,387 1,387
Retained earnings 3,512 3,457
Unrealized holding gain on securities held for
sale 3 4
--------- ----------
Total stockholders' equity 4,904 4,850
--------- ----------
Total liabilities and stockholders' equity $88,869 $78,672
========= ==========
See accompanying notes to financial statements
F-43
<PAGE>
Poinsett Financial Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
------------- ------------ ------------ -----------
INTEREST INCOME
Interest and fees on loans $1,532 $1,328 $3,083 $2,582
Interest and dividends on investments 110 56 172 138
------------- ------------ ------------ -----------
Total interest income 1,642 1,384 3,255 2,720
------------- ------------ ------------ -----------
INTEREST EXPENSE
Interest on deposit accounts 903 699 1,776 1,383
Interest on advance from the FHLB 12 42 - 80
------------- ------------ ------------ -----------
Total interest expense 915 741 1,776 1,463
------------- ------------ ------------ -----------
Net interest income 727 643 1,479 1,257
PROVISION FOR LOAN LOSSES 326 42 335 69
------------- ------------ ------------ -----------
NET INTEREST INCOME AFTER PROVISION 401 601 1,144 1,188
------------- ------------ ------------ -----------
NONINTEREST INCOME
Fees for services to customers 228 56 454 138
Insurance commissions and services 49 62 101 99
Net gain on sale of real estate held for
development - (7) 12 -
Gain on sale of securities held for sale - - - 24
Other income 7 30 56 52
------------- ------------ ------------ -----------
Total noninterest income 284 141 623 313
------------- ------------ ------------ -----------
NONINTEREST EXPENSE
Salaries and employee benefits 437 273 846 582
Occupancy and equipment expense 117 141 289 248
Federal insurance premiums 24 12 39 15
Advertising, office and administrative
expenses 152 135 301 242
Other expenses 98 84 203 153
------------- ------------ ------------ -----------
Total noninterest expense 828 645 1,678 1,241
------------- ------------ ------------ -----------
Income before income taxes (143) 97 89 261
INCOME TAX EXPENSE (44) 40 34 102
------------- ------------ ------------ -----------
NET INCOME $ (98) $57 $55 $159
============= ============ ============ ===========
NET INCOME PER COMMON SHARE $(0.52) $0.30 $0.29 $0.85
============= ============ ============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 189,615 187,115 189,615 189,615
============= ============ ============ ===========
</TABLE>
F-44
<PAGE>
POINSETT FINANCIAL CORPORATION
<TABLE>
<CAPTION>
<S> <C> <C>
Statements of Cash Flows
Unaudited
For the six months ended March 31, 1998 and September 30, 1997
(Dollars in Thousands)
Six Months Ended
March 31, March 31,
1998 1997
----------- ----------
Cash flows from operating activities:
Net income (loss) 55 158
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities
Provision for loan losses 335 69
Loss on sale of office properties and equipment
Net (gain) loss on sale of real estate held for
development and sale (12) -
Gain on sale of securities available for sale - (24)
Deferred income taxes - -
Depreciation 54 48
(Increase) decrease in accrued interest receivable 29 (90)
(Increase) decrease in other assets 124 (55)
Increase (decrease) in income taxes payable - current - 140
Decrease in other liabilities (156) (362)
-------- ---------
Net cash provided by (used for) operating
activities 429 (118)
-------- ---------
Cash flows from investing activities
Net increase (decrease) in loans 601 (7,537)
Proceeds from the sale of securities available for
sale - 2,468
Proceeds from the maturity of securities available
for sale - 694
Proceeds from the maturity of securities held to
maturity - 500
Purchase of securities available for sale (529) (1,300)
Purchase of Federal Home Loan Bank stock (78) -
Proceeds from the sale of real estate 156 490
Disbursements for real estate purchases and
construction (219)
Proceeds from the sale of office properties and
equipment
Proceeds of office properties and equipment
Purchase of office properties and equipment (10) (274)
-------- ---------
Net cash used for investing activities (79) (4,959)
-------- ---------
Cash flows from financing activities
Increase in deposit accounts 8,863 4,893
Repayment of notes payable (70) 169
Proceeds from note payable 1,500 -
Dividends on common stock - -
Exercised stock options 6 27
-------- ---------
Net cash provided by financing activities 10,299 5,089
-------- ---------
Net increase in cash and cash equivalents 10,649 12
Cash and cash equivalents, beginning period 5,545 3,430
-------- ---------
Cash and cash equivalents, end of period 16,194 3,442
======== =========
Cash paid for
Interest 1,785 1,444
======== =========
Income taxes 35 96
======== =========
</TABLE>
F-45
<PAGE>
POINSETT FINANCIAL CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
A summary of Poinsett Financinal Corporation's significant accounting
policies is included in the 1997 Annual Report to Shareholders.
2. Management's Opinion
In the opinion of management, the accompanying interim financial statements
reflect all normal recurring adjustments which are necessary for a fair
presentation of a financial position of Poinsett Financial Corporation at
March 31, 1998, and the results of their operations and their cash flows
for the six months ended March 31, 1998 and 1997.
F-46
<PAGE>
ANNEX A
REORGANIZATION AGREEMENT
BY AND BETWEEN
CAROLINA FIRST CORPORATION
AND
POINSETT FINANCIAL CORPORATION
DATED AS OF JUNE 26, 1998
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION I. DEFINITIONS.........................................................6
1.1. Articles of Merger......................................6
1.2. Benefit Plans...........................................6
1.3. CERCLA .................................................6
1.4. CFC ....................................................6
1.5. CFC Benefit Plans.......................................6
1.6. CFC Common Stock........................................6
1.8. Code ...................................................6
1.9. Confidential Information................................6
1.10. Derivative Contract.....................................6
1.11. ERISA...................................................6
1.12. Effective Time..........................................6
1.13. Exchange Act............................................7
1.14. Fair Market Value.......................................7
1.15. FDIC....................................................7
1.16. Federal Reserve Board...................................7
1.17. Federal Reserve.........................................7
1.18. GAAP....................................................7
1.19. IRS.....................................................7
1.20. Knowledge...............................................7
1.21. Lien....................................................7
1.22. Material Adverse Event; Material Adverse Effect.........7
1.23. Merger..................................................7
1.24. OTS.....................................................7
1.25. PBGC....................................................7
1.26. Person..................................................7
1.27. PFC.....................................................7
1.28. PFC Benefit Plans.......................................7
1.29. PFC Common Stock........................................7
1.30. PFC Shareholder Approval................................8
1.31. PFC Shareholders' Meeting...............................8
1.32. Plan of Merger..........................................8
1.33. Poinsett Bank...........................................8
1.34. Proxy Statement.........................................8
1.35. Registration Statement..................................8
1.36. Regulations.............................................8
1.37. Regulatory Approvals....................................8
1.38. Regulatory Authority....................................8
1.39. Reorganization Agreement................................8
1.40. Rights..................................................8
1.41. SEC.....................................................8
1.42. Securities Act..........................................8
1.43. State Board.............................................8
SECTION II. THE MERGER.........................................................8
2.1. The Merger..............................................8
2.2. The Closing.............................................8
2.3. Consideration for the Merger............................8
2.4. PFC Shareholder Approval; Registration Statement........9
2.5. Cooperation; Regulatory Filings.........................9
2.6. Tax Treatment...........................................9
SECTION III. REPRESENTATIONS AND WARRANTIES OF PFC.............................9
3.1. Organization, Good Standing and Conduct of Business.....9
3.2. Subsidiaries...........................................10
3.3. Corporate Authority....................................10
3.4. Binding Effect.........................................10
3.5. Capitalization of PFC..................................10
3.6. Compliance with Laws; Absence of Defaults..............10
A-2
<PAGE>
3.7. Non-Contravention and Defaults; No Liens...............11
3.8. Necessary Approvals....................................11
3.9. Financial Statements...................................11
3.10. Tax Returns............................................11
3.11. Undisclosed Liabilities................................12
3.12. Properties, Encumbrances...............................12
3.13. Litigation ............................................12
3.14. Reports................................................12
3.15. Brokers................................................12
3.16. Expenditures...........................................12
3.17. Insurance..............................................12
3.18. Contracts and Commitments..............................13
3.19. Employee Benefit Plans and Contracts...................13
3.20. Allowance for Loan Losses..............................14
3.21. Environmental Matters..................................14
3.22. PFC Information........................................15
3.23. Asset Classification...................................15
3.24. Derivatives Contracts, Etc.............................15
3.25. Labor Matters..........................................15
3.26. Ownership of CFC Common Stock..........................15
3.27. Resale of CFC Common Stock.............................15
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC.............................15
4.1. Organization, Good Standing and Conduct of Business....15
4.2. Subsidiaries...........................................16
4.3. Corporate Authority....................................16
4.4. Binding Effect.........................................16
4.5. Capitalization of CFC..................................16
4.6. Compliance with Laws; Absence of Defaults..............16
4.7. Non-Contravention and Defaults; No Liens...............17
4.8. Necessary Approvals....................................17
4.9. Financial Statements...................................17
4.10. Undisclosed Liabilities................................17
4.11. Litigation.............................................17
4.12. CFC Information........................................18
4.13. Securities Reports.....................................18
4.14. Ownership of PFC Common Stock..........................18
4.15. Due Diligence..........................................18
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING...............................18
5.1. Conduct of PFC Pending Closing.........................18
5.2. Conduct of CFC Pending Closing.........................19
SECTION VI. COVENANTS OF THE PARTIES..........................................19
6.1. Access to Properties and Records.......................20
6.2. Confidentiality........................................20
6.3. Cooperation............................................20
6.4. Affiliates' Letters....................................20
6.5. Listing of CFC Common Stock............................20
6.6. Tax Treatment..........................................20
6.7. Expenses...............................................20
6.8. Material Events........................................20
6.9. Acquisition Proposals...................................21
6.10. Public Announcements...................................21
6.11. Updating of Schedules..................................21
6.12. Certain Policies of PFC................................21
6.13. Employment Matters.....................................21
6.14. Prohibited Actions.....................................22
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE.........................22
7.1. Performance of Acts and Representations by PFC.........22
A-3
<PAGE>
7.2. Opinion of Counsel for PFC.............................22
7.3. Conduct of Business....................................23
7.4. Consents...............................................23
7.5. Certificate............................................23
7.6. PFC Shareholder Approval...............................23
7.7. IRS Ruling.............................................23
7.8. Securities Laws........................................23
7.9. PFC Allowance..........................................23
SECTION VIII. CONDITIONS TO THE OBLIGATION OF PFC TO CLOSE.....................23
8.1. Performance of Acts and Representations by CFC.........23
8.2. Opinion of Counsel for CFC.............................24
8.3. Conduct of Business....................................24
8.4. Consents...............................................24
8.5. Certificate............................................24
8.6. Tax Opinion............................................24
8.7. PFC Shareholder Approval...............................24
8.8. Securities Laws........................................24
SECTION IX. TERMINATION......................................................24
9.1. Termination............................................25
SECTION X. INDEMNIFICATION...................................................25
10.1. Information for Application and Statements............25
10.2. Indemnification of Officers and Directors.............25
10.3. Insurance.............................................26
10.4. Survival..............................................26
SECTION XI. MISCELLANEOUS....................................................26
11.1. Survival of Representations, Warranties and Covenants.26
11.2. Entire Agreement......................................26
11.3. Binding Agreement.....................................27
11.4. Notices...............................................27
11.5. Counterparts..........................................27
11.6. Headings..............................................27
11.7. Law Governing.........................................27
11.8. Amendment.............................................27
11.9. Waiver................................................27
APPENDICES
Appendix A Plan of Merger
Appendix B Consulting Agreements
SCHEDULES
Schedule 3.5: Capitalization Exceptions
Schedule 3.6: Violations
Schedule 3.10: Taxes
Schedule 3.11: Material Liabilities or Obligations Not Disclosed in the PFC Financial Statements
Schedule 3.12: Exceptions to No Liens
Schedule 3.13: Litigation
Schedule 3.16: Proposed Expenditures Exceeding $50,000
Schedule 3.17: Insurance
Schedule 3.18: Contracts or Other Commitments of PFC; Other Material Contracts or Commitments
Schedule 3.19: PFC Employee Benefit Plans
Schedule 3.23: Classified Assets
Schedule 3.24: Derivatives Contracts, Etc.
Schedule 4.4: Exceptions to CFC Capitalization Representations
Schedule 4.5: Violations
Schedule 4.10: Undisclosed Liabilities
Schedule 4.11: Litigation
</TABLE>
A-4
<PAGE>
This REORGANIZATION AGREEMENT is entered into as of this 26th
day of June, 1998 between Carolina First Corporation ("CFC"), a corporation
organized and existing under the laws of the State of South Carolina and
Poinsett Financial Corporation ("PFC"), a corporation organized and existing
under the laws of the State of South Carolina.
RECITALS
A. PFC is a South Carolina corporation headquartered in
Travelers Rest, South Carolina, and a registered savings and loan holding
company under the Home Owners' Loan Act of 1933, as amended ("HOLA").
B. CFC is a South Carolina corporation headquartered in
Greenville, South Carolina, and a registered bank holding company under the Bank
Holding Company Act of 1956, as amended ("BHCA").
C. The parties hereto desire that PFC be merged with and
into CFC, all as more particularly set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties and agreements herein contained, CFC and PFC
hereby agree as follows:
SECTION I. DEFINITIONS
1.1. Articles of Merger. The Articles of Merger to be executed
by CFC and PFC in a form appropriate for filing with the Secretary of State of
South Carolina, and relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.2 Benefit Plans. All employee benefit plans within the
meaning of Section 3(3) of ERISA and any related or separate contracts, plans,
trusts, annuities, programs, policies, arrangements, practices, customs or
understandings that provide benefits of economic value to any present or former
employee, or current or former beneficiary, dependent or assignee of any such
employee or former employee.
1.3. CERCLA. The Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 et seq.
1.4. CFC. Carolina First Corporation, a bank holding company
headquartered in Greenville, South Carolina. Where the context permits, CFC
shall include all subsidiaries.
1.5. CFC Benefit Plans. All Benefit Plans, and all other
material fringe benefit plans or programs, sponsored or maintained by CFC or
under which CFC may be obligated.
1.6. CFC Common Stock. The common stock, par value $1.00 per
share, of CFC.
1.7. Closing; Closing Date. The terms "Closing" and "Closing
Date" shall have the meanings ascribed to them in Section 2.2 hereof.
1.8 Code. The Internal Revenue Code of 1986, as amended,
including, if the context permits, the applicable regulations promulgated
pursuant thereto.
1.9 Confidential Information. The term "Confidential
Information" shall mean all information of any kind concerning a party hereto
that is furnished by such party or on its behalf pursuant to Section 6.1 hereof
as a result of the transactions contemplated herein, except information (i)
ascertainable or obtained from public or published information, (ii) received
from a third party not known to the recipient of Confidential Information to be
under an obligation to keep such information confidential, (iii) which is or
becomes known to the public (other than through a breach of this Reorganization
Agreement), (iv) of which the recipient was in possession prior to disclosure
thereof in connection with the Merger, or (v) which was independently developed
by the recipient without the benefit of Confidential Information.
1.10. Derivative Contract. Any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar
financial contract or any other contract not included on a balance sheet which
is a derivative contract (including various combinations thereof).
1.11. ERISA. The Employee Retirement Income Security Act of
1974, as amended.
1.12. Effective Time. The date and time which the Merger
becomes effective as set forth in the Articles of Merger. Subject to the terms
and conditions hereof, the Effective Time shall be such time on
such date as CFC shall notify PFC in writing not less than five days prior
thereto, which date shall not be more than 30 days after all conditions have
been satisfied or waived in writing.
1.13. Exchange Act. The Securities Exchange Act of 1934, as
amended.
1.14. Fair Market Value. The average of the closing prices as
quoted on the Nasdaq National Market for CFC Common Stock for the twenty days in
which CFC Common Stock was traded immediately prior to the Closing Date.
1.15. FDIC.The Federal Deposit Insurance Corporation.
1.16. Federal Reserve Board. The Board of Governors of the
Federal Reserve System, or any successor thereto.
1.17. Federal Reserve. The Federal Reserve Bank of Richmond
acting under delegated authority from the Federal Reserve Board, or any
successor thereto.
1.18. GAAP. Generally accepted accounting principles
consistently applied.
1.19. IRS. The Internal Revenue Service.
1.20. Knowledge. When used in the phrase "to the knowledge" or
a similar phrase, shall mean the actual knowledge of the executive officers of
the referenced party or parties, as applicable, after reasonable inquiry of the
other executive officers and the directors of the parties and the Persons
responsible for the day-to-day operations of the parties or their subsidiaries
(although this definition shall not give rise to any duty of any independent
verification or confirmation by members of senior management or board of
directors of the entity making the representation or warranty from other
Persons).
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1.21. Lien. Any lien, claim, encumbrance, security interest,
assessment, charge, restriction (including restriction on voting rights or
rights of disposition), mortgage, deed of trust, equity of any character, third
party right of whatever nature or other similar or like charge.
1.22 Material Adverse Event; Material Adverse Effect. This
shall mean an event, effect, occurrence or circumstance which, alone or when
taken with other events, effects, occurrences or circumstances existing
concurrently therewith (including without limitation, any breach of a
representation or warranty contained herein by such party) (i) has or is
reasonably expected to have a material adverse effect on the properties,
financial condition, results of operations, or business of such party and its
subsidiaries, taken as a whole, or (ii) would materially prevent such party's,
or any affiliated party's, ability to perform its obligations under this
Reorganization Agreement or the consummation of any of the transactions
contemplated hereby; provided, however, that in determining whether a Material
Adverse Effect or Material Adverse Event has occurred, there shall be excluded
any effect the cause of which is (A) any change in banking, tax and similar laws
or regulations of general applicability or interpretations thereof by courts or
governmental authorities, (B) any change in GAAP or regulatory accounting
requirements applicable to the parties hereto, (C) any action or omission of PFC
or CFC or a subsidiary thereof taken with the prior written consent of CFC or
PFC, as applicable, in contemplation of the transaction contemplated herein, (D)
the actions contemplated by Section 6.13, and (E) any changes in general
economic conditions affecting financial institutions generally, including but
not limited to changes in interest rates.
1.23. Merger. The Merger of PFC with and into CFC.
1.24. OTS. The Office of Thrift Supervision.
1.25. PBGC. The Pension Benefit Guaranty Corporation.
1.26. Person. An individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, a governmental
entity (or any department, agency, or political subdivision thereof) or other
entity.
1.27. PFC. Poinsett Financial Corporation, a corporation
organized and existing under the laws of the State of South Carolina. Where the
context permits, PFC shall include Poinsett Bank and any other subsidiaries.
1.28. PFC Benefit Plans. All Benefit Plans, and all other
material fringe benefit plans or programs, sponsored or maintained by PFC or
Poinsett Bank or under which PFC or Poinsett Bank may be obligated.
1.29. PFC Common Stock. The common stock, par value $0.01 per
share, of PFC.
1.30. PFC Shareholder Approval. This term shall mean the
requisite approval of the Merger by the shareholders of PFC at the PFC
Shareholders' Meeting, all in accordance with this Reorganization Agreement and
the Plan of Merger.
1.31. PFC Shareholders' Meeting. The meeting of PFC
shareholders at which the Merger will be voted upon.
1.32. Plan of Merger. The Plan of Merger attached to this
Reorganization Agreement as Appendix A.
1.33. Poinsett Bank. Poinsett Bank, a federal savings bank,
which was organized and is existing under the laws of the United States of
America.
1.34. Proxy Statement. The proxy statement/prospectus included
in the Registration Statement which shall be furnished to the PFC shareholders
in connection with the PFC Shareholders' Meeting and the matters contemplated
hereby.
1.35. Registration Statement. The Registration Statement on
Form S-4 to be filed with the SEC registering the issuance of the CFC Common
Stock to be issued to the PFC shareholders in connection with the Merger.
1.36. Regulations. The regulations issued by the IRS under the
Code.
1.37. Regulatory Approvals. The order of the Federal Reserve
Board (or, if applicable, of the Federal Reserve acting under delegated
authority) approving the Merger and the required order, approval, or
exemption of the FDIC, the OTS, the State Board, or any other Regulatory
Authority approving the Merger.
1.38. Regulatory Authority. Any federal or state governmental
agency or authority charged with the supervision or regulation of depository
institutions or engaged in the insurance of deposits (including, without
limitation, the OTS, the FDIC, and the Federal Reserve Board) and any other
federal or state bank, thrift or other financial institution, insurance or
securities regulatory authorities, and any and all other agencies or departments
of federal, state or local government, including without limitation the SEC.
1.39. Reorganization. This Reorganization Agreement, including
all schedules, appendices and exhibits attached hereto.
1.40. Rights. Rights shall mean warrants, calls, commitments,
options, rights (whether stock appreciation rights, conversion rights, exchange
rights, profit participation rights, or otherwise), securities or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, and other arrangements or commitments which obligate a
Person to issue, otherwise cause to become outstanding, sell, transfer, pledge,
or otherwise dispose of any of its capital stock or other ownership interests,
or any voting rights thereof or therein, or to pay monetary sums by reference to
the existence or market valuation, or in lieu and in place of, any of its
capital stock or ownership interests therein.
1.41. SEC. The Securities and Exchange Commission.
1.42. Securities Act. The Securities Act of 1933, as amended.
1.43. State Board.The South Carolina State Board of Financial
Institutions.
SECTION II. THE MERGER
2.1. The Merger. Subject to the terms and conditions of this
Reorganization Agreement, including the Plan of Merger, PFC shall merge with and
into CFC (the "Merger"), the separate existence of PFC shall cease, and CFC
shall survive and the name
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of the surviving Corporation shall be "Carolina First
Corporation." The parties agree that the Merger will be effected pursuant to the
terms set forth in the Plan of Merger.
2.2 The Closing. The Closing of the transaction contemplated
herein shall be held as soon as reasonably practicable after fulfillment of all
conditions set forth in Section VII and Section VIII hereof (the "Closing
Date"), at the offices of Wyche, Burgess, Freeman & Parham, P.A. or at such
other place and time as the parties hereto may mutually agree; provided,
however, that in the event that Closing has not occurred by March 31, 1999,
either party hereto shall have the right to terminate this Reorganization
Agreement.
2.3. Consideration for the Merger. The manner of converting
the shares of PFC into shares of CFC shall be as set forth in the Plan of
Merger.
2.4. PFC Shareholder Approval; Registration Statement. PFC
shall call the PFC Shareholders' Meeting in accordance with the applicable
provisions of South Carolina law and its Articles of Incorporation and Bylaws
for the purpose of considering and voting on this Reorganization Agreement and
the transactions contemplated hereby. The PFC Shareholders' Meeting shall be
held as soon as practicable. The board of directors of PFC shall recommend to
its shareholders and (subject to compliance with their legal and fiduciary
duties, as advised by counsel) use its best efforts to obtain the approval of
this Reorganization Agreement and the Merger. CFC shall file the Registration
Statement with the SEC as soon as practical and shall pay the required filing
fees. The parties will use their respective best efforts and cooperate with each
other to obtain promptly the effectiveness of the Registration Statement. CFC
shall also take any reasonable action required to be taken under the blue sky
laws in connection with the issuance of CFC Common Stock in the Merger. CFC and
PFC shall jointly prepare the Proxy Statement, which shall be reasonably
acceptable to all parties. The Proxy Statement shall be mailed to the PFC
shareholders as soon as reasonably practicable after the SEC's declaration of
effectiveness of the Registration Statement, with due consideration given to the
anticipated length of time that will be required to obtain the Regulatory
Approvals. PFC shall mail, at its expense, the Proxy Statement to its
shareholders.
2.5. Cooperation; Regulatory Filings. Subject to the terms and
conditions of this Reorganization Agreement, CFC and PFC shall cooperate, and
shall cause each of their subsidiaries to cooperate, in the preparation and
submission by CFC and PFC, as promptly as reasonably practicable, of such
applications, petitions, and other documents and materials as any of them may
reasonably deem necessary or desirable to the SEC, the Federal Reserve, the OTS,
the appropriate Regulatory Authorities of South Carolina, the shareholders of
PFC, and any other Persons for the purpose of obtaining any approvals or
consents necessary to consummate the transactions contemplated by this
Reorganization Agreement. Prior to the making of any such filings with any
Regulatory Authority or the making of any written disclosures with respect to
the transactions contemplated hereby to shareholders or to any third person
(such as mailings to shareholders or press releases), the parties shall submit
to each other the material to be filed, mailed, or released. Any such materials
shall be reasonably acceptable to all parties prior to the filings with any
Regulatory Authorities or the disclosures to shareholders or to any third
person, except to the extent that any person is legally required to proceed
prior to obtaining the approvals of the other parties. CFC shall be responsible
for all filings fees associated with the Regulatory Approvals.
2.6. Tax Treatment. CFC and PFC intend that the Merger shall
qualify as a tax-free reorganization under Section 368(a) of the Code.
2.7. Reservation Of Right To Revise Transaction. CFC may at
any time change the method of effecting the acquisition of PFC (including
without limitation the provisions of this Section II) if and to the extent it
deems such change to be desirable; provided, however, that no such change shall
(i) alter the type of consideration to be issued to the holders of PFC Common
Stock as provided for in this Reorganization Agreement, (ii) reduce the value of
such consideration, (iii) adversely affect the intended tax-free treatment to
PFC's stockholders as a result of receiving such consideration or prevent the
parties from obtaining the tax opinion of Wyche, Burgess, Freeman & Parham, P.A.
referred to herein, (iv) materially impair the ability to receive the Regulatory
Approvals, or (v) materially delay the Closing.
SECTION III. REPRESENTATIONS AND WARRANTIES OF PFC
PFC hereby represents and warrants to CFC the following
matters on and as of the date of this Reorganization Agreement and at the
Effective Time; provided, however, that before any breach of or inaccuracy in
any of the representations or warranties given in this Section III shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by CFC, such breach or
inaccuracy must have a Material Adverse Effect.
3.1. Organization. PFC is a corporation, duly organized,
validly existing and in good standing under the laws of the state of South
Carolina, is duly registered as a savings and loan holding company under the
HOLA, and has full power and authority and all governmental and regulatory
authorizations ("Authorizations") necessary to own all of its properties and
assets and to carry
on its business as it is presently being conducted, and is properly licensed,
qualified and in good standing as a foreign corporation in all jurisdictions
wherein the character of the properties or the nature of the business transacted
by PFC makes such license or qualification necessary. Poinsett Bank is the sole
direct subsidiary of PFC. Poinsett Bank is a savings bank, duly organized,
validly existing and in good standing under the laws of the United States of
America, and has full power and authority and all Authorizations necessary to
own all of its properties and assets and to carry on its business as it is
presently being conducted, and is licensed, qualified and in good standing as a
foreign corporation in all jurisdictions wherein the character of the properties
or the nature of its business makes such license or qualification necessary.
Poinsett Bank is an "insured depository institution" as defined in the Federal
Deposit Insurance Act and the applicable
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regulations thereunder. The deposits of
Poinsett Bank are insured by the Savings Association Insurance Fund of the FDIC.
Poinsett Bank is a member of the Federal Home Loan Bank of Atlanta (the "FHL
Bank").
3.2 Subsidiaries. Other than Poinsett Bank, PFC neither owns
nor controls five percent (5%) or more of the outstanding equity securities,
either directly or indirectly. PFC is the direct, record and beneficial owner of
100% of the outstanding shares of capital stock of Poinsett Bank. There are no
contracts, commitments, understandings or arrangements by which PFC is or may be
bound to sell or otherwise issue any shares of Poinsett Bank's capital stock,
and there are no contracts, commitments, understandings or arrangements relating
to the rights of PFC to vote or to dispose of such shares. All of the shares of
capital stock of Poinsett Bank are fully paid and nonassessable and are owned by
PFC free and clear of any liens. Poinsett Bank does not own or control five
percent (5%) or more of the outstanding equity securities, either directly or
indirectly, of any Person.
3.3 Corporate Authority. The execution, delivery and
performance of this Reorganization Agreement have been duly authorized by the
Board of Directors of PFC. Other than PFC Shareholder Approval, no further
corporate acts or proceedings on the part of PFC are required or necessary to
authorize this Reorganization Agreement or the Merger.
3.4. Binding Effect. Subject to receipt of PFC Shareholder
Approval and the Regulatory Approvals, when executed, this Reorganization
Agreement will constitute valid and legally binding obligation of PFC,
enforceable against PFC in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to rights of creditors of FDIC-insured institutions
or the relief of debtors generally, (ii) laws relating to the safety and
soundness of depository institutions, and (iii) general principles of equity.
Each document and instrument contemplated by this Reorganization Agreement, when
executed and delivered by PFC in accordance with the provisions hereof, shall be
duly authorized, executed and delivered by PFC and enforceable against PFC in
accordance with its terms, subject to the exceptions in the previous sentence.
3.5. Capitalization of PFC. The authorized capital stock of
PFC consists solely of (i) 15,000,000 authorized shares of common stock ($0.01
par value), of which 190,365 shares are issued and outstanding as of the date
hereof, and 5,000,000 authorized shares of preferred stock, none of which is
outstanding. All of the issued and outstanding shares of PFC are validly issued
and fully paid and nonassessable. Except as set forth on Schedule 3.5, there are
no outstanding Rights to purchase shares of any class of capital stock of PFC,
or outstanding agreements pursuant to which PFC is or may become obligated to
issue any shares of its capital stock. None of the shares of the PFC Common
Stock is subject to any restrictions as to the transfer thereof, except as set
forth in PFC's Articles of Incorporation or Bylaws and except for restrictions
on account of applicable federal or state securities laws.
3.6. Compliance with Laws; Absence of Defaults. (a) PFC is not
in default under, or in violation of, any provision of its Articles of
Incorporation. Poinsett Bank is not in default under, or in violation of, any
provision of its Federal Stock Charter or Bylaws. PFC is not in default under,
or in material violation of, any agreement material to the operations of PFC and
Poinsett Bank taken as a whole.
(b) Except as disclosed in Schedule 3.6, PFC is not in
violation of any applicable law, rule or regulation. PFC has not received any
notification or communication from, or consented to or entered into any
memorandum, agreement or order with, any Regulatory Authority (i) asserting that
PFC is not in compliance with any of the statutes, regulations, rules or
ordinances which such Regulatory Authority has promulgated or enforces, or the
internal policies and procedures of PFC, as applicable, (ii) threatening to
revoke any Authorization, (iii) requiring or threatening to require PFC, or
indicating that PFC may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting or purporting to restrict or limit in
any manner the operations of PFC, or (iv) directing, restricting or limiting, or
threatening to direct, restrict or limit in any manner the operations of PFC
(any such notification, communication, memorandum, agreement or order described
in this sentence herein referred to as a "Regulatory Agreement").
(c) PFC: (i) is not required to give prior notice to any federal banking
agency regulating thrift institutions of the proposed addition of an individual
to its Board of Directors or the employment of an individual as a senior
executive; (ii) is "well capitalized" as defined in 12 CFR 564.4 and is not in
"troubled condition" as defined in 12 CFR 574.9; and (iii) is in compliance in
all material respects with all fair lending laws or other laws relating to
discrimination, including, without limitation, the Equal Credit Opportunity Act,
the Fair Credit Reporting Act, the Fair Housing Act, the Community Reinvestment
Act and the Home Mortgage Disclosure Act and similar federal and state laws and
regulations.
3.7. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Reorganization Agreement, nor the fulfillment of,
or compliance with, the terms and provisions hereof, will (i) result in a breach
of the terms, conditions or provisions of, or constitute a default under, or
result in a violation of, termination of or acceleration of the performance
provided by the terms of, any material agreement to which PFC is a party or by
which it may be bound, (ii) violate any provision of any law, rule or
regulation, (iii) result in the creation or imposition of any Lien on any asset
of PFC, or (iv) violate any provisions of PFC's or Poinsett Bank's Articles of
Incorporation, Federal Stock Charter or Bylaws. To the best of PFC's knowledge,
no other party to any material agreement to which PFC is a party is in default
thereunder or in breach of any provision thereof. To the best of PFC's
knowledge, there exists no condition or event which, after notice or lapse of
time or both, would constitute a default by any party to any such agreement.
3.8. Necessary Approvals. PFC has obtained all certificates of
authority, licenses, permits, franchises, registrations of foreign ownership or
other regulatory approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets except where the failure to
obtain such certificates, licenses, permits or registrations would not have a
Material
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Adverse Effect. Except for those which may be renewed or extended in
the ordinary course of business, no such certificate, license, permit,
franchise, registration or other approval is about to expire or lapse, has been
threatened to be revoked or has otherwise become restricted by its terms which
would, upon such expiration, lapse, revocation or restriction, have a Material
Adverse Effect. Further, there is no reasonable basis for any such expiration,
lapse, revocation, threat of revocation or restriction. Except for any necessary
Regulatory Approvals, no consent, approval, Authorization, registration, or
filing with or by any governmental authority, foreign or domestic, is required
on the part of PFC in connection with the execution and delivery of this
Reorganization Agreement or the consummation by PFC of the transactions
contemplated hereby. Except for the Regulatory Approvals, PFC is not required to
procure the approval of any Person in order to prevent the termination of any
right, privilege, license or contract of PFC as a result of this Reorganization
Agreement.
3.9. Financial Statements. The audited financial statements of
PFC at and for each of the fiscal years ended September 30, 1995, 1996 and 1997,
and the unaudited quarterly statements subsequent to September 30, 1997 (the
"PFC Financial Statements") all of which have been provided to CFC, are true,
correct and complete in all material respects and present fairly, in conformity
with GAAP, the financial position of PFC at the dates indicated and the results
of its operations for each of the periods indicated, except with respect to the
unaudited statements, normal year end adjustments. The financial books and
records of PFC have been kept, and will be kept to the Closing Date, in
reasonable detail, and will fairly and accurately reflect in all material
respects to the Closing Date, the transactions of PFC.
3.10. Tax Returns. PFC files its income tax returns and
maintains its tax books and records on the basis of a taxable year ending
September 30. PFC has duly filed all tax reports and returns required to be
filed by any federal, state or local taxing authorities (including, without
limitation, those due in respect of its properties, income, franchises,
licenses, sales, payrolls, and trusts established by PFC) through the date
hereof, and PFC has duly paid all taxes with respect to the periods covered
thereby and has established adequate reserves in accordance with GAAP for the
payment of all income, franchises, property, sales, employment or other taxes
anticipated to be payable after the date hereof. PFC 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. PFC does not have in effect any waiver relating to any statute of
limitations for assessment of taxes with respect to any federal, state or local
income, property, franchise, sales, license or payroll tax. Except as set forth
on Schedule 3.10, PFC 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 PFC which, if determined adversely, would result in
the assertion of any deficiency.
3.11. Undisclosed Liabilities. Except for the liabilities
which are disclosed in the PFC Financial Statements or as set forth on Schedule
3.11, PFC has no material liabilities or material obligations of any nature,
whether absolute, accrued, contingent or otherwise, and whether due or to become
due. Since September 30, 1997, there has been no (i) Material Adverse Event with
respect to PFC, or (ii) any incurrence by or subjection of PFC to any obligation
or liability (whether fixed, accrued or contingent) or commitment material to
PFC not referred to in this Reorganization Agreement, except such obligations or
liabilities as were or may be incurred in the ordinary course of business and
which are reflected on the PFC Financial Statements at and for the periods
subsequent to September 30, 1997.
3.12. Properties, Encumbrances. PFC has good and marketable
title to all of the real property and depreciable tangible personal property
owned by it, free and clear of any Lien, except for any Lien for (i) current
taxes not yet due and payable, (ii) pledges to secure deposits and other Liens
incurred in the ordinary course of the banking business, (iii) such
imperfections of title, easements and other encumbrances, if any, as are not
material in character, amount or extent, or (iv) such items as are set forth on
Schedule 3.12. Set forth on Schedule 3.12 are all business locations of PFC,
including whether such locations are owned or leased and a statement of when
such locations were first occupied by PFC. All buildings and all fixtures,
equipment, and other property and assets which are material to their business
and are held under leases or subleases by PFC are held under valid leases or
subleases enforceable in accordance with their respective terms.
3.13. Litigation. Except as shown on Schedule 3.13, there are
no claims, actions, suits or proceedings pending or threatened against PFC, at
law or in equity, before or by any Federal, state, municipal, administrative or
other court, governmental department, commission, board, or agency, an adverse
determination of which could have a Material Adverse Effect, and PFC knows of no
basis for any of the foregoing. There is no order, writ, memorandum, agreement,
injunction, or decree of any court, domestic or foreign, or any Federal or state
agency naming PFC specifically or to which PFC is subject.
3.14. Reports. Within the last two (2) years PFC has duly made
all reports and filings required to be made pursuant to applicable law.
3.15. Brokers. Except as provided in its contract with
Capital Resources Group, Inc. (a copy of which has been provided to CFC),
PFC has not incurred any liability for any commission or fee in the nature
of a finder's, originator's or broker's fee in connection with the transaction
contemplated herein.
3.16. Expenditures. Schedule 3.16 sets forth any single
expenditure of $50,000 or more proposed to be made by PFC after the date hereof
and a summary of the terms and conditions pertaining thereto. At least 20
business days prior to the Closing Date, PFC will advise CFC of any changes to
Schedule 3.16 reflecting additions or deletions thereto since the date hereof.
3.17. Insurance. Attached hereto as Schedule 3.17 are the
policies of fire, liability, life and other types of insurance held by PFC,
setting forth with respect to each such policy, the policy number, name of the
insured party, type of insurance, insurance company, annual premium, expiration
date, deductible amount, if any, and amount of coverage. PFC management believes
that each such policy is in an amount reasonably sufficient for the protection
of the assets and business covered thereby, and, in the aggregate, all such
policies are reasonably adequate for the protection of all the assets and
business of PFC taking into account
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the availability and cost of such coverage.
There is no reason known to PFC that any such policy will not be renewable on
terms and conditions as favorable as those set forth in such policy.
3.18. Contracts and Commitments. (a) Schedule 3.18 attached
hereto sets forth each contract or other commitment of PFC which requires an
aggregate payment by PFC after the date hereof of more than $50,000, and any
other contract or commitment that in the opinion of PFC management could
materially adversely affect the business of PFC. Except for the contracts and
commitments described in this Reorganization Agreement or as set forth on
Schedule 3.18, PFC is not party to or subject to:
1. Any contracts or commitments which are
material to its business, operations or financial condition
other than loans or agreements with respect thereto entered
into in the ordinary course of business;
2. Any employment contract or arrangement,
whether oral or written, with any officer, consultant,
director or employee which is not terminable on 30 days'
notice without penalty or liability to make any payment
thereunder for more than 30 days after such termination;
3. Any plan or contract or other
arrangement, oral or written, providing for insurance for any
officer or employee or member of their families;
4. Any plan or contract or other
arrangement, oral or written, providing for bonuses, pensions,
options, deferred compensation, retirement payments,
profit-sharing or other benefits for employees;
5. Any contract or agreement with any labor
union;
6. Any contract or agreement with customers
for the sale of products or the furnishing of services, or any
sales agency, broker, distribution or similar contract, except
contracts made in the ordinary course of business;
7. Any instrument or arrangement evidencing
or related to indebtedness for money borrowed or to be
borrowed, whether directly or indirectly, by way of
purchase money obligation, guaranty, conditional sale,
lease-purchase, or otherwise;
8. Any joint venture contract or arrangement
or any other agreement involving a sharing of profits;
9. Any license agreement in which PFC is the
licensor or licensee;
10. Any material contract or agreement, not
of the type covered by any of the other items of this Section
3.18, which by its terms is either (i) not to be performed
prior to 30 days from the date hereof, or (ii) does not
terminate, or is not terminable without penalty to PFC, or any
successors or assigns prior to 30 days from the date hereof.
3.19. Employee Benefit Plans And Contracts.
(a) Schedule 3.19 contains a complete list of all PFC Benefit
Plans. PFC has delivered to CFC (i) accurate and complete copies of all PFC
Benefit Plan documents and all other material documents relating thereto,
including all summary plan descriptions, summary annual reports and insurance
contracts, (ii) accurate and complete detailed summaries of all unwritten PFC
Benefit Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all PFC Benefit Plans for which
financial statements or actuarial reports are required or have been prepared,
(iv) accurate and complete copies of all annual reports for all PFC Benefit
Plans (for which annual reports are required) prepared within the last two
years, and (v) accurate and complete copies of determination letters from the
IRS for any PFC Benefit Plan maintained or intended to be maintained under
Section 401(a) of the Code. Any PFC Benefit Plan providing benefits that are
funded through a policy of insurance is indicated by the word "insured" placed
by the listing of the PFC Benefit Plan on Schedule 3.19.
(b) All PFC 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 PFC 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 PFC Benefit Plans that
could subject PFC to any material penalty or tax imposed under the Code or
ERISA.
(c) Except as set forth on Schedule 3.19, any PFC Benefit Plan
that is intended to be qualified under Section 401(a) of the Code and exempt
from tax under Section 501(a) of the Code has been determined by the IRS to be
so qualified, and such determination is current, remains in effect and has not
been revoked. To the best knowledge of PFC, nothing has occurred since the date
of any such determination that is reasonably
likely to affect adversely such qualification or exemption, or result in the
imposition of excise taxes or income taxes on unrelated business income under
the Code or ERISA with respect to any PFC Benefit Plan.
(d) PFC has adequately reserved for all liabilities accrued
prior to the Effective Time under PFC's and Poinsett Bank nonqualified
retirement or deferred compensation plans.
(e) Except as set forth on Schedule 3.19, neither PFC nor
Poinsett Bank has any current or contingent obligation to contribute to any
multiemployer plan (as defined in Section 3(37) of ERISA). Neither PFC nor
Poinsett Bank has any liability with respect to any employee benefit plan (as
defined in Section 3(3) of ERISA) other than with respect to the PFC Benefit
Plans.
(f) There are no pending or threatened claims by or on behalf
of any PFC Benefit Plans, or by or on behalf of any individual participants or
beneficiaries of any PFC Benefit Plans, alleging any breach of fiduciary duty on
the part of PFC or any of such party's officers, directors or employees under
ERISA, the Code or any applicable regulations, or claiming benefit payments
other than those made in the ordinary operation of such plans. The PFC Benefit
Plans are not the subject of any investigation, audit or action by the IRS, the
Department of Labor or the PBGC. PFC has made all required contributions under
the PFC Benefit Plans, including the payment of any premiums payable to the PBGC
and other insurance premiums. There is no underfunding liability for any PFC
Benefit Plan that is subject to the funding requirements of Section 412 of the
Code.
(g) Neither PFC nor Poinsett Bank maintains any defined
benefit plan, and neither has incurred, or has any reason to expect that it will
incur, any liability to the PBGC or otherwise under Title IV or ERISA (including
early withdrawal liability) or under the Code with respect to any such plan. No
PFC Benefit Plan has been subject to a reportable event for which notice would
be
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required to be filed with the PBGC, and no proceeding by the PBGC to
terminate any PFC Benefit Plan has been instituted or threatened.
(h) With respect to any PFC 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 PFC Benefit Plan that is a group health plan (within the meaning of Section
4980B(g)(2) of the Code) complies, and in each and every case has complied, with
all of the material requirements of Section 4980B of the Code, ERISA, Title XXII
of the Public Health Service Act and the applicable provisions of the Social
Security Act, (iv) such Welfare Plan may be amended or terminated at any time on
or after the Closing Date, and (v) there are no benefits to be provided to
retirees under a group health plan that are subject to disclosure under
Financial Accounting Standards Board No. 106.
(i) Except as set forth on Schedule 3.19, as of the Closing
Date, there will be no contract, agreement, plan or arrangement covering any
person that provides for the payment of an amount that would not be deductible
to CFC by reason of Section 280G or any other provision of the Code.
3.20. Allowance for Loan Losses. The allowance for loan losses
(the "PFC Allowance") shown on the consolidated statements of financial
condition of PFC as of March 31, 1998, has been determined, in the opinion of
management of PFC, in accordance with GAAP, to be adequate to provide for losses
relating to or inherent in the loan portfolio of PFC.
3.21. Environmental Matters. PFC is in material compliance
with all local, state and federal environmental statutes, laws, rules,
regulations and permits, including but not limited to CERCLA and the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq. Neither PFC nor Poinsett Bank
has, nor to the best of PFC's knowledge have other parties, used, stored,
disposed of or permitted any "hazardous substance" (as defined in CERCLA),
petroleum hydrocarbon, polychlorinated biphenyl, asbestos or radioactive
material (collectively, "Hazardous Substances") to remain at, on, in or under
any of the real property owned or leased by PFC (including, without limitation,
the buildings or structures thereon) (the "Real Property"). Neither PFC nor
Poinsett Bank has, nor to the best of PFC's knowledge have other parties,
installed, used, or disposed of any asbestos or asbestos-containing material on,
in or under any of the Real Property. Neither PFC nor Poinsett Bank has, nor to
the best of PFC's knowledge have other parties, installed or used underground
storage tanks in or under any of the Real Property. PFC has provided CFC with
copies of all complaints,
citations, orders, reports, written data, notices or other communications sent
or received by it with respect to any local, state or federal environmental law,
ordinance, rule or regulation as any of them relate to PFC.
3.22. PFC Information. The written information with respect to
PFC and its officers, directors, and affiliates which shall have been supplied
by PFC (or any of its accountants, counsel or other authorized representatives)
specifically for use in soliciting PFC Shareholder Approval, or which shall be
contained in the Registration Statement, will not, on the date the Proxy
Statement is first mailed to shareholders of PFC or on the date of the PFC
Shareholders' 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.
3.23. Asset Classification. Set forth on Schedule 3.23 is a
list, accurate and complete in all material respects, of the aggregate amounts
of loans, extensions of credit or other assets of PFC that have been classified
by it as of March 31, 1998 (the "Asset Classification"); and no amounts of
loans, extensions of credit or other assets that have been classified as of
March 31, 1998 by any regulatory examiner as "Other Loans Specially Mentioned",
"Substandard", "Doubtful", "Loss", or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than amounts of loans,
extensions of credit or other assets that were charged off by PFC prior to
March 31, 1998.
3.24. Derivatives. PFC is not a party to nor has agreed to
enter into an exchange-traded or over-the-counter swap, forward, future, option,
cap, floor or collar financial contract or any other contract not included on
the balance sheet which is a derivative contract (including various combinations
thereof) (each a "Derivatives Contract") or owns securities that (i) are
referred to as "structured notes", "high risk mortgage derivatives", "capped
floating rate notes" or "capped floating rate mortgage derivatives", or (ii) are
likely to have changes in value as a result of interest rate changes that
significantly exceed normal changes in value attributable to interest rate
changes, except for those Derivatives Contracts and other instruments legally
purchased or entered into in the ordinary course of business and set forth on
Schedule 3.24, including a list, as applicable, of any PFC assets pledged as
security for each such instrument.
3.25. Labor Matters. No material work stoppage involving PFC
is pending or, to the best knowledge of PFC, threatened. PFC is not involved in,
or, to the best of PFC's knowledge, threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding which might
reasonably be expected to have a Material Adverse Effect. Employees of PFC are
not represented by any labor union, and, to the best of PFC's knowledge, no
labor union is attempting to organize employees of PFC.
3.26. Ownership of CFC Common Stock. No shares of CFC Common
Stock are beneficially owned (as defined in Rule 13d-3 under the Exchange Act)
by PFC.
3.27. Resale of CFC Common Stock. PFC knows of no present plan
or intention on the part of its shareholders to sell, assign, transfer or
otherwise dispose of shares of CFC Common Stock to be received by such
shareholders in connection with the Merger which would reduce said shareholders'
holdings of CFC Common Stock to a number of shares having, in the aggregate, a
value of less than 50% of the value of PFC Common Stock outstanding as of the
Effective Time. For purposes of this
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representation, shares of PFC 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 PFC and then disposed of by shareholders
of PFC.
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC
CFC hereby represents and warrants to PFC the following
matters on and as of the date of this Reorganization Agreement and at the
Effective Time; provided, however, that before any breach of or inaccuracy in
any of the representations or warranties given in this Section IV shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by PFC, such breach or
inaccuracy must have a Material Adverse Effect.
4.1. Organization. Good Standing and Conduct of Business. CFC
is a corporation, duly organized, validly existing and in good standing under
the laws of South Carolina, is duly registered as a bank holding company under
the BHCA, and has full power and authority and all governmental and regulatory
authorizations ("Authorizations") necessary to own all of its properties and
assets and to carry on its business as it is presently being conducted, and is
properly licensed, qualified and in good standing as a foreign corporation in
all jurisdictions wherein the character of the properties or the nature of the
business transacted by CFC makes such license or qualification necessary.
4.2. Subsidiaries. (a) Other than Carolina First Bank
("CFB"), Carolina First Mortgage Company and Blue Ridge Finance Company, Inc.,
Carolina First Securities, Inc. and CF Investment Company (collectively, the
"Subsidiaries") or except as provided below, CFC neither owns nor controls five
percent (5%) or more of the outstanding equity securities, either directly or
indirectly, of any Person. CFC is the direct, record and beneficial owner of
100% of the outstanding shares of capital stock of the Subsidiaries. There are
no contracts, commitments, understandings or arrangements by which CFC is or may
be bound to sell or otherwise issue any shares of the Subsidiaries' capital
stock, and there are no contracts, commitments, understandings or arrangements
relating to the rights of CFC to vote or to dispose of such shares. All of the
shares of capital stock of the Subsidiaries are fully paid and nonassessable and
are owned by CFC free and clear of any Liens. CFC has the right to acquire in
excess of 15% of the common stock of Affinity Technology Group, Inc., a Delaware
corporation headquartered in Columbia, South Carolina, Net.B@nk, Inc., a Georgia
corporation and savings and loan holding company headquartered in Atlanta,
Georgia., and ITS, Inc., a South Carolina corporation headquartered in
Greenville, South Carolina.
4.3. Corporate Authority. The execution, delivery and
performance of this Reorganization Agreement have been duly authorized by the
Board of Directors of CFC. No further corporate acts or proceedings on the part
of CFC are required or necessary to authorize this Reorganization Agreement or
the Merger.
4.4. Binding Effect. Subject to receipt of the Regulatory
Approvals, when executed, this Reorganization Agreement will constitute valid
and legally binding obligation of CFC, enforceable against CFC in accordance
with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to rights of creditors of FDIC-insured institutions or the relief of
debtors generally, (ii) laws relating to the safety and soundness of depository
institutions, and (iii) general principles of equity. Each document and
instrument contemplated by this Reorganization Agreement, when executed and
delivered by CFC in accordance with the provisions hereof, shall be duly
authorized, executed and delivered by CFC and enforceable against CFC in
accordance with its terms, subject to the exceptions in the previous sentence.
4.5. Capitalization of CFC. The authorized capital stock of
CFC consists solely of (i) 100,000,000 authorized shares of common stock ($1.00
par value), 18,119,186 shares of which were issued and outstanding as of June
15, 1998 and (ii) 10,000,000 shares of preferred stock, none of which is
outstanding. All of the issued and outstanding shares of CFC are validly issued
and fully paid and nonassessable. Except for (i) stock or options to purchase
shares of CFC Common Stock granted under director or employee benefit plans or
stock issued by CFC to its Employee Stock Ownership Plan, (ii) shares which may
be issued pursuant to CFC's Shareholders' Rights Plan entered into as of
November 9, 1993 between CFC and CFB, as amended and restated (the "Rights
Plan"), (iii) existing dividend reinvestment plans, (iv) shares which may be
issued in connection with acquisitions of other financial institutions or
assets, or (v) as otherwise set forth on Schedule 4.5, there are no outstanding
Rights or any outstanding securities or other instruments convertible into
shares of any class of capital stock of CFC, or pursuant to which CFC is or may
become obligated to issue any shares of its capital stock, and no shares of CFC
common stock were issued between June 15, 1998 and the date hereof except
pursuant to clauses (i) through (v) of this sentence. None of the shares of the
CFC Common Stock is subject to any restrictions as to the transfer thereof,
except as set forth in CFC's Articles of Incorporation or Bylaws or the Rights
Plan and except for restrictions on account of applicable federal or state
securities laws. The Common Stock to be issued in connection with this
Reorganization Agreement and the Merger will, when issued, (i) be validly
issued, fully paid and nonassessable, (ii) have been issued pursuant to an
effective registration statement and (iii) have been properly registered for
trading on the Nasdaq National Market.
4.6. Compliance with Laws; Absence of Defaults. CFC is not in
default under, or in violation of, any provision of its Articles of
Incorporation or Bylaws. CFC is not in default under, or in violation of, any
agreement to which CFC is a party. Except as disclosed on Schedule 4.6, CFC is
not in violation of any applicable law, rule or regulation. CFC has not received
any notification or communication from, or
consented to or entered into any memorandum, agreement or order with, any
Regulatory Authority (i) asserting that CFC is not in compliance with any of the
statutes, regulations, rules or ordinances which such Regulatory Authority has
promulgated or enforces, or the internal policies and procedures of CFC, as
applicable, (ii) threatening to revoke any Authorization, (iii) requiring or
threatening to require CFC, or indicating that CFC may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting
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or purporting to restrict or limit in
any manner the operations of CFC, or (iv) directing, restricting or limiting, or
threatening to direct, restrict or limit in any manner the operations of CFC
(any such notification, communication, memorandum, agreement or order described
in this sentence herein referred to as a "Regulatory Agreement").
4.7. Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Reorganization Agreement, nor the fulfillment of,
or compliance with, the terms and provisions hereof, will (i) result in a breach
of the terms, conditions or provisions of, or constitute a default under, or
result in a violation of, termination of or acceleration of the performance
provided by the terms of, any material agreement to which CFC is a party or by
which it may be bound, (ii) violate any provision of any law, rule or
regulation, (iii) result in the creation or imposition of any Lien on any asset
of CFC, or (iv) violate any provisions of CFC's Articles of Incorporation or
Bylaws. To the best of CFC's knowledge, no other party to any material agreement
to which CFC is a party is in default thereunder or in breach of any provision
thereof. To the best of CFC's knowledge, there exists no condition or event
which, after notice or lapse of time or both, would constitute a default by any
party to any such agreement.
4.8. Necessary Approvals. CFC has obtained all certificates
of authority, licenses, permits, franchises, registrations of foreign ownership
or other regulatory approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no such certificate,
license, permit, franchise, registration or other approval is about to expire or
lapse, has been threatened to be revoked or has otherwise become restricted by
its terms which would, upon such expiration, lapse, revocation or restriction,
have a Material Adverse Effect. Further, there is no basis for any such
expiration, lapse, revocation, threat of revocation or restriction. Except for
any necessary Regulatory Approvals (including the filing with the SEC of the
Registration Statement and filings with blue sky authorities), no consent,
approval, Authorization, registration, or filing with or by any governmental
authority, foreign or domestic, is required on the part of CFC in connection
with the execution and delivery of this Reorganization Agreement or the
consummation by CFC of the transactions contemplated hereby. Except for the
Regulatory Approvals, CFC is not required to procure the approval of any Person
in order to prevent the termination of any right, privilege, license or contract
of CFC as a result of this Reorganization Agreement.
4.9. Financial Statements. The audited financial statements of
CFC at and for each of the fiscal years ended December 31, 1995, 1996 and 1997,
and the unaudited quarterly statements subsequent to December 31, 1997 (the "CFC
Financial Statements") all of which have been provided to PFC, are true, correct
and complete in all material respects and present fairly, in conformity with
GAAP, the financial position of CFC at the dates indicated and the results of
its operations for each of the periods indicated. The books and records of CFC
have been kept, and will be kept to the Closing Date, in reasonable detail, and
will fairly and accurately reflect in all material respects to the Closing Date,
the transactions of CFC.
4.10. Undisclosed Liabilities. Except for the liabilities
which are disclosed in the CFC Financial Statements or as set forth on Schedule
4.10, CFC has no material liabilities or material obligations of any nature,
whether absolute, accrued, contingent or otherwise, and whether due or to become
due. Since December 31, 1997, there has been no (i) Material Adverse Event with
respect to either CFC, or (ii) any incurrence by or subjection of CFC to any
obligation or liability (whether fixed, accrued or contingent) or commitment
material to CFC not referred to in this Reorganization Agreement, except such
obligations or liabilities as were or may be incurred in the ordinary course of
business and which are reflected on the CFC Financial Statements at and for the
periods subsequent to December 31, 1997.
4.11. Litigation. Except as set forth on Schedule 4.11, there
are no claims, actions, suits or proceedings pending or threatened against CFC,
at law or in equity, before or by any Federal, state, municipal, administrative
or other court, governmental department, commission, board, or agency, an
adverse determination of which could have a Material Adverse Effect, and CFC
knows of no basis for any of the
foregoing. There is no order, writ, memorandum or agreement, injunction, or
decree of any court, domestic or foreign, or any Federal or state agency naming
CFC or to which CFC is subject, except for (i) agreements between CFC and the
Federal Reserve regarding CFC's ownership interest in Affinity Technology Group,
Inc. and (ii) an agreement between CFC and the Federal Reserve regarding CFC's
ownership interest in Net.B@nk, Inc.
4.12. CFC Information. The written information with respect to
CFC and its officers, directors, and affiliates which shall have been supplied
by CFC (or any of its accountants, counsel or other authorized representatives)
specifically for use in soliciting PFC Shareholder Approval, or which shall be
contained in the Registration Statement, will not, on the date the Proxy
Statement is first mailed to shareholders of PFC or CFC or on the date of the
PFC Shareholders' Meeting, or in the case of the Registration Statement, at the
time it becomes effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.13. Securities. Within the last two (2) years, CFC has filed
on a timely basis all reports, registrations, and statements, together with
any amendments, required under the Securities Act and the Exchange Act, all of
which, as of their respective dates, were in compliance in all material respects
with the rules and regulations of the SEC.
4.14. Ownership of PFC Common Stock. No shares of PFC Common
Stock are beneficially owned (as defined in Rule 13d-3 under the Exchange Act)
by CFC.
4.15. Due Diligence. All information provided by CFC in
connection with the due diligence investigation by PFC was, at the time that
such information was provided, fair, accurate and complete in all material
respects. Since the date of such provision of information, there have been no
changes in such information, which taken in the aggregate, represent a Material
Adverse Event. CFC has not failed to provide or make available to PFC all
material information regarding CFC.
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING
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5.1. Conduct of PFC Pending Closing. During the period
commencing on the date hereof and continuing until the Closing Date, PFC
covenants and agrees to the following (except to the extent that CFC shall
otherwise expressly consent in writing, which consent shall not be unreasonably
delayed or withheld); provided, however, that any breach of or inaccuracy in any
of the covenants given in this Section 5.1 must have a Material Adverse Effect
before such breach shall be actionable or shall constitute grounds for
termination or failure to perform under this Reorganization Agreement.
(a) PFC will carry on its business only in the ordinary
course in substantially the same manner as heretofore
conducted and, to the extent consistent with such business,
use all reasonable efforts to preserve intact its business
organization and goodwill, maintain the services of its
present officers and employees and preserve its relationships
with customers, suppliers and others having business dealings
with PFC. PFC shall not purchase or otherwise acquire or enter
into a contract to acquire servicing or subservicing rights
with respect to loans not originated by PFC without the
written consent of CFC, which consent shall not be
unreasonably withheld.
(b) Neither PFC nor Poinsett Bank will amend its Articles
of Incorporation, Federal Stock Charter or Bylaws as in effect
on the date hereof, except as may be required by applicable
law or regulation.
(c) PFC will not issue, grant, pledge or sell, or
authorize the issuance of, reclassify or redeem, purchase or
otherwise acquire, any shares of its capital stock of any
class or Rights to acquire any such shares or any shares or
Rights to acquire shares of Poinsett Bank; nor will it enter
into any arrangement or contract with respect to the issuance
of any such shares or other Rights to acquire shares; nor will
it declare, set aside or pay any dividends (of any type) or
make any other change in its equity capital structure.
(d) PFC will promptly advise CFC in writing of any change
in the business of PFC which is or may reasonably be expected
to have a Material Adverse Effect.
(e) PFC 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 PFC, or otherwise,
which would be contrary to or in breach of any of the terms or
provisions of this Reorganization Agreement, or which would
cause any of the representations of PFC contained herein to be
or become untrue in any material respect.
(f) Neither PFC nor Poinsett Bank will incur any
indebtedness for borrowed money, issue or sell any debt
securities, or assume or otherwise become liable, whether
directly, contingently or otherwise, for the obligation of any
other party, other than in the ordinary course of business.
(g) Except for expenses attendant to the Merger and
current contractual obligations, neither PFC nor Poinsett Bank
will incur any expense in an amount in excess of $50,000 after
the execution of this Reorganization Agreement without the
prior written consent of CFC.
(h) Neither PFC nor Poinsett Bank will grant any
executive officers any increase in compensation (except in the
ordinary course of business in accordance with past practice
and only upon prior notice to CFC), or enter into any
employment agreement with any executive officer without the
consent of CFC except as may be required under employment or
termination agreements in effect on the date hereof which have
been previously disclosed to CFC in writing.
(i) PFC will not acquire or agree to acquire a material
amount of assets, or merge or consolidate with, purchase
substantially all of the assets of or otherwise, any business
or any corporation, partnership, association or other business
organization or division thereof.
(j) Except as may be directed by any Regulatory
Authority, as may be undertaken in the ordinary course of
business in accordance with past practices, or as may be
reasonably appropriate in view of changes in economic
circumstances, neither PFC nor Poinsett Bank shall (1) change
its lending, investment, liability management or other
material banking or other policies in any material respect, or
(2) implement or adopt any change in accounting principles,
practices or methods, other than as may be required by GAAP.
(k) PFC shall not impose, or permit or suffer the
imposition of any Liens on any shares of capital stock of
Poinsett Bank, or (except in the ordinary course of business)
on any of its or Poinsett Bank's assets, other than Liens on
such other assets that, individually or in the aggregate, are
not material to the business, properties or operations of PFC.
5.2. Conduct of CFC Pending Closing. During the period
commencing on the date hereof and continuing until the Closing Date, CFC
covenants and agrees to the following (except to the extent that PFC shall
otherwise expressly consent in writing, which consent shall not be unreasonably
delayed or withheld); provided, however, that any breach of or inaccuracy in any
of the covenants given in this Section 5.2 must have a Material Adverse Effect
before such breach shall be actionable or shall constitute grounds for
termination or failure to perform under this Reorganization Agreement.
(a) CFC shall carry on its business in substantially the
same manner as heretofore conducted.
(b) CFC will not amend its Articles of Incorporation or
Bylaws as in effect on the date hereof in any manner that will
adversely affect the PFC shareholders in any material respect.
(c) CFC will promptly advise PFC orally and in writing of
any change in its business which is or may reasonably be
expected to be materially adverse to CFC.
(d) CFC will not take, agree to take, or knowingly permit
to be taken any action or do or knowingly permit to be done
anything in the conduct of its business or otherwise, which
would be contrary to or in breach of any of the terms or
provisions of this Reorganization Agreement, or which would
cause any of the representations of CFC contained herein to be
or become untrue in any material respect.
SECTION VI. COVENANTS OF THE PARTIES
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6.1. Access to Properties and Records. Between the date of
this Reorganization Agreement and the Closing Date, the parties will provide to
each other and to their respective accountants, counsel and other
authorized representatives reasonable access, during reasonable business hours
and upon reasonable notice, to their respective premises, properties, contracts,
commitments, books, records and other information and will cause their
respective officers to furnish to the other party and its authorized
representatives such financial, technical and operating data and other
information pertaining to their respective businesses, as the parties shall from
time to time reasonably request.
6.2. Confidentiality. Each party will and will cause its
employees and agents to hold in strict confidence, unless disclosure is
compelled by judicial or administrative process, or in the opinion of its
counsel, by other requirements of law, all Confidential Information and will not
disclose the same to any Person. The party gaining access to such Confidential
Information shall exercise the same degree of care with respect thereto that any
such party uses to preserve and safeguard its own confidential proprietary
information. Confidential Information shall be used only for the purpose of and
in connection with consummating the transaction contemplated herein. If this
Reorganization Agreement is terminated, each party hereto will promptly return
all documents received by it from each other party containing Confidential
Information. Each party will and will cause its employees and agents to hold in
strict confidence, unless disclosure is compelled by judicial or administrative
process, or in the opinion of its counsel, by other requirements of law, the
status of the Merger. Each party shall coordinate with the other parties, any
public statements regarding the Merger. These confidentiality provisions are in
addition to (and do not supersede) those provisions set forth in that certain
Evaluation and Confidentiality Agreement entered into between CFC and PFC on or
about June 3, 1998 (the "Confidentiality Agreement"). The parties expressly
acknowledge that the execution of this Reorganization Agreement does not
terminate or alter the Confidentiality Agreement.
6.3. Cooperation. To the extent consistent with the other
provisions hereof, each party shall use its respective, reasonable best efforts
to take any and all necessary or appropriate actions, and to use its reasonable
best efforts to cause its officers, directors, employees, agents, and
representatives to use their reasonable best efforts and to take all steps in
good faith within their power, to cause to be fulfilled those of the conditions
precedent to its obligations to consummate the Merger which are dependent upon
its or their actions, including but not limited to (i) requesting the delivery
of appropriate opinions and letters from its counsel and (ii) obtaining any
consents, approvals, or waivers required to be obtained from other parties.
6.4. Affiliaties' Letters. PFC shall deliver to CFC a letter
identifying all Persons who are, at the time the Merger is submitted to a vote
of the shareholders of PFC, "affiliates" of PFC for purposes of Rule 145 of the
General Rules and Regulations under the Securities Act. PFC shall use its
reasonable best efforts to cause each Person who is identified as an "affiliate"
in the letter referred to above to deliver to CFC on or prior to the Effective
Time a written agreement, in form reasonably satisfactory to CFC that such
Person shall not sell, pledge, transfer or otherwise dispose of any capital
stock of PFC or any CFC Common Stock owned by such person or to be received by
such person as part of the consideration except in compliance with the
applicable provisions of the Securities Act.
6.5. Listing of CFC Common Stock. CFC shall cause the shares
of CFC Common Stock to be issued in the transactions contemplated by this
Reorganization Agreement to be approved for quotation on the Nasdaq National
Market, subject to official notice of issuance, prior to the Effective Time. CFC
shall give such notice to the Nasdaq Stock Market as may be required to permit
the listing of the CFC Common Stock issued in connection with the Merger.
6.6. Tax Treatment. PFC and CFC shall each take such acts
within their power as may be reasonably necessary to cause the Merger to
qualify as a "reorganization" within the meaning of Section 368(a) of the
Code, except to the extent such performance or failure would be prohibited by
law or regulation.
6.7. Expenses. Except to the extent expressly provided
otherwise herein, the parties shall pay their own fees and expenses (including
legal and accounting fees) incurred in connection with the Merger.
6.8. Material Events. At all times prior to the Closing Date,
each party shall promptly notify the other party in writing of the occurrence of
any event which will or may result in a breach of any covenant, representation
or warranty in this Reorganization Agreement, or the failure to satisfy the
conditions specified in Section VI or Section VII of this Reorganization
Agreement or other material developments relevant to the consummation of the
Merger, and shall use its reasonable best efforts to prevent or promptly to
remedy the same.
6.9 Acquisition Proposals. In the case of PFC, without the
prior written consent of CFC, it shall not solicit or encourage inquiries or
proposals with respect to, or furnish any nonpublic information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets or deposits of, or a
substantial equity interest in, PFC or any merger or other business combination
with PFC; provided, however, that if PFC is not otherwise in violation of this
Section 6.10, the Board of Directors of PFC may furnish or cause to be furnished
information and may participate in such discussions and negotiations if such
Board of Directors, after having consulted with and considered the written
advice of outside counsel, has determined that the failure to provide such
information or participate in such negotiations and discussions would cause the
members of such Board of Directors to breach their fiduciary duties under
applicable law. PFC shall instruct its officers, directors, agents, advisors and
affiliates to refrain from taking any action that would violate or conflict with
the foregoing; and it shall notify CFC immediately if any such inquiries or
proposals are received by, or any such negotiations or discussions are sought to
be initiated with, PFC.
6.10 Public Announcements. At all times until after the
Closing Date, neither PFC nor CFC shall issue or permit any of its respective
subsidiaries, affiliates, officers, directors or employees to issue any press
release or other information to the press with respect to this Reorganization
Agreement, without the express prior consent of the other party, except as may
be required
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by law or the policies of the Nasdaq Stock Market. The parties shall
cooperate to prepare a joint press release with respect to the transaction
contemplated herein.
6.11 Updating of Schedules. PFC and CFC shall, at the
Effective Time, prepare and deliver to each other such supplements to the
schedules attached hereto as may be necessary or appropriate to ensure the
accuracy and completeness of the information required to be disclosed in such
schedules at all times prior to the Effective Time, provided that the furnishing
of any such supplement to such Schedules shall not modify, limit, or otherwise
affect any representations or warranties of PFC or CFC contained herein or any
right of PFC or CFC to terminate this Reorganization Agreement. PFC and CFC
shall provide to each other drafts of such supplemental Schedules at least three
(3) business days prior to the Closing Date.
6.12 Certain Policies of PFC. PFC shall, consistent with GAAP
and regulatory accounting principles, use its best efforts to record any
accounting adjustments required to conform its and Poinsett Bank's loan,
litigation and other reserve and real estate valuation policies and practices
(including loan classifications and levels of reserves) so as to reflect
consistently on a mutually satisfactory basis the policies and practices of CFC;
provided, however, that PFC shall not be obligated to record any such accounting
adjustments pursuant to this Section unless and until (i) PFC shall be
reasonably satisfied that all the conditions to the obligation of the parties to
consummate the Merger will be satisfied or waived on or before the Effective
Time, and (ii) in no event until the day prior to the Closing Date.
Notwithstanding any other provision hereof, until the Effective Time, the
management of PFC and the authority to establish and implement its business
policies shall continue to reside solely in PFC's officers and Board of
Directors, and the election of PFC directors shall be solely the prerogative of
PFC shareholders.
6.13 Employment Matters. (a) Prior to the Effective Time,
Poinsett Bank shall terminate the Poinsett Bank Employee Stock Ownership Plan
("ESOP") by proper action of the Board of Directors of Poinsett Bank. At or as
soon as administratively practicable after the Effective Time, the ESOP shall
convert to cash a sufficient number of shares of Company Common Stock as may be
received by the ESOP with respect to unallocated shares of PFC Common Stock held
by the ESOP at the Effective Time to the repayment in full of the outstanding
ESOP indebtedness to Perpetual Bank, a Federal Savings Bank. Any surplus of CFC
Common Stock remaining after repayment of such indebtedness shall be allocated
as investment earnings of the ESOP to the accounts of ESOP participants (and, if
required, to the accounts of former participants or their beneficiaries) in
proportion to their account balances at the Effective Time.
(b) CFC agrees that those former PFC employees who are
employed by CFC or its subsidiaries immediately following the Closing Date: (i)
will be eligible, on the same basis as current CFC employees, for all CFC
Benefit Plans; and (ii) will receive past service credit for eligibility and
vesting (but not benefit accrual) purposes under CFC Benefit Plans for years of
service with PFC as if such service had been with CFC or its subsidiaries.
(c) Prior to the Effective Time, Poinsett Bank shall terminate
the Poinsett Bank 401(k) Profit Sharing Plan (the"401(k) Plan") by proper action
of the Board of Directors of Poinsett Bank and, thereafter, distributions shall
be made to participants in accordance with the requirements of ERISA and the
Code.
(d) CFC acknowledges and agrees that, prior to the Effective
Time, Poinsett Bank may transfer the life insurance policies identified in
Schedule 6.14(f) to the insureds in fully paid up form.
(e) CFC acknowledges and agrees that, following the Effective
Time and for a period of 18 months, the advisory Board of Directors of Poinsett
Bank's Rock Hill division shall be continued at their present level of
compensation.
(f) At closing, CFC shall enter into a consulting agreements
with James D. King, Jr. and James D. King in substantially the forms attached
hereto as Exhibit B.
(g) CFC acknowledges that the transactions contemplated by
this Agreement constitute a change in control for purposes of the employment
agreements between Poinsett Bank and James D. King, James D. King, Jr., Edward
R. Blakemore and Louise P. Ellenburg (the "Officers"), respectively, and CFC
further acknowledges that the Officers are entitled to receive the payments
provided for in Section 12 of such employment agreements upon their termination
of employment at or after the Effective Time.
6.14 Prohibited Actions. (a) Except as expressly provided in
this Reorganization Agreement, as agreed to by CFC or as required by applicable
law, rules or regulations (including the fiduciary duties of the PFC directors
under applicable law), during the period from the date of this Reorganization
Agreement to the Effective Time, PFC shall, and shall cause its subsidiaries to,
(i) take no action which would adversely affect or delay the ability of the
parties hereto to obtain any necessary Regulatory Approvals or Authorizations
required for the transactions contemplated hereby or to perform its covenants
and agreements on a timely basis under this Reorganization Agreement and (ii)
take no action that could reasonably be expected to have a Material Adverse
Effect on PFC.
(b) Except as expressly provided in this Reorganization
Agreement, as agreed to by PFC or as required by applicable law, rules or
regulations, during the period from the date of this Reorganization Agreement to
the Effective Time, CFC shall, and shall cause its subsidiaries to, (i) take no
action which would adversely affect or delay the ability of the parties hereto
to obtain any necessary Regulatory Approvals or Authorizations required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Reorganization Agreement and (ii) take no action that
could reasonably be expected to have a Material Adverse Effect on CFC.
SECTION VII. CONDITIONS TO CFC'S OBLIGATION TO CLOSE
The obligation of CFC to consummate the transactions
contemplated in this Reorganization Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
7.1 Performance of Acts and Representations by PFC. Each of
the acts and undertakings of PFC to be performed on or before the Closing Date
pursuant to the terms of this Reorganization Agreement shall have been duly
authorized and duly
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performed, and each of the representations and warranties of PFC set forth in
this Reorganization Agreement shall be true in all material respects on the
Closing Date, except as to transactions contemplated by this Reorganization
Agreement or representations which are as of a specific date.
7.2 opinion of Counsel for PFC. PFC shall have furnished CFC
with an opinion of its counsel, dated as of the Closing Date, and in form and
substance reasonably satisfactory to CFC and its counsel, to the effect that,
except as disclosed herein: (i) Each of PFC and Poinsett Bank is organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation (except that with respect to Poinsett Bank,
counsel shall be entitled to state merely that it has no knowledge of any reason
why Poinsett Bank is not duly organized); (ii) the consummation of the
transactions contemplated by this Reorganization Agreement will not (A) violate
any provision of PFC'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 agreement listed on Schedule 3.18 or any order,
arbitration award, judgment or decree known to counsel to which PFC is a party,
or by which it is bound, except as such would not, in the aggregate, have a
Material Adverse Effect, except as disclosed on schedules to the Reorganization
Agreement, or (C) violate or conflict with any other
restriction of any kind or character of which such counsel has knowledge and to
which PFC is subject; (iii) all of the shares of Poinsett Bank common stock are
validly authorized and issued, fully paid and non-assessable; (iv) PFC has the
legal right and power, and all authorizations and approvals required by law, to
enter into this Reorganization Agreement, and to consummate the transactions
contemplated herein and all applicable regulatory waiting periods have passed;
(v) other than filings and registrations required under applicable law to be
made by CFC, all filings and registrations with, and notifications to, all
federal and state authorities required on the part of PFC for the consummation
of the Merger have been made; (vi) PFC has full corporate power and authority to
enter into this Reorganization Agreement, and this Reorganization Agreement has
been duly authorized, executed and delivered by each of PFC and constitutes a
valid and legally binding obligation of PFC enforceable against PFC in
accordance with its terms, except as such enforceability may be limited by (x)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to rights of creditors of FDIC-insured
institutions or the relief of debtors generally, (y) laws relating to the safety
and soundness of depository institutions, and (z) general principles of equity;
and (vii) to the best knowledge of such counsel, no material suit or proceeding
is pending or threatened against PFC or Poinsett Bank which would have a
Material Adverse Effect on PFC's business or properties or PFC's ability to make
the representations and warranties and perform the obligations set forth herein.
7.3 Conduct of Business. There shall have been no Material
Adverse Event with respect to PFC from the date hereof through the Closing Date.
7.4 Consents. All Regulatory Approvals and other
authorizations necessary, in the reasonable opinion of counsel for CFC, to the
consummation of the transactions contemplated hereby shall have been obtained,
and no governmental agency or department or judicial authority shall have issued
any order, writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Regulatory Approvals shall have been obtained
without the imposition of any condition or requirements that, in the reasonable
judgment of CFC, renders the consummation of this transaction unduly burdensome
(excluding conditions or requirements that are typically imposed in transactions
of the type contemplated herein).
7.5 Certificate. CFC shall have been furnished with such
certificates of officers of PFC, in form and substance reasonably satisfactory
to CFC, dated as of the Closing Date, certifying to such matters as CFC may
reasonably request, including but not limited to the fulfillment of the
conditions specified in this Section VII.
7.6 PFC Shareholder Approval. PFC Shareholder Approval shall
have been obtained.
7.7 IRS Ruling. In the event that CFC shall have determined to
restructure the Merger as permitted under Section 2.8 hereof and CFC determines
that it is desirable to obtain an IRS ruling with respect to such restructuring,
then it shall be a condition of Closing that CFC shall have received such IRS
ruling, which ruling shall be reasonably acceptable to CFC.
7.8 Securities Laws. The Registration Statement shall have
been declared effective. No order suspending the sale of the shares of CFC
Common Stock in any jurisdiction shall have been issued, and no proceedings for
that purpose shall have been instituted.
SECTION VIII. CONDITIONS TO THE OBLIGATION OF PFC TO CLOSE
The obligation of PFC to consummate the transactions
contemplated in this Reorganization Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
8.1 Performance of Acts and Representations by CFC. Each of
the acts and undertakings of CFC to be performed on or before the Closing Date
pursuant to the terms of this Reorganization Agreement shall have been duly
authorized and duly performed, and each of the representations and warranties of
CFC set forth in this Reorganization Agreement shall be true in all material
respects on the Closing Date, except as to transactions contemplated by this
Reorganization Agreement or representations which are as of a specific date.
8.2 Opinion of Counsel for CFC. CFC shall have furnished PFC
with an opinion of its counsel, dated as of the Closing Date, and in form and
substance reasonably satisfactory to PFC and its counsel, to the effect that,
except as disclosed herein: (i) CFC is duly organized, validly existing and in
good standing under
the laws of the State of South Carolina; (ii) the consummation of the
transactions contemplated by this Reorganization Agreement will not (A) violate
any provision of CFC's Articles of Incorporation or Bylaws, (B) violate any
provision of, result in the termination of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or decree known to
counsel to which CFC is a party, or by which it is bound, except as such would
not, in the aggregate, have
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a material adverse effect on the business or financial condition of CFC, or
(C) violate or conflict with any other restriction of any kind or character of
which such counsel has knowledge and to which CFC is subject; (iii) all of the
shares of CFC Common Stock to be issued in connection with the Merger will be,
when issued, validly authorized and issued, fully paid and non-assessable; (iv)
CFC has the legal right and power, and all authorizations and approvals required
by law, to enter into this Reorganization Agreement, and to consummate the
transactions contemplated herein 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 PFC for the consummation
of the Merger have been made; (vi) CFC has full corporate power and authority to
enter into this Reorganization Agreement, and this Reorganization Agreement has
been duly authorized, executed and delivered by CFC and constitutes a valid and
legally binding obligation of CFC enforceable against CFC in accordance with its
terms, except as such enforceability may be limited by (x) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to rights of creditors of FDIC-insured institutions
or the relief of debtors generally, (y) laws relating to the safety and
soundness of depository institutions, and (z) general principles of equity;
(vii) to the best knowledge of such counsel, no material suit or proceeding is
pending or threatened against CFC or other parties which would have a material
adverse effect on CFC's business or properties or its abilities to make the
representations and warranties and perform the obligations set forth herein, and
(viii) the Registration Statement became effective on [date] and no stop order
suspending the effectiveness of the Registration Statement or any part thereof
has been issued and no proceedings for that purpose have been instituted or are
pending under the Securities Act.
8.3 Conduct of Business. There shall have been no Material
Adverse Event with respect to CFC from the date hereof through the Closing Date.
8.4 Consents. All Regulatory Approvals or other authorizations
necessary, in the reasonable opinion of counsel for PFC, to the consummation of
the transactions contemplated hereby shall have been obtained, and no
governmental agency or department or judicial authority shall have issued any
order, writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable regulatory
agencies shall have been obtained without the imposition of any condition or
requirements that, in the reasonable judgment of PFC, renders the consummation
of this transaction unduly burdensome (excluding conditions or requirements that
are typically imposed in transactions of the type contemplated herein).
8.5 Certificate. PFC shall have been furnished with such
certificates of officers of CFC, in form and substance reasonably satisfactory
to PFC, dated as of the Closing Date, certifying to such matters as PFC may
reasonably request, including but not limited to the fulfillment of the
conditions specified in this Section VIII.
8.6 Tax Opinion. PFC shall have received from Wyche, Burgess,
Freeman & Parham, P.A. a tax opinion, reasonably satisfactory to PFC, opining,
subject to reasonable qualifications, that the Merger shall, upon compliance
with reasonable conditions, qualify as a tax-free reorganization under Section
368(a) of the Code.
8.7 PFC Shareholder Approval shall have been obtained.
8.8 The Registration Statement shall have been declared
effective. No order suspending the sale of the shares of CFC Common Stock in any
jurisdiction shall have been issued, and no proceedings for that purpose shall
have been instituted.
SECTION IX. TERMINATION
9.1 Termination. This Reorganization Agreement may be
terminated at any time prior to the Closing Date:
(a) by mutual consent of the parties;
(b) by either CFC or PFC, at that party's option, (A) if a
permanent injunction or other order (including any order
denying any required regulatory consent or approval) shall
have been issued by any Federal or state court of competent
jurisdiction in the United States or by any United States
Federal or state governmental or regulatory body, which order
prevents the consummation of the transactions contemplated
herein, or (B) if PFC Shareholder Approval is not received at
the PFC Shareholders' Meeting;
(c) by either CFC or PFC if the other party (or its
subsidiaries) has failed to comply with the agreements or
fulfill the conditions contained herein, provided, however,
that any such failure of compliance or fulfillment must result
in a Material Adverse Event and the breaching party must be
given notice of the failure to comply and a reasonable period
of time to cure; or
(d) by either CFC or PFC as set forth in Section 2.2 hereof.
SECTION X. INDEMNIFICATION
10.1 Information for Application and Statements. Each of CFC
and PFC represents and warrants that all information concerning it which is or
will be included in any statement and application made to any governmental
agency (including the Registration Statement) in connection with the
transactions contemplated by the Agreement shall be true and correct in all
material respects and shall not omit any material fact required to be stated
therein or necessary to make the statements made, in light of the circumstances
under which they were made, not misleading. Each of CFC and PFC so representing
and warranting will indemnify and hold harmless the other, each of its directors
and officers, who controls the other within the meaning of the Securities Act,
from and against any and all losses, claims, damages, expenses or liabilities to
which any of them may become subject under applicable laws and rules and
regulations thereunder and will reimburse them for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
actions whether or not resulting in liability,
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insofar as such losses, claims, damages, expenses, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any such application or statement or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing by
the representing and warranting party expressly for use therein. Each of CFC and
PFC agrees, at any time upon the request of the other, to furnish to the other a
written letter or statement confirming the accuracy of the information contained
in any proxy statement, registration statement, report or other application or
statement, or in any draft of any such document, and confirming that the
information contained in such document or draft was furnished expressly for use
therein or, if such is not the case, indicating the inaccuracies contained in
such document or draft or indicating the information not furnished expressly for
use therein. The indemnity agreement contained in this Section X shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the other party.
10.2 Indemnification of Officers and Directors. (a) CFC
covenants and agrees that it will cause each person who is an officer or
director of PFC or Poinsett Bank (an "Indemnitee") on the Closing Date to be
indemnified for any costs and expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
arising out of such person's service as an officer or director of PFC or
Poinsett Bank to the fullest extent to which such Indemnitee is entitled under
the Articles of Incorporation and Bylaws of CFC in effect on the date hereof
(except that this provision shall not be construed so as to cause CFC to violate
applicable law). Without limiting the foregoing obligation, CFC agrees that all
limitations of liability existing in favor of an Indemnitee in the Articles of
Incorporation and Bylaws of PFC or under applicable law as in effect on the date
hereof, arising out of matters existing or occurring at or prior to the
Effective Time shall survive the Merger and shall continue in full force. CFC,
upon request of such Indemnitee, shall advance expenses in connection with such
indemnification. The
provisions of this Section X shall survive the closing and shall be enforceable
directly by each officer and director of PFC and Poinsett Bank benefitted or
intended to be benefitted by this Section X.
(b) Any Indemnitee wishing to claim indemnification under this
Section X, upon learning of such claims or liabilities, shall promptly notify
CFC thereof; provided, that the failure so to notify shall not affect the
obligations of CFC hereunder unless such failure materially increases CFC's
liability hereunder. In the event of any litigation giving rise to a claim
hereunder, (i) CFC shall have the right to assume the defense thereof, if it so
elects, and CFC shall pay all reasonable fees and expenses of counsel for the
Indemnitees promptly as statements therefor are received; provided, however,
that CFC shall be obligated pursuant to this Section to pay for only one firm of
counsel for all Indemnitees in any jurisdiction for any single action, suit or
proceeding or any group of actions, suits or proceedings arising out of or
related to a common body of facts, (ii) the Indemnitees shall cooperate in the
defense of any such matter, (iii) CFC shall not be liable for any settlement
effected without its prior written consent and (iv) CFC shall have no obligation
hereunder in the event a federal banking agency or a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of an Indemnitee in the
manner contemplated hereby is prohibited by applicable law.
10.3 Insurance. PFC and CFC shall use their reasonable best
efforts to maintain PFC's existing directors' and officers' liability insurance
policy (or a policy, similar to PFC'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 CFC or PFC shall not make aggregate premium payments in respect of such
policy (or replacement policy) which exceeds $25,000 and provided further that
PFC and CFC shall obtain the maximum amount of such coverage as can be obtained
by paying an aggregate premium of $25,000. Following the Closing Date, CFC shall
take no action to terminate prematurely such policy.
10.4 Survival. If CFC 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 CFC
shall assume all of the obligations set forth in Sections 10.2 and 10.3.
SECTION XI. MISCELLANEOUS
11.1 Survival of Representations, Warranties and Covenants.
Except as otherwise provided in this Reorganization Agreement, the
representations, warranties and covenants contained in this Reorganization
Agreement or in any other documents delivered pursuant hereto, shall not survive
the Closing of the transactions. Notwithstanding any investigation made by or on
behalf of the parties, whether before or after Closing Date, the parties shall
be entitled to rely upon the representations and warranties given or made by the
other party(ies) herein. Each of the covenants set forth in Sections 6.2, 6.13,
10.2, 10.3 and 10.4 shall survive the Closing Date forever (except that this
sentence shall not be construed to extend any applicable statutes of
limitations). The provisions of the foregoing sections shall survive the Closing
and shall be enforceable directly by each person benefitted or intended to be
benefitted by such sections.
11.2 Entire Agreement. This Reorganization Agreement,
including any schedules, exhibits, lists and other documents referred to herein
which form a part hereof, contains the entire agreement of the parties with
respect to the subject matter contained herein and there are no agreements,
warranties, covenants or undertakings other than those expressly set forth
herein except for the Evaluation and Confidentiality Agreement dated on or about
June 3, 1998, the terms of which shall survive Closing and the termination of
the transaction provided for herein.
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11.3 Binding Agreement. This Reorganization Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Agreement shall
not be assigned by either of the parties hereto without the prior written
consent of the other party hereto.
11.4 Notices. Any notice given hereunder shall be in writing
and shall be deemed delivered and received upon reasonable proof of receipt.
Unless written designation of a different address is filed with each of the
other parties hereto, notice shall be transmitted to the following addresses:
For CFC: William S. Hummers III
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Fax: 864-239-4605
Copy to: William P. Crawford, Jr.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602
Fax: 864-235-8900
For PFC: James D. King
Poinsett Financial Corporation
6514 B State Park Road
Travelers Rest, South Carolina 29690
Fax: 864-834-7784
Copies to: John F. Breyer, Jr.
Breyer & Aguggia LLP
1300 I Street, N.W., Suite 470 East
Washington, D.C. 20005
Fax: 202-737-7979
11.5 Counterparts. This Reorganization Agreement may be
executed in one or more Counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
11.6 Headings. The section and paragraph headings contained in
this Reorganization Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretations of this Reorganization
Agreement.
11.7 Law Governing. This Reorganization Agreement shall be
governed by and construed in accordance with the laws of the State of South
Carolina.
11.8 Amendment. This Reorganization Agreement may not be
amended except by an instrument in writing signed on behalf of all of the
parties.
11.9 Waiver. Any term, provision or condition of this
Reorganization Agreement (other than that required by law) may be waived in
writing at any time by the party which is entitled to the benefits thereof.
IN WITNESS WHEREOF, this Reorganization Agreement has been
duly entered as of the date first written above.
WITNESS:
CAROLINA FIRST CORPORATION
/s/_________________________ By: /s/ William S. Hummers III
----------------------------------------
William S. Hummers III
/s/_________________________ Executive Vice President
POINSETT FINANCIAL CORPORATION
/s/_________________________ By: /s/ James D. King
James D. King
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/s/_________________________ President and Chief Executive Officer
Schedules Omitted
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APPENDIX A to AGREEMENT AND PLAN OF REORGANIZATION
PLAN OF MERGER OF
POINSETT FINANCIAL CORPORATION
WITH AND INTO
CAROLINA FIRST CORPORATION
Pursuant to this Plan of Merger (the "Plan of Merger"), Poinsett Financial
Corporation ("PFC"), a South Carolina corporation headquartered in Travelers
Rest, South Carolina, shall be merged with and into Carolina First Corporation
("CFC"), a South Carolina corporation headquartered in Greenville, South
Carolina.
ARTICLE I. DEFINITIONS
The capitalized terms set forth below shall have the following meanings:
1.1. "Articles of Merger" shall mean the Articles of Merger to be executed
by CFC and PFC in a form appropriate for filing with the Secretary of State of
South Carolina, relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.2. "BCA" shall mean the South Carolina Business Corporation Act of 1988,
as amended.
1.3. "CFC Common Stock" shall mean the common stock, par value $1.00 per
share, of CFC.
1.4. "Change of Control Transaction" shall mean, with respect to CFC, a
transaction in which a majority of the surviving entity of such transaction (or
a majority of the entity holding substantially all of the assets of CFC) is not
owned by persons holding CFC Common Stock immediately prior to such transaction.
1.5. "Conversion Ratio" shall mean the number of shares of CFC Common
Stock issuable in exchange for one share of PFC Common Stock, as calculated
pursuant to Section 3.1 hereof.
1.6. "Merger" shall mean the merger of PFC with and into CFC as more
particularly set forth herein and in the Reorganization Agreement.
1.7. "Effective Time" shall mean the date and time which the Merger
becomes effective as more particularly set forth in Section 2.2 hereof. Subject
to the terms and conditions hereof, the Effective Time shall be such time on
such date as CFC shall notify PFC in writing not less than five days prior
thereto, which date shall not be more than 30 days after all conditions have
been satisfied or waived in writing.
1.8. "Fair Market Value" shall mean the average of the closing prices as
quoted on the Nasdaq National Market for CFC Common Stock for the 20 days in
which CFC Common Stock was traded immediately prior to the Closing Date;
provided, however, if prior to the Effective Time, any other Person shall have
publicly announced an intention to acquire control of CFC by merger or otherwise
or CFC shall have publicly acknowledged that it is seeking to be acquired by
another Person or is discussing being acquired by another Person, then the
average of the Closing Prices as quoted on the Nasdaq National Market for CFC
Common Stock for the 20 days for which the CFC Common Stock was traded
immediately prior to such announcement or acknowledgement shall be determined
and, if such average is less than the average determined pursuant to the first
clause of this sentence, then the smaller average shall be the Fair Market
Value.
1.9. "OTS" shall mean the Office of Thrift Supervision.
1.10. "Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
1.11. "PFC Shareholder Approval" shall mean the approval by the requisite
vote of the shareholders of PFC at the PFC Shareholders' Meeting of the merger
of PFC with and into CFC.
1.12. "PFC Shareholders' Meeting" shall mean, as applicable, the meeting
of the shareholders of PFC at which the Merger shall be voted upon.
1.13. "Reorganization Agreement" shall mean the Reorganization Agreement
between CFC and PFC dated the date hereof, to which this Plan of Merger is
attached as Appendix A.
1.14. "Rights" shall mean warrants, calls, commitments, options, rights
(whether stock appreciation rights, conversion rights, exchange rights, profit
participation rights, or otherwise), securities or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
and other arrangements or commitments which obligate a Person to issue,
otherwise cause to become outstanding, sell, transfer, pledge, or otherwise
dispose of any of its capital stock or other ownership interests, or any voting
rights thereof or therein, or to pay monetary sums by reference to the existence
or market valuation, or in lieu and place of, any of its capital stock or
ownership interests therein.
1.15. "Surviving Corporation" shall mean CFC after consummation of the
Merger.
ARTICLE II. THE MERGER
2.1. MERGER. At the Effective Time, subject to the terms and conditions of
the Reorganization Agreement and this Plan of Merger, PFC shall merge with and
into CFC, the separate existence of PFC shall cease, and CFC (the
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"Surviving Corporation") shall survive and the name of the Surviving Corporation
shall be "Carolina First Corporation". By virtue of the Merger and without any
action on the part of the holders thereof, each of the shares of PFC Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
shares held by PFC, CFC, any PFC subsidiary or any CFC subsidiary, in each case
other than in a fiduciary capacity or as a result of debts previously contracted
(the "Excluded Shares")) shall be converted into the right to receive the Merger
Consideration referenced in Section III below. Each of the shares of CFC Common
Stock (including the rights ("CFC Rights") issued pursuant to a Shareholder
Rights Agreement, dated November 9, 1993 (as amended, the "CFC Rights
Agreement")), and any shares of any CFC subsidiary or PFC subsidiary outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding, and shall not be converted, exchanged or altered in any manner as a
result of the Merger.
2.2. EFFECTIVE TIME. The Merger shall become effective on the date and at
the time specified in the Articles of Merger, and in the form to be filed with
the Secretary of State of the State of South Carolina.
2.3. CAPITALIZATION. The number of authorized shares of capital stock of
the Surviving Corporation shall be the same as immediately prior to the Merger.
2.4. ARTICLES OF INCORPORATION. The articles of incorporation of CFC as in
effect at the Effective Time shall be and remain the articles of incorporation
of the Surviving Corporation.
2.5. BYLAWS. The Bylaws of CFC, as in effect at the Effective Time, shall
continue in full force and effect as the bylaws of the Surviving Corporation
until otherwise amended as provided by law or by such bylaws.
2.6. PROPERTIES AND LIABILITIES OF PFC AND CFC; MANAGEMENT. At the
Effective Time, the separate existence and corporate organization of PFC shall
cease, and CFC shall thereupon and thereafter, to the extent consistent with
applicable law and with its articles of incorporation and the changes, if any,
provided by the Merger, possess all the rights, privileges, immunities,
liabilities and franchises, of a public as well as a private nature, of PFC
without further act or deed. The directors and officers of CFC in office
immediately prior to the Merger becoming effective shall be the directors and
officers of the Surviving Corporation, together with such additional directors
and officers as may thereafter be elected, who shall hold office until such time
as their successors are elected and qualified.
ARTICLE III. MERGER CONSIDERATION
3.1. MERGER CONSIDERATION. In connection with the Merger, each share of
PFC Common Stock issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be exchanged for and converted into a number shares of CFC Common Stock
equal to $82.00 divided by the Fair Market Value (the "Conversion Ratio"). All
of the stock prices set forth in this Section 3.1 shall also be subject to
equitable adjustment for stock splits, stock dividends, reverse stock splits and
similar items.
3.2. CFC COMMON STOCK. None of the shares of CFC shall be converted in the
Merger and the capitalization of CFC after the Merger shall remain unchanged.
3.3. AUTHORIZED OR TREASURY SHARES. Any and all shares of PFC Common Stock
held as treasury shares by PFC or authorized but unissued shares shall be
canceled and retired at the Effective Time, and no consideration shall be issued
or given in exchange therefor.
3.4. FRACTIONAL SHARES. No fractional shares of CFC Common Stock will be
issued as a result of the Merger. In lieu of the issuance of fractional shares
pursuant to Section 3.1 hereof, cash will be paid to the holders of the PFC
Common Stock in respect of any fractional share that would otherwise be issuable
based on the Ending Price.
3.5. EXCLUDED SHARES. Each of the Excluded Shares shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.6. EQUITABLE ADJUSTMENTS. In the event of any change in the outstanding
CFC Common Stock by reason of a stock dividend, stock split, stock
consolidation, recapitalization, reorganization, merger, split up or the like,
the Conversation Ratio and all stock prices set forth in this Article III shall
be appropriately adjusted so as to preserve, but not increase, the benefits of
this Plan of Merger to the holders of PFC Common Stock.
3.7. TRANSFERS. At the Effective Time, the stock transfer books of PFC
shall be closed and no transfer of PFC Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Merger notwithstanding, none of
the parties to the Reorganization Agreement or any affiliate of the foregoing
shall be liable to a holder of PFC Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. ISSUANCE OF CFC CERTIFICATES; CASH FOR FRACTIONAL SHARES. (a) As soon
as practicable after the Effective Time (but in no event more than five days
after the Effective Time), CFC or its transfer agent (in such capacity, the
"Exchange Agent") shall mail, or cause to be mailed, and otherwise make
available to each record holder of Shares, 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 PFC Common
Stock ("Certificates") for payment therefor. Upon receipt of such notice and
transmittal form, each holder of Certificates at the Effective Time shall
surrender the Certificate or Certificates to the Exchange Agent, and shall
promptly upon surrender receive in exchange therefor the Merger
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Consideration provided in Section 3 of this Plan of Merger. If any portion of
the payment to be made upon surrender and exchange of a Certificate is to be
paid to a person other than the person in whose name the Certificate is
registered, it shall be a condition of such payment that the Certificate shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay in advance any transfer or other taxes
or establish to the satisfaction of CFC that no such tax is applicable. Upon
surrender, each Certificate shall be canceled. In addition, Certificates
surrendered for exchange by any person constituting an affiliate of PFC for
purposes of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), shall not be exchanged for certificates representing shares
of CFC Common Stock until CFC has received the written agreement from such
person as provided for in Section 6.4 of the Reorganization Agreement.
(b) Adequate provisions shall be made to permit Certificates to be
surrendered and exchanged in person not later than the business day following
the Effective Time.
4.2. AUTHORIZED WITHHOLDINGS. CFC shall not be obligated to deliver the
consideration to which any former holder of PFC Common Stock is entitled as a
result of the Merger until such holder surrenders his or her certificate or
certificates representing the shares of PFC Common Stock for exchange as
provided in this Article IV, or, in default thereof, an appropriate affidavit of
loss and indemnity agreement and/or a bond as may be reasonably required in each
case by CFC or PFC. 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 PFC Common Stock issued and outstanding at the Effective Time until
such holder surrenders such certificate for exchange as provided in Section 4.1
above. However, upon surrender of the PFC Common Stock certificate both the CFC
Common Stock certificate, together with all such withheld dividends or other
distributions and any withheld cash payments in respect of fractional share
interest, but without any obligation for payment of interest by such
withholding, shall be delivered and paid with respect to each share represented
by such certificate.
4.3. LIMITED RIGHTS OF FORMER PFC SHAREHOLDERS. After the Effective Time,
each outstanding certificate representing shares of PFC Common Stock prior to
the Effective Time shall be deemed for all corporate purposes (other than voting
and the payment of dividends and other distributions to which the former
shareholder of PFC Common Stock may be entitled) to evidence only the right of
the holder thereof to surrender such certificate and receive the requisite
number of shares of CFC Common Stock in exchange therefor (and cash in lieu of
fractional shares) as provided in this Plan of Merger.
ARTICLE V. STOCK OPTIONS AND OTHER RIGHTS
5.1. OPTIONS. (a) At the Effective Time, by virtue of the Merger, and
without any action on the part of any holder of an option, each PFC option
identified in Schedule 3.5 of the Reorganization Agreement (a "PFC Option") that
is then outstanding and unexercised shall be converted into and become a option
to acquire CFC Common Stock on the same terms and conditions as are in effect
with respect to the PFC Option immediately prior to the Effective Time, except
that (i) the number of shares of CFC Common Stock subject to such PFC Option
shall be equal to the number of shares of PFC Common Stock subject to such PFC
Option immediately prior to the Effective Time multiplied by the Conversion
Ratio, the product being rounded, if necessary, up or down to the nearest whole
share, and (ii) the per share exercise price of the option shall be adjusted by
dividing the per share exercise price of the PFC Option by the Conversion Ratio,
and rounding up to the nearest cent. It is intended that the foregoing
assumption shall be effected in a manner which is consistent with the
requirements of Section 424 of the Internal Revenue Code of 1986, as amended, as
to any PFC Option that is an incentive stock option.
(b) In lieu of having a PFC Option converted pursuant to Section 5.1(a),
the holders of such options may elect prior to the Effective Time to receive, in
settlement thereof, solely a cash payment equal to the excess of (i) $82.00 over
the exercise price per share of PFC Common Stock covered by the option
multiplied by (ii) the total number of shares of PFC Common Stock covered by the
option. Each PFC Option the holder of which has made such election shall at the
Effective Time represent solely the right to receive the foregoing cash payment.
ARTICLE VI. MISCELLANEOUS
6.1. CONDITIONS PRECEDENT. Consummation of the Merger is conditioned upon
receipt of the Shareholder Approval. In addition, consummation of the Merger is
conditioned upon the fulfillment of the conditions precedent set forth in
Section VII and Section VIII of the Reorganization Agreement, subject to waiver
of any such conditions, if appropriate, as provided thereunder.
6.2. TERMINATION. This Plan of Merger may be terminated at any time prior
to the Effective Time as provided in Section IX of the Reorganization Agreement.
6.3. AMENDMENTS. To the extent permitted by law, this Plan of Merger may
be amended by a subsequent writing signed by all of the parties hereto upon the
approval of the board of directors of each of the parties hereto; provided,
however, that this Plan of Merger may not be amended after the Shareholders'
Meeting except in accordance with applicable law.
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APPENDIX B TO AGREEMENT AND PLAN OF REORGANIZATION
CONSULTANT AGREEMENT
THIS CONSULTANT AGREEMENT (this "Agreement"), made and entered into this
____ day of ______________, 1998, by and between CAROLINA FIRST BANK, ("Bank"),
and James D. King, Jr.
("Contractor").
WHEREAS, Contractor has previously served as officer of Poinsett Bank,
F.S.B.; and
WHEREAS, the experience, knowledge, and contacts in the banking business
are valuable to the Bank, and the Bank desires to retain Contractor's services
as a consultant for the term hereof and Contractor desires to be so retained;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. CONSULTANT. The Bank hereby retains Contractor as a consultant and
Contractor accepts such appointment on the terms and conditions set
forth below.
2. TERM. The term of this Agreement shall be for a period of twelve
months, commencing on the date hereof.
3. DUTIES. During the term hereof, Contractor shall render to the Bank
such services of an advisory or consultative nature as the Bank may
reasonably request primarily for the purpose of developing the
business of the Bank in the Travelers Rest area. Contractor shall
be available for advice and counsel to the officers and directors of
the Bank at reasonable times by telephone, letter or in person so
that the Bank may have the benefit of Contractor's experience,
knowledge, contacts or reputation in the business in which the Bank
is engaged. Contractor agrees that he will not, during the term of
this Agreement, be involved in any other venture that, in the sole
opinion of the Bank, would conflict or compete with the operations
of the Bank.
4. COMPENSATION, EXPENSES, ETC. As consideration for the services
provided under this Agreement,:
(A) Bank will pay to Contractor the sum of $5,833.33 per month due
on the first day of the month.
(B) The Bank shall pay or reimburse Contractor for all documented
expenses incurred by Contractor in connection with the
performance of his obligations under this Agreement.
(C) The Bank shall provide Contractor with office space at the
Bank's main branch in Travelers Rest, South Carolina and shall
further provide Contractor with secretarial services,
telephone and fax access and copying facilities on an
as-needed basis.
5. INDEPENDENT CONTRACTOR. It is expressly understood that Contractor
is an independent contractor under this Agreement and, as such, he
shall have no authority, executive or otherwise, to bind the Bank,
or to determine the affairs of the Bank, and he shall not
participate as an employee in any plan or program maintained by the
Bank for the benefit of its employees. Contractor shall be solely
responsible for all federal, state, and local tax obligations
arising out of the payments and benefits provided to Contractor
under this Agreement.
6. TERMINATION OF CONSULTANT ENGAGEMENT. Engagement of Contractor as a
consultant under this Agreement shall terminate upon the occurrence
of any of the following events:
(A) TERMINATION BY CONTRACTOR WITHOUT CAUSE. Contractor may
terminate his obligations to provide consulting services under
this Agreement at any time upon not less than thirty (30)
days' written notice to the Bank. In the event of such notice
by Contractor, the Bank may deem the termination effective
prior to the expiration of the notice period but in no event
not less than ten (10) days from receipt of such notice. In
the event of such termination, the Bank shall pay to
Contractor the compensation then due him through the effective
date of termination.
(B) TERMINATION BY BANK FOR CAUSE. The Bank may terminate this
Agreement immediately at any time for cause (as defined
below). In the event of such termination, the Bank shall
pay Contractor the prorated monthly compensation then due him
through the effective date of such termination as designated
by the Bank.
Termination for cause shall mean termination because of (i)
the willful failure by Consultant to substantially perform his
duties hereunder after notice and reasonable opportunity is
given to correct deficiencies; (ii) fraud, misappropriation,
embezzlement, or intentional and material damage to property
of the Bank; (iii) breach of or a final cease and desist order
or any of the covenants under Paragraph 7 hereunder; or (iv)
acts constituting a felony which
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materially impairs his ability to serve the interests of the
Bank (for which the Bank only needs to have reasonable grounds
for believe).
(C) TERMINATION BY THE BANK WITHOUT CAUSE. Contractor's engagement
as a consultant under this Agreement may be terminated at any
time by the Bank upon ten (10) days' written notice to
Contractor. In the event of such termination, the Bank shall
pay Contractor the compensation to which he would be entitled
under this Agreement in such installments and on such dates as
regularly paid under Paragraph 4 through the expiration date
of this Agreement.
7. CONFIDENTIALITY. During and after his engagement as a consultant
hereunder, except for the purpose of carrying out his duties
hereunder, Contractor shall not remove or retain, or make copies or
reproductions of any non-public figures, calculations, letters,
paper or information of any type or description relating to the
business of the Bank, its respective subsidiaries, affiliates,
or customers, and the Contractor shall not divulge to others or use
for his personal benefit any non-public information or data acquired
by him while in the employ of the Bank which relates to the methods,
processes, or other trade secrets or confidential information of the
Bank or the subsidiaries or affiliates or either. Contractor agrees
that, in the event of termination of this Agreement for any reason,
he will not retain any non-public information written or otherwise
recorded or copied concerning the business or operations of the
Bank.
8. [RESERVED].
9. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement and all
rights and powers granted hereunder shall bind and enure to the
benefit of the parties hereto and their respective successors and
assigns. Since the Bank is contracting for the personal services of
Contractor, he shall, however, not assign or delegate his
obligations and duties of performance hereunder.
10. ENTIRE AGREEMENT; AMENDMENTS AND WAIVER. This Agreement sets forth
all of the promises, covenants, agreements, conditions and
undertakings between the parties hereto with respect to the subject
matter hereof and supercedes all prior and contemporaneous
agreements and undertakings, inducements or conditions, express or
implied, oral or written. This Agreement may be amended only by an
instrument in writing signed by Contractor and a duly authorized
officer of the Bank, and any provision hereof may be waived only by
an instrument in writing duly signed by the party against whom
enforcement of such waiver is sought.
11. GOVERNING LAW. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or
otherwise, by the laws of South Carolina except to the extent that
federal law shall be deemed to apply. All rights and powers granted
herein to Contractor or the Bank shall be subject to and superseded
by applicable state and federal laws and rules, regulations and
policies promulgated thereunder by governmental authority having
jurisdiction in respect to the Bank.
12. NOTICES. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in
writing and shall be deemed given and received; (a) upon delivery,
if delivered personally; (b) on the fifth day after being deposited
with the U.S. Postal Service if mailed by First Class Mail, postage
prepaid, registered or certified with return receipt requested, to
Contractor at his home address as maintained in the records of the
Bank or the Chief Executive Officer of the Bank, at the principal
business office of the Bank; or (c) on the next day after being
deposited with a reliable overnight delivery service addressed to
such persons at such addresses.
13. COUNTERPARTS; CAPTIONS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument. The
sections, subsections, and other headings as may appear in this
Agreement are for convenience of reference only and are not
intended, to any extent and for any purpose to limit or define the
text of any section or subsection hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: CAROLINA FIRST BANK
____________________________________ By: ________________________________
Its: _______________________________
WITNESS: CONTRACTOR
____________________________________ ____________________________________
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CONSULTANT AGREEMENT
THIS CONSULTANT AGREEMENT (this "Agreement"), made and entered into this
____ day of ______________, 1998, by and between CAROLINA FIRST BANK, ("Bank"),
and James D. King ("Contractor").
WHEREAS, Contractor has previously served as officer of Poinsett Bank,
F.S.B.; and
WHEREAS, the experience, knowledge, and contacts in the banking business
are valuable to the Bank, and the Bank desires to retain Contractor's services
as a consultant for the term hereof and Contractor desires to be so retained;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. CONSULTANT. The Bank hereby retains Contractor as a consultant and
Contractor accepts such appointment on the terms and conditions set
forth below.
2. TERM. The term of this Agreement shall be for a period of six
months, commencing on the date hereof.
3. DUTIES. During the term hereof, Contractor shall render to the Bank
such services of an advisory or consultative nature as the Bank may
reasonably request primarily for the purpose of developing the
business of the Bank in the Travelers Rest area. Contractor shall be
available for advice and counsel to the officers and directors of
the Bank at reasonable times by telephone, letter or in person so
that the Bank may have the benefit of Contractor's experience,
knowledge, contacts or reputation in the business in which the Bank
is engaged. Contractor agrees that he will not, during the term of
this Agreement, be involved in any other venture that, in the sole
opinion of the Bank, would conflict or compete with the operations
of the Bank.
4. COMPENSATION, EXPENSES, ETC. As consideration for the services
provided under this Agreement,:
(A) Bank will pay to Contractor the sum of $8,333.33 per month due
on the first day of the month.
(B) The Bank shall pay or reimburse Contractor for all documented
expenses incurred by Contractor in connection with the
performance of his obligations under this Agreement.
(C) The Bank shall provide Contractor with office space at the
Bank's main branch in Travelers Rest, South Carolina and shall
further provide Contractor with secretarial services,
telephone and fax access and copying facilities on an
as-needed basis.
5. INDEPENDENT CONTRACTOR. It is expressly understood that Contractor
is an independent contractor under this Agreement and, as such, he
shall have no authority, executive or otherwise, to bind the Bank,
or to determine the affairs of the Bank, and he shall not
participate as an employee in any plan or program maintained by the
Bank for the benefit of its employees. Contractor shall be solely
responsible for all federal, state, and local tax obligations
arising out of the payments and benefits provided to Contractor
under this Agreement.
6. TERMINATION OF CONSULTANT ENGAGEMENT. Engagement of Contractor as a
consultant under this Agreement shall terminate upon the occurrence
of any of the following events:
(A) TERMINATION BY CONTRACTOR WITHOUT CAUSE. Contractor may
terminate his obligations to provide consulting services under
this Agreement at any time upon not less than thirty (30) days'
written notice to the Bank. In the event of such notice by
Contractor, the Bank may deem the termination effective prior to
the expiration of the notice period but in no event not less
than ten (10) days from receipt of such notice. In the event of
such termination, the Bank shall pay to Contractor the
compensation then due him through the effective date of
termination.
(B) TERMINATION BY BANK FOR CAUSE. The Bank may terminate this
Agreement immediately at any time for cause (as defined below).
In the event of such termination, the Bank shall pay
Contractor the prorated monthly compensation then due him
through the effective date of such termination as designated by
the Bank. Termination for cause shall mean termination because
of (i) the willful failure by Consultant to substantially
perform his duties hereunder after notice and reasonable
opportunity is given to correct deficiencies; (ii) fraud,
misappropriation, embezzlement, or intentional and material
damage to property of the Bank; (iii) breach of or a final
cease and desist order or any of the covenants under Paragraph 7
hereunder; or (iv) acts constituting a felony which materially
impairs his ability to serve the interests of the Bank (for
which the Bank only needs to have reasonable grounds for
believe).
(C) TERMINATION BY THE BANK WITHOUT CAUSE. Contractor's engagement
as a consultant under this Agreement may be terminated at any
time by the Bank upon ten (10) days' written notice to
Contractor. In the event of such termination, the Bank shall
pay Contractor the compensation to which he would be entitled
under this Agreement in such installments and on such dates as
regularly paid under Paragraph 4 through the expiration date
of this Agreement.
7. CONFIDENTIALITY. During and after his engagement as a consultant
hereunder, except for the purpose of carrying out his duties
hereunder, Contractor shall not remove or retain, or make copies or
reproductions of any non-public figures, calculations, letters,
paper or information of any type or description relating to the
business of the Bank, its respective subsidiaries, affiliates, or
customers, and the Contractor shall not divulge to others or use for
his personal benefit any non-public information or data acquired by
him
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while in the employ of the Bank which relates to the methods,
processes, or other trade secrets or confidential information of the
Bank or the subsidiaries or affiliates or either. Contractor agrees
that, in the event of termination of this Agreement for any reason,
he will not retain any non-public information written or otherwise
recorded or copied concerning the business or operations of the
Bank.
8. NONCOMPETITION. Contractor agrees that he will not, during the term
hereof, be involved in any other venture that, in the sole opinion
of the Bank, would conflict or compete with the operations of the
Bank. Contractor further agrees that for six (6) months following
the termination of this Agreement either as principal, agent,
consultant, manager, employee, owner, partner, director, officer,
stockholder, or investor (other than as a less than 5% owner of a
business entity whose stock is registered pursuant to the Securities
and Exchange Act of 1934) engage in any business or be affiliated
with any business organization which engages in the business of
banking and related services in Greenville County or York County,
South Carolina, or induce or attempt to induce any person
contracting, doing business with, or employed by the Bank to cease
contracting with, doing business with, or being employed by the
Bank. Notwithstanding the foregoing, Contractor may engage or
participate in business operations that are otherwise determined to
be competitive with the operations of the Bank if the Bank and
Contractor agree in writing, in advance, to Contractor's engagement
and participation in such business operations.
9. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement and all
rights and powers granted hereunder shall bind and enure to the
benefit of the parties hereto and their respective successors and
assigns. Since the Bank is contracting for the personal services of
Contractor, he shall, however, not assign or delegate his
obligations and duties of performance hereunder.
10. ENTIRE AGREEMENT; AMENDMENTS AND WAIVER. This Agreement sets forth
all of the promises, covenants, agreements, conditions and
undertakings between the parties hereto with respect to the subject
matter hereof and supercedes all prior and contemporaneous
agreements and undertakings, inducements or conditions, express or
implied, oral or written. This Agreement may be amended only by an
instrument in writing signed by Contractor and a duly authorized
officer of the Bank, and any provision hereof may be waived only by
an instrument in writing duly signed by the party against whom
enforcement of such waiver is sought.
11. GOVERNING LAW. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or
otherwise, by the laws of South Carolina except to the extent that
federal law shall be deemed to apply. All rights and powers granted
herein to Contractor or the Bank shall be subject to and superseded
by applicable state and federal laws and rules, regulations and
policies promulgated thereunder by governmental authority having
jurisdiction in respect to the Bank.
12. NOTICES. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in
writing and shall be deemed given and received; (a) upon delivery,
if delivered personally; (b) on the fifth day after being deposited
with the U.S. Postal Service if mailed by First Class Mail, postage
prepaid, registered or certified with return receipt requested, to
Contractor at his home address as maintained in the records of the
Bank or the Chief Executive Officer of the Bank, at the principal
business office of the Bank; or (c) on the next day after being
deposited with a reliable overnight delivery service addressed to
such persons at such addresses.
13. COUNTERPARTS; CAPTIONS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument. The
sections, subsections, and other headings as may appear in this
Agreement are for convenience of reference only and are not
intended, to any extent and for any purpose to limit or define the
text of any section or subsection hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: CAROLINA FIRST BANK
___________________________________ By: ________________________________
Its: _______________________________
WITNESS: CONTRACTOR
___________________________________ ____________________________________
A-27
<PAGE>
ANNEX B
[CRG LETTERHEAD]
August 10, 1998
Board of Directors
Poinsett Financial Corporation
203 State Park Road
Travelers Rest, South Carolina 29690
Dear Board Members:
You have requested our opinion as to the fairness from a financial point of
view to the holders of shares of common stock of Poinsett Financial Corporation
(the "Company") of the proposed consideration to be paid to the shareholders of
the Company by Carolina First Corporation ("CFC"). The current opinion serves as
an update of our original Fairness Opinion dated June 26, 1998.
Capital Resources Group, Inc. ("Capital Resources") is a financial
consulting and an investment banking firm that, as part of our specialization in
financial institutions, is regularly engaged in the financial valuations and
analyses of business enterprises and securities in connection with mergers and
acquisitions, valuations for initial and secondary stock offerings, divestiture
and other corporate purposes. Senior members of Capital Resources have extensive
experience in such matters. We believe that, except for the fee we will receive
for our opinion and other financial advisory fees to be received in connection
with the transaction discussed below, we are independent of the Company.
Financial Terms Of The Offer
We understand that, pursuant to a Reorganization Agreement including a Plan
of Merger ("Agreement") between the Company and CFC, each share of Company
common stock issued and outstanding immediately prior to the Effective Time
will, by virtue of the merger, be exchanged for and converted into a number of
shares of CFC Common Stock equal to $82.00 divided by the Fair Market Value (the
"Conversion Ratio").
"Fair Market Value" shall mean the average of the closing prices as quoted
on the Nasdaq National Market for CFC Common Stock for the 20 days in which CFC
Common Stock was traded immediately prior to the Closing Date; provided,
however, if prior to the Effective Time, any other person shall have publicly
announced an intention to acquire control of CFC by merger or otherwise or CFC
shall have publicly acknowledged that it is seeking to be acquired by another
person or is discussing being acquired by another person, then the average of
the closing prices as quoted on the Nasdaq National Market for the 20 days for
which the CFC Common Stock was traded immediately prior to such announcement or
acknowledgment shall be determined and, if such average is less than
<PAGE>
CAPITAL RESOURCES GROUP, INC.
Board of Directors
August 10, 1998
Page 2
the average determined pursuant to the first clause of this sentence, then the
smaller average shall be the Fair Market Value.
It is expected that, at the Effective Time of the Merger, all outstanding
stock options to purchase shares of common stock of the Company will be
exchanged for CFC stock options based on the Conversion Ratio. In lieu of having
Company stock options converted pursuant to the preceding sentence, the holder
of such options may elect prior to the Effective Time to receive, for each
option, solely a cash payment equal to the excess of (i) $82.00 over the
exercise price per share of Company common stock covered by the option
multiplied by (ii) the total number of shares of Company common stock covered by
the option.
In the event of any change in the outstanding CFC common stock by reason of
a stock split, stock dividend, reverse stock split, recapitalization and similar
items, the Conversion Ratio and all stock prices will be appropriately adjusted.
As a result of the Merger transaction, the Company will be merged with and
into CFC and the separate existence of the Company will cease.
Materials Reviewed
In the course of rendering our opinion we have, among other things:
(1) Reviewed the terms of the Agreement and discussed the Agreement with
management and the Board of Directors of the Company, and the Company's
legal counsel, Breyer & Aguggia LLP;
(2) Reviewed the following financial data of the Company:
o the audited financial statements of the Company for the fiscal years
ended September 30, 1993 through September 30, 1997 and the
unaudited financial statements for the three months ended March 31,
1998 as reported in the Company's internal financial reports,
o The Poinsett Bank's (the "Bank") Thrift Financial Reports covering
the period through March 31, 1998, the latest available period,
o the Company's latest available asset/liability reports,
o other miscellaneous internally-generated management information
reports for recent periods, as well as other publicly available
information,
<PAGE>
CAPITAL RESOURCES GROUP, INC.
Board of Directors
August 10, 1998
Page 3
o the Company's most recent business plan and budget report;
(3) Reviewed the Company's Annual Report to shareholders for fiscal 1997
which provides a discussion of the Company's business and operations
and reviews various financial data and trends;
(4) Discussed with executive management of the Company, the business,
operations, recent financial condition and operating results and future
prospects of the Company;
(5) Compared the Company's financial condition and operating results to
those of similarly-sized thrifts operating in South Carolina and the
U.S.;
(6) Compared the Company's financial condition and operating performance to
the published financial statements and market price data of
publicly-traded thrifts in general, and publicly-traded thrifts in the
Company's region of the U.S. specifically;
(7) Reviewed the relevant market information regarding the shares of common
stock of the Company including trading activity and volume and
information on options to purchase shares of common stock;
(8) Performed such other financial and pricing analyses and investigations
as we deemed necessary, including a comparative financial analysis and
review of the financial terms of other pending and completed
acquisitions of companies we consider to be generally similar to the
Company;
(9) Examined the Company's economic operating environment and the
competitive environment of the Company's market area;
(10)Reviewed available financial reports and financial data for CFC,
including Annual Reports to shareholders and Form 10-K Reports covering
the fiscal years ended through December 31, 1997, quarterly reports,
Form 10-Q reports, other published financial data and other internal and
regulatory financial reports provided by management of CFC; reviewed
CFC's banking office network; and reviewed the pricing trends of CFC's
common stock and dividend payment history;
(11)Visited CFC's administrative and executive offices and conducted
interviews with management.
In arriving at our opinion, we have relied upon the accuracy and
completeness of the information provided to us by the various parties mentioned
above, upon public information and
<PAGE>
CAPITAL RESOURCES GROUP, INC.
Board of Directors
August 10, 1998
Page 4
upon representations and warranties in the
Agreement, and have not conducted any independent investigations to verify any
such information or performed any independent appraisal of the Company's or
CFC's assets.
This fairness opinion is supported by the detailed information and analysis
contained in the Evaluation and Analysis Report dated June 26, 1998 and our
updated analysis dated August 10, 1998 ("Reports"), which have been produced by
Capital Resources and will be delivered to the Company. We have relied on the
Reports for purposes of rendering this current fairness opinion.
Opinion
Based on the foregoing and on our general knowledge of and experience in the
valuation of businesses and securities, we are of the opinion that, as of
August 26, 1998, the consideration proposed by CFC for shares of common stock
of the Company is fair to the shareholders of the Company from a financial
point of view.
Respectfully submitted,
CAPITAL RESOURCES GROUP, INC.
/s/ Capital Resources Group, Inc.
<PAGE>
Annex C
DISSENTER'S RIGHTS STATUTE
ANNEX C
ANNEX C TO PROXY STATEMENT/PROSPECTUS
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
ss. 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.
ss. 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.
C-1
<PAGE>
ss. 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
ss. 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.
ss. 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.
ss. 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.
ss. 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 the beneficial shareholder on whose
behalf he is asserting dissenters' rights) acquired beneficial ownership of the
shares
C-2
<PAGE>
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.
ss. 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.
ss. 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.
ss. 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.
ss. 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.
ss. 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 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
C-3
<PAGE>
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
ss. 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.
ss. 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.
C-4
<PAGE>
ANNEX D
CONDENSED BALANCE SHEET
CAROLINA FIRST CORPORATION
(unaudited)
December 31,
---------------------------
(dollars in thousands)
1996 1997
----------- -----------
Assets:
Cash and due from banks ...................... $ 86,322 $ 73,326
Interest-earning deposits with banks ......... 26,037 34,703
Investment securities ........................ 245,359 298,533
Loans ........................................ 1,138,986 1,614,190
Less unearned income ........................ (14,211) (11,775)
Less allowance for loan losses .............. (11,290) (16,211)
----------- -----------
Net loans ................................ 1,113,485 1,586,204
Premises and equipment ....................... 32,418 39,682
Other assets ................................. 70,583 123,898
----------- -----------
Total assets ................................... $ 1,574,204 $ 2,156,346
=========== ===========
Liabilities and stockholders' equity:
Liabilities
Deposits
Noninterest-bearing ...................... $ 194,067 $ 206,938
Interest bearing ......................... 1,086,983 1,539,604
----------- -----------
Total deposits ....................... 1,281,050 1,746,542
Borrowed funds ............................... 171,631 178,858
Other liabilities ............................ 16,559 29,287
----------- -----------
Total liabilities .......................... 1,469,240 1,954,687
----------- -----------
Total stockholders' equity ..................... 104,964 201,659
----------- -----------
Total liabilities and stockholders' equity ..... $ 1,574,204 $ 2,156,346
=========== ===========
D-1
<PAGE>
CONDENSED SUMMARY OF EARNINGS
CAROLINA FIRST CORPORATION
(unaudited)
Years Ended December 31,
-------------------------------
(dollars in thousands)
1995 1996 1997
-------- -------- --------
Interest income ............................ $101,750 $116,872 $135,706
Interest expense ........................... 50,978 59,802 69,000
-------- -------- --------
Net interest income ...................... 50,772 57,070 66,706
Provision for loan losses .................. 6,846 10,263 11,646
-------- -------- -------
Net interest income after provision
for loan losses ....................... 43,926 46,807 55,060
-------- -------- -------
Noninterest income ......................... 17,326 21,341 19,615
Noninterest expenses ....................... 46,882 51,675 52,243
-------- -------- -------
Income before income taxes ............... 14,370 16,473 22,432
Income taxes ............................... 4,956 5,999 8,092
-------- -------- -------
Net income ............................... 9,414 10,474 14,340
Dividends on preferred stock ............... 2,752 63 -
-------- -------- -------
Net income applicable to common
shareholders............................. $ 6,662 $ 10,411 $14,340
======== ======== =======
D-2
